Gold Fields Ltd (GFI) 2009 Q2 法說會逐字稿

Good afternoon and welcome to the Gold Fields Quarter 2 of Fiscal 2009 Results. All participants are in a listen-only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions). Please also note that this conference is being recorded.

I would now like to turn the conference over to Willie Jacobsz. Please go ahead, sir.

Thank you very much. Good afternoon, ladies and gentlemen. Thank you very much for joining us for this results teleconference call. We have in the room Mr. Nick Holland, the Chief Executive Officer of Gold Fields. He will do a brief introduction, after which he will hand to Paul Schmidt, our new Chief Financial Officer, who will take us through some of the financial numbers. After that, Vishnu Pillay will take us through the South African Operations, and Glenn Baldwin through the International Operations, after which we will go back to Nick for a wrap-up. We will then take questions from the audience.

Nick, I hand over to you.

Thank you, Willie, and good afternoon or good morning to everybody wherever you may be. Firstly, I would like to introduce Paul Schmidt, who was recently appointed as CFO. With Paul's appointment, the senior leadership team at Gold Fields is now complete.

If I look at the highlights of the first half of financial 2009, back in May of last year, I characterized 2009 as a year of two halves, with the first half focused on setting Gold Fields up to again produce at a rate of approximately 4 million ounces per -- approximately 1 million ounces per quarter, or 4 million ounces per annum and the second half of fiscal 2009, a period during which we would start to see the benefits in improved cash flows.

To achieve this, we had to effectively deal with the power interruptions of early last year. We had to do extensive safety-related mediation work at our South African operations. We needed a step change in safety performance, in particular at our South African mines, and we had to complete our international growth projects.

Having largely achieved all of these objectives, we are now at the point where we can look forward to the second half of fiscal 2009, during which we should see the benefits of our efforts result in much improved cash flow generation. We've achieved our quarter one and Quarter 2 production targets, and we are on track to achieving the guidance provided for Quarter 3, adjusted for the decline in the copper price.

In terms of remediation projects in South Africa, the main shaft steel replacements at Kloof was completed on schedule, as was the critical secondary support backlog at Driefontein. At South Deep, 95 2 West and 3 West ramps rehabilitation was completed, and the vent raise hole where the tragic happened -- tragic accident happened in May '08 was repaired, and it's about to be commissioned. With all of the rehabilitation projects complete, the SA Ops are now well placed to increase production from around 15.5 tons a quarter to around 18 tons of gold per quarter.

In terms of growth projects, I'm pleased to report that we have achieved all of our targets. The CIL plant expansion of the Tarkwa Mine was completed and reached its design capacity of 1 million tons per month on 23 December of last year. Cerro Corona in Peru reached a name plate capacity of 500,000 tons per month by late December '08, and production at Belleisle and Cave Rocks at St. Ives have ramped up in December.

During the past two quarters, we've achieved the step change in safety that we planned for. Our ongoing efforts in this area have resulted in significant improvements in all safety metrics. While we've not achieved our target of zero harmers yet, we have seen a significant improvement with only eight fatalities for the year-to-date, that's over six months, against total of 47 for financial 2008.

Looking briefly at the results for the second quarter of F2009, gold production up 5% to 839,000 attributable ounces. That's in line with the guidance. Cash costs were flat in rand terms, but in US-dollar terms were down 21% to $487 an ounce, driven by the weaker rand.

NCE, national cash expenditure, after the all-in costs of production including capital, was down to $774 an ounce, and that includes of course all of the remaining capital on the expansion projects that I spoke about earlier. Operating profits $286 million -- $268 million, net earnings $54 million. An interim dividend of ZAR0.30 per share was also declared. Gold Fields remains the highest dividend payer in the gold industry.

Talking briefly about uranium, we have identified around 600 million tons of resource, of which about two-thirds is on surface and 200 million tons is underground and about 4 more -- 4.2 million ounces of gold on surface. We originally said we would review various options on how best to optimize the uranium opportunity, and after a careful review of all of the options available, we have decided to proceed with a full feasibility study on a standalone basis.

Drilling has been accelerated with a SAMREC Resource expected in June and a reserve by November of this year. There's extensive metallurgical test work and pilot plant work underway, and an investment decision is expected in December of 2009.

