Gold Fields Ltd (GFI) 2011 Q3 法說會逐字稿

Good day and welcome to the Gold Fields Q3 2011 Results. All participants are in listen-only mode and there will be an opportunity for you to ask questions after today's presentation. (Operator Instructions). Please also note that this conference is being recorded. I would now like to hand the conference over to Willie Jacobsz. Please go ahead sir.

Good afternoon ladies and gentlemen, and thank you very much for joining us for the results teleconference for our quarter three results. Nick Holland is going to give a brief introduction to the results, after which we're going to open it up for questions. I now hand over to Nick.

Thank you very much. With me today are Paul Schmidt, our Chief Financial Officer, (inaudible) our head of investor relations, Willie, who you've already heard from and then also Michael Fleischer, our General Counsel, is with us today.

Let me briefly highlight some of the key features of the quarterly results, after which we will be prepared to take any of your questions.

The Group delivered a strong performance in quarter three, reporting quarterly earnings of $293 million. That's a record quarter for Gold Fields and significantly higher than the $186 million recorded in the previous quarter for June quarter.

Group attributable production was up 3% to 900,000 ounces for the September quarter. That is in line with guidance, supported by the acquisitions of minorities in Ghana and Peru, which we concluded at the end of the previous quarter. And the 900,000 ounces and 3% increase was also achieved despite a five-day wage-related industrial action in South Africa at the early part of the quarter.

The international regions within Gold Fields contributed 52% or 472,000 ounces of the Group attributable gold equivalent production and 63% to the Group operating results. That is particularly interesting that the international portfolio of Gold Fields has increased over the last 3.5 years from 1.3 million ounces [of] production to 2 million ounces of production. And net productions came in at lower costs than the rest of the Group and had a positive impact on our overall costs.

There was a 14% increase in the realized gold price for the quarter, which resulted in an 11% increase in revenue to $1.6 billion for the quarter. Our business process reengineering initiatives across the globe continued to develop, demonstrating sound cost control and improved efficiencies across the Group.

Total Rand-denominated spend for the September quarter in South Africa increased by only 1.8% when compared with the September 2010 quarter despite, amongst other things, increasing electricity tariffs associated with winter months where higher and tariffs levied particularly in South Africa, as well as wage increases over that particular period.

Total cash costs for the Group for the quarter were $851 per ounce compared to $816 an ounce in the previous quarter. And around about a quarter of that increase was driven by higher royalties, which in turn increased because of the higher gold price.

Cash flow generated from operating activities for the quarter increased by 133% to $717 million. That is $717 million when compared with the September 2010 quarter. On an annualized basis, we are now generating almost $3 billion in cash flows from our operating activities [across the board] (inaudible).

If we take capital expenditure off for the quarter by deducting that from our cash from operating activities, then we also made a record $346 million of net cash flow compared with $99 million in the previous quarter. And that is an increase of 249% on the previous quarter.

The NCE margin for the quarter increased from 21% to 29%, exceeding our medium to long-term target of 25%. Remember, we're the only Company that extensively reports our NCE margins for each of our assets of the Group and believes that this is an important proxy for generation of free cash flow. Margin increases were driven by the higher gold price and sound cost control.

The South African operation's NCE margin improved to 16% for the June quarter. And if we exclude the developing South Deep project, which is building up and not yet cash positive, then the NCE margin for the other operations in South Africa increased to 24%.

The delivery of our growth strategy is a key focus for Gold Fields. During the September quarter, significant progress was made in support of this strategy.

At the Chucapaca joint venture project in Peru, we announced a 35% increase in resources to 7.6 million ounces. Very important to remember that the vast majority of that 7.6 million ounces now reports into the indicated category, which is essentially reserve status ounces, and gives us increased confidence that we can successfully build a mine in this particular part of Peru. We continue to progress with the feasibility study and expect to finalize this during the first half of next year.

At the Damang super pit project in Ghana, and that is a Brownfields expansion of an existing operation, the second phase of our drilling has now been completed and we have completed and other 38,000 m of drilling across the entire ore body. We're now in the process of constructing a geological model, taking those drilled results into account together with the earlier proof of concept drilled results that we finished around the middle of the year. And we expect to complete that work during the second quarter of 2012.

Metallurgical, geotechnical and environmental test work is running in parallel with engineering and design activities. As we previously indicated, our aim is to quadruple our reserves at the Damang pit from 1,000,000 ounces to 4,000,000 ounces, and we intend to achieve that target within the next 12 months or so.

We have made a second down payment of $66 million to acquire the 60% interest in the Far South East project in the Philippines. And that means to date we have funded $120 million of the total $340 million that will need to be funded to invest a 60% interest in that particular project.

Proof of concepts drill results, which contained 27,000 meters of drilling over 17 holes, have confirmed our initial understanding of scale and grade of the deposit that we inherited using historical models. But beyond that, is also demonstrating significant upside potential both at depth and laterally.

