Gold Fields Ltd (GFI) 2022 Q2 法說會逐字稿

Good afternoon, and ladies gents. Welcome to Gold Field's 2022 Interim Results Presentation.

Just drawing your attention, as always, to the forward-looking statements. And then today, I'm going to take you through the first -- I'll take you through the highlights, safety and sustainability and the operations. I'll hand over to Paul Schmidt, our CFO, who will take you through the financials. I'll come back and talk to you about Salares Norte, give you an update on both Salares and the Yamana transaction and then a conclusion.

So this has been a strong operational performance and a strong cash flow generation performance in the first half of this year. All of these points that I'll make on the slide will be discussed in more detail in the slides to come. Firstly, on safety, we're very pleased to announce that we've had 0 fatalities in the first half of this year. We continue to make very good progress on the ESG front. We have just commissioned Gruyere solar plant in Australia and the South Deep solar plant, the 50-megawatt solar plant at South Deep is on track for commissioning towards the end of this quarter.

On operations, we had a 9% increase year-on-year in gold production attributable to Gold fields. On the financial side, another strong set of results generating normalized earnings of just under $500 million, 16% up year-on-year. The balance sheet continues to make great improvements with $118 million of decrease in debt, notwithstanding the Salares Norte capital and the dividend payments in the first half of this year.

We have declared a payout of 35% dividend. That's at the top end of our current range of 25% to 35% of normalized earnings. So that increases from ZAR 2.10 a share to ZAR 3 a share, or a 43% increase year-on-year. And then very pleasing to announce that we have no adjustments to the guidance that we provided in the first -- at the beginning of this year, the guidance for 2022.

So for those of you who don't know Gold Fields, this is sort of Gold Fields' snapshot. If you look at the box on the top right-hand side, we operate 9 mines, 1 project in 5 countries. All the stats under the production all-in costs and cash flows, we'll be discussing on the slides to come.

If I just draw your attention to the pie charts on the very left-hand side of the slide, you can see that we generated 44% of our production from Australia, 32% from Ghana, 13% from South Africa and 11% from Cerro Corona in Peru, and roughly the same cash flow generated from each of the regions as their production.

So turning your attention now to the safety and sustainability performance of the group. Firstly, as I said in the highlights, very pleasing to announce that we had 0 fatalities in the first half, and we've now gone calendar year or 12 months fatality-free. On the right-hand side top chart, you can see the serious injuries for the group. We had 3 serious injuries for the first half of this year.

So you can see the amount of serious injuries reducing. And if you look at that blue line on top, you can see the severity rate of those serious injuries continues to reduce as well. So 2 out of the 3 serious injuries that we had in the first half of this year were related to slip and fall.

The bottom chart on the right-hand side, you can see the total recordable frequency rate. You can see a slight increase in recordable rates in the first half of this year. That's largely attributable to our Australian operations, where we've had very high turnover, lots of new employees, unexperienced employees coming into the business. And of those inexperienced employees, coupled with the first half of this year, we had high COVID numbers in Australia, and so the shortage of labor and the high turnover of labor, we can see that impacting the smaller injuries that we're having on site.

On the health front, we continue to make good progress as well. The majority of our workforce remains fully vaccinated. We had no COVID-related fatalities in the group this year. And at the beginning of the year when the board is open for Australia, we saw the first positive cases. So we saw quite a big wave of COVID in Australia, but most of the cases were reported as mild cases, but that did have an impact on the amount of people available at work.

We continue also to make good progress on the technology that we're applying to both safety and health. In this particular example, this is the diesel particulate filters that we're putting on underground equipment, being put in place, so that we can improve the health conditions of the air that people breathe underground. And then also making good progress on the mental health programs that we're rolling out across the group.

Our decarbonization journey, as I mentioned, right up front in the highlights continues to deliver good results. If I draw your attention to the top right-hand side picture, you can see that's the newly commissioned 12-megawatt solar plant at Gruyere, commissioned on the 31st of July this year. The chart -- the picture underneath it is the South Deep solar plant. It's 120,000 solar panels that are in place. They've now got a 5-kilometer fun run around the solar plant. So that construction is 95% complete, will be delivered in the third quarter of this year.

Actually, today, Martin texted me this morning to say that we have just introduced 5 megawatts of power into the grid, into the twin shafts, and we'll be doing that every few days, now connecting 5 megawatts into the grid. And we'll do that when we've reached 40 megawatts. And then in next month, we should be able to connect the last 10 into the grid at the South shaft. So making great progress on the commitments we made for Gruyere and South Deep to deliver their solar plants this year.

We're working now seeing is we're starting to prepare for the next wave of renewables. We now have the feasibility underway at St Ives in Australia. That's going to be 80 to 90 megawatts of power that we're going to be seeking to install, both wind, solar and battery backup as a part of a micro grid. We're also doing the work now for the design for the Salares Norte solar plant that we plan to have in place in the first half of 2024.

You've seen this slide before. This is the recognition of our ESG achievements. We've started to see 1 or 2 rating agencies come through in the first half of this year. But the rating agencies mostly deliver their results in the second half, and we look forward to showing you the progress that we've made from the recognition that we're receiving for the work that we're doing on the ESG front.

So turning now to our operations. Firstly, the group delivered a strong operational performance. As I said in the highlights, we were up 9% year-on-year, the production attributable to Gold Fields to 1.2 million ounces, generating a free cash flow margin of 21% and delivering cash flow from operations of $518 million at an all-in cost of $1,352 an ounce, that was 6% up year-on-year.

