I � am � not � going � to � give � the � Gold � Fields � corporate � presentation � today. �� In � fact � I � am only going to talk about elements of our growth strategy and exploration am � only � going � to � talk � about � elements � of � our � growth � strategy � and � exploration. �� If � there � is � anyone � wanting � to � know � more � about � the � Gold � Fields � production � machine � I � will � gladly � answer � your � questions � after � the � presentation � , � or, � please � visit � our � booth � where � we � have � a � number � of � people � who � can � answer � your � questions. ���� Over � the � past � year � Gold � Fields, � together � with � Richard � Schodde � of � Minex Consulting, � has � compiled � a � very � comprehensive � database � of � gold � discoveries. �� It � includes � gold � deposits � over � 100Koz � in � size � and � we � think � that � it � represents � well � over � 70% � of � the � ounces � discovered. �� A � number � of � trends � were � observed, � some � confirming � our � pre � conceived � ideas � , g p but � a � number � were � a � complete � surprise. Today, � I � will � talk � about � two � of � these � trends � and � how � they � have � impacted � our � Gold � Fields � growth � strategy. �� The � first � trend � questions � whether � the � industry � is � replacing � its � production � and � the � second � questions � the � effectiveness � of � exploration investment for gold exploration � investment � for � gold. Given � that � this � is � Australia’s � premier � mining � conference � I � will � focus � specifically � on � our � activities � here � in � Australia � as � well � as � touching � on � our � new � discovery � in � Peru. �� 1
Although � limited, � I � will � be � making � some � forward � looking � statements, � that � g g g might � not � turn � out � exactly � the � way � I � have � predicted. I � hope � you � manage � to � read � and � adsorb � these � statements? 2
The � bars � in � this � graph � totals � the � quoted � resource � and � production � ounces � of � g p q p gold � discoveries, �� including � by � product � gold, � for � the � last � 60 � years. �� We � have � also � added � an � estimate � of � new � discoveries, � without � defined � resources, � found � in � the � last � 6 � to � 7 � years. We � see � a � trend � of � increasing � discovery � to � a � peak � in � the � mid � 1980’s � and � then � a � steady decline to 2010 where less than half the number of ounces is being steady � decline � to � 2010, � where � less � than � half � the � number � of � ounces � is � being � found. � Given � the � industry � produces � about � 75Moz � annually � are � we � discovering � enough � new � gold � to � replace � this � production? 3
To � answer � this � question � we � need � to � look � at � the � proportion � of � discovered � q p p ounces � that � eventually � get � mined. � Historically � we � estimate � about � 60 � to � 80% � of � all � discovered � resource � ounces � will � be � mined. In this graph we have coloured the bars by increasing conversion to mined In � this � graph � we � have � coloured � the � bars � by � increasing � conversion � to � mined � ounces. �� So � ounces � from � discoveries � that � will � eventually � get � mined � lies � in � the � mid � range � blues � i.e. � between � the � dark � and � the � light � colours. � When � we � look � at � world � gold � production, � the � red � line, � you � can � clearly � see � that � over � the � last � decade � we � have � not � discovered � sufficient � ounces � to � replace � production. In � fact � the � peak � in � discoveries � during � the � mid � 80’s � leads � the � peak � in � global � production � in � 2001. �� It � is � likely � also � that � the � lack � of � discoveries � in � the � naughties is � currently � leading � the � decrease � in � production � evident � since � 2001. 4
This � trend � is � amplified � when � we � examine � this � graph. p g p The � bars � in � the � graph � are � coded � by � stage � of � development � from � production � and � construction � in � the � blues � to � feasibility � and � exploration � in � the � greens. �� The � red � colouring are � discoveries � that � have � been � stalled � indefinitely. Here you can see some projects discovered 20 years ago are still in feasibility Here � you � can � see � some � projects, � discovered � 20 � years � ago, � are � still � in � feasibility � or � advanced � exploration. �� Clearly � the � industry � is � being � sustained � by � the � maturing � mines � in � the � blue. The � industry � is � experiencing � significantly � increasing � business � and � regulatory � complexity � which � causes � delay � – but � – also � we � are � seeing � a � decrease � in � the � quality � of � ounce � being � discovered � challenging � the � economics � of � extraction. 5
This � graph � shows � the � gold � price, � the � red � line, � and � exploration � investment � g p g p p categorised � into � grassroots, � late � stage � and � near � mine � funding. The � industry � experienced � a � quantum �� shift � in � funding � after � the � 1980’s. �� This � coincided � with � the � era � of � cheap � credit � and � the � entrance � of � risk � tolerant � investors � that � spawned � the � junior � explorer. Over � this � period � the � industry � maintained � on � average � a � $2.4 � billion � exploration � investment � – but �� this � was � highly � cyclical. �� The � cycles � are � somewhat � unrelated � to � the � gold � price � or � the � demand � for � gold � and � are � more � closely � correlated � to � things � like � the � 2000 � technology � stocks � sell � off � and � the � 2008 � credit � crisis � i.e. � general � market � cycles � and � availability � of � risk � capital. � 6
Given � the � trend � of � reducing � discovered � ounces � and � increased � investment � it � is � g not � surprising � that � discovery � costs � are � rising. In � this � graph � we � can � see � that � the � cost � of � discovery � has � increased � from � $6.80/oz � in � the � 1950’s, � to � $10/oz � in � 1980 � to � $52/oz � in � 2008. This trend is underplaying the fact that the gold price over that time has This � trend � is � underplaying � the � fact � that � the � gold � price � over � that � time � has � doubled. So � it � would � seem � that � the � cost � of � discovering � an � ounce � of � gold � resource � is � rapidly � increasing. �� We � have � not � yet � attempted � to � estimate � the � true � reserve � cost � per � ounce � – possibly � the � next � stage � of � this � work. 7
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