CLIENT: Gold Fields DATE: 01/08/2007 FILE NAME: Q4F2007 Presentation
CLIENT: Gold Fields DATE: 01/08/2007 FILE NAME: Q4F2007 Presentation Speaker Narrative Good morning everyone and welcome to Gold Fields 2007 Nerina Bodasing year end results. Ian Cockerill will start today’s presentation with a brief introduction, followed by Nick Holland on the financials. Terrence Goodlace will go through the South African operational review. Glen Baldwin will then go through the international operational review. John Munroe will give you an update on the Cerro Corona project and exploration, and this will be followed by Ian who will conclude. I now hand over to Ian. Thank you Nerina. Good morning everyone. Just to show Ian Cockerill that Gold Fields is a typical contrary gold company, I will not be announcing my retirement today. Also I think it is appropriate to congratulate Glen Baldwin, our head of international operations. He had actually pulled himself away from the maternity ward this morning where at 7.30 am his wife gave birth to a baby daughter and a baby son. Congratulations Glen. So this meeting is to talk about our fourth quarter as well as the year end. I think it’s actually nice to be able to stand up here and talk to you about a reasonable set of results. Certainly in line with the guidance that we gave last quarter. Our attributable production is back up over the million ounce mark. Unit cash costs are at R92 000 per kilogram, as well as $405 per ounce. Someone has a cell phone on. Net earnings are up 35%, which is a pleasing improvement. That’s on the back of the very flat gold price, but also on the basis of the improved production. And that is up to 81c per share. Operating profit was just shy of the R2 billion mark, and we have declared a dividend of 95c. And someone said to me earlier today, a fairly chunky dividend. Well, it is exactly in line with our policy of 50% of earnings. But it shows that Gold Fields as a company is able to pay a dividend and still withstand a fairly hefty capital programme. Perhaps it gives you a sense of the confidence in the company going forward. If you look at the highlights of 2007 overall, despite the fact that the last quarter (and Terence will go into it in a little more detail) our last quarter safety performance was not good. But I have to say it is pleasing to see year on year some very good improvements in safety on all of our safety performance parameters that we measure. Having said that, it is still not where it needs to be. Gold Fields is still striving to achieve the international benchmark of safety performance. I do believe that we’ll get there. It’s going to take us some time, but I do know 2
CLIENT: Gold Fields DATE: 01/08/2007 FILE NAME: Q4F2007 Presentation Speaker Narrative that everyone in the company is making sure that we do move towards that level of safety performance. Gold production was steady year on year. Unit cash costs were up in Rand terms. They were up 28%. And in dollar terms they’re up 14%. Which gives you a real sense of the currency fluctuations that a company such as ours is subjected to. Operating profit was up over 50% to over $1 billion, and net earnings were up 53% to R2.4 billion. I think just putting 2007 into context, probably the most significant event of the year was obviously the acquisition of South Deep. And with that came a very chunky increase both in reserves as well as resources. Notwithstanding that, certainly the licence conversion that we were able to achieve at Driefontein, Kloof and Beatrix was very pleasing. And certainly I hope that South Deep will be converted in the not too distant future. I think there was also very good progress on Cerro Corona, the project in Peru, and John will take you through that a little later on. When we saw what our balance sheet looked like post the South Deep acquisition, and when we realised that the Western Areas hedge was not a hedge – it was just an outright liability – the closeout of that and the recapitalising of the Gold Fields balance sheet were very significant events in our year. Probably the most significant change in 2007 though was a big increase in capital investment for growth into the future. In 2006 we invested something like $416 million in inward capital investment. That has cranked up this year to $815 million. And in fact in 2008 it’s likely to go at or around $1 billion. Again, building for the future and certainly building towards what is our franchise, and that is the long-life quality assets. So all in all a very active year for Gold Fields. Some good bits, some less good bits, but overall a reasonably satisfactory performance. Nick let’s hand over to you and go over the finances. Thanks very much Ian and good morning ladies and Nick Holland gentlemen. First of all I’m going to deal with the quarter and then I’m going to give you some highlights of the year just passed. If you look at out gold produced for the quarter you can see that we’re up 3% as Ian mentioned. And I think particularly pleasing is that all of that increase comes from the South African operations. All four of the mines have shown an improvement in their production against last quarter. That was slightly offset by a small 3
CLIENT: Gold Fields DATE: 01/08/2007 FILE NAME: Q4F2007 Presentation Speaker Narrative reduction at the international operations. At Damang we were plagued with problems with our crusher, and also Tarkwa produced slightly less ounces than the previous quarter. But over all 3% up. If we look at the Rand gold price achieved you can see we are slightly up on the previous quarter at R1700 for the quarter. And remember, this is the average price achieved during the last quarter. And if you look at the components making that up you can see our dollar gold price has gone up to $670 an ounce. That’s a nice increase. But you can see the Rand has pulled back from R7.21 to R7.09. You will see Sterling has been fairly rampant having gone through ₤ 2 to the dollar. And we’re also seeing the Euro at around 1.38 Euro. So we may well see a further strengthening of the Rand in the short term over the next quarter or two. So whilst we may see gold going up further – and I think the fundamentals for gold are very good. We’re seeing primary amounts coming down and very good sentiment because of the dollar – it may well be that that is offset by the Rand strengthening over the same period. The combined effect of the higher price and the higher production meant that revenue went above R5 billion for the quarter to R5.1 billion. If you look at our operating costs, net of GIP changes are roughly flat quarter on quarter, despite the increase in production. The gross costs are up about 4%. I’m going to give you a brief analysis of that in a moment. If you look at our operating profit then you can see it’s almost R2 billion for the quarter compared to just over R1.8 billion in the previous quarter. And cash costs flat then at R92 000 a kilogram. What we’ve also done here is just show you if you exclude South Deep, which is really a developing operation (it’s really more of a project than an operating mine), if you look at what its currently producing compared to where we want to take it. You saw in the results it is producing at R135 000 per kilogram. Well that’s obviously not the long-term production cost. If we exclude that and just look at the base load operations, you can see that our cash costs are about R89 000 quarter on quarter. Ok, if we look at our operating costs net of gold in process changes. As I said earlier it’s essentially the same as last quarter but within that we have some variances. At the SA operations it’s pleasing to say that costs are only up 1%, a R15 million increase in costs. At St Ives we’ve changed the configuration of our mining there. Previously we were mining fairly low cost pits. Now we’re moving into the 4
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