Australia had a great operational performance in the first half of this year, up 10% year-on-year to 527,000 ounces, generating free cash flow margin of 18% and with a cash flow of $235 million at an all-in cost of $1,211 an ounce. So that was up 2% year-on-year, but we did have a 6% weakening of the Australian dollar to the U.S. dollar. And so the all-in cost in Australia -- in Australian dollars was up by 10%.

West Africa had a steady performance. Tarkwa continued to deliver year-on-year, roughly the same number of ounces. We had a planned decrease of production at Damang, and Damang is meeting its targets that reduced production. And as we said in the guidance for this year, that Asanko would be delivering less production. So overall, a steady performance from West Africa.

Free cash flow margin. 22% generating $154 million of free cash flow and an all-in cost of $1,230 an ounce or 10%, up year-on-year. In the Americas, at Cerro Corona in Peru, we had a 31% increase in production. That's largely as a result of mining higher-grade areas and higher recoveries. But you'll also recall that in the first half of last year, we had that slippage on the west -- on the east wall of the pit. And so we had lower production last year. So this is both a recovery from that setback last year, but also now mining the higher-grade areas.

Free cash flow margin of 49%, with free cash flow of $56 million, at an all-in cost of $981 per equivalent ounce. South Africa had a great performance so at South Deep, exceeding its guidance. So production increased by 28%, that was ahead of the planned ramp-up. We delivered a free cash flow margin from South Deep of 24%, generating cash flow of $74 million at an all-in cost of $1,425 an ounce or ZAR 705,000 per kilogram. So in rands, they were up by 5% and all-in cost in dollars was down 1%.

South Africa, very similar to Australia, had a weakening of the rand to the dollar of 6% year-on-year. I've shown you over the last few reporting periods, just a bit more detail around South Deep because we often get asked, is the production improvement that we're seeing sustainable. And if you have a look at the underlying productivity that you see, we didn't do quite as well on the longhole stoping tonnes. We had some challenges with the rigs. But if you look at the right-hand side, you can see, again, we had an improvement, an increase in the productivity from our development rigs. So the whole fleet had another 4% increase year-on-year.

If we turn to the bottom left-hand side chart, you can see the gold produced for the first half of this year in tonnes. You see 5.1 tonnes produce of gold. We did say to you that we would be producing between 9.6 and 9.7 tonnes of gold. So you can see very nicely ahead of ramp-up planned for this year. And again, you can see a bit of improvement in the productivity of kilograms per employee.

But the really great chart is the one on the bottom right-hand side. If I take your -- draw your eye to the left-hand side of that chart on free cash flow, you can see in the period from 2010 to 2017, we were losing about ZAR 1 billion a year. In 2018, it was when we had the strike and the big reset of the operations at South Deep, where we were ZAR 1.9 billion loss in 2018. But from then on, you can see the upward trajectory, at least in 2019, we were cash-positive.

$34 million generated in 2020, $97 million in the whole of 2021. But you can see in the first half of this year, we generated $74 million or ZAR 1.2 billion and compare ZAR 1.2 billion positive to the ZAR 1 billion that we were losing in that period from 2010 to '17. So we're starting to see a great performance and South Deep starting to properly earn its place in the portfolio.

So with that, I'm going to hand over to Paul, who will take us through the finances. Thanks, Paul.

Good day, everybody. I think when the regions performed well and also having just over [$50] an ounce increased gold price, it's going to translate into better results. And on the financial side, makes it a lot easier for me. I mean Chris alluded to it earlier on, we have a look normalized earnings up 16% to $498 million, adjusted free cash flow up 63% to $293 million. This translated us to us being able to declare an interim dividend of ZAR 3 compared to ZAR 2.10 in the corresponding period last year. And also, our net debt has decreased to $851 million. And more importantly, my net debt to EBITDA down to 0.33x.

If we look how the $293 million adjusted free cash flow was made up, $518 million from the ops interest and Chris spoke to it earlier, South Deep, $73 million free cash flow. Who would have thought of that 4 years ago?, Really proud, and I'm glad we stuck it out to South Deep, and we're definitely reaping the benefits of South Deep now.

If we look at the all-in cost, this is a reconciliation between the all-in costs for 6 months '21 versus '22, showing only a 6% increase year-on-year to $1,352. And that's despite that you'll see at the end of the presentation, one of the (inaudible) we were saying, mining inflation for the group is around 11% that we are facing. But I think more importantly, and I think this is one of the benefits of having a diversified currency portfolio that Gold Fields have been having rand, being having Aussie dollar and then the rest of our operations in U.S. dollars.

We have been -- one of the few companies, I think, have been able to maintain our cost guidance of between $1,370 and $1,410. And even at budgeted rates, we would be marginally above the $1,410, but at forecasted rates, which are much lower, we are well within our range of guidance, and we've benefited of around circa $50 an ounce because of the exchange rate conversion of our South African and our Australian operations.

I think the net of this is the healthy balance sheet, net debt down to $851 million, as I repeat again, net debt to EBITDA 0.33x. What did we do with the cash flow that we did? We paid our final 2021 dividend in quarter 1, $168 million. We invested another $145 million into Salares Norte and also managed to reduce -- debt by $118 million.

I think that's me. I'm going to hand over back to Chris to do the Salares Norte update.

Thanks, Paul. So this is Salares Norte, just a picture before I go into the detail. This is the picture of the processing plant, and you can see some fantastic progress being made compared to the same picture that I would have shown you at the beginning of the year.

So let's go through some of the numbers. So we have had impact again by a fourth wave of COVID that came through during the course of the first half. We've had a very serious and severe weather that impacted the progress in June, where we had 3 of the 4 weeks that we were unable to make any progress on the project.

