Gold Fields - Q1 2024
May 7, 2024
Transcript
Mike Fraser (CEO)
Good afternoon, ladies and gentlemen. My name is Mike Fraser, and welcome to our Q1 2024 operational update, which we have also combined with our annual ESG webcast. We'll be spending approximately 25 minutes each on the operational update, and then 25 minutes on the ESG webcast, leaving another 20 minutes for Q&A after this. Today, I'm joined in the room by our Interim CFO, Alex Dall; our EVP, External Affairs, Jongisa Magagula; our VP, Environmental Performance, Andrew Parsons; and our VP, Investor Relations, Thomas Mengel. I'd like to start first with the key developments of the first quarter of 2024. Importantly, it is with profound sadness that we reported two fatalities at our operations in the year to date. On the January 2nd, 2024, an engineering supervisor was fatally injured in a trackless mining equipment incident at South Deep.
A second fatal incident occurred just two weeks ago at our St. Ives mine in Australia, when a colleague employed by our contractor was fatally injured in a mobile equipment-related incident at a construction site on the mine. We extend our sincere condolences to the family, friends, and colleagues of our two colleagues that lost their lives at our operations this year. At this stage, I would ask that we observe a moment of silence as we remember them and their loved ones. Thank you. Clearly, this is very distressing for us, and I'll be discussing our response to these incidents and our safety performance and other trends in the slides that follow. Similarly, our ESG performance, including the approval of our the renewable power plant at St. Ives, will be discussed in our annual ESG review.
In terms of our operational performance, it has been a challenging quarter. Attributable gold production, excluding Asanko, which we disposed of in January this year, it was 464,000 oz, and this is 18% lower year-on-year compared to Q1 in 2023. Consequentially, our all-in sustaining costs increased sharply, mainly as a result of these lower gold production. Our balance sheet, however, remains strong, with net debt to EBITDA still at a healthy 0.51x net debt to EBITDA on a twelve-month rolling to the end of March. Another highlight is that we commenced production at our Salares Norte project, with a pour of first gold on the March 28th. Just spending a bit of time on safety, I think it's one of the biggest failings that we still have fatal incidents in our mines.
We, however, do strongly believe that an injury and incident-free mining is possible, and we are committed to the guarantee that everyone who works at our operations goes home safe and well every day. We acknowledge that we have a lot of work to do, not just at Gold Fields, but across the industry, to improve our health and safety performance. At Gold Fields, we have initiated an independent review conducted by dss+, formerly DuPont, of our entire group safety culture, processes, systems, and practices. This review commenced in February 2024 after our first incident on the January 2nd, and we expect this to be completed in the first half of 2024, and will identify opportunities to accelerate our safety journey and standardize the safety approach across our business.
While innovation and technology is undoubtedly a key contributor to creating a safe workplace, significant effort is also focused on our behavioral and leadership interventions and training through our Courageous Safety Leadership and other leadership programs. We have a range of policies in place and engage extensively with our employees and our people at Gold Fields, encouraging them to speak up. A key part of our lexicon is that if we cannot mine safely, and this is a key message that we seek to deploy across our organization and amongst our contractors. Moving on to our group production performance in the quarter. Our attributable gold production was down 18%, was severely impacted by weather-related events and operational challenges, particularly at Gruyere, St. Ives, South Deep, and Cerro Corona mines.
I'll spend a little bit of time on those in a short while. This lower gold production has had a material impact on cost, with all-in sustaining costs increasing by 51% year-on-year and by 28% quarter-on-quarter. The group all-in cost of $2,115 per ounce includes costs for Salares Norte of around $319 per ounce, contribution to the Windfall development of $46 per ounce, and corporate costs of $17 per ounce. There is no impact on the St. Ives renewable project yet in the quarterly costs, as construction only commenced in May. The Salares Norte all-in cost also included costs for the project and capital costs in the first quarter, but there was only marginal gold equivalent production, as first gold was only delivered at the end of the quarter.
From a cash point of view, we delivered cash flow from operations of $126 million. Our group guidance, however, remains unchanged for 2024. The guidance for South Deep has, however, been revised down from 10.4 tonnes to between 9.5 and 9.7 tonnes, and from Salares Norte, down from 250,000 oz to 220,000-240,000 oz. The all-in cost for both of these operations for 2024 are consequently higher, and I'll cover these both shortly, as, as I alluded to. Looking at Q1 2024 production and costs across our business, we expect to accelerate production for the balance of the year to meet the annual production and cost guidance.
Many of our operations have back-ended production profiles, which should see a stronger second half for 2024. In terms of the impacted assets in Q1, and I'll spend a bit of time on the assets that had a lower than expected contribution. Firstly, starting with Gruyere. Gruyere, based in Western Australia, expected a significant rainfall event in March, and Gruyere was coming off the back of a slower start because of some of the contracted challenges in the second half of 2023. But this material rainfall event in March resulted in damage and closure of the primary access roads to the mine. This meant that delivery of crucial fuel and consumable supplies, in particular cyanide, was restricted, and mining and ore processing was temporarily halted for a part of March and April.
