Gold Fields - H1 2023

Transcript

Martin Preece (Interim CEO)

Good afternoon, good evening to those in other parts of the world. Thank you for joining us at the Gold Fields H1 2023 results presentation. Myself and Paul will be taking you through the slides. I think before I start, I wanna touch on the announcement we made about Paul giving the board intention of his request to go on early retirement, which we've put in the book and the results this morning. Paul has been with the company since 1996, has been a loyal servant and has done the company really well. I think he's seen the transformation of this company, being a South African narrow-based, narrow reef, based sort of miner to a globally diverse, gold miner.

He's been the CFO for the last 15 years, 14 years of which he has, has been an executive director of the company. I think certainly I've got to know Paul over the last 6.5, 7 years, he's been key in helping us at South Deep, to get South Deep around the corner and over the, over the hill. More recently, as I've taken up this, this interim role, I think Paul has provided significant guidance and support to myself and the rest of the executive, so that we maintain stability in the company and I think continue producing good results. You know, I've-- I'm indebted to Paul, as is the company. I think pleasingly, Paul is in no rush to go, so this won't be the last time you see him.

We've started the executive search for Paul's replacement, but as you can imagine, that will take some time, and I'm sure we'll see Paul here at the next set of results. So it's certainly not a farewell, but it's allowed us to start with the process to find Paul's replacement. Paul, if you'd like to maybe add a few comments.

Paul Schmidt (CFO)

Yeah. Just thank you for the very kind words. Just, this is, this is about a lifestyle change. As Martin said, I've been with Gold Fields for a very long time. My wife and I, we just, we wanna go and relax and enjoy life, and that's what it's about. Thanks, Martin.

Martin Preece (Interim CEO)

Good. Well, if we can then move on to the, to the slide deck. I just wanna draw your attention to the, to the statements, and to please take note of both the, the forward-looking and the non-IFRS measures. If we can then move on to what we're gonna cover today, start off with the salient features for H1. I think some really positive developments in the ESG space that we'll cover. We'll run through the operations at a high level. Of course, the Salares Norte update. Paul is gonna run us through, through the financials and where we are, and then I'll just conclude at the end. If we can just go on to the salient features. Unfortunately, we suffered one fatality in quarter one, which we have reported on, and three serious injuries.

It takes us to one fatality and three serious injuries for H1. The fatality, it was our Tarkwa mine in Ghana. I, I can assure you that this is front and center of both the executive and the board's minds, and we've deliberated this at length this week, while we've been gathering in Perth. In terms of ESG, as committed, we have submitted our GISTM and tailings reports for our high, high-risk dams at the three at Tarkwa and the one at Cerro Corona on the 3rd of August. There are no material dam safety-related issues. We've still got work to do around community engagement, around emergency response and preparation plans. Operations have seen a 4% year-on-year decrease in attributable gold equivalent production.

This is largely related to the planned downscaling at the Damang mine in Ghana, which we have spoken about. Adjusted free cash flow for the half year at, at $140 million. I think pleasingly, all-in costs only 3% up year on year, in a very difficult inflationary environment across most of our regions. The balance sheet has seen a net increase of $324 million of debt, largely driven by the Windfall payment of $222 million, for our entry into Canada, and the dividend that we paid, which included a portion of the break fee of $215 million.

The net debt to EBITDA ratio has climbed to 0.42, and Paul assures us that we will make hard work to drive that back down in the second half. In terms of dividends that we've declared, we've declared a dividend of ZAR 3.25 per share. That equates to 35% of our normalized earnings, which is in line with our dividend policy. Corporate actions, the proposed Tarkwa/Iduapriem JV in March, which we announced, we're progressing well with AngloGold Ashanti, getting the necessary in place between the two JV partners. Initial discussions have commenced with the government of Ghana, and we will be dictated to by their timeline as we go along. We closed and announced the Windfall joint venture in Canada in May. We're very pleased with the progress there.

Permits for construction have been submitted, and we expect approvals in quarter four next year. Pleasingly, the team at Salares Norte are confident that we remain on track to deliver our first gold in quarter four this year. I have touched on Paul and his early retirement. I think the last point on the slide is that we're happy to report that our full year production and cost guidance remains unchanged from what we guided earlier in the year. Just at a snapshot, Australia remains a really critical region for us, both in terms of production contribution of 44%, 41% of the cash flow.

Ghana also very, very important to us in terms of the cash flow they're generating, as well as the production and then the balance between the Americas and South Africa at South Deep. Obviously, that Americas dial will move significantly with Salares Norte coming, coming on track. Production at Australia coming in at an all-in cost of $1,270. In South Africa, $1,387. The Ghana team at $1,210, and then at Cerro Corona at $990, taking the overall all-in cost to $1,398 per ounce. Paul will delve into the details of the cost as we go along. We just touched on ESG. This is our dam at Cerro Corona. That's one of the dams we've submitted our tailings report for.

You can see it's a well-constructed dam, and we certainly believe well managed by the team there. On health and safety, as with the trend in many of our, our, our peers, we're expanding our concept of zero harm, I think, to move beyond just physical health and safety and include psychological well-being of our people. We're doing a lot of work in that space. I have touched on the fatality at Tarkwa. We've also had one non-operational fatal incident at the Tarkwa & Aboso Stadium. That's a community project that Gold Fields is funding in Ghana. It's a soccer stadium that hosts national games. Unfortunately, a contractor working there in the foundation lost his life to an incident.

