Gold Fields Ltd (GFI) 2015 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen and welcome to the Gold Fields Full Year Results Conference. All participants will be in listen-only mode. There will be an opportunity to ask questions at the end of today's presentation. (Operator Instructions) Please note that this conference is being recorded.

I'd like to hand the conference over to Mr. Nick Holland. Please go ahead, sir.

Thank you very much. Good afternoon everybody or good morning depending on where you are in the world today. Thanks for joining us to discuss Gold Fields results for the quarter and year ended 31 December, 2015.

With me today are our CFO, Paul Schmidt; Nico Muller, the EVP for the SA region; Avishkar Nagaser, Head of Investor Relations; and Taryn Harmse, Group General Counsel.

2015 was another challenging year for the gold industry with the US dollar gold price peaking at around $1,300 an ounce in January and then falling around $250 an ounce through the course of the year to close the year at around $1,050 per ounce.

For Gold Fields, however, weakening commodity currencies provided some offset to the weaker US dollar gold price. Together with ongoing cost-saving initiatives and efficiency improvements, the Group generated net cash flow of $123 million for the year. This performance driven by our strong international portfolio has enabled Gold Fields to meet its commitments of paying dividends and improving the balance sheet.

At South Deep, good progress has been made on getting the basics right, with early encouraging indicators emerging in the second half of 2015.

First looking at the fourth quarter, production was 566,000 ounces, which was 2% up on the previous quarter. All-in costs and all-in sustaining costs; $929 an ounce, all-in sustaining; $942 an ounce, all-in costs.

Despite a further reduction in the average gold price to $1,092 an ounce, the operations generated net cash flow of $47 million during the quarter. Impairments of $300 million were recognized in quarter four. However, none of our significant operating assets were impacted.

Normalized earnings for the quarter were $15 million. In line with our dividend policy, we have declared a final dividend of ZAR0.21 per share, taking the full dividend to ZAR0.25 per share, which is 34% of our normalized earnings, in line with our policy.

During the quarter, there was a further reduction in net debt to $1.38 billion, which improved the [net debt to EBITDA] ratio to 1.38 from 1.41 at the end of quarter three.

Now looking at the individual regions, production from South Deep was 24% higher quarter on quarter at 2,119 kilograms or 68,000 ounces on the back of a 42% increase in the previous quarter. That means it's a 64% increase in the second half versus the first half. All-in costs fell 19% quarter on quarter to $1,156 per ounce. There was further progress on a number of important initiatives at the mine including the rollout of the high profile destress mining method. And we continue to target cash breakeven by the end of 2016 at the latest.

Gold production in Australia increased 6% quarter on quarter to 263,000 ounces due to higher production at St Ives and Agnew/Lawlers. Consequently, all-in cost decreased 5% quarter on quarter to $819 per ounce. Given the material increase in exploration spend and activity in the Australia operations last year, we expect reserves in the region to remain largely unchanged after depletion and expect a double-digit increase in resources. However, we will give you resolution on those numbers hopefully by the end of March when we issue the mineral reserves and resources supplement.

Attributable gold production in Ghana decreased 3% quarter on quarter to 174,000 ounces as a result of lower production at both Tarkwa and Damang. However, all-in cost was 4% low at $925 per ounce.

Production at Corona of both gold and copper decreased quarter on quarter due to lower head grades as expected. Attributable gold production dropped by 16% quarter on quarter to 66,000 ounces.

And turning to the full year, attributable production for the Group was 2.16 million ounces. I think that was 0.69% within the original guidance provided in February, so essentially guidance was met.

All-in sustaining costs and all-in costs of $1,007 an ounce and $1,026 an ounce respectively came in below 2014 and better than both the original and revised guidance for 2015.

Notwithstanding the $100 an ounce decrease in the average gold price during the past year, the Group generated net cash flow $123 million. That's after all the bills have been paid, all CapEx, all taxes, all royalties, and we managed to achieve a further reduction of $73 million in our total net debt.

Looking ahead to the year that we're in now, we expect attributable gold production of between 2.05 million ounces and 2.1 million ounces. That's between a 2.5% to 5% reduction with decreases in the international operations partly offset by growth in production at South Deep.

However, we expect unit costs to be largely unchanged from 2015 with all-in sustaining costs expected to be between $1,000 an ounce and $1,010 an ounce and all-in costs expected to be between $1,035 per ounce and $1,045 per ounce.

Group capital expenditure for 2016 is expected to be around $600 million an ounce and that's about 10% lower than the previous year.

With that, we are going to open up for questions. Either myself, Nico, Paul, Taryn or Avishkar will deal with the questions. Thank you.

(Operator Instructions) Andrew Byrne, Barclays.

When we look at the grade at Granny Smith in 2016 the guidance [is projected to] decline by about 10%. [Does your mines line] expect that to increase as you go into 2017 however as you start to access the (inaudible) levels. So should we expect a return to higher grades in 2017 and 2018?