South Deep, now that our strategy and plans for South Deep have bedded down, we have done some work to see if we can accelerate the build-up of this mine. There is an opportunity to increase production from current levels of approximately 200,000 ounces per annum to around 320,000 ounces per annum, potentially by the first quarter of fiscal year 2010, in other words the September quarter of this year.

We will do this by refurbishing the south shaft and accelerating the depletion of the current mine reserve of 3.3 million ounces. We have started on this work, and we should see the build-up starting to come through from June of this year. The long-term target for South Deep remains 800,000 ounces per annum. By the end of calendar 2014, with around 750,000 ounces coming from the mechanized bulk mining and around 50,000 from low-profile mechanized mining of the VCR.

In terms of our outlook for Quarter 3, we expect to produce around 960,000 ounces for the quarter, an increase of 14% against the current quarter, and that's despite the 12-day Christmas break in South Africa. We've previously said that we aim to achieve a production run rate of approximately 1 million ounces between Quarter 3.

All of our mines remain on track for us to achieve this milestone, except for the lower copper price, which impacts the conversion of our copper at Cerro Corona into gold-equivalent ounces. By converting the copper at the current copper price, we lose about 25,000 ounces per quarter, despite the fact that the physical amount of gold in copper produced is expected to be spot on the target.

To allow for this negative impact of the copper price on the equivalent ounces, we have revised our run rate target of 1 million ounces between Quarter 3 to be achieved by the March month, down to a run rate of around 975,000 ounces. Despite this, we remain committed to achieve a 1 million ounce run rate as soon as possible. As I have said, total gold produced for Quarter 3 as a whole is expected to be about 960,000 ounces. That's slightly lower than the 975,000 ounces, steady state, because of the Christmas break.

Cash flows going forward, we are well placed to benefit from cost reductions due to a pull-back in mining consumable prices, our power conservation programs and lower all-over prices. Cash costs for Quarter 3 are thus expected to be around $440 per ounce if the rand holds at ZAR10 to the dollar, as a result of the higher production and lower input costs.

In terms of NCE, with the growth projects now complete, CapEx will decrease significantly in the second half of F2009, which will contribute positively to NCE, which is expected to be approximately $630 per ounce. This will put Gold Fields in a very good position to start generating more cash flow and return to a cash-positive position.

With that introduction, I now hand over to Paul, who will briefly take us through the financial highlights.

Thanks, Nick. Good morning, everybody. If we can start with the income statement, as Nick mentioned earlier, gold produced increased from 798,000 ounces to just over 839,000. This 839,000 ounces is in line with the guidance given at the September quarterlies.

If we look at the dollar gold price, the realized dollar gold price decreased from $874 per ounce to $792 per ounce. The net effect of the increased production and the lower dollar gold price resulted in revenue decreasing from $740 million to $718 million.

If we look at net operating costs, net operating costs decreased from $536 million to $450 million. This is a combination of two things. First of all, we see the inclusion of a full quarter's cost from Cerro Corona coming in as opposed to one month in the previous quarter, but offset to this was the conversion of the South African Operations costs from -- into dollars at a much weaker rand exchange rate. In the previous quarter, we converted the rands to dollars at ZAR7.74. In this quarter, it was at ZAR9.82.

The effect of the -- by these that operating profit increased from $203 million to $268 million. What's pleasing is that the operating margin increased from 27% to 36%. If we look further down at the income statement of [notice] and exploration, exploration increased from $9 million to $15 million. The main reasons for this increase is inclusion of costs at our palace project in [Kurdistan] as well as some of our joint ventures with Sino Gold in China.

If we look at net profit attributable to ordinary shareholders, this increased from $5 million to $54 million, or from $0.01 to $0.08 per share. If we look at normalized earnings, that is net profit attributable to ordinary shareholders but excluding losses from the relatives, losses from foreign exchange, losses from associates and exceptional items, this increased from $15.6 million to $50 million -- to almost $60 million, or from $0.02 to $0.10 per share.

If we move across to the cash flow, if you look at cash flows from operating activities, this basically increased from almost zero in the previous quarter to $186 million in the current quarter. The main reason for this is the increase in operating profit and also lower tax payments in the December quarter. If you remember in the September quarter, our tax payments were high due to the [yen] tax payments made for the South African Operations.

