World gold output on the decline
By: Tessa Kruger
Posted: '26-OCT-06 18:00' GMT © Mineweb 1997-2006
JOHANNESBURG (Mineweb.com) --Ian Cockerill, chief executive officer of Gold Fields, said that he saw global gold production as falling between 1 and 1.5% annually as new gold mining projects fail to replace declining production at existing mines, at the company’s quarterly results presentation in Johannesburg today. He went on to say that the world consumes 85 milllion ounces of gold from finite ore bodies. Gold production in South Africa and elsewhere will continue to decline in the absence of new discoveries of gold resources.
He confirmed that net production in South Africa was falling despite new projects that are undertaken.
Cockerill believes the gold price is still in a “very positive” cycle and will continue to be strong despite the fact that it has come off its highs. “I believe the driver behind the gold price is still in place. The recent pull back in high prices was a healthy correction.”
He said it was possible that economic growth in China could slow from 10% to 6%, but growth of 6% was still very significant. “Another factor to consider is whether the world can cope with supplying China with commodities at its current growth rate.” A slower Chinese economy would also have positive ramifications for the mining industry as input costs would lower.
Cockerill said a gold price that increased slowly and steadily was better for strong physical demand as volatiliy in the price was damaging to the market’s credibility.
Gold Fields reported a net increase in earnings of what was considered a disappointing 13% for the September quarter of this year – and first fiscal quarter of 2007 – with earnings increasing from R618 million to R698 million (US$93.1 million). Operating profit increased a further 6% to R2 billion (US$267 million) with South African operations accounting for 62% of the profit.
Group margins were at 42%, while the company continues to invest in depth extension projects at Kloof and Driefontein and its bid for the rest of South Deep mine continues.
Its shareholder offer to Western Areas, which owns 50% of South Deep will go out in the next two days, Cockerill said. “The only remaining issue will be approval from the Competition Commission and there is no logical reason why the Commission would not approve.”
Total gold production decreased by 1% to 1,005,000 ounces in the last quarter as South African production decreased by 3% to 649,000 ounces and production from international operations increased 2% to 356,000 ounces.
Revenues increased to R4.7 billion (US$627.5 million) from R4.4 billion on the back of the rand gold price that was boosted 10% to R142,035 per kilogram.
Cockerill said that although a weaker rand added to the company’s bottom line in the short term, it could be a double-edged sword as it could “all of a sudden” result in suppliers demanding higher prices. Operating costs for September 2006 amounted to R2.764 billion – an increase of 10% comprising of a 5% increase in South Africa and 18% at international operations.
Cockerill emphasised that cost control was very critical to Gold Fields as cost pressures were mounting across the board. The company currently has good initiatives in place to deal with cost increases and is coping “reasonably well” with the cost environment.
“Gold Fields is in very strong investment mode locally and internationally and our strong cashflow help us to fund this.”
Overall production from operations is expected to be in line with the September quarter in the next, although gold output at the flagship Driefontein mine is expected to reduce from a little over 8 tons currently to 7.5 tons in the next two quarters due to delayed pillar extraction at No. 4 shaft.
AI