And then the second question again is on Australia. Your cost guidance for the region looks quite conservative with costs flat to slightly up in Aussie dollar terms. And if that's the case, do you feel there is a little bit [of fact] in that guidance given the declining oil, consumables, and a weaker labor environment?

Yes, Andrew we don't give sort of production guidance beyond the budget year that we're in. Obviously internally we do look beyond the first year but it's indicative only. When you get the updated reserves and resources, I think you can actually have a good look at that and that will help you to map out 2016 and beyond. So we don't give updated guidance beyond the 2016 year. And one of the reasons for that is we get more resolution on the production as we get closer to the year that we're going into, costs can change, prices can change, they can have an impact on that.

But all I would leave you with on Granny Smith is to reiterate what we said before is that we expect grades to continue to increase as we get deeper into ore body or certainly be maintained or increased. We also are looking potentially at wider loads. So it's difficult for us to comment on what the ultimate cost of extraction will be at deeper levels. But I think you've seen in the presentation today that we've showed you some of the drill intercepts that we're getting in some of the deeper parts of the mine which are showing really positive grade.

So I guess we're pretty sure that the grades will hold up. Whether or not they are going to increase as we get deeper, I don't have the resolution to give you that at this point in time.

In terms of costs, we give you costs that we think are realistic and -- so we've given you what we think is a realistic cost base. Obviously there may be improvements in time. I don't think we stop in terms of trying to optimize the operations. The operations continue to try and reduce costs. We will do, obviously, whatever we can to try and achieve lower costs into the forthcoming year.

Richard Hatch, RBC.

Good morning all and thanks very much for the call. Just a few questions. Firstly, would you just mind reminding me of the timing of the stripping that will take place at Neptune and A5 and at St Ives, just how long is that going to take? And then my second question is can you just remind me the timing of the development, the decline development to Cinderella, Agnew/Lawlers? And then finally, I know you mentioned about the movements to the gas plants at Granny Smith. Just a clarification on can you give any kind of quantum on cost savings and what percentage of the OpEx of that mine is power? Thank you.

I think in terms of the strip we are doing at Neptune, we're into that now. We started that in quarter four. So we're into that stripping now. I think that we will be in a position to get first ore in the second half of the year sometime and also the same applies to Cinderella. We're in a decline development, we're in the early stages of that. So I think it's going to be in the latter stages of the year that we will start getting first ore. I think Cinderella will be the feature of the 2017 plan.

In terms of Granny Smith, if we look at total utilities, it's probably around about 14% of total costs. We're hoping that we'll have the gas pipeline hooked by the middle of the year and commission the power station. And I think the cost reduction is a moving target because obviously oil prices are coming down, but probably somewhere between 10% and 15% at this stage. It was a bit more before, but I think with input costs changing 10% to 15% is probably a bankable figure that you could look at on about 14% of the cost.

Great. Thanks, Nick. And one last one, on Cerro Corona I know you've mentioned that you won't be taking the -- or expanding the tailing storage facility. Are you able to share what gold price you need to see to take that forward?

No, we don't have that resolution here at this stage. Obviously, it will be higher than where we are, probably $100 to $200 an ounce higher.

[It's $1,500 because that's what it is all.] At least $15,00. (inaudible)

That's against the currently engineered plan, that's why I am hesitant to give you prices. I think there's also the potential to engineer the cost down. We're going to have another go at this at the end of this year and we can make it work. So I wouldn't be too definitive on prices at this stage, slightly higher prices than where we are, possibly the worst case scenario is probably $200 to $300 and try and get it down from there.

Okay. Thanks for your help. Cheers.

(Operator Instructions)Brian Nunes, Gramercy.

Thanks for the call. A couple of questions, if I may. What's the basis that you are using for the copper price budget on Cerro Corona of $4,914 per ton?

$2 a pound.

Yes, $2 a pound.

$2 a pound. (multiple speakers)

No, I'm just trying to understand why are you using that given that it hasn't been at that level for about three months.

Yes, I think we are using $2 a pound. It's pretty close. $2 a pound is very close to where the spot is.

Yes, but I think you need to also understand our planning cycle starts a lot earlier than where we are now. But it's $2 a pound.

Yes, I think Paul's point is relevant as we have to give our guys sort of three or four months of advance warning to do the plans. They don't just do the plans overnight and then they give us the answer tomorrow morning. So we use prices that we determined closer to the time, which are the best reflection of spot prices at the time and future prices, but actually it's not that far away from spot prices today in my understanding.

Yes, fair enough. I'm just looking out at the future and it's kind of low, but -- okay. The demand, just a question on demand, the CapEx is expected to increase from I think $16.9 million in 2015 to $30 million in 2016. Can you just talk a little bit why?

Yes, look we're going to do some strip there to access some of the ore that's not yet accessible. Otherwise we're not going to be able to on our mine plan, but we're looking at that in some detail. As you know, it's very much what I would call a holding plan. I think we say that in the book it's very much a holding plan because we're looking potentially at an expansion case or pairing back. So this is very much an interim plan which we're probably going to update for you by the middle of the year if we go ahead with a big push-back to access the high grades under the original pit that we mined. So these numbers, I think, are interim as we say, and we may update them in three or four months.