If we move further down, if we look at capital expenditure, capital expenditure increased from $234 million to $239 million. In rand terms however, this increased from ZAR1.8 million to ZAR2.3 million. The main reason for the increase was due to the final costs coming through for the Cerro Corona project as well as the CIL upgrade at Tarkwa.

If you look at the cash flows from financing activities, in this quarter we saw a net upflow of $39 million compared to an inflow of $335 million in the previous quarter. The reasons for the net outflow this quarter was that we had a 50% redemption of our preferred shares, which was about ZAR620 million. In the previous quarter, we saw extensive borrowings by our South African Operations to fund working capital movements.

If we take into -- the net cash outflow for the quarter increased from $13 million to $92 million. If we add to this translation adjustments as well as cash at the beginning of the period, cash decreased from $229 million at the end of September to $109 million at the end of December.

With that, I'll hand over to Vishnu.

Thank you, Paul, and good morning, ladies and gentlemen. On the back of the introduction that's been given by Nick, I'll get straight into the matters for the South African Operations and start with safety.

Over the last quarter and over the last six months, there's been a significant improvement in the key safety statistics for the South African Operations. The trends are headed in the right direction, and we're pleased to say that our fatal injury frequency rate, our serious injury frequency rate and our lost time frequency rate have all improved significantly over the last six months.

The Du Pont review on safety for the South African Operations has been completed, and the key findings relate to culture, training and the application of standards. We recognized these learning points from the assessment, and we currently have a team in place to comprehend the recommendations and derive an action plan for implementation on our operations. This action plan will only serve to supplement our current initiatives that have delivered good results for us to date.

In summary, the South African Operations, the Kloof Gold Mine has completed its main shaft rehabilitation program, and I'm pleased to say over the five-month period, we've replaced 225 tons of steel. That shaft is now back to normal operating mode. Secondary support across Driefontein, Kloof and South Deep has been completed as per schedule, and we've installed 18,800 meters of secondary support across those operations for the six months. The vent raise hole at South Deep, the site of the tragic accident on the 1st of May has been completed and is awaiting commissioning, which is likely to happen in the next week or two.

In particular, if I discuss the operational performance, the Driefontein had a difficult quarter, and that's only because of a multiple fatal accident at its principal Shelf Number 5 that resulted in the stoppage of the total mine for the period of five days that affected production and grade. And the reason why grade was involved was that we had to make moves with respect to crews from areas that would deemed to be of a similar nature to where the accident had happened.

We have decided to move back into two of the shelves on the west side of the mine, that's Number 6 and Number 7, to undertake reclamation for cleaning and very limited mining. We'll see the results of that at the end of Quarter 3.

Kloof, the remediation work has been touched on, but it's also important to note that this mine, over the last two quarters, have actually exceeded its guidance in terms of production, despite the fact that the main shaft was out of commission. The expectation is that this shaft will get back to its normal production capacity of 6.1 tons per quarter.

South Deep, the secondary support on the ramps has been completed, and there's been a clear improvement in gold production and development over the last quarter. The project continues to remain on schedule for a full load up by 2014.

There's been an approval for an investment in the refurbishment of South Shaft, which Nick had touched on earlier, and that is only to afford hoisting flexibility. And we expect to be using that shaft for the hoisting of waste by the end of Quarter 3 of 2009. In addition, that shaft provides some opportunity for mining of the Elsburg massives and the VCR. A resource team is looking at how soon that can be accessed.

Beatrix has shown an improvement in production quarter-on-quarter. However, it's nowhere near its maximum capacity. Now, that operation has the opportunity to improve production by an additional 300 kilograms, and hopefully over the next two quarters, we will see it coming to the full.

In summary, the South African Operations now have a very simple strategy in pursuit of operational excellence, and the intention is to focus strongly on safety as a principal value and top priority in the organization. And in addition, we are focusing on the delivery against our operational plan.

Senior management team on the operations and on the ground have been made aware of the requirements in terms of production for Quarter 3 and Quarter 4, and hopefully we will look forward to discussing our results going forward into the future, given that most or all of the safety remediation wishes are now behind us. Thank you very much.

Glenn Baldwin?

Good day, everyone, Glenn here. Since the last quarterly presentation, the International Operations have added a full quarter of Cerro Corona production, and I am pleased to say as well that our safety performance improved quarter-on-quarter with a reduction in the number of lost-time injuries.