The mine opportunistically brought forward a planned 3-day maintenance during this period, and in mid-April, we were able to receive fuel and consumables through an alternative route via South Australia and the Northern Territory. Mining therefore recommenced on the April 12th, 2024 and plant processing on the April 14th. The primary road access has since been repaired and reopened, and mining and plant processing have resumed to normalized levels by the end of April. What I can say is that things are progressing really well, and the team at Gruyere have really delivered a good recovery from that material event. St. Ives, on the other hand, was impacted by lower ore mined and reduced grades. This was part of the overall mine plan.
Ore mined from the underground was lower following the change in bulk stopes at Invincible, as we had planned. While there was no open pit ore mined, as mine moved to pre-stripping at the Invincible Footwall South and the Swiftsure open pits, which are expected to commence production during quarter three, resulting in a much improved production profile in quarter four. St. Ives annual production and all-in cost guidance remains unchanged. Just moving on to Cerro Corona. Cerro Corona has also been impacted by inclement weather during quarter one, and this was a follow-on from a very heavy December rainfall event as well, and this impacted the stability of the north wall of the pit. As a result, we re-sequenced mining to lower grade areas as we rehabilitated the north wall, and gold equivalent ounces were impacted also by the copper, gold-copper price ratios.
The north wall has since been rehabilitated, and we are confident of delivering the 2024 guidance at Cerro Corona. And the team at Cerro Corona have had a really good track record of delivering to their plan. Moving on to South Deep, which is another important asset in our portfolio. And firstly, we had obviously the impact of the fatal incident on January 2nd. Rightfully, we took our time to restart work after that incident and spend time to engage with our teams in understanding what we needed to change and do differently. But probably the biggest challenge in the quarter facing the mine is backfill rehandling, and we have had a significant amount of work and effort to rehandle backfill, and I'll talk about that in a little while.
To address this, we've re-implemented a number of initiatives, including increasing the number of backfill tipping points, increasing longhole stope drilling capacity, and spent time on improving operator competence to improve drilling rates through crushed ground, and also improving ventilation, road conditions, and service utilities underground. Guidance for South Deep has therefore been revised down to 9.5-9.7 tonnes, which is in line with our mined gold production in 2023. What is really important for me is that we show consistent incremental improvement at South Deep. We know that this mine has got potential to be better than it is today, but it is crucial that we manage this mine for the long term, because it's a long-term, important asset in the portfolio.
If you look at some of the key metrics that we look at across South Deep, I think it's really important to understand how improvement has been demonstrated over the past 5 years. You can see that longhole stoping tonnes continues to head in the right direction, as does development meters. But the biggest challenge facing the mine is the backfill rehandling, and you can see in the last 12 months, the huge amount of additional rehandling, which is having a negative impact on stope turnaround and availability of stopes to mine. To address this, we have implemented a number of initiatives, as described on the previous slide, and this has certainly slowed down the production performance of the improvement over the past few years....
There's been a significant journey that South Deep has been on. There's nothing fundamentally different that we need to do in terms of our, our mining methods and our mining approach. But addressing the rehandling of backfill will certainly enable us to access more ore and push more ore through, through our mill, which is certainly unconstrained at this point in time. And this is the main reason for the downward revision in guidance for 2023. Just moving on to Salares Norte. On the March 28th, the Salares Norte project produced first gold and this was a significant milestone for a project that Gold Fields has taken from discovery into production over a 13-year journey.
In terms of progress, Circuit A and Circuit B of the processing plant, which collectively account for 85% of annual gold production, are being commissioned, and operating control has been handed over to the operations team. The ramp-up is progressing, but the first 2-3 weeks were slightly slower than anticipated, largely due to two significant early weather events that came through the mine, which required us to slow down the ramp-up process. Gold equivalent production for 2024 is therefore expected to be in the range of 220,000-240,000 oz, at an all-in cost of $1,840-$2,010 equivalent per ounce. In April, the first month of production, we produced around 10,000 oz. Our guidance for 2025 of 580,000 oz, however, remains unchanged, and really, the impact for 2024 is just that slow ramp-up in the first few weeks.
I want to reiterate that Salares Norte is expected to be one of the industry's lower-cost profiles, and with a payback period of less than three years at current gold prices, will contribute meaningfully to our future cash flows. We also continue to undertake extensive exploration drilling to look at further opportunities to extend the life of mine, and we expect to spend approximately $23 million this year on exploration, drilling, and greenfield opportunities in 2024. Just closing on Salares Norte, in terms of the Chinchilla program, which gets a lot of attention, we have been going through a systematic process of capture of, or attempting to capture the chinchillas in the area, in conjunction with the environmental authorities in Chile.
The first rocky area has been surveyed to completion in accordance with the approved relocation plan, and this program was run from the February 7th to the April 30th. No chinchillas have been found in the rockery area, and we are now in the process of dismantling this. Once that rockery has been removed, the relocation program will then be put on hold until the spring, which is expected in early August. Importantly to note that, mining continues without any concerns, and we continue to create extensive stockpile opportunities to mine and set ourselves up for 2025. Just on a couple of corporate development activities and on the balance sheet, there's two major projects that we are working on. The first is the Windfall project in Quebec.
