Gold miners can profit ‘if they work together’



GOLD producer Gold Fields was open to suggestions from the owners of South Deep mine on ways that the parties could co-operate to profit from the mine, Gold Fields CEO Ian Cockerill said yesterday.

He presented the group’s March quarter results at a time when speculation has intensified that SA’s major gold companies, AngloGold Ashanti, Gold Fields and Harmony, are likely bidders for the mine.

South Deep, which is jointly owned by Western Areas and Barrick Gold, is a deep level orebody that has been developed over the past 10 years and is likely to require more capital in the next few years to bring it to full production.

South Deep’s phase two development, which it has said would not be started for at least 20-30 years, could be accelerated by using the shaft at Gold Fields’ adjacent Kloof mine.

Cockerill said co-operation among gold miners made more sense than consolidation. Gold Fields did not need to become involved in a bidding war for South Deep — the more paid for South Deep, the less money the buyers would have available to spend on developing the mine, he said.

AngloGold Ashanti CE Bobby Godsell told Bloomberg at the weekend that the group “would be delighted” to become owners and managers of South Deep.

Asked about rumours that Gold Fields and AngloGold were discussing a possible merger, Cockerill said that if a proposal were put on the table, it would be for Gold Fields’ shareholders to approve. However, no offer had been forthcoming and he could not see a compelling reason, from Gold Fields’ perspective, to merge with AngloGold.

It could make sense for gold companies to merge regional operations where they could benefit from management and cost savings, he said.

Gold Fields grew net profit 84% to R483m, equivalent to headline earnings of 90c a share, in the March quarter compared with the December quarter.

The main contributors were an 8% improvement in the average gold price realised of R109500/kg, compared with the same period in December and the containment of costs to a 2% increase in an environment where all gold producers are facing hikes in inputs such as steel, cement and fuel. The operating margin rose to 32% from 28%.

The group produced 1,02-million ounces of gold, down slightly on the 1,04-million ounces produced in the previous quarter, mainly because of an 18% decline in production at Kloof, while Driefontein and Beatrix operations managed to maintain production despite the Christmas break.

The group’s operations in Ghana and Australia increased production.

In the past quarter, Gold Fields finalised the purchase of the Choco 10 gold mine in Venezuela. Cockerill said the mine would be positioned to increase productivity and detailed exploration had begun to expand the mine’s reserves and resources and to determine the appropriate mine size.

Gold Fields’ chief financial officer Nick Holland said the group held R1,5bn in cash at the end of the quarter and R2bn of debt.

The development of the mine at Cerro Corona in Peru would cost about $277m in the next year.

Gold Fields would also spend about $18m to expand the Choco 10 mine in the next six months.