Managed gold production was substantially up, reflecting the addition of Peru to the International Operations' statistics and solid performances in Australia and at the main. The overall cash costs were down by 18% quarter-on-quarter to just over $500 an ounce, which was also a good improvement on the guidance of $550 an ounce. The reduction is due to the [grade kick] from underground at St. Ives, the inclusion of the lower cost producer of Cerro Corona and the weaker Australian dollar. Of note is that the capital was also managed to levels better than guidance, and the NCE was lower by $100 an ounce.

In the quarter, the Cerro Corona project was completed, the Tarkwa CIL expansion project was mechanically completed, and the St. Ives, Belleisle and Cave Rocks underground projects achieved full production. Going forward, we are planning for higher production as a result of the expanded CIL plant at Tarkwa, [soaping] from Cave Rocks at St. Ives and in mining efficiencies at Agnew. This will result in lowering the cost per ounce across the portfolio.

The next main growth prospect is our Athena Project at St. Ives. We have intersected some high-grade mineralization, and we aim to complete a consensual study on the underground prospect in the March quarter and plan to share positive news with you all about this project in April.

At Tarkwa where production was lower than guidance mainly due to the lock-up of gold in process in the heap leach pads, we certainly plan for production to be lower quarter-on-quarter as a result of the planned completion of the CIL expansion and the disruptive impact of the tie-ins between the existing plant and the new circuit.

The lock-up of gold in the heap leach was due to the placement of higher-grade material on the north heaps at the end of the quarter and the inability to leach the gold before the end of this period. We plan to release a substantial portion of this lock-up over the next three and six months.

You may recall a steady-state production for Tarkwa of around 750,000 ounces per year when we justified the CIL expansion. We are targeting 800,000 ounces per year in the next year or so with a view to the CIL plant outperforming and release of the GIP from the south heap leach pads where placement has now stopped. The south heap leach material is now being either put into the CIL plant, or the lower grade is placed on the north heaps. The future of Tarkwa in the short term is to optimize all processing circuits and maximize the NCE margin. That is to deliver cash.

To Damang and looking at the results of Quarter 1 versus the price, the margin was clearly on the wrong side of the ledger, so the mining and plant performances were critically analyzed and we were able to improve the operation in the quarter.

One of the differences, or one of the additions to the quarter was the Rex pit, and that was started earlier by some six months because we were able to amicably remove the illegal miners from the pit and this improved the blend to the mill. The cash costs and NCE improved quarter-on-quarter and we plan for more improved costs into the March quarter, mainly as a function of volume.

We plan to rebuild the primary crusher in this coming quarter, but this will depend on the arrival of critical spares. We have been building up the stocks of the crushed ore stockpile, so there will be little impact on our ounce profile planned. But long term production of Damang is still targeted at around 200,000 ounces per year.

The St. Ives performance improved, showing the benefit of high-grade sources from underground on both the mill performance and ultimately ounce production. Cave Rocks reached full production in the quarter and Belleisle's contribution was on plan. In the next quarter, we are planning to increase production again, mainly due to a full quarter of stoving at Cave Rocks, and reach our target of 115,000 ounces to 120,000 ounces by the last quarter of the financial year end.

The shortfall of 100 -- the plan of 113,000 ounces versus getting to the 115,000 ounce mark in the March quarter is because of a mill shutdown, which will take about three days. And that's, therefore, an opportunity loss of a couple of thousand ounces.

The key to the future of stable underground production, and therefore the great backbone of St. Ives, we believe to be the Athena Project and associated deposits. In the December quarter, we continue to delineate this project, which is located about two kilometers from the Argo ore body. It appears that Athena has three distinct and parallel lodes, which are generally steeply dipping and well defined. In inventory, Athena currently has about 1.5 million ounces and it is open at depth. Athena also appears to be steeper, higher grade and wider than Argo.

We plan to complete the conceptual study on Athena in the March quarter and if positive, move to feasibility study immediately. If you add up the inventory of the deposits around Athena, there are over 3 million ounces, including Athena, which is being newly defined in the last -- within the last year.

At Agnew, production was pretty much in line with the guidance of 45,000 ounces. The [Song Vein] low-grade stockpiles were totally depleted and we have started to mill other low-grade stockpiles to clean up the environmental liability. In the March quarter, we aim to increase production from the Waroonga complex, from about 55,000 tons per month to 70,000 tons per month. The lower grade main load ore blended with the high-grade cume load ore is planned to produce about 200,000 ounces per year going forward.