This is a 50/50 joint venture with Canada's Osisko Mining, and we see this as a unique opportunity for Gold Fields to grow in a sought-after Tier One mining jurisdiction. The project's EIA has been submitted to the regulator in December 2023, and we expect a decision in early 2025. Once the EIA is approved, construction of the mine will commence, and Gold Fields will settle the CAD 300 million balance of the acquisition price. Gold Fields has also acquired a 50% interest in Osisko, Osisko's highly prospective Urban-Barry and Quevillon district exploration tenements, and we think that this is a, a significant opportunity to extend the, the position that we have in, in Quebec. In March 2023, we also announced the proposed JV between our Tarkwa Mine and, and the contiguous AngloGold Ashanti's Iduapriem Mine in Ghana.
Since then, we have been in ongoing engagement with the government of Ghana, and while we continue to make significant progress, we have not yet finalized agreement with, with the government, and we'll continue to keep the market updated as progress is made. While our net debt increased by about $100 million in Q1 to $1.14 billion, as we mentioned earlier, the net debt to EBITDA continues to remain at a healthy 0.5x net debt to EBITDA. Later this month, we are also planning to redeem our 2019 five-year, $500 million bond program, using part of our revolving credit facility. Finally, a quick overview of our 2024 group guidance.
While we had a poor quarter in cost in the production front, and have revised both South Deep and Salares Norte's guidance, we retain our overall FY 2024 group guidance on costs, production, and capital. The original guidance announced in February is displayed here as our exchange rate assumptions. The operations that we spoke about earlier, that, that were slightly lower in the quarter, are subject to very close control and oversight by the executive team. We are confident that the recovery will deliver the remainder of the year's program as planned. We now move on to the second part of the presentation, which is our annual ESG webcast. Just starting with the 2030 ESG targets, these were launched in December of 2021.
And just as a reminder, we have six ESG priorities, against which we have set very clear targets. Three of them relate to our people and stakeholders, and the other three to our environmental impacts of our mines. And all of this, of course, is underpinned by our commitment to sound corporate governance and adherence to all relevant regulations. As part of our strategic review, we are also reviewing our ESG commitments and targets, and looking at how we align this to our portfolio out beyond 2035. As discussed earlier, keeping our people safe remains our biggest challenge and our absolute priority at Gold Fields. Beyond safety, we have also extended our definition of zero harm to include the mental wellbeing of our people.
The findings of the independent Respectful Workplace Report, which we commissioned and released in 2023, were clearly shocking to all of us. The Elizabeth Broderick & Co. recommendations recommended 21 specific actions, which were adopted in full by the Gold Fields board and executive, and we are implementing all of these, in addition to updating and launching our relevant internal responses to these actions. Finally, we have committed to a follow-up independent respectful workplace review within 3 years. Pleasingly, we had no serious environmental incidents in 2023, and this is the fifth year running that there's been no significant environmental impacts across the business. Nature-based reporting is also becoming more of a priority, and we have started working on building a nature baseline at all of our mines, in line with the guidance from the ICMM.
Moving on to gender diversity, we see this as not just a critical component of our ESG priorities, but really an important part of creating the culture and the workplace that we aspire to. We have made some steady progress in 2023. At the end of 2023, 25% of our employees are women, compared to 23% in 2022. And of that, 27% of women are in leadership, and 50% of women work across core mining roles. But we know that this is still well below the demographics of the societies within which we work, and we will continue to have a focused recruitment, retention, and development programs in place to accelerate gender balance and equality in our workplace.
Furthermore, we continue to address gender pay gaps, where we have identified these, and put in practical measures to eliminate this. As a priority, we aspire to ensure that our workplaces are inclusive and above all, safe for women and other underrepresented groups. And we believe that in implementing the actions from the EB & Co. survey will be critical to this. A strong focus is also working with our contractors to ensure our gender-positive policies and programs are implemented by them, as they employ around two-thirds of our workforce. In terms of stakeholder value creation, our efforts are focused really on our key stakeholders, but with a strong emphasis on our host communities. And these host communities, or those impacted by our mines, receive around a third of all of the value we created last year, which is just over $1 billion.
We created value for our host community through spending around 37% of total procurement of over $2.5 billion with suppliers and contractors from our host communities. We improved payment times for host community SMEs to below 14 days, and we ensured that over half of our employees in 2023 are from these communities. The second major 2030 target is for us to develop six legacy programs across our business, and the first of these in our pipeline of legacy programs kickstarted our Cerro Corona mine in Peru in 2023. We also recently published our annual report to stakeholders, in which we detail the value we have created for our material stakeholders on a country-by-country basis in 2023, and our approach to engagement with these stakeholders.
It also includes our initial reporting, aligned with the ICMM's eight social and economic contribution indicators. The report also transparently shows some of the challenges we are facing and how we are seeking to address these, including our progress against the commitments which we made to addressing the recommendations from the Elizabeth Broderick & Co.'s Respectful Workplace Review. This report is on our website, and I encourage all of you to go to that link and see that report. Just moving to decarbonization and our commitment to decarbonization across our business.