We've had three serious injuries, a slight rise in our total recordable injury frequency rate, as well as the lost time injury frequency rate, and the occupational disease frequency rate. I think importantly, during the half year, we've launched the Gold Fields Way culture journey, I think very much aligned to creating respectful and psychologically safe workspaces, and there'll be more on that in the back end of this month when we release our report on that. I think decarbonization is a highlight and certainly an area that we believe Gold Fields leads in. We've generated 5% less carbon than H1 last year at 819 kt, and the intensity is 3% lower.

I think importantly, we've moved with our total energy derived from renewables, has moved from 12% to 16% with the Gruyere and South Deep solar plants now in operation. The big focus leading up towards the end of this year is the St Ives microgrid, where we're aiming to get approximately 70% of the power requirements of St Ives from renewables, with a split between solar and wind. We expect delivery of that by the team in the November sort of board cycle. We've completed the rebase study on our Scope 3 emissions, and we do plan to produce and publish Scope 3 reduction targets at year end. I did touch on the tailings management, but we have submitted our disclosure reports for both Tarkwa and Cerro Corona.

I did say they were both in partial conformance, and the focus now is on community engagement with regards to emergency response and preparedness. We're working hard on the remaining 33 tailings storage facilities to report by August 2025, and we would envisage that if, if those, facilities come, to ready for reporting before that, we would report earlier. Then our team has also joined the GeoStable Tailings Consortium, looking at how we implement new technologies to further advance, tailings and the management of tailings facilities. In terms of operations, at a group level, we did touch on all in, at, attributable production decrease of 4%, down to 1.154 million oz, largely driven by the reduction at, Damang. All-in costs up 3%, and Paul will go into the details.

Adjusted free cash flow, down from the $518 million H1 last year to $482. I think importantly with this slide is that guidance, both in terms of cost and ounces, remains intact for year end. Australia, cost pressures remain in Australia, a 3% increase in all-in cost. Sorry, a 5% increase in all-in cost, and we're down 3% on production. Some challenges at Gruyere, we certainly believe that that will come back on track. At grade issues at Granny Smith and some volume at St Ives. Certainly, we will bring that back on track, and between the mix of the group, we will achieve our guidance.

In South Africa, at South Deep, production decreased by 5% year-on-year. You've seen the book impacted by some ground conditions, three major ground events in Q1. We've downgraded guidance to 10 tonnes of gold or 320,000 oz for the year. We've expected that the steady state of 380,000 oz per annum will be reached in H2 2025, pushing that out by a year. South Deep's cost performance remains strong, generating $97 million in the half. The costs also more a little bit under pressure, partly by volume, and some inflation, but still a strong financial performance from South Deep. In Ghana, a really strong performance by the team there.

Production decreased by 6% to 360,000 oz, but both Damang and Tarkwa are exceeding what we had planned for the year. All-in costs, marginally, marginally up, but well under control, generated $116 million of free cash. I did touch earlier that we are working on the Tarkwa-Iduapriem JV, and we have started engagements with government. The future of Damang and Asanko are being considered and worked on, I think, with a lot of focus and energy at the moment. Lastly, if we go to our operations in Peru, strong operational performance. Production increased by 4%, driven largely by higher grades and recoveries.

All-in costs up 1% at $990 per equivalent ounce and generating cash of $71 million. It's a perennial great performer, Cerro Corona, and we're very pleased with the performance of the team there. We can just update you on where we are with the Salares Norte project. Total project at the end of the half was at 94% versus 87% at the end of the year. CapEx of $81 million was spent by mid-end of June, and a total of $124 million for the year for the half so far. I think very pleasingly, the regulator has approved our amended chinchilla relocation plan. Approval is for commencement as we move through the spring into summer, starting in September this year.

We're looking forward to being able to report on the successful relocation, which will take place over a 3-year period now. Construction at 95% versus 86% at the end of last year. Skills does remain a challenge in that space, but as we get nearer and nearer to completion, obviously, we should start seeing a tapering off of that requirement. Plant was at 92% versus 77%. A lot of that progress is now about OEMs signing off on commissioning to keep our guarantees in place. Then I think very pleasingly, the mining team has continued to mine, so we've moved 16 million tonnes during the half. Total moved tonnes to date is 67 million tonnes. 51 obviously last year and the balance in the half.

I think we've now got 840,000 tonnes on stockpile, with 172,000 oz in stockpile at the end of June. We're on track to have just shy of 500,000 oz on stockpile by end of December. The exploration work continues, and our team is very focused on finding the, the, the next piece of the puzzle there, and we remain on track for first gold in quarter four. You can just see the pictures. We've spoken about this before. I, I think if you start in the top right-hand corner, that is the primary crusher and stockpile facility that is completed and commissioned. They've run the belts and run some ore through that. If you then move to the left, that's your main body of your process plant.