We had proved the continuity of Kim and Main lodes at depth and so we have already put in plan places -- we have already put in place plans to ensure a life of in excess of five years at Agnew going forward and we'd like to see some of that reflected in the declaration in the middle of this year.

At Cerro Corona, the project capital of $545 million was completed in the December quarter. The mine outperformed guidance substantially, with respect to physical production of gold and copper. In fact, the ramp up of mine to full production, given the complexity of the minerality, was exceptional. The mining fleet is performing well and the plant did finish the quarter strongly.

The issues within the mine's control are copper recoveries, construction of the [tolling] stand and general tolling stand management. However, out of our control, as you're all aware, is the copper price. And this impacts on equivalent ounces. During the December quarter, we were actually up 20% on guidance in terms of accrual in ounces, at the estimated copper and gold prices at the start of the quarter, but only slightly better than guidance at the end of the quarter, because the copper price was lower.

Into the March quarter, and we are planning much higher production levels of physicals, as one would expect, but not going to realize the equivalent ounce benefits due to the low copper price. I see the copper price is up today, so if you're buying stock, please keep doing so. And hopefully, we can push the copper price higher. During this quarter, we will, again, review all aspects of the Cerro Corona Mine, with the objective of generating an NCE with margin at $800 per equivalent ounce.

In closing, the major projects are complete and the next project in the international operations may be the brownfield development of Athena at St. Ives. We plan to increase gold production with improvements at all operations compared to the December quarter, with the result being a substantially lower NCE.

The March quarter will be one of consolidation at each mine, change management from projects to operations and delivery on the plan. The international operations are positioning themselves well to take advantage of the current higher gold price and generate a pre-tax NCE margin of in excess of $200 per ounce. Thank you.

Thank you, Glenn. In conclusion, let's talk briefly about the gold price. I'm sure it's going to be one of your questions and how we see the gold market at the moment. Now, I think it's worth saying that investments in ETFs are up to around 1,200 tons of gold, which has, again, has increased substantially from before. The central banks are not selling their full allocation in terms of the Washington agreement and over the last quarter of last year, coins and small bars basically could not be found. And this has resulted in a premium, in particular on crude and [rands].

Mine supply also, year-on-year, was only up 2%. And that certainly is well below a lot of the forecasts that various research companies were talking about. Add to that the positive sentiment for gold, the fact that a lot of people believe it really is a store of value, and it's actually got its position back at that. The situation around the world, with the financial crisis that will continue, we believe that gold has the potential to go higher. How much higher is very difficult to say. I'll leave that up to you to consider, but $1,000 an ounce, if you had to push us, we think that's not an unreasonable target for the balance of this year.

Against that backdrop, Gold Fields is moving into a higher production scenario. We expect to increase our production by around 14% going into the March quarter and if the prices hold up, and in particular if the exchange rates in both South Africa and Australia stay where they are, we'll be well placed to benefit, not only from the gold price improvement, but production improvement and the continued weaker currencies in those countries.

Also, with the base metal pull back, we are seeing reductions in various input costs. Oil in particular translates into lower diesel costs, which particularly impacts our international operations. And we're also seeing other lower input costs like steel, also ammonia, et cetera. So, those cost reductions take time to flow through, but I think we'll start seeing them coming through over the balance of this fiscal year.

Also the lower CapEx, now that we've completed our major projects, as Glenn has indicated, puts us in a good position to harvest our projects and also to benefit from the higher gold price, and therefore achieve our strategy of improving our free cash flow. We're not looking for any particular heroics in terms of M&A activity at this stage, the most important focus for us is to steady the ship, to deliver the guidance, and then we'll see where we stand after that.

With that, we'll hand over for any questions that people may have.

Thank you very much. (Operator Instructions).

Our first question comes from Paul Durham of the HSBC. Please go ahead.

Hi, gentlemen. Good morning. Can you just flesh out the exploration a bit more? I see you've got a slide on there and you did mention that quarter-on-quarter, you had spent a good deal more on a couple of projects. I think you said one in China and something else. So, if you could just give us a bit more flush out on the exploration, that would be great.