I do believe that Gold Fields is one of the leaders in our sector when it comes to mitigating its climate change impact, and particularly if you think about the programs and projects that are underway to reduce our carbon footprint. I think that demonstrates our willingness to make a difference. We all have a role to play in combating climate change and the impact that it is having on our planet and our mines and our people. We can just see by the report that we've spoken about in terms of production, the impact of severe weather events is having, and we certainly believe that that is going to become more prevalent. We are targeting 30% net emission reduction and 50% absolute emission reduction by 2030.
This calculation is based on an assumed production volume of around 2.8 million oz by 2028. Critically, we are, like many other corporates, committed to a net-zero by 2050 against our 2016 baseline. We also rebaselined our Scope 3 emissions during 2023 and set a 2030 target to reduce our Scope 3 emissions by 10% against our 2022 baseline. These Scope 3 emissions make up around 37% of our total emissions, and while not in our direct control, we will continue to be working with our major suppliers to achieve this target. The contribution of renewables in our electricity mixes continues to grow, and last year totaled 17% of our total energy requirements, thanks to the contribution of our new solar plants at Gruyere and at South Deep.
As a result, our net Scope 1 and Scope 2 emissions in 2023 were 4% below the baseline and absolute emissions reduced by 12%. In terms of the new renewables projects at St. Ives, where we are starting construction of a solar and wind plant that will provide more than 70% of St. Ives' electricity requirements with backup to the thermal plants. The plant will reduce any electricity cost by around 30% annually and reduce group emissions by 6%. At Granny Smith, we are adding 11 MW of solar with 7 MW of battery storage to the existing 8 MW and 2 MW of battery storage. Construction is also underway of a 7-MW solar farm at our newest Salares Norte mine in Chile.
As I mentioned earlier, our 2030 target is a 30% net decline for Scope 1 and 2 emissions, and a 50% absolute decline. Since the gold production outlook for the long term is not guaranteed, we also are preferring to start focusing on emissions intensity, which are the numbers circled in the graph. We believe that focusing on an emissions intensity per ounce may be a more appropriate way of reporting on our emissions reduction. This graph also shows how we plan to get to 2030, with our planned and approved projects providing good impetus towards this target. In addition, the South Deep Wind Turbine project is captured under scoping and trials. And beyond renewables, there's still a lot of work to be done.
We are committed to diesel replacement, but the focus will also be extended beyond battery electric fleet to other opportunities on bulk material handling. We will also intend to revert to the market in 2025 with a review of these targets as committed in terms of a midterm review. And once we have undertaken this review of all of our programs and viabilities, we'll revert back on our position. At the end of March, and as part of the release of our Integrated Annual Report, suite of reports, we also published our sixth Climate Change Report, which among others, provides an overview of Gold Fields climate change-related strategies and a detailed Scope 1 to 3 carbon footprint during 2023. You can also find the Climate Change Report on our website.
Moving on to tailings management, another critical component of our environmental strategy. The focus of our TSF management work at present is implementing and adopting the global industry standard on tailings management conformance. As part of the GISTM process, in August 2023, we published our own self-assessment reports for the Cerro Corona and Tarkwa tailings storage facilities, which have extreme or very high consequence category rating. All other TSF reports are due by August 2025 and remain on track. We have five active upstream raised TSFs in our portfolio, and with the transition of the Tarkwa TSFs, one and two from upstream to downstream, our raised facilities are on track for completion later this year.
In terms of water management, we're also very much on track to achieve our 2030 targets, namely, the recycling or reusing 80% of the water we use, and reducing our freshwater use by 45% against the 2018 baseline. During 2023, 74% of our water was recycled and reused, compared to 75% in 2022, and freshwater use was reduced by 39% against 40%, in 2022 from the 2018 baseline. Water-saving initiatives are implemented at all our mines, but specifically those in countries where water is a scarce resource or where we share it with host communities, remains a key focus. Just lastly, on governance, it is critical that everything we do is underpinned by sound governance and compliance structures and processes.
This is the cornerstone of building trust with our stakeholders, and key issues we faced in the last 12 months is just an increase in the quality and quantity of ESG reporting requirements. And during 2023, this included the ISSB's IFRS sustainability disclosure standards, which seeks to consolidate many of the leading reporting standards. The U.S. SEC has also indicated its intentions to launch a new climate-related disclosure rules, but we know that these are being highly contested within the U.S. and held up in courts. Lastly, the emergence of AI, we see as both an opportunity and a risk to the business, and this has been subject of a number of discussions in the organization to ensure that we manage this with the right opportunity and risk lens.
With that, I will close the presentation and move on to any questions that anyone may have, and I believe the line is open for taking questions.
Jongisa Magagula (EVP of Investor Relations and Corporate Affairs)
Good. Thank you so much, Mike, and we do apologize for, we understand that there were some sound issues at the beginning of the call, which we have been resolved, so, apologies for that. There are a couple of questions from the webcast, and we also have participants joining via Chorus Call. So we will be taking questions from both. And I will start with the webcast questions. The first one is from Prince Mopai, from All Weather Capital. He says that it appears that the current run rate is 22% below for production and 21% below for cost. What is the likelihood that this current guidance will be revised downwards, as the quarters progress?