The leach tanks in the background are starting to be filled with water again, and they've run the paddles in some of those during the night. That should, in the next week, all the leach tanks should have water in and should have the paddles running. We have run the thickness in the foreground before. I think importantly, the picture at the bottom left-hand side of the graph is your buildings where the Merrill-Crowe is. That's the big building, and then the carbon building just beyond that, the carbon recovery. Merrill-Crowe accounts for 85% of the metal, and the last 15% are the carbon circuit, and the other plants are just to assist with those processes, where we do our reagents.

I think the important thing is the cladding is on those buildings, and as such, we will not be impacted by weather events going through the winter, because people can work indoors in a, in a safe environment. Those two cranes that are left there are just doing the last bits of work, but essentially, all big craneage is done. Then in the bottom right-hand corner, that's the lined tailings facility, also basically now complete, where we stand today. We're ready to start the deposition of tailings once we commission the plant. Paul, if I can hand over to you to run us through the finances.

Paul Schmidt (CFO)

Thanks, Martin. Martin has already alluded to some of the salient features. I will talk to free cash flow and net debt on later slides. Just to talk to the all-in costs, 3% up year-over-year. Really pleased to confirm that we're on track to meet our guidance, reminding you our guidance was $1,480-$1,520, and current forecasts show whether we use exchange rates we use in guidance or forecasted exchange rates, we will meet guidance. A lot of people will ask, but the guidance is a lot higher. Remember, we normally spend more capital in the second half of the year. We always have a slow start-up, so, yeah, we're on track for the $1,480-$1,520.

Pleased to confirm the interim dividend of ZAR 3.25. If we can go to the next slide. Really very proud of the ESG sustainability-linked loan that we did. It's the first for Gold Fields. I think this just confirms and emphasizes Gold Fields' commitments to ESG, and we've linked it to three of our key ESG priorities: gender diversity, decarbonization, and water stewardship. We can go to the next slide, please. We can talk to the cash flow. If we look at it, the operations, which we call adjusted free cash flow from operations, generated $482 million. We put $202 million into Salares Norte, leaving us $280 million. After taking all the interest paid, et cetera, we ended up with $140 million.

It's a lot lower than last year. One of the main differences year-on-year is that we had a very, very big investment in working capital in the first half of this year. $22 million related to a prepayment for a new camp at Salares. We're going to build a new camp in Kambalda around the Salares mine. Also, we had a circa $90 million build-up of stockpiles, mainly at our Tarkwa mine and Cerro Corona, as well as some smaller amounts at our other mines. If you wanna move to the next one, please, Thomas. Our net debt, net debt has increased to $1,028 million.

As Martin said, it relates to our final 2022 dividend payment of $215 million, our capital injection of $222 million to purchase the Windfall project as well. We had another $33 million that we contributed in terms of capital calls. If we exclude the leases, 'cause remember, this increases leases, our actual true debt at the end of June was $629 million. Our net debt to EBITDA, 0.42, reminding our covenants are 3.5x net debt to EBITDA, so well within our covenants. That's all I have. I'll hand over to Martin for the conclusion.

Martin Preece (Interim CEO)

Thanks, Paul. In terms of conclusion, I, I think one of the big highlights for H1 is we took the significant step on our culture journey by launching The Gold Fields Way, followed by a summit with, with our, I think, a diverse group of leaders from all our regions. We recognize the need to build a, I suppose, an inclusive, diverse culture in which people feel they, they belong, and we think that could be a significant differentiator for our business. As we face skill shortages, we've got some pressing issues to address around our, our, our culture and we will be releasing our Elizabeth project report at the back end of, of this month.

I think in terms of pillar one, maximizing the potential from our asset, we've taken the board through a proposal on our asset optimization framework this week, and we've started developing key initiatives to drive our asset optimization, and we'll be reporting at that in the beginning of next year with the full-year results. We will lay out the detailed asset optimization plan and the value we're chasing. In terms of our ESG commitments, very proud that we've now moved to 16% of our energy is from renewable sources, and, you know, under Paul's stewardship, we're driving that on a value-accretive basis, and we're taking long, hard looks at our investments to make sure they are value accretive.

We've, we've done the tailings disclosure reports for both Tarkwa and Cerro Corona, as we committed, and as Paul said, a, a big step forward, we've got a sustainability-linked loan. Growing the quality and the value of our portfolio, we've, we've started the negotiations with government, around the Tarkwa-Iduapriem JV. The Windfall JV announced and concluded in May. The teams are working really closely to align processes, the permitting is underway, and we're looking forward, to that being, the next sort of, real success at Gold Fields. Lastly, Salares Norte is making great progress and on track for first, first gold in quarter four. The team, is, committed, and I, I, I believe, doing a great job.

Just in terms of guidance, Paul has touched on this, and I don't wanna consume time, but I think the essence is that we remain on track, both from a production perspective in terms of ounces and costs. I think importantly, our big focus for H2 remains getting our first gold from Salares Norte in quarter four. Continue the progress on organizational culture initiatives, including the progress towards zero harm. I touched on asset optimization. We believe there's a big opportunity there. Decarbonization remains front of mind as well, and we see value in that. As we touched on the discussions around Asanko and Damang, some work to do on portfolio management. Those would be our big focus areas.