So if we look at the project, you can see that at the end of 2021, we were 62%, and we've made actually, relatively speaking, good progress to 77%. And if you sort of divide it by that by half, that performance of 15%, and you look at that's what we do each quarter, and you look at then 3 quarters to come, we can get very close to 100%. So I think the point I'm making is that in the first half of this year, we were at the right run rate to deliver the project at the end of the first quarter.

Total CapEx spent of $145 million, as Paul mentioned a bit earlier, spent in the first half, investing in this world-class project. But we did have another more impact from another wave of COVID, the fourth wave now. In the past, we've been able to make plans by moving production off the critical path, bringing in more contractors, but as we start getting to the sharp edge now of delivery, what you're seeing is we're having less ability to make other plans to catch up from the impact of COVID.

I mentioned to you that we had severe weather impacted us in the month of June but also in July. And the impact of that is that we're probably going to end up delaying the project by between 1 and 3 months. Let me continue about the construction. You can see we were at 55% at the end of 2021. We were at 73% complete by the end of H1. On the plant side, you can see here is where the majority of the work is happening, improved from 35% to 64% at the end of the H1.

On the mining side, you can see we were at 23 million tonnes at the end of 2021. We're now at 42 million tonnes, so making great progress on the mining side, ahead of plan, and we expect to reach first ore in the fourth quarter of this year. And that's great because then we've got 3 months to get ore and stockpile ahead of the planned commissioning of the plant.

Exploration. We continue to explore in the district around Salares and spent $15 million on district exploration during the first half. And so I mentioned that because of some of the delay, because of weather and COVID, we could potentially face 1 to 3 months of delay. Now in the scheme of a major project, that might not sound like much. But if you look at our planned ramp-up that I mentioned to you at the beginning of the year, where we gave you a sense of what the ramp-up would look like, as we anticipated to produce about 200,000 ounces. If we move that final quarter over, then you can see, whilst, of course, the [goal] is not lost, what it will do is impact the production from next year.

So it's a little bit early for us to say whether we are able to mitigate some of that delay and certainly, the team on site are doing all the things that they've done up to now is to find ways to work around to bring some of that forward. The team are working on that now. But as we're running out of time now to get to the end, there is a potential that we might delay by a few months, and we will update you on what that looks like towards the end of the year.

Just an update on CapEx. You'll remember that we said that we had planned for $860 million of spend. That was the real number. Because we had very little use of -- we had very little change of scopes and we had used very little of our contingency, we were targeting internally able to try and deliver this project on $860 million in nominal terms.

But what we've seen is with the impact of COVID, having to bring more people on to site, having to put up more living accommodation to be able to de-densify the camp, all of the mitigating actions we've done, we said we'll probably increase our CapEx between 6% and 9%. And what that actually just meant is that we would get to $860 million nominal, which is $920 million.

So up to now, that still would have been delivering the project on time and on budget. So with potential delays that may add because, of course, the contractors will have to be on site for a little bit. So is a potential for an increasing capital from $920 million to $940 million. I think overall, as we manage some of the challenges that are being faced globally with very, very few projects that we know of anywhere near delivering on time and on budget. I think the team at Salares Norte continue to do a fantastic job managing the headwinds and being able to deliver on time. So a bit later, closer to the end of the year, we will be able to give you more update and guidance on what the impact of any potential delays might be.

Just a couple of pictures to see that it's really happening. The picture on the processing plant on the top left-hand side, another view on the top right-hand side. The bottom left-hand side is the material handling. So you can see the conveyor belt coming into the covered stockpile area. And then as that covered stockpile goes into the plant, you can see what that looks like. And then the filter plant in the bottom right-hand side under construction.

And then just on the mining front. You can see the 2 top pictures and the one on the right, those are just different views of the mining that's happening. And again, you can see very neat mining and ahead of plan. On the bottom left-hand side, that's the area that's now being prepared and is ready for the dry stack tailings. So you can see that area that's now being flattened out, that's where we're going to put the line on and so that we can put the dry stack tailings on top of that. And compare that to a traditional tailings dam, that you can see why dry stack tailings is such a material improvement in the way that we handle tailings going forward.

Okay. And then just a little bit of an update on Yamana. I'm not going to go through the rationale of the deal other than to just very, very briefly to touch on what we see. So this slide came straight out of the presentation that we made on the 11th of July. So that was the seventh -- the second presentation we made to the market with just more update trying to help the market and our shareholders and analysts understand a little bit more about our strategy and why this deal fits very uniquely into our strategy. And on the right-hand side, talk to -- well, why the Yamana assets.

So on the left-hand side, if we think about the strategy, I think the points that we made is that Gold Fields has consistently invested to grow the value and the quality of its portfolio. As a matter of fact, all the assets that are now in the Gold Fields portfolio came about as a result of acquisitions. The second point is that actually, all the work that we have done has rewarded shareholders with superior returns over the past 5 years.

We also have a delivery of a track record that has shown that we can do the things that we say we're going to do and that we can put ourselves in this position of strength. So the results that we're presenting today, I think, are a testimony to the strength that the company is in. And it's from that position of strength that we think that we can now look to deal with the challenges facing not only Gold Fields, but the broader gold industry of declining production and of less success rates with exploration.

And then we've said, as we look to the strategy, we think that Yamana represents a great solution for us and a great addition to us for the next phase of our strategy, and that we're going to be investing in growing the value and the quality of our portfolio of assets and addressing the challenges that are facing the industry, replacing reserves. And we think that we're doing this proactively from a position of strength.