And then I've got two questions from Martin Creamer, who says, what is the latest for the wind energy generation at South Deep? And when do we expect that South Deep will be at the 63% renewables that has been highlighted? And then the next question, also from Martin Creamer, is when do we expect the South Deep backfill problems to be resolved? As Mike said, we do have colleagues joining us, so Mike, shall I let you kick off, and maybe Andrew and the rest of the team can add, particularly on the South Deep question.
Mike Fraser (CEO)
Perfect, thank you. I'll start, Prince. Thank you for the question on guidance. Look, I think the one thing I would say is that if you look at Gold Fields, historically, we tend to have a back-ended production profile across the business. I think if you look at the specific causes of the underperformance, you know, I've spoken about the challenges at Cerro Corona and the slow start at Cerro Corona. We spoke about the impacts at Gruyere, and we spoke about St. Ives, you know, the planned slower start, and we also spoke about South Deep.
If we just think about those as being probably the most important contributors to the recovery for the remainder of the year, I certainly have a high degree of confidence with Gruyere and St. Ives and the ability to recover, and certainly, the indications are that they are moving in the right direction. Salares Norte, as you can appreciate, it's a project that's very early in its ramp up. That's why we kind of decided to take some of the risk out of the plan and ensure that we delivered a safe and reliable ramp up and ensure that we set ourselves up for a successful 2025.
And on South Deep, again, what was really important is that we don't go backwards, and so the guidance that we've provided was probably closer to 2023, rather than the probably more ambitious growth objective that we had in 2024. So coming back to the heart of your question, we certainly know what's required to deliver on the numbers, and based on what we've gone out on our revised guidance on Salares Norte and South Deep, we feel quite confident that we will deliver these numbers. And certainly, we had a very clear intention of ensuring that we don't have another disappointing quarter in quarter two. But again, having said that, it's important to note that while you may see an incremental improvement, the real improvement's gonna come in the second half.
Then moving on to the South Deep Wind project, I'll make one comment and maybe ask Andrew to talk about the achievement of the program. So the South Deep Wind project is in scoping and in feasibility at the moment. One of the key pieces of work has been around the environmental impact, and particularly the impact on the bat community that exists in the nearby area. We believe at an economic level it is viable, but we just need to close out the full feasibility. But maybe, Andrew, if you want to add any comments to that.
Andrew Parsons (VP of Environmental Performance)
Thanks very much, Mike. Yes, we've had a meteorological tower in place, measuring the wind availability at a number of different heights above ground level. That's been going since early 2023, so we've now got a year's set of data, and that work is more or less done. We'll be getting the report quite soon. As Mike said, the environmental impact assessment studies are currently underway. Those have got another three months or so to run. So we should have all the data that we need...
During the third quarter, and we'll be in a position at that point, you know, with all of the Windfall availability data, and the environmental impact assessment having been completed to then be in a position to make a decision.
Mike Fraser (CEO)
Thanks, Andrew. And then just on the backfill issue, Martin, I think, if you go back to and you look at the graphs that we showed on the amount of rehandling that we're doing, I almost kind of look at this as a bit of an opportunity for South Deep. Because if we can really get a handle on this rework, it really sets ourself up for getting ahead of what's possible at South Deep. Because the amount of rehandling now is just causing a lot of a lot of congestion in that system. There are specific pieces of work going on, looking at different binders on the paste, looking at opportunities to put some plugs in on some of the pillars underground.
Looking at ways of maybe, you know, rehandling or increasing the density of, of paste underground. And we're working with a number of experts to help us that. So, you know, it's hard for, for me to give you a, a clear answer as to when that'll be solved, but, we, we have forecasted lower this year because we expect, this to take some time. And if we can fix it, I think the opportunity is, is there for South Deep to really, get to where it needs to be, as, as an asset. But there's, there's a huge amount of work done going on between the operations team, our technical team, as well as, external experts in this area. So we'll provide an update in, in the, in the second quarter.
Jongisa Magagula (EVP of Investor Relations and Corporate Affairs)
Good. At this stage, there are no further questions on the webcast, so I will pause and see if we have any questions coming in from the Chorus Call.
Operator (participant)
Thank you. We do have a few questions. The first question we have is from Rene Hochreiter of Noah Capital. Please go ahead.
René Hochreiter (Mining Analyst)
Thank you. Hello, Mike. I'm Rene Hochreiter from Noah Capital. I've got a couple of questions on South Deep, and also one on St. Ives. What exactly is crushed ground, and how can you go through crushed ground? And how long is it gonna be before you're going to be through this crushed ground? On the backfill rehandling, I know what you just answered to Martin Creamer, but what exactly is that? I mean, you mentioned a 2,000-meter number in your slide on backfill rehandling. What is that? How long before you're back to normal on the backfill? And then also on St. Ives, what is the change in bulk stopes? What are you changing?
Are you stepping over to another stope, or are you simplifying the, changing the stoping method, or what? I'm a mining engineer, so you could answer a little bit more technically, if you don't mind.
Mike Fraser (CEO)
Yeah, sure, Rene. Maybe just starting with South Deep. I think on the first one, in terms of crushed ground, what's been happening at South Deep over the last five years is a change in the orientation of the pillars in the stopes. And what we are now—what these stopes are intended to do, as you mine through them, and you go through the de-stress cuts, is that these stopes actually are intended to crush as you advance. What we are finding is that as we backfill, there's a huge amount of leakage of backfill material. So it means that as these... You can't actually get to the stopes in time. And it also means that the availability of future stopes is a problem.
