Gold Fields (GFI)

Q2 2012 Earnings Call

August 23, 2012 10:00 am ET

Executives

Willie Jacobsz

Nicholas John Holland - Chief Executive Officer and Executive Director

Paul A. Schmidt - Chief Financial Officer, Finance Director and Executive Director

Michael D. Fleischer - Executive Vice President and General Counsel

Analysts

David Leffel

Tanya M. Jakusconek - Scotiabank Global Banking and Market, Research Division

Presentation

Operator

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Previous Statements by GFI
» Gold Fields Management Discusses Q1 2012 Results - Earnings Call Transcript
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» Gold Fields Ltd. - Analyst/Investor Day

Good day and welcome to the Gold Fields Second Quarter 2012 Results. [Operator Instructions] Please also note that this conference is being recorded. I would now like to hand the conference over to Willie Jacobsz. Please go ahead, sir.

Willie Jacobsz

Thank you very much. Good afternoon, ladies and gentlemen, and thank you very much for joining us here for the quarter 2 2012 results conference call for Gold Fields. The presentation will be done by our Chief Executive Officer, Nick Holland. He'll be making some high-level remarks on the quarter, and then we will open the call for your questions. I now hand over to Nick.

Nicholas John Holland

Thank you very much and good afternoon, ladies and gentlemen. Thank you for dialing into the call. With me here is Paul Schmidt, our CFO; our General Counsel, Michael Fleischer. And as you've heard, Willie Jacobsz, our Head of Investor Relations and Corporate Affairs. I trust you've seen our results announcement this morning. What I'll do is just give you some highlights and then we can go into your questions.

We'll look at the first half of the year and also the quarter. Here are some of the salient details. EBITDA for the quarter, essentially operating profit, $667 million and for the half year, just under $1.4 billion. Normalized earnings for Quarter 2 were $224 million and for the half year, $504 million. And just to put that into context, last year 2011, we generated earnings of $1 billion, so we look as though we're halfway to what we did last year at this stage.

Operating cash flow, very strong this particular quarter. $514 million generated from the operations and $874 million for the half year. Free cash flow, which is the ultimate measure of what cash generation ability we have in the company, $100 million for the quarter and $120 million for the half year. And the reason that the quarter is a lot more disproportionate than the half year is that in the first quarter of the year, we have our annual or half-annual tax payments, and also there were some working capital movements arising from the year end that usually affect the first quarter. So $100 million is what we've made in free cash for this quarter.

We look at production, 862,000 ounces for the quarter, which is up 4% on the previous quarter. Cash costs were down 2% to $851 per ounce, and that's well within our guidance for the year. And NCE, $1,308. Remember, NCE is the all-in costs capital expenditure, whether it's growth capital, whether it's sustaining or replacements, including all of the operating costs and G&A. That's all in there. $1,308 for the quarter. Again, that's also very close to the guidance we gave for the year.

The performance in South Africa has been a welcome improvement for the quarter. And KDC, the Kloof Driefontein Complex, we saw production rise by 12% to 280,000 ounces for the quarter. And also, if you look at the half year's production for KDC, in fact we were in line with the previous year. The first half of this year is very similar to the first half of last year. And that's a trend that we've not seen for some years. That's a pleasant reversal for us. KDC is now producing in line with what I've indicated a year or so ago of between 1 million and 1.1 million ounces per annum. So what you've seen in this quarter is what we said it would be.

We're also pleased with the progress made at South Deep with our critical power de-stress mining. That's really to open up the ore body at depth. It will be up and starting, which will be the bulk of the mining in the future. And we achieved record levels during the quarter, the de-stress mining going up by 52% quarter-on-quarter. And that bodes well for the future certainly.

Capital expenditure projects at South Deep relating to the key infrastructure being the ventilation shaft, the plant expansion, as well as the full plant tailings facility for the base flow are getting very close to completion, and we should see both the ventilation shaft as well as the plant expansion completed by the end of the year, with the full plant tails facility completed early in 2013. And those particular infrastructure projects will provide the backbone together with the tails facility that's already been commissioned last year for the buildup to full production to reach 700,000 ounce run rate by the end of 2015.

As some of you may know, we have issued a Section 189 notice to the unions during this quarter, in fact on August 2. The mediation process is now underway, and hopefully we'll get a final resolution on this situation over the next few months. So we're hopeful that we can try to find a solution on this particular matter. But there are no guarantees, of course.

Beatrix also had a steady quarter. That is now also producing at a steady-state within its medium-range guidance of about 325,000 ounces to 350,000 ounce range per year, which we provided around a year ago.

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