And so why this deal? And we've explained in the last few presentations, and we've certainly spent quite a bit of time talking our shareholders through this. That we think that there's now -- that the Yamana assets are a winning combination with Gold Fields. They -- a complementary portfolio that is greater than the sum of the parts. So we have -- it's not often that you get portfolios that make up incredible industrial logic that actually do complement each other.

But we've also got strong convictions in our ability to be able to drive superior value from Yamana's assets, that's way in excess of what we're paying for those assets. And then secondly, that we can unlock these world-class assets. That we've got a combination of technical and financial capability in our company to be able to realize the full potential of Yamana's assets, which potentially, in their hands by themselves, wouldn't be able to deliver the same set of value.

And then -- pardon me, lastly, that we are going to be creating a company with comparable scale, liquidity, diversification and all the operating metrics that you measure us on to our major peers. Except that we're going to have a material value discount to them and a huge potential upside in the share price for our shareholders. There's also potential for some capital and portfolio optimization that once we get to know the assets and potentially higher cost, smaller assets that have got less potential in the future, we'll be able to think about optimizing those portfolios even further.

And then because we have confidence in our near-term cash flow generation, we think that we've been able to increase our dividend policy. So when we spoke to the market in July, we said that we would be increasing our dividend payout policy from 25% to 35% of earnings to 30% to 45% of earnings. And that's irrespective of whether the deal goes through or not. But then dependent on the deal going through, we have said in 2023, to demonstrate to our shareholders that we are absolutely focused on shareholder returns and trying to alleviate some of the short term dilution that our shareholders go through as we invest for future value, we're going to be increasing our payout ratio for 2023 to 45%.

So the next big steps are the circular and the shareholder votes. So the publication of the circular is likely to be end of September, early October. The shareholder votes then end of October, early November or in the transaction, likely to close in mid-November. We have now South African Reserve Bank approval, that has been obtained in July. So that's one regulatory step obtained. And there's now clearly the big next steps are the shareholder approvals and the remaining regulatory approvals.

So on the Yamana transaction. I think we're making good progress in helping shareholders understand the strategy, the timing and the price and that's going to be further amplified in the publication of our circulars.

So okay, so how do we put the first half results together? And how do we summarize all of that? I think we would say that we are absolutely delivering on our promises. We continue to make focus on safety and make great forward steps, reducing the safety incidents in our group. We're delivering on our ESG commitments. We've got 2 amazing projects that have been delivered during the second half of this year. Strong production performance, plus 9% unparalleled with our peers across the gold industry.

Strong financial performance, as Paul said, normalized earnings just under $500 million, plus 16%, and it's that, that we declare our dividends of adjusted free cash flow, the cash that we used to pay dividends and that we used to pay down debt of $293 million, plus 63% year-on-year. Dividends at 35% at the top end of our dividend policy payout ratio policy. Of normalized earnings, we're going to pay $174 million in rand terms, it's 43% year-on-year increase.

The balance sheet is in a healthy position. Net debt to EBITDA from 0.4x down to 0.3x. And then we've got the world-class Salares Norte project making good progress, potentially will be marginally delayed but overall, still making great progress, and this great project will come into fruition in the first half of next year. And then lastly, we're making good progress with the Yamana Gold acquisition process, and we look forward to concluding that in the fourth quarter of this year.

And so group guidance. I think as I mentioned right upfront on the first highlight slide, all of our group guidance remains intact as we told you at the beginning of the year, whether that's gold production; all-in sustaining costs; all-in costs, including Salares; all-in cost, excluding Salares; and CapEx, all remain within the guidance that we gave you at the beginning of the year. Lots of work to focus on.

Clearly, the inflationary headwinds that are facing us all finding ways to mitigate those to make sure that our costs are lower than inflation and finding ways to do that, delivering on Solaris, implementing our strategy and getting Yamana transaction over the line. And that's our focus area enough to keep us busy.

And with that, I'd like to thank all of the Gold Fields staff for incredible first half. Thanks, as always, for your amazing work, what you're doing to deliver and demonstrate to our shareholders and to the market that we're delivering on our promises, that Gold Fields is in great shape. And for those that are shareholders of Gold Fields, benefiting from the financial payouts and the returns of capital to shareholders. So thanks to the Gold Field staff.

And with that, I will -- myself and Paul are available to take your questions. Thanks.

Okay. Okay. Chris, we're going to start with questions from the conference call. So Judith, over to you.

The first question comes from Patrick Mann of Bank of America.

Thanks very much for the presentation and taking the question. I wanted to ask maybe just around the Yamana acquisition and your interaction with shareholders. I mean we've seen the discounts narrow quite a lot, and I know you've been doing a lot of work in talking to shareholders and trying to make them see what do you see in terms of the strategic rationale. Geographically, what are you seeing?

I mean what work do you still think might need to be done to convince everybody? The spread is still relatively high, although it's narrowed quite a bit. So maybe what are the still stumbling blocks that -- all the questions you get from shareholders about the deal? I mean, why isn't it sort of slam dunk? And then the second question is maybe what are the alternatives, right? So if for whatever reason Yamana doesn't go through what would Gold Fields look to do then?

Okay. Patrick, thanks very much. Lots of questions in there. I think that the first observation that you make is entirely right is that, first of all, when the deal was announced in that first week, I think we were down up to 28% or 29% in those first few days. And then subsequently, since then, as we have been talking to shareholders that we've been helping the shareholders to understand what it is about the strategy and the deal, and we have done 2 domestic and international roadshows to talk to shareholders and help them understand that with the 2 presentations.