And so the amount of that you see there, the 2,000 meters, is actually the amount of backfill that needs to be cleaned up before we can actually get to the advanced development. So it's causing quite a significant challenge across the different working areas and the different open areas that we have. And the biggest challenge that we've got, it's not, it's not so much the crushed ground, but it's actually avoiding the leakage of backfill, because that's creating a backlog in the ability to get to these stopes. I don't know if you want to add anything. No? I think we're good. And then just on St.
St. Ives, one of the things that we, with the Invincible underground deposit, we are trying to increase the handling, the ore handling underground, so increasing the bulk handling of material. And so we actually have changed, again, the stope and underground design at Invincible in order to manage the bulk handling and recovery of material. But I think the biggest issue there has really been there was a planned resequencing of the mine development that probably didn't really come through, and we're only gonna see some of that value later in the year.
René Hochreiter (Mining Analyst)
Okay, so St. Ives looks like you're through the worst of it. And South Deep, how long do you think you'll be there before you're back to normal?
Mike Fraser (CEO)
I think the issue there is really solving for the backfill. And I think, Rene, you'd appreciate this. If you go to, you know, operations in Australia, you're mining at a 1,000 meters at most. So getting paste from the surface to the bottom, you can actually have it coming down at a much higher density. The problem that we've got at South Deep is you kind of producing paste on surface and sending it 3,200 meters down below ground, and so your viscosity has to be higher. And when you've got leakages because you've got some of this fractured ground, you get a lot of paste flowing, which kind of impacts you. So we've got to solve for...
As I said earlier, we've got to find a way of either plugging the pillars or else increasing the density underground. That's why the guidance that we've provided is one that actually realizes it's gonna probably take us a couple of months to get through this.
René Hochreiter (Mining Analyst)
Okay. Thank you very much, Mike.
Operator (participant)
The next question we have is from Leroy Mnguni of HSBC. Please go ahead.
Leroy Mnguni (Mining Equity Analyst)
Hi, good afternoon. My question is around your decarbonization targets for 2030, and specifically, what CapEx would be required over the next, call it, 6 years to achieve these targets. St. Ives microgrid, you've guided the South Deep Wind project. We've got a good idea of what that could potentially cost. Are there any other projects in the pipeline that you require to meet these targets that we should be aware of?
Mike Fraser (CEO)
Leroy, maybe I can ask Alex to give an update just on the CapEx estimates on...
Alex Dall (Interim CFO)
Yeah, Leroy, so I think you're right on the St. Ives and the South Deep Wind we've guided. The other projects are still in early stage, so we obviously have the option of doing PPAs, looking at other financing solutions. So there's no CapEx we can specifically guide on them yet. We will, once we've completed feasibility studies, have more guidance on that.
Jongisa Magagula (EVP of Investor Relations and Corporate Affairs)
But I think, Leroy, important to stress, you know, we are thinking very carefully about how we fund these, the returns on these, and the commercial aspects of it. We are committed to that target, but we are very mindful when we think about our capital allocation, that these projects and these investments need to also compete for capital, and we need to think about how we approach that and structure it. So, we are thinking about that.
Leroy Mnguni (Mining Equity Analyst)
Got it. Thank you.
Operator (participant)
The next question we have is from Ed Stoddard of freelance, as a freelance journalist. Please go ahead.
Ed Stoddard (Freelance Journalist)
Thanks. Hi, actually, with Daily Maverick. Thanks, folks. Look, I was just, I'm looking as always, I was just wondering if you have an update on Operation Chinchilla.
Mike Fraser (CEO)
Yeah. Ed, thanks for that, and I think we tried to cover it in the presentation briefly, but we have been working with the authorities on the capture and the relocation of the chinchillas since we started the process at the end of January. We have gone through the sequencing of the attempted capture of the chinchillas, and to date, we have not captured any chinchillas. What we did conclude, though, is the end of the first program in terms of rockery number three, and that was the rockery that was closest to our waste dump tip. No chinchillas have been identified, and we now are proceeding with the deconstruction of that rockery.
If we observe any chinchillas, then we'll have to go through another capture program there, during that deconstruction of the rockery. And what we will also do now is post the removal of that rockery, is take a hiatus until the main parts of the winter months are completed. So we'll probably recommence in August, in line with our plan and our approved plan with the EIA. But to date, no chinchillas have been captured, and we continue to deploy and follow the approved program that was approved by the EIA.
Ed Stoddard (Freelance Journalist)
Thanks. And then, well, just can you just explain what you mean by that rockery? I mean, does that mean that you're starting to remove a rockery for mining purposes for the next pit?
Mike Fraser (CEO)
There's just again, to put it in perspective, there's 9 rockeries that we formally-
Ed Stoddard (Freelance Journalist)
Yeah
Mike Fraser (CEO)
... need to go through on a systematic way, to identify and capture chinchillas. If we haven't, after 3 rounds of attempted capture, we actually then are permitted to remove the rockeries, and then we move on to the next, the next rockery and the next capture program.