Sure. I think the one that's worth mentioning as the major increase quarter-on-quarter, is the Talas Project, that's in Kurdistan. That is a joint venture with [Orzone] a London listed company. It's a copper-gold pull [free]. A very large prospective anomaly. And the drilling results out of this are getting better and better. So, this is a project that we can earn into over a period of time and we've stepped up expenditure on that. We've been looking at this one for quite awhile now and that's one in particular that looks particularly interesting.

The other sort of notable exploration expenditure to talk about is the brownfield exploration, particularly in Australia and a lot of people may not know, but we're spending about $30 million to $35 million a year in Australia on exploration, which is -- a lot of that's accounted for in the capital expenditure, by the way. And as Glenn has mentioned, a lot of targets in Australia are providing the opportunity to more than double the current reserve base. And I'm not talking about something in three to five years. We're talking about something over the next 18 months that could actually come true.

So, we're spending money there. And also at Agnew, we believe there's a possibility to convert what is around about a 2 to 2.5 year mine life, implicit in the reserve statement, to a mine life of five years, at least in [Bustfreemore]. So, those are three of the main items that we're spending on.

In China, we obviously have a joint venture with Sino and we are stepping up exploration activity at two sites we've identified there. That's also looking promising into the future. But I think this gives you a sense (inaudible - technical difficulty) despite the financial position, is spending approximately $100 million a year in growing the Company for the future.

Good. Thank you. Just one final quarter if I may. You've got a slide on CapEx going forward for the next couple of quarters. Longer term, say in the next two or three years, what do you expect the trend of that CapEx to be?

Well, it really depends, if we continue doing as we are. If we continue running along at 4 million ounces, I don't think you're going to see any material increase against that because it's really sustaining capital. If the uranium projects gets the nod, then clearly that's going to be extra capital that's approved. And again, I don't want to try to give you estimated numbers at this particular point in time because let's rather wait for the Board to see whether they approve it (inaudible - technical difficulty).

Honestly, Athena would come through. But again, that's by and large sustaining capital. Because as St. Ives is a series of mines that continually get built up, depleted and replaced, this would -- a large part of this would go into sustaining capital anyway. So, that really means that absent any more significant findings, absent any other acquisitions that require capital and absent a decision on the uranium project, we're probably not going to see these figures moving substantially at this stage.

Obviously, we still have the potential for further extensions, [Le Tresenteine] and Kloof, into the future, and at some stage, they will come back on the table. But I don't think we're looking at that over the next year. Probably thereafter.

Great. Thanks so much indeed, Nick. I'll -- that's my questions done. Thank you.

Thank you, Paul.

Our next question comes from Sayah Ghosh of Citadel Investment Group. Please go ahead.

Hi, guys. Thanks for doing the call. My first question on CapEx, I think you just answered it beyond FY '09. The second question I had was the South Deep's ramp, 320,000 ounces from first quarter, FY '10. Can you give us some more color on what the next two to three years might look like in your new plant before you, obviously, get closer to 750 in mechanized mining? That's the first question.

And secondly, on this -- on one of the overhangs on Gold Fields is the 6.7% share that is expected to come onto the market from [Embella for] Resources. Are you -- can you give us any color on how you think that plays out over the next six months? I think you're going to issue the number of shares in the next couple of months from now?

Yes, let me deal with the second question first and then, I'll ask Vishnu to give you a shorter term view. We can give you guidance on how we see 2010 and these are order of magnitude figures for South Deep. Beyond that, it's probably a gradual buildup. But he'll give more color to that.

But coming back to the 50 million shares of Embella, first of all, they've got to get the shares. They only get the shares on the 17th of March, so they haven't got the shares yet. And obviously, they need to decide what they want to do with the shares. We have a preemptive right in the event that they wish to dispose of those shares.

And so, I think the first step is they've got to get the shares. They then need to decide whether they want to keep them, sell them or whatever. And to the extent that they want to sell them, we have a preemptive right and we can't actually tell you today what we're going to do on shares that might potentially be put out in two months' time.

I think we have to deal with that at the time because I can't talk to Embella, but there's no guarantee, for example, that all of the shares will be sold. I think a lot of people are assuming the whole block comes loose. I don't know whether you conclude -- can conclude that. And also, whether we're actually going to take up our rights on a smaller block versus the entire block, it's an entirely different decision. So, we have to wait and see what Embella wants to do, what their strategy is and then once we know that, we can mold our own strategy.