And then maybe just a follow-up to that comment, would that be you are looking to bring a partner in to help with that or would that be just internally financed?

Yes, we do it ourselves. I think we did this. We do it ourselves.

Okay. And then last question, the extension of the 2017 [ICF], I think just -- can you just give an update on date at that was done?

No, we haven't done it. We're starting with meetings, Brian, at the moment with the bankers and hopefully we will have some result by towards the end of the year. We still got quite a bit of time to do that -- to have done it by the end of the year.

Patrick Mann, Deutsche Bank.

A very quick one follow-up on St Ives. With Athena closing, can you just help with the kind of ratio between underground tonnages and open pit for next year and then maybe just help us with the grade there as well? And then how do you see that going forward, I mean, obviously much more open pit now, what's the kind of long-term average?

I think what you can do is in terms of the grades, I mean, look at the grades we got in quarter four. We did split out the underground and the price. Use that as a proxy, Patrick. But in terms of Athena coming out, Athena was quite a low proportion of the underground anyway in quarter four. We were in the last vestiges. So I stand on a correction, but I think it's probably around about 20% to 25% of the total underground volumes.

So I think if you just took the numbers for quarter four, strip out about 25% of the underground volume. I think similar grades, there is not much difference in the grades between Athena and Hamlet. And obviously when Neptune comes in, which will be in the second half of the year, we'll obviously see a bigger pick-up. So St Ives is really going to be two open pits in 2016 and one underground. And you've seen the grades that we got before in Neptune. We're probably going to have similar or slightly lower grades from what we got from Neptune in the past. And we've given you the resource and reserve grades (inaudible) before so you can use those (inaudible). If you need any help, Avishkar can give you a call afterwards and just guide you to the right information that we've previously given.

And at this stage, there are no questions. (Operator Instructions)

I think, Lessi, you can give them another minute or so to see if there is any other questions.

No problem. Do you have any comments in the interim?

We'll just -- let's just wait another 30 seconds to see if there is any more and then we'll close up.

Patrick Mann, Deutsche Bank.

Just on the exploration spend in Australia, can you just confirm is that in the CapEx kind of guidance for the region?

Yes, it's in the CapEx. It's in the all-in costs and CapEx figures, yes.

Okay. And then -- I mean, when the three-year program comes to an end, which I think is next year and it being I think AUD90 million last year and AUD87 million this year, what's the plan then? I mean, is it kind of a rolling to your program or do you think then you've firmed up enough resources to kind of buy yourself a little bit of a break from drilling?

I think if you remember, we're dealing with these orogenic greenstone belts in the Australian region. You've got this massive mineralized structure called the Yilgarn Craton, which runs many hundreds of kilometers from the Northwest to Southeast and we're in the middle of all of that. There is a lot of stuff to be drilled on these leases. We've got many thousands of hectares of property with host rocks and analogs of what we've mined before which have not being properly drilled and properly tested. So they are drill intensive, they take time. A lot of it's under cover. So you don't necessarily get all the information from aeromag surveys.

I think we're going to be quite busy on these operations for the foreseeable future. So if you wanted to factor something in to your future models, Patrick, the safe bet is to assume that this is what we're going to have to spend pretty much every year and it works out.

I mean, if you work between 900,000 and 1 million ounces a year, whatever it might be, you're talking somewhere between $80 and $90 reserve ounce, which is very similar to the historical discovery costs that we've had. So that's pretty much what I think you should factor in.

I don't think we're going to be able to ease off unless we have a massive big discovery that's one big disseminated ore body. But unfortunately you don't find those very often in orogenic greenstone belts. They tend to be clusters of ore bodies, they tend to be discreet, they tend to pinch and swell. So that's been the history that I've seen over 15 years that we've owned the mines in Australia. So it's probably not going to change going forward.

Now there are paleochannels at St Ives which are a little bit different. They tend to be more extensive and we do have an inventory of paleochannels, which is a softer sedimentary type of ore similar to Neptune. I mean, Neptune is a paleochannel ore body on the lake.

And there is existence of a number of other paleochannel type structures, but there's a lot of work to do for us to drill it out and find out what we think we've got there. So, foreseeable future, work on the numbers we've given you.

Thanks a lot. That's exactly what I was looking for. And then I think Richard asked this or kind of a similar question, but on Cerro Corona and the kind of tailings to extend the life of the mine, can you -- I'm not sure if you guys have disclosed this or happy to, can you give us a sense of what the CapEx related to that life of mine extension or to the tailings would be?

Yes, I don't think we're in a position to give those kind of numbers. Suffice to say that we need higher prices to recover. So I don't really want to go into numbers. I'll tell you why, because numbers can change. When we look at it again, we may have optimized it, we may have engineered a different solution. So I wouldn't want you to have a number that you think is cost instead, sorry.

No problem. Thanks.

Thank you very much. Gentlemen, there is no further questions.

Well, I think with that thank you very much for everybody's interest and we look forward to chatting to you soon. Thank you very much. Bye-bye.

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