I think what you've seen is, although it doesn't really feel like it because of the very big reduction in the overall markets for gold and for all mining stocks. What you have seen is you have seen that return. We're down, I think this morning, we were down to 7% versus the market. So overall, I think we've made a great recovery. We are starting -- we are seeing shareholders buy more shares. I think it's been fairly quiet over the last 2 months, which is traditionally quite a quiet time in the European and the U.S. and Canadian markets.

So I think, Patrick, the thing is that the reason that we're coming back is, I think shareholders are starting to understand this. The spread has come down from over 20%, as you said, I think, down to 9% this morning. So we are seeing shareholders starting to come back. It's not a particularly exciting market overall. But I think as the tide starts rising in the market, we should see Gold Fields rising with that. I think the next big point that you asked is, so what's next? I think the next step is the circular. We're putting a lot more detail into the circular. And one of the reasons why the original timing is a little bit delayed is because is we're putting the valuation of the Yamana assets. So they're doing that with independent advisers. We're going to be putting valuation into the circular. And then you'll be able to see the value that we can see and the price that we've paid. So I think overall, that's a very positive -- next step is the circular. And then post that, we will again engage with our shareholders.

And I think that will be the last push to get shareholders to what, we believe, will be a positive vote. So I think we're making good progress, Patrick, and -- but it does need -- the next big step now is the circular. And that's why on this road show that we're doing now, it's really talking about the results, not really aimed at a marketing of the Yamana transaction.

Yes. And then the question that you asked around the alternatives. They are always alternatives. And I think the point that we made in the past is that Gold Fields is in a position of strength. And so we can look at other alternatives. But the -- I mean I think the message to our shareholders is why look at other alternatives that are not nearly as attractive and the take -- that include a lot more risk and that require us to build more assets in an environment where CapEx inflation is massive and the risk associated with building big capital projects to be able to grow our portfolio of assets.

So whilst we're very able to deliver and grow and build assets, what you -- we don't want to really go out and develop a new portfolio of assets. We have to do 2 or 3 of these projects at a point in time. So alternatives exist. We don't think they're nearly as valuable as this collection of assets that we get with the Yamana deal. And we're saying to our shareholders, that's by far the most valuable way for us to invest in the future value and growth of our portfolio.

So that's the reason. I mean, ultimately, though, if shareholders don't vote it down, gold or shareholders vote this down, which we don't think we're going to see and we think is a real likelihood of getting shareholders over the line. But in the event they don't, Gold Fields is in a good position with other opportunities available in the future.

The next question comes from Adrian Hammond of SBG Securities.

So Adrian, we can't hear you. Still can't. I'm not sure if you are asking a question, Adrian.

Our apologies, sir. The next question comes from [Maricris Cojo] of FactSet.

So we also can't hear [Maricris].

(technical difficulty)

I am going to then place Adrian Hammond next into the call. That's Adrian Hammond from SBG Securities.

Hi, Chris, can you hear me?

I can hear you perfectly. Thanks, Adrian.

Yes. Okay. So I'd like to ask something about South Deep. First of all, just on the current grades trending above reserve. How should we look at these grades going forward, given they're quite substantially above reserve grade? And what's the target that you set yourselves for the annual reef tonnages?

And then just on Salares. There's obviously, a bit of a delay that's potential. The Chinchilla relocation issue, I mean, that's been fit on hold. Why is that? And is there any risk posed to the projects from this? And then lastly, on demand, what's sort of latest thinking or any change in your thinking around demand and the closure liability that you'd have to incur and plans around the workforce there?

So I'll talk to the grade. Yes, so there's nothing weird about that. Look, I mean if you look at the produced gold and the mined gold, you can see our mined gold is probably a little under called at the moment. So our mine core factor is a little bit higher than that. So actually, rather than there being an issue in the -- I'm just turning to that South Deep page.

So if I look at the yield, the underground reef, which is currently at 6.6%, there's nothing strange about that. We just happen to be going through a higher grade area with more stoping tonnes and less development. But if you look a bit up in that table of 6.2 grams a tonne from underground reef, I think we just, at this point in time, under calling that. So a little bit higher Mine Call Factor. It's a great problem to have. But I think that will settle down over time. And I think we're still saying that we will deliver the life of mine grade at 5.5 grams a tonne. That's right.

So I think, yes, there will be patches but the way that we have to mine. We will, over time, be seeing higher grades than we've been getting in the past as we mine more stoping percentages to development. I don't know what the percentage of reef tonnes is to develop -- and do you know it? And maybe we can get back to Adrian. Adrian, we will get back to you on that. I don't think any of us can recall that number off hand.

On the chinchillas at Salares, there's no issue with the potential delay yet. Remember, we still said there's a number of years before we need to even start stripping in that area where the chinchillas are located. And that ultimately is only about 10% of the production from South Deep. So it's still in its way up -- South Deep. You got me stuck on South Deep, Adrian.

So on Salares. So at Salares, let me say that again. We only need to start mining where the chinchillas are located in, at least, 2 years from now. We don't need to start mining before then, and it's only about 10% of the production at Salares will come from that area.

There is still a potential for us to go underground in that area as opposed to open pit. So we are not concerned at this point in time that the -- put the chinchilla relocation on hold. The Chinchilla relocation was on hold since we had the 2 individuals that died. And since then, we've been engaging with the authorities, we continue to engage with the authorities.

And we think that -- I mean, we weren't going to move chinchillas in the middle of winter either. So we think that by the time the summer comes, we think we'll have made good progress. But I think the overall point I wanted to make is that the relocation of the chinchilla is not an immediate threat to the ramp-up and the continued production from Salares.