So, I think on the first part of your question, let me ask Vishnu (inaudible - technical difficulty)

Sayah, good afternoon. It's Vishnu.

Hi, good afternoon.

On an annualized basis, South Deep's currently doing 7.2 tons of gold a year. And for F2010, we expect that to increase to 10 tons per year. I just don't recall right now the exact figure for F20'11 and '12. And I'm quite happy to send that to you, via Willie's office.

Having said that, the buildup for 2010 is pretty much in place and we expect to achieve the tons per annum target. A lot of that will depend on us bringing South Shaft into operation, purely to give us the flexibility to hoist waste. And we're currently refurbishing that shaft going forward. We expect to start hoisting between 30,000 and 40,000 tons of waste from the end of this quarter.

I'll make sure that you have access to the remaining year's production through Willie's office.

Okay. Thank you.

Our next question comes from David Haughton of BMO. Please go ahead.

Oh, yes. Hi, Nick and thank you for hosting the call. I've got two questions. One probably to be picked up by Paul and the other one by Glenn. The first one relates to the South African royalty coming in on the 1st of May. And I'm wondering how you intend to express that royalty, whether it's included in your cash costs or whether you'd have a separate royalty line to identify it? And if it is in the cash costs, whether the guidance for going forward will include that?

Generally, the royalties are showing -- are included in the cash costs. And we're expecting it to be in the region of about 2%, or just above 2% on current calculations for our operations. And I don't think it'll have a material impact on the South African cash costs going forward, in terms of the guidance that we've given. That's about all I can say at the moment.

I think the other thing is, (inaudible - technical difficulty) [Aberdeen] Capital at two of the mines, which will probably mean that the royalty will probably kick in on two of those mines at the minimum level of a 0.5%.

It would be Beatrix and South Deep.

Yes, Beatrix and South Deep have a new clause losses, which can utilize the royalty. So, the impact on us is going to be diluted by that consequence. So, we don't have the precise figure today, but Paul's estimates are about right. I don't think it's going to have a significant impact.

Okay. And the second question relates to the ramp up of the CIL at Tarkwa. It seemed a little bit slow and I'm just wondering whether you'd be able to provide some guidance as to what your expectation is of throughput and production for FY '09 and FY '10?

Thank you. I've been waiting for that question actually. Slow -- not necessarily, actually. What happened was we put first rock into mill in the middle of December. We reached the name plate capacity in terms of the days milling on the 23rd of December. And since then, we have -- we've consistently achieved over 25,000 tons per day and obviously, there's been a couple of days where we have taken the mill down to do what we call normal maintenance checks of the mills and other parts of the circuit, which you always do with a plant of this magnitude.

Certainly in the March quarter, we plan on getting up to the constant run rate of 1 million tons per annum. And if you normalize that, it's somewhere around 33,000, 34,000 tons per day. We do plan to possibly go and tweak the circuit somewhat and see what we can do in terms of exceeding that going forward.

You can see in the book, it basically says that we are going to look to a number of around 190,000 ounces from Tarkwa, that's obviously a full complex, which is a CIL plant as well as the north heaps, plus the GIP released from the south heaps. And we would expect production from Tarkwa to be -- well, we're planning to try to and get that up to around about 200,000 ounces a quarter from Quarter 4 through at least the next four quarters after that.

For your modeling purposes, that number of 190,000 to 200,000 ounces is definitely in the right range and we think there's opportunity to get the 200,000 ounces every quarter for at least the next year. So, that really would take you through to the end of F2010.

All right. Well thank you very much.

Our next question comes from [David Neville] of Deutsche Bank. Please go ahead.

Yes, thanks, gentlemen. A couple of questions. Nick, the first one, I guess, dividend cover, historically Gold Fields has aimed for about a two times dividend cover and even maintain that cover during financial 2008, which was clearly a horrendous year with extremely high CapEx. Now, the CapEx is falling off and the gold price is better and the cash flow generation is far higher. Just wondered why now the Board has chosen to sell the balance sheet to be even more -- greater strength than it was? Why the reduction of -- dividend cover at this point in time?