I think we, we can conclude there, Thomas, and, I'm sure Paul and myself will be happy to take questions.

Thomas Mengel (Manager of Investor Relations)

Thanks, Martin and Paul. If we could go to the phone lines first, please.

Operator (participant)

Of course. We have a few questions on the conference call. The first one is from Catherine Cunningham of JPMorgan. Please go ahead.

Catherine Cunningham (Equity Research Associate)

Hi, guys. Thanks for the call, sorry if one of these has been addressed, I did get cut off. I have two questions. The first is on Salares Norte. I appreciate you say that you're on track for Q4 production, but I did notice that the, the guidance is lower for Q4. Just maybe some color on what's driving that and whether you see any risk to the pace of the ramp-up post the fourth quarter. Then also just briefly on South Deep, I think you said on the earlier call that you, you plan on bringing contractors in to plug the skills gap. Could you maybe just share some color on the, the impact that you expect to labor costs on the, the back of that? Thanks.

Martin Preece (Interim CEO)

Let me start with South Deep. I think the question was, we've contracted in some skills, and what do we think the cost impact will be? What we've contracted in a small part to make up some of the shortfall that of roles we're struggling to fill or where we're training people. Certainly not, this isn't a long-term, full-time intervention. Those costs or those skills are coming at a slight premium. Certainly in the materiality of South Deep, those skills, it's maybe 10 or 12 people and would not have a material impact on cost, and certainly far outweighed by the impact of getting the drilling up and breaking stoping done. We don't see material impact on cost with that.

I think in Salares Norte, we, we put in broad guidance at the beginning of the year. I think we've, certainly, you know, we've looked at it as we go into quarter four. We've marginally scaled that back. At this stage, the team is still confident of a rapid ramp-up once we've commissioned the project. I, I did touch on the answers that will be on stockpile that we are commissioning in parallel to construction. We've got, you know, the crush of the stockpile running. They've turned the mill, we've put water in the mill, and the OEM now comes and does the final commissioning on the mill. Work is happening with the filter plant at the back, as well as the leach tank.

The team remains confident of a, a big ramp-up of production next year.

Catherine Cunningham (Equity Research Associate)

Thank you so much.

Operator (participant)

Thank you. The next question is from Jared Hoover of RMB Morgan Stanley. Please go ahead.

Jared Hoover (Equity Analyst)

Afternoon, team, and thanks for the call. Three questions from my side, please. I just wanted to just touch on the Exco changes, and I mean, I think it's well known that the Exco has probably been in a degree of flux over the last 6 to 12 months, and now you've got Paul, who's retiring, will probably lend a degree of continuity to the leadership team. For me, the risk has always been that these leadership changes would potentially be reflected in a regression in your operational performance. Arguably, we've seen that now in South Deep, Salares and Gruyere. My question really is, to what extent do you think that these leadership changes might have contributed to the regression in operational performance? Can you help us understand potentially, maybe that there's just one-offs that have contributed to the regression in performance?

That's my first question. My second is around South Deep, I mean, obviously, this mine had a pretty good run over the last 3 years or so. You've reorientated the mine to control seismicity, you've upskilled the workforce. There's quite a few other changes you've made as well, now production has been downgraded slightly for this year. Longer-term guidance, the buildup is pushed out a bit. You flag skill shortages, I think you're remedying that with the contractors. For me, the bigger issue is around the unexpected events that you've encountered at South Deep.

My question around that is: do you think that you might need to go back into experimentation mode at South Deep, potentially having to reorientate the mine, and therefore, the risk to your production outlook over the next 2 years is actually lower than what we might be expecting at this point? Very lastly, just on your asset optimization, I mean, I appreciate that you'll probably give us something a bit more substantive in the first half of next year. Given that I think you started this program at some of your bigger assets, like St Ives, how should we be thinking about the impact that this program will have on your business?

Should we be thinking about a step change lower in your unit cost into 2024, or is this program really just going to offset the elevated levels of inflation that we're seeing? I'll leave it there for now. Thanks.

Martin Preece (Interim CEO)

Thanks, Jared. I, I think I'll start with the Exco question, and, there has been flux, but certainly, the roles have, have been filled. We've, we've got great team members, that have, have joined the executive and, certainly the way Gold Fields works is we've got a strong regional model. I think if you looked at, you know, all the distraction last year around Yamana, where the corporate team was very focused on trying to get the Yamana, you know, deal over the line. What you have in Gold Fields is you've got your, your four regions that are headed by executives, that, that have carried on and delivered a good set of results last year.

You know, bar some hiccups this year, have delivered a good set of hiccup, a good set of results this year. You know, there's some ups, there's some downs. Paul leaving, he's, he's got us through, through the stability. He's helped us stabilize the business. He's been part of the recruitment and selection of, of the new executive that we've put in place. Paul won't be leaving next week. You can expect to see him at the results presentation, I'm sure in February, because searches like this take a long time, and we, we wanna get the right person. You know, we're not in a rush to rush Paul out of the office.