At Damang, our latest thinking is we said that we are going to be doing the pre-feasibility during the course of this year and we'll probably make a decision on the pre-feasibility by the end of the year. So nothing really is happening other than -- or nothing to announce, but the pre-feasibility on Damang is underway. And we'll know at the end of the year, if we're likely to invest more into a further cutback or to be going underground, and whether we're going to proceed from pre-feasibility into feasibility.

So a little bit early to say, Adrian, but still on track to do the things that we said we're going to do, and that is the pre-fees this year. Closure liability pool, I mean other than to say we are providing...

We are providing, yes. We contribute every year towards it. So I think we're about 40%, 50% provided already (inaudible) towards the balance. Ghana has got the same dispensation. In South Africa, we have to really provide x amount every year. So we've got quite a big fund towards both Tarkwa and Damang.

The next question comes from Jared Hoover of RMB Morgan Stanley.

Congratulations from my side. Two questions from my side, please. I thought maybe I could start with Yamana and maybe ask Patrick's question in a different way. And I mean, I know you've given shareholders a sweet now in the form of bumping up the dividend policy, and agreeing to pay out at the top end of the range, if the deal goes through next year, effectively nullified any dilution on the dividend.

But let's say the Circular does come out and you go to your shareholders, and they still aren't over the line as you expect them to be. Is there a potential for there to be a further sweetener? I mean, obviously, notwithstanding the fact that [slower] needs to ramp up. And we don't know where gold prices are going. So that's my first question.

Then my second is on Australia. I mean, I think we all know that there's COVID-19 absenteeism problems there as well as tight labor markets. But I just wanted to find out if you've taken any short-term measures to prioritize production for 2022 as opposed to development, which could eventually result in maybe some of your longer-term production being a bit lower than planned in that region?

And then my last question is on Salares. It seems like -- I mean, you can never plan for these things and you don't know how a ramp-up of any mining project will go. But it sounds like you have a degree of confidence that any potential delay might be a maximum of 3 months. But are there any things that you are seeing at the moment that could potentially mean that, that delay could be a bit longer than 3 months?

Look, on your mind, that's an interesting question about can we or will be further sweeten the deal. I mean half of our shareholders, well, the Gold Fields shareholders are fighting with us because they believe that we have paid 2 larger premium. I'm not sure that they're going to be particularly happy if we come back and say, "Oh, no, no, we want to sweeten the deal further".

We've got to get both sets of shareholders over the line. I think it's a great deal for Yamana shareholders and that they get a premium, but they also participate in a company that, going forward, is absolutely likely to be greater than the sum of the parts. So I think it's a great deal for your minor shareholders.

Likewise, for Gold Fields shareholders, I think it's a great deal. We get the longer-term assets and the growth potential for our business going forward that is way better than going to do a whole lot of single deals or other things that we may have to buy. So it's a great option for them. But of course, for the Gold Field shareholders, there's an investment required. But like any investment, there's an upfront investment and what you require is over the longer term, a return on that investment.

So -- but I don't think it's going to be -- that Gold Fields shareholders are going to be particularly happy with us if we, all of a sudden, want to sweeten the deal. So no, I don't think at this point in time, that we are thinking about sweetening the deal, and I do think we're getting shareholders over the line. And whilst one never says never, that's not something that's on our radar at the moment, Jared.

In Australia, we're not taking short-term decisions to get the production out now. We have had some impact for some of the contractors that do development for us with shortages of labor, like we've had in our own staff, which is mostly contractors anyway. So we are not taking short-term decisions. If you have a look at the [non money] we're spending on exploration and development, investing in the camps around us, investing in ESG. We're not taking short-term decisions, Jared, to maximize production.

As a result, as a matter of fact, actually, in all of our quarterly production reviews when we talk to our Australian team, we say we would much rather have -- you get your development than chase short-term stoping production. So there's nothing short term about our business. We know that this is not a 6-month business. This is a 10-, 15-year as we stand now, life of mines for those assets, and we've got to make sure that we can consistently deliver over all of those years. So we are not in the business of short-term decision-making that impacts us later.

And then on Salares. Look, I think we -- one doesn't really know because I mean, at the moment, we're getting more of the plant, for example, closed up, so we should be able to be sheltered and do more of the construction under shelter. But the area of the plant that we're delivering now is in the area that we're still at the foundation levels.

Now when the wind is blowing in the way, and the snow keeps going over your foundations, and in amongst all your scaffolding, and then it's very difficult to work there. And whilst we had heavy snowfalls, the real challenge for us there was the very, very high winds. And we had very high wins that actually made it unsafe to even move where you couldn't see. And we've got some videos there that it's just impossible to see. So you can't put people onto a construction site in that kind of weather events.

Now we're getting towards the end of winter. Exactly what the weather is going to do, we don't know. But I think we're getting towards the end of winter. We're getting to the end of the production. The mining is in place, most of the plants in place. We know what we need to deliver. And I think it's 99.5% of all the equipment that we need is actually on site, never mind just in Chile. So I think the level of risk is increasing all the time. But as we get to that sharp end, as I said, if there's -- if we don't have people because there's COVID, our ability in the remaining area to bring extra contractors on is diminishing.

So I think we're there or thereabouts. The risk is declining like by the day. And there's no big risk events that we can see other than if we've got shortage of labor, but that doesn't mean that the project won't get delivered. As you've seen from the pictures as you've seen from the progress, we're making good progress as to exactly whether we would under all of these, are very challenging conditions globally, not just for us. But the fact that we are so close to delivering this project on time, I think, it's a great testimony to the work that the guys have done.