We expect to fund the balance of the $340 million before the middle of next year, which would then vest a 60% interest in the project. And so far, we can see very little reason why we would not proceed to take our 60% interest in this very exciting project.

The 250 ton pilot plant test programs at the Arctic Platinum project in Finland have been completed. And the results from the test program broadly confirm the bench scale test work, which indicates around about a 25% improvement in recoveries to a range of 70% to 75% depending on the metal.

Bear in mind this is a polymetallic deposit which contains Palladium, platinum, a 3-to-1 ratio of Palladium to platinum. That makes up about 40% metal in the head. Gold is around about 10%, with nickel and copper making up the balance of the 40% of metal.

We're now going to look at all of the different options now that we have been able to demonstrate that we can produce the metals on-site at acceptable recovery levels. Now we want to determine what is the right scale for this project. We want to look at additional ore sources on the area, because in essence we've looked at initial models on (inaudible) Konttijarvi and Ahmavaara ore bodies.

We're now going to look at the Vaaralampi, [Tubosso] and Suhanko North ore bodies on that particular property and work out what is the best production profile and mix for this project. We expect this work to take the next 12 months and we will be in a position to then make a definitive decision as to which way we go on the project.

The Yanfolila project scoping study is complete and that is focused, as you could recall, on the Komana project to the South, which is a series of puts, and indicating that this project will require a minimum of 1.5 million ounces of resource to satisfy project thresholds. We're about two-thirds of the way there at present and we have started another drilling program now that the rainy season in Mali is behind us.

We expect to finish that early next year, put together the new models. And if all goes well, I believe that we'll fast-track this project towards the end of next year, get that into a feasibility study.

In South Africa, the South Deep infrastructure program continues to meet its key delivery dates to support the build-up to production of 750,000 ounces (inaudible). The new tailings storage facility was commissioned during the quarter and that will provide sufficient capacity over many years to come.

The ventilation shaft deepening program remains on track for commissioning before the end of 2012, along with the planned expansion from 220,000 tons a month to 330,000 tons a month. We expect that also to be commissioned at more or less the same time as the ventilation shaft (inaudible).

The de-stress mining project, which in essence is the opening up and development of the ore body to facilitate long haul open [disturbing], had a nice 23% increase quarter-on-quarter. And we're now starting to get some momentum on this very important aspect of the project to make sure that the additional hoisting and processing capacity can be filled with the requisite quantum of ore-bearing material.

Turning to the outlook for the rest of the year, which is almost behind us, our production guidance remains unchanged at 3.5 million ounces. Despite the recent wage-related industrial action, where we lost some five days of production plus the knock-on effects of trying to get back to full production thereafter, as well as (inaudible) related stoppages that we encountered, our guidance for cash costs for the year are $810 per ounce and $1200 an ounce NCE.

With that backdrop, I would now like to open up the floor to your questions, which either myself or my colleagues will endeavor to answer. Thank you.

(Operator Instructions). John Bridges, JPMorgan.

Afternoon, everybody. I was intrigued to hear you are making progress with the [TGN] project. I wondered if you could give us a bit more detail on that. That sounds very interesting. What sort of cost structure do you expect from it? And you spoke about the steps, but if you could give us a bit more detail on how you expect that to go forward, I would really appreciate it.

Sure. John what we're going to be doing is we're going to be doing some additional drilling on some of the other deposits. If you can recall, we have said that the 12,000,000 ounces that we have is made up of a series of different pits across the ore body, including the SK reefs as well as the ones I've just mentioned.

We're going to look at what is the best level of production for the projects in terms of annual volume, what is the best mix, and then we're going to look at the associated cost structures taking that into account.

We've done some initial indications just looking at the Konttijarvi and Ahmavaara ore bodies, which are fairly well understood. And some broad indications are that this project would be around about the median of the overall PGM cost curve. And of course, given that 40% of the metals here are PGMs and having worked in the PGM industry myself, PGM positioning is always very important cost positioning.

So, we have done some broad numbers which obviously we'll firm up as we get into the next phase. But this project looks like it could be placed around the middle of the cost curve, which is important of course to consider, taking this to the next stage. So the next stage is we're going to be drilling some of the other satellite deposits, getting more information. We've got some information, but not enough.

And then we'll will be running a series of iterations and then coming up with what we think is the best outcome for the ore body, and [that] also look at what the annual tonnage is likely to be for this particular project, and looking at how we can optimize strip ratios, how we can optimize mix, grade and feed into the plant and of course the [Hydromed autoclave] system which the concentrate feed will feed into. So that's going to be the focus of the work over the next 6 to 12 months, and I believe we will then better be in a position to decide what to do.

I'm not fixated whether we build this ourselves. We could look at all sorts of different options. Do we partner with somebody else? Do we sell it? Do we spin it off? All of these options can be considered once we have optimized all of the different options and we'll take that view later.

But right now, we're sitting with something that frankly I don't think anyone has attributed any value in our NAV. I think our job is to see how we can valorize this project in whatever way.