Certainly, for me, it's quite important because he's, he's the first one in the office, and I'm the second one, so at least I've got somebody to talk to in the morning when I, when I get in. I, I'm, I'm confident that we've got a great team in place. We wanna build a business that isn't personality-based, and we, we will keep on putting good people in place, and you will see changes over time. People get older, get retired, but our regional and, and central model, I think, works, works well for us. I think at South Deep, we're confident with the overall trajectory of the mine and, and the remodeling we've done. Like you said, about seismicity, the reorientation of the mine. I think the, the workforce, we, we've had these problems with ground conditions.

We've, we've had a stope that unraveled across a main access drive, in one of the key corridors, and that, from a safety perspective, we're not prepared to use just a single access to get to the remainder of that corridor until we've opened it up. We, we lost a footwall ramp into an old, narrow stoping area. The, the main access drive, we expect to be back into that cut in, in Q4. The other two areas that failed, the team are back in there and producing. It has impacted on guidance. If I can talk maybe longer term, to build some flexibility into South Deep, we motivated last year to the board to head towards South of Wrench a little earlier.

I think what we do know is that at 2.5 to 3,000 m below surface in a seismically active mine, just-in-time production is most probably not the right way to go. We've started slowly getting our, our sort of, lead development teams at the bottom to inch their way towards South of Wrench. We wanna get in there, start opening up that area so that when events like this happen, we do have the capacity to go somewhere else. There has been some change at South Deep. We've, we've said that most probably getting to the 380,000 tonnes is pushed out by a year. That's what we're guiding. I think it's on a steady trajectory. You'll see we've made just shy of $97 million for the half.

It's, it's, it's not just watching its face, it's making a valuable contribution to the business, and we'll stay on top of it. I think in terms of asset optimization, we've broken that into three components. Business improvement elements, which would be the incremental changes that we'd expect, the operations to run. Breakthrough interventions, which would be more regionally based interventions with a, a team trying to sort of get a bit more of a step change. And then transformational interventions, which would fundamentally look at moving the cost base significantly. Obviously, the plan we've put to the board is, we're proposing certain targets that we've, we've got to define over the next few months for, for a 5-year period. We'll see some of it coming through incrementally over a 5-year period.

You don't do transformational moves in, in one quarter, so it will be a steady increase. Hopefully, it's gonna erode some of the impact of inflation over time. That would be the intention. We've also got to look to find cheaper and better answers.

Jared Hoover (Equity Analyst)

Great. Thanks, team.

Operator (participant)

Thank you. The next question is from Raj Ray of BMO Capital Markets. Please go ahead.

Raj Ray (Managing Director)

Thank you, operator. Good afternoon, Martin and team. My first question is on Salares Norte, it's a follow-up from what Catherine asked. Martin, you did highlight that you remain comfortable for the ramp-up in 2024. If there was one risk that you would say is something that keeps you awake, what would that be in terms of the ramp-up next year? Because the 500,000 oz in the first year of production is a pretty significant milestone, if you can talk to that. Second, on the chinchilla relocation, I did see that you're looking at options of mining that part of the deposit from underground. Is that a requirement of the relocation, or is that something Gold Fields is looking at?

If so, what could be the potential impact on, let's say, additional capital or, or, or even the production profile when you get to that part of the mine? The second question is on the skill shortage that you have highlighted across the portfolio. I do appreciate that South Deep is a challenging mine.

You need continuity, and just bringing in a contractor, does that really solve the problem, or do you want to, at some point, look at the longer-term steady state and say, "Well, maybe 300, 350 is the better way to go?" Also looking at Australia, from what I remember from the site visit, last year, it's got a good run rate of around 1 million oz, but there's a lot of development that needs to be done in terms of underground infrastructure upgrades, possibly looking at new shaft or hole options, new mining fronts.

And the skill shortage there, is that something that can impact your medium-term outlook for, for that portfolio? One last question on Asanko. I saw that the new mining contract has been awarded, but the feasibility study approval is still pending. Can you share some thoughts on what you are thinking about it?

Martin Preece (Interim CEO)

Yeah. Raj, thanks for your questions. The, the ramp-up must be front of mind for us. You know, but I think what we, we must bear in mind with the ramp-up next year is we don't need to treat in terms of volume at full capacity because you've got grade. You have a an advantage in terms of grade next year that, that drives some of the answers. We certainly don't need to run that process plant at, at full tonnage capacity next year. We, we keeping a very close eye on it, Paul and myself. That would be the thing that would keep us awake, that, that Salares Norte moves the dial materially for, for the group next year. That we'll keep a close eye on it.

We're focusing on the production to get it going this year and to, you know, we have to keep a close eye on it. That, that will keep us awake. At this stage, the team has assured us that we're in a fairly good space. In terms of the chinchillas, we have got the permission now to relocate. What we did do, as the relocation plan was being, I suppose, authorized by government, we were getting worried in terms of timing. That's when we initiated the underground study to mine the second open pit, Agua Amarga. That and it's just, I suppose, a good thing to do, that we had somewhere to go if we didn't manage to get the permit to relocate the chinchillas that are over that area.

Essentially, what you, what you do with the open pit, you end up with very similar economics on at a conceptual pre-feas level, and the team will present a more detailed study to us towards November this year. You replace a very high strip ratio open-pit mine with a very low strip or waste ratio to ore ratio underground mine. We plan. The sort of initial thinking is to access the Agua Amarga deposit through the Brecha Principal pit on bench two, and then mine it from underground. We also believe there's a little bit of upside with that underground option because there's certain lenses of ore that went beyond the current open pit that we'd be able to get.