Now whether or not that's going to be 1, 2, 3 months delay in that area, I think it's still going to be a great job. But I think we are reducing the risk all the time, Jared. We don't -- we can't at this point in time, see what would materially delay us, any further than what I've just described.

The next question comes from Leroy Mnguni of HSBC.

My first question is on Damang. So I know you said you -- it doesn't look like you're going to be investing and extending the life at Damang. And I was just wondering if there's any scope for you to go underground instead as a life extension? And then just with that, if there are any other opportunities in your portfolio where you can transition from open cost to underground, to reduce the impact on the environment?

And then just on your costs. You seem to be containing costs really well compared to your peers, so well done for that. I'm just curious as to what you believe you're doing differently and maybe if there are any risks that you see to your costs increasing above your expectations in the medium term?

Thanks, Leroy. Okay, I'll just quickly run through those. So from Damang, I don't think we said yet that we have made the call that we won't be investing in the open pit. But the fact is the pit is getting to the end of its life. And now, any cutback that we do is you get less return for that. So you need to do big cutbacks. In the case of Damang, we've actually got to go through one of the old tailings dams.

And so it's not looking like a slam dunk that the next big cutback is on the card. So we just need to do the work. And Joshua and his team in Ghana are absolutely focused on completing the work. And then the numbers [and the structures]. If there's a return to be made that's acceptable, then we can invest. But if it's not, and there's better places for the company to put their capital, then we must consider those options.

One of the options that you correctly point out is the potential to go underground. That ore body does go underground. They're not high-grade ore bodies. So again, that's not a slam dunk that it makes sense to go underground at Damang. We just need to finish the work, Leroy.

By the end of the year, we should have a feel at the pre-feasibility level. And that's exactly what a pre-feas must do. Is it must give you the indication of actually, should you stop now or have you got a very real likelihood of this project becoming something, and then you take those options and do fine engineering work on those. But if it's not going to make sense that we must stop that early. But in somebody else's hands, of course, this may make a whole lot of sense. So we -- those are the kind of things that we're balancing at the moment.

Are there other areas that we can go from open pit to underground? Well, we are doing that at St Ives with Invincible. So as we start finishing off the main pit at St Ives. We're going underground, increasing our production. So I'm trying to think. So in Australia, we already have 3 mines that are underground. We only have the 1 open pit at Gruyere. At the Damang -- sorry, Tarkwa, it's going to be a long time before we go underground there.

I mean that's 15, 20 years before that will even become a possibility. It doesn't make sense for us to go underground at Cerro Corona. So that's not likely to be the case. Salares is where we've first got to start, and then there's sort of 11 years of life of that pit. And we think that there's likely to be more potential in the region. We are underground at South Deep.

So I don't -- and then maybe at Damang, which as we've already spoken about, about...

Maybe Agua Amarga.

Maybe.

Agua Amarga. (inaudible).

Yes, yes. So Avi has just reminded me, potentially Agua Amarga, that's the area where the chinchillas are. That might be a potential to go underground. And there was one at Asanko, there was -- one of the options is that we are very interested in, is to go do the exploration because some of those areas look to us to be very interesting to potentially go underground.

So that's something always on our mind. But the fact is it's -- yes, there's environmental issues you've got to consider, but the fact is that it's easier and cheaper mining, mining from open pits. So your first -- your -- the first port of call is always going to be open pit mining, if you can. I think we've been forced overtime to go underground, Leroy. Do you want to talk about the cost?

Yes. I think, Leroy, as I alluded to earlier on when I did the presentation, I said we are benefiting from having a mixed currency portfolio. You can see on an individual assets, we have increased some of the all-in costs. But as I said, we've got about a $50 exchange positive that is helping us come in line with our guidance. And also, there's been some really good cost control and moving around by the regions to try and mitigate some of the impacts of inflation.

But you can't run away from 11%. But when we guided, we guided $0.76 for the Aussie dollar, we're down at $0.70, that's after also on the rand. That is what has really helped us. And I think having a mixed currency, it does help you when you're reporting a single currency and us reporting in U.S. dollars.

The next question comes from Raj Ray of BMO Capital.

I have 3 questions, if I may. My first is on -- as a follow-up on (inaudible) question on South Deep. So I remember correctly from the site visit, it said the grade is a function of where you're mining. The East was the highest grade than the central and then the West. Just wanted to get a sense of what your ore mix is looking like for the rest of the year and going into 2023?

Second question was on the Salares Norte CapEx. If you can give us some idea. So the increase, is that net of the benefit from the Chilean peso hedge position or is it excluding that, if you can touch upon that? And lastly, on your investments in the current assets. So if you're looking at Damang, for example, are you still using the same criteria? And correct me, if I'm wrong, it's $1300 for the long-term goal and 15% after-tax IRR. Is that the same criteria that you use? And then we are looking forward to the valuation assumptions for the Yamana assets that's going to come within information circular. Are the assumptions in terms of commodity prices similar that you'll be using for those as well? If you can touch upon that.

Raj, sorry, I didn't hear your last question. Do you want to just talk -- I know you said that you're looking forward to the valuation, but I'm not sure if there was a question after that?

No. Yes, I just wanted to see -- ask if the assumptions with respect to commodity prices and everything are the same that you'll be using for the valuation when you came out with the Yamana asset valuation in the information circular?

Okay, thanks. Okay, I'll take South Deep and you take the Salares Norte? Okay, go for it.

No, it doesn't include the hedge. I had my monthly review yesterday, the hedge benefit is sitting at $37 million at present. So that would be deducted from the total capital build that we've guided. So yes, it would be $37 million. Assume we end up on the $940 million, we would realistically net end up at around $900 million.