David, the dividend policy is very clear, that it's a 50% pay-out, as you correctly say. Subject to investment opportunities and that's documented in the annual report. And as you've heard, we've spent a lot of capital over the last six months to get the Corona and Tarkwa projects finished. In fact, the capital in fact increased ZAR500 million this last quarter, as the last of that capital came through.

And we feel that we've got to judge the sort of point in time and that we should take a prudent approach. It's a 38% pay-out relative to a 50% pay-out. So, we've paid it back slightly because of that higher capital. Yes, you're right, the gold price is going up and the production's going up. And once we've delivered the results in the second half, then clearly we can re-evaluate the final dividend for the year. Once we've actually delivered on what hopefully will be a much better second half.

But we -- I have to look at the numbers and Paul and I have looked at the numbers for the first half and we believe it's prudent to pare it back slightly to take account of the high capital, but we hope to reward shareholders in the second half of the year on the projects that will deliver for us.

Okay. So, there's not identified investment opportunity in the way of acquisitions or something that you're building up some powder?

No, no, it's purely because of the loss of the major capital on the projects that has impacted the cash flow up to the end of December. And we're looking at that period to assess what dividend we can pay, not the looking forward period. The look-forward period will be dealt with on the final dividend.

Okay. And just a follow-up question. On Cerro Corona, I see on the notes something about a [gullet], capital you spend on a gullet starter dam. Is that a freshwater dam? Or is that a second pavings dam facility?

Glenn here. Essentially the main tailings facility at Cerro Corona has two dams to start with. If you can picture, you've got two valleys, which are side by side and a little hill between the two of them. We started the [La Gorda] starter dam, which you would probably remember that dam starting quite some time ago. That gets basically built up to the top of the hill, which separates the two valleys.

The Las Aguilas dam is in the other valley, and that gets built up to the top of the hill. I think the timing on that is sometime around end of this calendar year. And then, basically the Las Aguilas and the La Gorda dams then join together and you build one very wide dam up to the final elevation.

Okay, okay. Thanks for that. One last question, I see in the notes, South Deep previously, I think you were guiding to 750,000 ounces production after closing the VCR section, another -- some notes around low profile mechanized VCR. I mean, maybe take us through why you exit the VCR and now why you think not even six months later, you can re-enter that? I guess it's actually been 18 months since you've announced the closure of the VCR?

Good morning, it's Vishnu here, and let me answer that question, David. When we excited the VCR, it was for the simple reason that the mining horizon had intersected a major geological [creature] and mining could not continue. So, there was a very clear reason for that. At that point, we had taken the decision that we would have to review the operating mode of that mine and leave behind conventional mining and mechanize that operation going forward into the future.

We realize that there's a significant VCR potential available to that operation, in the order of about 1 million ounces. And what we are doing is looking at how best we can extract that through mechanized means. Given that at Kloof, which is a neighboring mine to South Deep, we're mining VCR and we are currently trialing low-profile equipment, mechanized equipment, for the extraction of the VCR.

So, would you say this is highly likely or it's 50/50 or one-in-three? I mean, how -- it sounds like this is still pretty early days?

It's still early days, but I can assure you, as much as I sit here and tell you that South Deep still remains the best asset in the group, we're going to go for this hell for leather. Both at the twin shaft and at the south shaft complex.

And there's one last question. Maybe we can go offline. It's too complicated. I mean, clearly, I mean, the original VCR was a rock mechanics issue and now when you stepped away, you decided to do the cut to rock mechanics within the masses. That now -- doesn't this change the plan again around rock mechanics, considering where the VCR lies versus the bulk material?

David, can we give you a call and we can take you through it offline so that we can give other people an opportunity, please?

Okay.

I'll give you a call afterwards and we can set it up with Willie here.

Okay. Thanks, guys.

Thanks. Next question?

(Operator Instructions).

Gentlemen, we have no further questions. Would you like to make some closing comments?

Well, thank you very much for attending the call and certainly we're filled with optimism for 2009 and we believe that safety is definitely the main priority for the company and will continue to be. We're still targeting 4 million ounces on an annualized basis. And we want to get more consistency and delivery of our assets. And as I said earlier, the first and most important priority for this Company is to get our assets to deliver their potential. And after that, we'll see what we can do.

Thank you very much, everybody. We look forward to talking to you soon. And bye-bye.

On behalf of Gold Fields, that concludes this afternoon's conference. Thank you for joining us. You may now disconnect your lines.