Business Context and Reporting Period
This Form 6-K filing by Gold Fields Limited (GFI) covers the month of December 2005. The report details the receipt of regulatory approval from the Peruvian Government for the environmental impact study of the Cerro Corona gold/copper project in Northern Peru. This approval triggers the commencement of the acquisition of the project and the start of construction.
Key Financial Metrics and Project Economics
- Project Capital Cost: US$277 million for the Cerro Corona development.
- Acquisition Consideration: US$40 million to acquire 92.0% of voting shares (80.7% economic interest) in Sociedad Minera La Cima S.A.
- Reserves: 2.9 million ounces of gold and 480,000 tons of copper (approx. 5.4 million ounces gold equivalent).
- Production Profile: Expected to produce 2.3 million ounces of gold and 412,000 tons of copper over a 15-year life. Initial annual production is estimated at 400,000 ounces gold equivalent, averaging 300,000 ounces per year thereafter.
- Cost Estimates: Life of mine total cash costs estimated at US$250 per ounce (gold equivalent). Total cost of gold bought (acquisition + capital + working costs) is approximately US$340 per ounce.
- Company-wide Production: Annual gold production of approximately 4.2 million ounces from operations in South Africa, Ghana, and Australia.
- Company-wide Reserves: 64.8 million ounces of gold reserves and 174.5 million ounces of mineral resources.
Material Changes and Strategic Developments
The primary material change is the regulatory green light for the Cerro Corona project, allowing Gold Fields to proceed with the US$40 million acquisition and begin construction in February 2006. This project is a key component of the company's strategy to acquire an additional 1.5 million ounces of international production by 2009, thereby improving the balance between South African and international operations.
Guidance, Outlook, and Financing
- Financing Structure: Approximately US$150 million of the capital costs will be financed through a project finance facility. The remaining capital costs and the purchase consideration are expected to be funded from internal sources.
- Management Commentary: CEO Ian Cockerill stated that the project represents "fundamental value" with a purchase price of less than US$11 per reserve ounce of gold-equivalent. The project is viewed as a significant foothold to grow in South America, alongside the proposed acquisition of Bolivar and its Choco 10 mine in Venezuela.
- Operational Outlook: The project will be a single surface mine treating 6.2 million tons of ore per annum with a life of mine strip ratio of 0.83. Ore will be treated in a conventional sulphide flotation concentrator.
Investor Verification Checklist
- Verify the final closing of the US$40 million acquisition of Sociedad Minera La Cima S.A.
- Confirm the commencement of construction in February 2006 as scheduled.
- Monitor the execution of the US$150 million project finance facility.
- Track progress on the proposed acquisition of Bolivar and the Choco 10 mine in Venezuela.
- Assess the impact of the Cerro Corona project on the company's target of 1.5 million additional ounces of international production by 2009.