The other, the other potential benefit of it is obviously reducing that strip ratio would significantly offset or reduce our carbon emissions with the, with running diesel trucks. They have approved the chinchilla relocation plan. We, we're confident that the, the plan we've proposed is gonna have a, a good success rate. We've got to think about if we did wanna move to underground, there's gonna be a permitting element to change the, the mining method. That's all stuff that's water that's got to flow under a bridge late this year, early next year. I think skill shortage, I think there's two different problems in Australia.

You've got a booming commodity market, you've got the big iron ore, miners in the Pilbara that we're competing for skills with, and you, you're sitting in a country, with less than 3% unemployment. You know, we can't compete on price. We just, we can't do that. We impact on our, on our bottom line too much, and that cost gets baked in. We believe that we are paying a very competitive, you know, salaries and bonuses. We've, we've got to look at different things to attract and retain people. We've got to look at innovation and technology, so that we automate and, and hopefully can do the same with less people.

At South Deep, what I've been saying to some of the calls earlier today, they've become a victim of their success in that, I think their stoping, longhole stoping skills were most probably not up to par. Over the last, you know, few years, they've developed a very competent base of longhole drill rig operators and maintenance per-personnel around that. We, those have been poached for by a large diamond mine that is busy commissioning the underground, as well as the big copper deposits in the DRC. In response to that, we've, we've taken on additional people.

We, we're training surplus to requirements, and we, as I said earlier, we've brought in a contractor to try and fill some of that gap in the short term while we build up the number of people and the competency of people to do that. Artisans and maintenance staff are still a challenge, and we, we're working on that. In terms of Asanko, the outstanding piece of the feasibility that we're working with Galiano on is, is the reserve and resource estimates. I think the, the mining plan, the mining costing per se, is not a challenge. It's about the sort of confidence we have in the resource and reserve models that have been produced. Both teams are working on that....

We're also looking at our options, with what we wanna do with Asanko and, and Damang, as I said. We, we would hope to conclude that very clear way forward in the coming months.

Raj Ray (Managing Director)

Okay, that's great, Martin. Thanks a lot. That's it from me.

Operator (participant)

Thank you. The next question is from Adrian Hammond of SBG Securities. Please go ahead.

Adrian Hammond (Resources Equity Analyst)

Hello. Afternoon, chaps. Martin, you've shown best-in-class cost performance versus your peers, clearly with quite lower inflation. Could you perhaps just give us some color on how you've been able to do that? Whether it's the assets themselves or your, your cost discipline efforts. Then secondly, the asset optimization plans you've put in place, what deliverables should the market expect to measure you by on this? Will you give us new cost and production targets or what should we be looking forward to next year? Then for Paul, Paul, you're on your way out, but obviously, you've still got some time. What do you think are the key issues on your to-do list before you leave? Thanks.

Paul Schmidt (CFO)

Adrian, let me just talk to our good cost performance. I think as what I said when I talked about the all-in cost, is that our capital is skewed in towards the second half of the year, and we're gonna obviously spend a lot more towards the end of the year. The 1380 circuit that we've talked about for the first half will be a lot higher towards the end of the year. I think we've been working hard on cost control. I don't think there's any magic, to be honest. A lot of it, as I said, is the, the capital. I have included a slide at the back of the presentation, which shows the inflationary pressures we are facing.

I mean, it's, it's a day-to-day job where we're talking to the teams on site as to how they can offset it or mediate some of the inflationary pressures. Especially in Australia, we're seeing huge pressures on wages. Martin alluded to it with the, with the iron ore mines putting pressure on us on every day. Secondly, you know, inflation, you asked, what am I want to do before the end of the year? It's inflation. Inflation is to, how do we tackle it? As Martin said, the number one priority for us is to get Salares Norte up and running by the end of the year.

That's what we all gear to, because that, as you know, is the big cash cow for Gold Fields for the next, 3 years as it ramps up to the 500,000 oz.

Martin Preece (Interim CEO)

Salares Norte just moves the dial, Adrian. In terms of, you know, cost performance, Paul must take a lot of credit. I think he keeps us all very focused on it, so that's an addition I'd have. I think we've also, you know, got to, I think, give praise to our regions. Again, the model we use, you know, the heads in the regions and the teams in the regions and the general managers, you know, they understand the importance of cost performance, what it does to our resource and reserves, and the team is very focused on it. There's a discipline around costs across our business.

I think in AO, in terms of what, what to expect, I, I'm not a, a big cut costs out of the business, person, but I certainly believe we've got to take wastage out. The, the two elements that drive value with asset optimization, Adrian, is you've either got to spend less money or produce more ounces. The, the kind of initiatives that we are looking at is how do you eliminate wastage, duplication, and unnecessary costs? I think there's necessary costs in the business, and those we, we must spend. Then looking at a number of initiatives that can move the dial on productivity, and that, that, by virtue of the fact that you can produce slightly more ounces from a particular block or, or from underground at a cheaper cost, that's what drives the dial.