Okay. South Deep grade. One of the things -- if you look in -- I'm not sure if you've got Raj, the results booklet, but I'll tell you the numbers anyway. But in the very final page of the results booklet at Appendix 2 shows the South Deep production plan. And there you can see what -- so we're mining roughly equally across the corridors in the very western side.

So the left-hand side, we're mining 20%; the next corridor, 22%, 59%, 14%. But what you can see -- so we don't have an opportunity and neither do we want to is push a higher grade area because at that depth, if with that level of seismicity, if you start pushing your mining front, the one leading too far in front, then you ending up in big trouble by inducing seismicity into those areas.

So there's nothing strange about the mining. Here, we're in a higher grade area at the moment. But you can see the shape of those mining fronts. If you look at that results presentation, you will be able to see that that's actually really, really disciplined the results, the mining that the South Deep team are doing. And yes, we happen to be in slightly higher grade areas, but we have no choice but to follow the sequence and mine consistently through with all of the corridors advancing at the same rates.

Investment criteria. Yes, there's nothing new about the investment criteria. We haven't changed our reserve and resource numbers. We haven't changed our investment criteria. I mean with inflation over time, we'll have to think about is getting a return of $1,300 or 15% viable. So -- but the fact is that nothing has changed in our investment criteria.

We are not doing the valuation of the Yamana assets. Yamana's independent advisers are doing that valuation. And so it's -- because I mean we don't know those assets to that level of detail, and it's independent valuation that Yamana have commissioned to deliver that. And I'm assuming that it will be at similar gold prices given that if we look at their resource and reserve, prices very similar to ours. So I don't know what those exact numbers are, and they will -- I guess, that will be declared when they deliver that valuation.

The next question comes from Maricris Cojo of FactSet.

Yes, we cannot hear her.

Yes. Judith, there's nothing coming through. Potentially, we should move on. I'm not sure what Maricris -- what the problem is? Just while we're waiting to see if Maricris comes on, just a thought has come to mind on the valuation, Raj, to answer your question.

I think the way that we have used the relative valuations has always been on market consensus. So I think you're going to see -- I think you're likely to see market consensus numbers. So for example, market consensus, gold prices being used as the valuation metrics as opposed to what our long-term resource and reserve prices will be. That way, everyone can see the relative valuations in the same way. So that was just a belated thought. Thanks, Raj.

Okay. I think that's all the questions on the conference call. So let's take a few from the webcast. Herbert from Investec, "Is the delay regarding Salares related to the chinchilla rescue and relocation?" You can touch on that but maybe just [post] that off?

Okay. So Herbert, absolutely not. Remember, I said to you, the work that we need to do in the Chinchilla area. We only need to start the mining in that area. So start the stripping in more than 2 years out from now. We only need to start mining their ore in 5 years from now. We have absolutely no -- nothing to do with the chinchillas is impacting the current performance of the plant.

For example, the chinchillas out in the plant, out in a rocky outcrop in the (inaudible) in the region. I mean, they're way away from the plant. So there's nothing about the current plant construction. And as you saw, the mining is ahead of plan and will deliver ore in the fourth quarter this year. So there's nothing around the mining. Mining's ahead of plan, all will be delivered on time. We will be able to get ore into the plant and into the stockpiles and ore stockpiled for the commissioning. So no issue with the chinchillas when it comes to current performance.

Okay. Next one from Ryan at 361, "Would you consider selling South Deep to fund M&A?"

Ryan, yes, a couple of years ago, that would have been a good question. Now given the amount of cash that South Deep is delivering, there's absolutely no reason. As we said, a couple of -- 1.5 years back, we said South Deep is a core asset to the portfolio. We're not selling South Deep. It's like any other asset now that's delivering good cash flows, still living good production. It's part of the portfolio. It's earned its right in the portfolio. So no, we're not -- we don't have South Deep on the for sale sign around its neck.

South Deep is delivering well, it's generating cash. A couple of years back, if we'd sold South Deep, we would have got a fraction of the money that we're making for it now. It's a very good return and value to shareholders if being part of our portfolio.

Okay. And then just one for you, Paul. Neil, from 91. "Do you have any issues getting cash out of Ghana? Is the cash generated in Ghana kept onshore or offshore? And related to that, has the operating environment in Ghana changed? Or is it still the same as it has been?"

I think Chris can comment on the operating environment. But on the currency, there's no issues. We're allowed to sell our gold in dollars. We have to repatriate a minimum of 30% and convert it into CDs. We actually repatriate a lot more because our CD goes a lot higher than 30%. So no issues at the moment with keeping cash outside of Ghana.

Nothing changing on the operating front. Look, all of us can see that the Ghana government is under pressure, but there's been no overtures. I mean there's things are dynamic in Ghana, but nothing that is preventing us from operating well there and returning cash to shareholders from Ghana.

Okay. Chris, that's it. Back to you for closing comments.

So thanks very much, Avi, and thanks very much for your time, all of you, that are on the call. Yes, I think we've had a great set of results in the first half. When we first announced the Yamana deal, there were some concerns that perhaps we were doing Yamana -- want to do something else because we were looking to hide something in Gold Fields.

And I think the results today have confirmed what we have said that Gold Fields is in great shape. We're doing all the right things. We're investing for the future and the operations are being well run, and we're generating cash and we're returning cash to shareholders, and we're investing for future value growth.

So a great set of production performances compared to many of our peers in the gold space. I think this is a good set of results with the growth in production, costs under control, investing for the future and returning cash to shareholders. So I think a great set of results, and thanks very much for the opportunity to talk you through them. Thanks very much.