Ed Stoddard (Freelance Journalist)
Okay. And I guess when you remove a rockery, I take it, you must blast it, I take it.
Mike Fraser (CEO)
Just repeat that, Ed?
Ed Stoddard (Freelance Journalist)
Yeah. How do you remove a rockery? I take it you blast it?
Mike Fraser (CEO)
No, no. These are, these are removed manually.
Ed Stoddard (Freelance Journalist)
Removed manually. So, okay, just for layman's terms, how do you remove a rockery manually? Do you go with a pick and shovel?
Mike Fraser (CEO)
No, you'd remove it with an IT, a little loader. Yeah.
Ed Stoddard (Freelance Journalist)
Oh, okay.
Mike Fraser (CEO)
So you wouldn't-
Ed Stoddard (Freelance Journalist)
Yeah.
Mike Fraser (CEO)
It doesn't... These are, these are kind of relatively small structures. They're not, they're not size that needs to be blasted in any way.
Ed Stoddard (Freelance Journalist)
Okay, but you weren't able to capture any. So, but, what's the presumed population around there now? Is it still around three dozen?
Mike Fraser (CEO)
... Yeah, that was. That's right. I think that was the last count, and we haven't identified any others. I mean, it's quite conceivable that they've moved on. You know, that's a very plausible scenario. I don't know if you want to add anything, Andrew, sorry, on this.
Andrew Parsons (VP of Environmental Performance)
Well, the only thing I'd add just on the removal of the rocky areas, so just as Mike said, you know, it's done, it's a laborious manual process and a sensor is inserted into all the little cracks and crevices between the rocks before the rocks are removed. So it's a very thorough process to determine that there are no chinchillas present before the rocks, or that, and which is the habitat for the chinchillas, removed.
Ed Stoddard (Freelance Journalist)
I see. So you have a sensor that can actually detect life, I take it?
Andrew Parsons (VP of Environmental Performance)
It's a heat sensor.
Ed Stoddard (Freelance Journalist)
It's a heat sensor. Oh, okay. So, there's a possibility that they've left the area, because they seem to suddenly be sort of...
Mike Fraser (CEO)
Yeah, they could have gone to other rockeries, and we'll only know that as we go rockery by rockery.
Ed Stoddard (Freelance Journalist)
Okay.
Mike Fraser (CEO)
Yeah.
Ed Stoddard (Freelance Journalist)
Okay, so for now, none have been captured since late January, and now they kind of capture project is going to be on hold until August. Is that correct?
Mike Fraser (CEO)
Correct. So we go—we take a hiatus during the winter months.
Ed Stoddard (Freelance Journalist)
Okay. All right. Okay, thanks for that.
Operator (participant)
The next question we have is from Tanya Jakuszonok of Scotiabank. Please go ahead.
Tanya Jakusconek (Managing Director)
Yes, good afternoon, and thank you so much for taking my question. Just wanted to circle back on Salares Norte with the mill start-up and the 10,000 oz produced in April. Maybe someone can share with me how the progress has gone. Is recovery on track? Probably lower grades put in, put through, but can you talk a little bit about how the recovery is tracking versus what you were expecting? And then just a reminder, with a bit of this delay, are we looking at commercial production now in Q4 of this year? And remind me of your definition of commercial production, if it's, you know, 60% of capacity over 30 days at the mill. So that's my first question on Salares Norte.
Mike Fraser (CEO)
Okay. So just on the recoveries, as you quite rightly suggest, one of the things that we are looking at very carefully is the grade feed through the mill, because as we ramp up, the last thing you want to do is to put the high, super high-grade stuff through. But the general grades are very good, even in the stockpile. So that is something that we look at quite carefully. But recoveries are tracking as per expectations in the ramp-up. So there's nothing untoward on the recoveries, and we're expecting to deliver against the design of the recovery. So that's not an issue. Just on commercial production, I'm just trying to remember the actual definition. We can come back to you on that.
I know we've looked at it, and I think we had planned commercial production for, I think, August, September. It'll probably move, but-
Andrew Parsons (VP of Environmental Performance)
It'll probably move to Q4, but the exact metrics of recovery, and it's recovery and throughput over a time period, but I'll get back to you on that.
Mike Fraser (CEO)
Yeah, we can just come back to you on that, Tanya, but it's, it's probably... I think it was initially in, in August, but I think it might be, you know, weeks. So, you know, it's not gonna be months or so, I don't suspect.
Tanya Jakusconek (Managing Director)
Okay. So sometime in September, October-
Mike Fraser (CEO)
It could still happen in Q3, but I think we can come back to you on that.
Tanya Jakusconek (Managing Director)
Okay. Q3. Okay, and then just, I wanted to come back on your production profile for this year. When we look at some of the mines that you've mentioned that are going to be doing the second half weighting, it seems that you mentioned that Q2 is going to be slightly better than your Q1, and then a stronger second half. And when we look at our numbers, we have a 45% in the first half, 55% in the second half with a stronger Q4. Is that something reasonable as we look through the year?
Mike Fraser (CEO)
I don't know.