We, we need to try and move the dial on the bottom line, Adrian, and that, that protects us against, you know, the inflation impact, and it, it gets us ahead of our peers.

Adrian Hammond (Resources Equity Analyst)

Good to that. Thanks, Martin. Thanks, Paul.

Operator (participant)

Thank you. The next question is from Cameron Needham of Bank of America. Please go ahead.

Cameron Needham (Equity Research Associate)

Thank you both for the presentation. Look, firstly, regarding the labor situation you've discussed in Australia, are the issues in terms of labor shortages becoming, you know, severe enough and going on for long enough such that they would actually influence how you allocate capital across your portfolio? Then just as a follow-up to that, have you had any engagement with the government in terms of perhaps making it easier to import labor? Thanks very much.

Martin Preece (Interim CEO)

I, I think it's something on our radar screen. The, the cost or the labor turnover has come down marginally. I think we're sitting at between 17% and 18% for the Australia region at the moment, which is better than where it was at the beginning of the year. The government, we met with Minister Johnston on Monday evening. Certainly, we, we found a very engaging government. There has been relaxation about skills, bringing skills into Australia. When I've traveled around the, the operations here, it's certainly the most cosmopolitan group of people in our business. You find people from all nationalities working on our mines in Australia. I think the government is doing their bit to enable the resources sector in terms of making it easier to get resources in.

Cameron Needham (Equity Research Associate)

Very clear. That's all from me. Thanks.

Operator (participant)

Thank you. The next question is from Leroy Mnguni of HSBC. Please go ahead.

Leroy Mnguni (Mining Equity Analyst)

Hi, good afternoon. I've, I've got two questions. The first one, if, if I look at the Tarkwa all-in sustaining costs, you're below about $1,200 an ounce. You've cut your guidance for the year slightly, it still remains quite high relative to what you delivered in the first half of the year. I was wondering if you could share some insights on some of the cost headwinds that you're expecting there in the second half of the year. Is that also linked to higher CapEx? The other question: I remember at your year-end results a few months ago, you alluded to some reserves in Australia that were close to being confirmed.

You were expecting to add those on, but just couldn't get it done in time for, for the, for the results. I was just interested in whether there's an update on those, and if you are planning on adding any additional reserves in Australia.

Martin Preece (Interim CEO)

Let me, let me start with the reserves question, then Paul will, will answer the cost question. What we spoke about at half year is aligning our reserve and resource program with our business planning cycle, that was one of the things, we had the two out of sync. What we, what we've done is we've brought the two into sync. We've given exception to one mine in Australia, Granny Smith, they're gonna be able to submit their reserve and resource conversions a little bit later than the rest of the group. What we were concerned about is that with changing the cut-off date early in the year, we would potentially not replace, as Australia consistently does, all the reserves and resources.

We are busy, obviously, now that the drilling's in, the assaying's in, and we've got our costs coming out of the business planning, in the process of, of obviously preparing for our business planning, which we, we sort of pull together in October and November. We will update you towards the end of the year. I think the one positive for us is that we've aligned the reserve and resource process with our business planning process, we, we're not gonna be out of sync in terms of mine designs and the resources and reserves. That was the anomaly I think we were trying to explain at the beginning of the year, Leroy.

Paul Schmidt (CFO)

Leroy, on Tarkwa, I'm not sure what you're referring to, but we've actually downed the all-in cost guidance from $1,390 to $1,370. That's a factor of the higher ounces, upgrading it from 545 to 550. If you're saying, why are we at $1,181 for year-to-date, and we're still in line to get $1,370, it's what I said earlier on. We skew our capital, generally less capital in the first half, more capital in the second half. I think one of the positives that we've seen in relation to our guidance is that we've had a slightly lower fuel price in Ghana. I hope that also answers your question, and that's what you were asking me.

Leroy Mnguni (Mining Equity Analyst)

it does. Thanks, Paul. Thanks, Martin.

Martin Preece (Interim CEO)

Thanks, Leroy.

Operator (participant)

Thank you. We have no further questions on the conference call, and I would like to hand back for questions on the webcast.

Thomas Mengel (Manager of Investor Relations)

Thank you. We've got a couple of questions on the webcast. The first one comes from Teleki, from Merithody Capital. Asked, you know, are there any plans in the short term, i.e., next 6 months, to bolster your balance sheet? If so, please advise.

Paul Schmidt (CFO)

No. As we did announce, we renewed our $1.2 billion group facility. It's now, there were two. It was made up of a 3-year and a 5-year, $600 facility. We've now got a one facility of $1.2 billion. It's a 5-year facility with addition to add 1 + 1, effectively taking us to 7 year, plus a $400 million accordion. One of the reasons I'm in Australia, been in Australia for the last 2 weeks, we're busy renewing and renegotiating our AUD 500 million facility, and hopefully by late September, early October, we would have completed that, and that will be similar to what we have at the moment.

On, in terms of, next year, as I've said before, we have the 2024 bond maturing, $500 million, and we want to pay that out of cash flows. As I said to Adrian, Salares Norte is a big kicker for us next year, and we're going to use most of the cash flows from Salares Norte to pay down the bond. It's not our intention to do a new bond next year.