Presumably, you've looked at the economics of platinum and palladium. And I would be interested in your view particularly on palladium as an independent arbiter of the industry being outside at the present.

Certainly the fundamentals for palladium have improved quite significantly. And that has given us the encouragement to do the test that we did. We've embarked on a year of work.

We have essentially replicated an entire Hydromed process facility with the front end concentrate. It's also almost like a mini system of what the real thing will be like, and it has taken us a lot of time and effort to do so. And the Palladium price has given us the incentive to do that. So I'm reasonably encouraged about what we're seeing today.

And if I look at the South African cost curve, John, at these sort of prices it's very evident, if you look at what is happening in South Africa, the platinum industry in this country is not making much money. If you had to look at a NCE comparative for the platinum industry in South Africa at these sort of prices, the [guys] are not making that much money.

So I think there is potential for the cost levels in South Africa, which are going to rise even more as we see further electricity price increases, further wage increases. That's going to act as a catalyst for PGM prices. And we're sitting with a project in a country with more benign cost inflation, and we could be a beneficiary of that into the future.

Excellent. That's very helpful. Thanks a lot.

(Operator Instructions). Gentlemen, it appears we have no further questions. Would you like to make some closing comments?

I just want to double-check because last time we did the conference call, afterwards when we didn't get a lot of questions we got some calls from people who were trying to press their buttons to alert your attention to a question. I don't know whether we want to try and double-check that people aren't trying to get through to ask questions.

Of course, sir. (Operator Instructions) [Adrian Hammond, KD Securities].

Good day, gentlemen. You've indicated that you'd be targeting 5,000,000 ounces by 2015 either in production or in development. Could you please indicate what the ramp up to this profile will look like over the next four years?

Well, we've indicated that we're either going to be in development or production. I can't give you categorically today what that split is going to look like. But I believe that we'll have Chucapaca and Damang in development. I think there is a very good chance that we will have Yanfolila in development, potentially APP.

Far South East I think is going to take longer. It's going to be -- particularly depending on the mining method we deploy, it's going to take quite a long time. But in terms of who's going to be in production, I think there is a reasonable prospect that Chucapaca and Damang could be in production. They may provide between them around about 500,000 ounces attributable production to the Group.

Of course we've got the South Deep project that is ramping up, some of which might be replacement, but certainly some of which is likely to be growth. So, we haven't quite got a definitive schedule for you today as to what that's going to look like because all of these projects are graduating up the curve. But we believe we will have 5,000,000 ounces either in development, in other words bricks and mortar level, or we'll have them in production. And that is why we have decided to state it that way.

In terms of actual production levels, we're going to give more thought to that and try and give you better resolution over the next months.

Thank you very much.

Sure.

(Operator Instructions) [Yana Moray], Bloomberg.

Thank you. Hi, Nick. I just want to double-check something. The platinum and palladium projects you were talking about earlier, that is the Arctic Platinum project in Finland, right?

Yes. That's the one in Finland.

Okay, great, thanks.

Yes, that's the one in Finland.

Very good, thank you.

Howard Flinker, Flinker & Company.

Hello everybody.

Good afternoon, Howard.

Hi. Could you please get us up to date if there are any political changes in South Africa?

Political changes in terms of what specifically?

Any regulatory or legislative developments to make it a little easier to do business down there?

No, there hasn't been anything specific that we would like to mention. You know the mining charter was revised around about a year ago and that is still enforced today. There is no real changes there. I've got Michael with me here, our General Counsel; Michael, I don't know if you want to answer Howard's question.

No, I wouldn't say that there's been anything material. The other legislature change was we got a new Companies Act on 1 May last year -- this year, sorry, which has made probably company law a little more in line with the rest of the world. So I think that was a good change. But other than that, there haven't been any material changes that I can think of offhand that impacts on us in any material way.

Were there any specific general changes in the ANC or not?

Any specific changes in the ANC? (multiple speakers) I think there have been some ministers, presidents -- [rumor has] announced some ministers that were the subject of various investigations have been removed from office. You might have seen the Commissioner of Police was suspended pending an investigation into some leases that had been entered into, where it was suspected that he may have been a related party.

May have been.

Well, you know, that is still an ongoing investigation.

Of course.

But for that, nothing material that I can think of.

Okay, thank you.

Ladies and gentlemen, we appear to have no one in the queue. Therefore, gentlemen, if you would like to make some closing comments.

Thank you very much, Dylan. Thank you everyone for attending the call today. We look forward to talking to you again in a quarter's time.

And don't forget the analyst day in New York and in Johannesburg, on 5 December in Johannesburg and 7 December in New York. We hope to see as many of you as we can face to face, and look forward to interacting with you there.

With that, I'm going to say goodbye and look forward to talking to you again in the future. Thank you.

Thank you very much, sir. On behalf of Gold Fields, that concludes this conference. Thank you for joining us. You may now disconnect your lines.