Gold Fields build five new mines

South African gold major Gold Fields, which generated R1,2-billion of free cash flow in the final quarter of 2010, is developing five new gold mines concurrently.

Gold Fields CEO Nick Holland, who forecast gold production of from 3,5-million ounces and 3,7-million ounces in 2011 at a total cash cost of R175 000/kg, says that all five projects are advancing at the same time.

“They’re providing us with a significant opportunity to change the trajectory and quality of the Gold Fields’ portfolio,” says Holland.

The five new gold mines in the making are Yanfolila in Mali, which is expected to produce at a rate of 150 000 oz to 250 000 oz/y; Arctic Platinum in Finland, which is expected to produce at a rate of 400 000 oz/y to 600 000 oz/y of gold equivalent; Chucapaca in Peru, where 200 000 oz/y to 300 000 oz/y is envisaged; Far Southeast in the Philippines, where 500 000 oz/y to one million gold equivalent ounces a year is seen as being possible; and South Deep in South Africa, which is at an advanced construction stage, and which produced 15 kg of gold in the December quarter.

Gold Fields currently produces 3,5-million ounces a year at a total cash cost of $1 000/oz, and spends $150-million a year on exploration, which last year added 11-million resource ounces of gold to its portfolio, at the low cost of $10/oz.

“Our five-million ounce target is no longer just a strategic wish, but potentially a reality that is coming down at us very quickly,” says Holland.

Philippines’ Far Southeast deposit – the newest of the five projects situated close to the San Fernando port in Northern Lausanne – is a copper-gold porphyry, into which eight rigs are drilling angle holes to augment 180 existing holes, and where Gold Fields envisages an underground mine.

In Finland, the 12-million-ounce Arctic Platinum deposit contains gold, copper, nickel, palladium and platinum, the rising prices of which have elevated the economics of the project, thich Gold Fields has had on its books since 2003.Here, the company intends producing copper cathode rather than concentrate, which is expected to result in this project being a low cost palladium/platinum producer.

The new portfolio will be defensive against a range of long-term prices.

Holland’s key objective is to grow the portfolio without diluting shareholders by leveraging off its strong balance sheet and using its fast-flowing cash.

“The South African restructuring is significantly under way. We’ve seen some stability come into the South Africa legacy mines in the last year. We have to continue the excellent performance of our international mines,” Holland adds.

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