Thomas Mengel (Manager of Investor Relations)

Thanks, Paul. Next question comes from Arnold, from Nedbank. He asks, "Is launching the Gold Fields Way culture journey a proactive initiative or in reaction to issues or challenges you've encountered recently? Is this related to some of the recent safety incidents?

Martin Preece (Interim CEO)

Arnold, thanks for the question. I think it's certainly a proactive initiative. You know, if you look at, at our cost base, the better part of 50% of our costs is linked to our people, and we certainly believe that, if we can create a more diverse, inclusive, equitable workplace where people have a sense of belonging, we can certainly get people to reach their full potential, but I think unlock discretionary effort. It's our fundamental belief that people are the thing that's gonna move the dial in our business. So proactively, we wanna, we wanna drive this, that we're the, we're the company, the go-to company, where people will come and want to work with us.

Thomas Mengel (Manager of Investor Relations)

Thanks, Martin. Next question is from Josh, from RBC. He's asking: Why was mining at Salares Norte solely focused on waste stripping in Q2? Has infill drilling provided any new information about reconciliation or required changes to the mine plan?

Martin Preece (Interim CEO)

I think, Josh, that's largely related to where you're doing your cuts. We have no pressure at the moment to stockpile more material. You know, we're waiting for the plant to commission, so the focus essentially in the beginning or in this Q2 has been around waste stripping. We're back in the bottom of the pit now, stockpiling ore again. We will meet the full year's mine plan as put in the guidance at the beginning of the year.

Thomas Mengel (Manager of Investor Relations)

Thanks, Martin. Next question is from Kendra, from Visio. The question is: What are the disadvantages to going underground at Agua Amarga? I.e., why did you initially plan to go open pit?

Martin Preece (Interim CEO)

I think open pit is, I think historically always been your, your go-to way. It certainly, I think in a traditional mindset, would carry less risk, would be more economic. You can move bigger volumes. What we did is with the chinchilla challenge, we started relooking at that. I think in a world where we're trying to reduce carbon, one of the big benefits of an underground operation would be on a strip ratio in excess of 20 to 1. That's a lot of diesel you're burning, it does come at a slightly elevated cost underground. The initial thing which we were setting up an open-pit mine, you had two ore bodies that lent themselves to open pit. I suppose the chinchilla issue forced us to relook at that, we're relooking at it.

I wouldn't, you know, I wouldn't bank the underground option now. The economics are similar of open pit and, and underground that we've done, but we need to look at it in more detail when they present the study. We need to bear in mind timing because there will be a permitting process associated with that, and whether we can maintain production continuity that the permitting doesn't delay us.

Thomas Mengel (Manager of Investor Relations)

Thank you. Next question is from René, from Noah. He asked: Can you comment, or do you have an update on your resources and reserves in terms of ounces or average life for Gold Fields mines?

Martin Preece (Interim CEO)

Rene, thanks for the question. That is something that we publish annually, and the team is working on that towards the end of the year. It will be published early next year as part of our annual reporting.

Thomas Mengel (Manager of Investor Relations)

Thanks, Martin. From David, from Ninety One. He's asking: Your FX assumptions for cost guidance are quite different from how the currencies have developed over the year. What impact will weaker rand and Aussie dollar have on your costs, and can you quantify that perhaps with a percentage saving?

Paul Schmidt (CFO)

It's what I said earlier in terms of the guidance, I mean, we guided the ZAR 17 to the dollar and AUD 0.7. Our current forecast is around ZAR 18.53 and AUD 0.67. Looking at the numbers I've got in terms of all-in cost, it's around $50 difference between improved impact using the forecast of the exchange rates. As I said, even at budgeted rates, we would still make our guidance, but the difference is about $50 in terms of where we will end. It's a quite a positive impact for us.

Thomas Mengel (Manager of Investor Relations)

Thanks, Paul. Last one, guys. Andrea Phillips from Risk Insights asks: What steps has Gold Fields taken to address the areas for improvement identified in community engagement and consultation and addressing human rights risks?

Martin Preece (Interim CEO)

I, I think we've got a, a, a big team working on that, Andrea, out of the Johannesburg office, under Naseem Chohan's leadership. We, we subscribe to the principles laid out by the ICMM, and I think we're one of the leading members there in this space. Certainly on our radar screen, we, we regularly present these risk assessments and reviews to our board. We covered some of our regions this past quarter, and it's something that we believe we have the necessary governance and structure around to ensure we can keep, keep, best practice there.

Thomas Mengel (Manager of Investor Relations)

Thanks, Martin. That's all the questions, if you wanna just wrap up.

Martin Preece (Interim CEO)

I, I think I'm not gonna try and repeat all the detail. We, we are pleased with how the teams have performed and what they've delivered. Salares Norte remains front and center of our focus in terms of delivery. We've got work to do with our safety. Again, I you know, just to thank Paul, he's gonna be sitting with me certainly at least another one time. If we drag our feet on the recruitment, maybe another two times, Paul. I think I'm gonna have difficulty with Paul's wife then, so I'll have to, we can't drag our feet on that. Thank you for joining us this evening, and we look forward to catching up in the coming week and next year.