Jongisa Magagula (EVP of Investor Relations and Corporate Affairs)
It's, Tanya, I think it's probably going to be more weighted towards the latter end, even more than that, and probably closer to a 40/60 split between the two. Particularly as Mike said, for example, St. Ives is expected to have a very big Q4. So I think a 40/60 split is probably the right way.
Tanya Jakusconek (Managing Director)
Okay. So slightly better Q2, and then obviously a very strong Q4.
Jongisa Magagula (EVP of Investor Relations and Corporate Affairs)
A very strong Q4.
Mike Fraser (CEO)
Yeah.
Jongisa Magagula (EVP of Investor Relations and Corporate Affairs)
Yeah.
Tanya Jakusconek (Managing Director)
Yes. Okay. And then my last question is, you know, on the Ghana joint venture. So you're continuing to you know, to work with the government on this. And, you know, we've got elections in Ghana. And so my question to you is, you know, at what point should we be thinking that, you know, we put this on pause as we go through campaigns and other, and should we be thinking that 2025 is probably the time that something could get done? Maybe some insights into how this is going.
Mike Fraser (CEO)
Yeah, and this is certainly something that I have. It's a significant part of my time trying to herd the cats, as I call it. You know, I think the starting point of this is there's definitely value uplift for all parties involved, so for us, for AGA, and for the government of Ghana. It is quite a politicized issue that we're dealing with at the moment, and the whole issue of, if you follow Ghanaian media, the issue around resource ownership is quite topical as part of the background to the election process. What is really important is that we make sensible commercial decisions around the way forward, and I think we are quite close.
There's a couple of points that are sticky points, and that's why we're not yet ready to call failure on this. But as you quite rightly acknowledge, you know, as we get closer to the electioneering, it may make it quite difficult. And the last thing that we wanna do is to make a poor decision on the backdrop of kind of that political maneuvering. So, I think by the time we get to the end of Q2, we'll have a very clear view on it. And if we get a clear view before then, we'll certainly announce it if we feel like there is gonna be a delay into 2025.
Even if we do get an agreement, you know, in, say, the next weeks or month or so, there is still an implementation period. So you're really only gonna start seeing the benefits of this flowing, you know, 6-9 months away. So I think that just put that in perspective as well. So in some respects-
Tanya Jakusconek (Managing Director)
Okay, and when you mentioned-
Mike Fraser (CEO)
The delay allows us to get ahead of some of the work that's required.
Tanya Jakusconek (Managing Director)
Right. Okay. And when you mentioned some of the sticky, there is, you know, you're almost there, and you've got some sticky points that you're working on. Would it be safe to assume the sticky points are over this, you know, percentage of what the government is looking to participate in? Would that be an ownership, would be one of them?
Mike Fraser (CEO)
Yeah, probably, I don't want to get into that, but I think, again, I'll just go back. If you follow the-
Tanya Jakusconek (Managing Director)
Mm
Mike Fraser (CEO)
Kind of media that's going on in Ghana, you can probably get to that conclusion.
Tanya Jakusconek (Managing Director)
Okay. And it isn't anything about royalties or taxation?
Mike Fraser (CEO)
No, but there is clearly there's some alignment that's required in time as well.
Tanya Jakusconek (Managing Director)
Okay. Good luck with it, and we hope that it does get done because it would be beneficial to both companies and for the government as well.
Mike Fraser (CEO)
Absolutely.
Tanya Jakusconek (Managing Director)
Thank you.
Mike Fraser (CEO)
I'm sure it's gonna happen. It's just a timing.
Tanya Jakusconek (Managing Director)
Thank you.
Operator (participant)
The next question we have is a follow-up from Leroy Mnguni of HSBC. Please go ahead.
Leroy Mnguni (Mining Equity Analyst)
Thank you. Just one more question from me, and it's a follow-up from René's question on South Deep. You know, issues like the lagging destress cuts, challenges with the backfill, these are issues that were a major challenge for South Deep a couple of years ago, and then we went through a few years where they seemed to be resolved, and now they're emerging again. Is there anything that has changed compared to, say, two to three years ago, that you know has resulted in these becoming a challenge again?
Mike Fraser (CEO)
Leroy, I think at this stage, what I can say is that if you go back to... Again, if you look at those graphs, and that was quite why we kind of pulled out some of those leading indicators. If you, if you look at what has been done on drilled, drilled meters, you know, there's, there's definitely continued improvement. And if you think about what was reported last year and the year before in terms of challenges on, on stope drill meters, it seems like we really are moving ahead quite rapidly, on getting that under control. It's actually just the rework that's the problem here. So I think in terms of the, the mining method, it's clearly paying off on that change to the mining method that it kind of initiated in 2018.
You know, I think we're getting ahead of ourselves there. But it's quite clear that again, as I said, as we get the sequencing right, it's quite clear that we really need to solve this paste issue and the backfill issue. And if we can do that, then I think we're fine. I don't think it's a systemic problem that's gonna take us back to 2017 or 2016.
Leroy Mnguni (Mining Equity Analyst)
All right, got it. Thanks, Mike.
Operator (participant)
We have another follow-up question from Ed Stoddard of Daily Maverick. Please go ahead.
Ed Stoddard (Freelance Journalist)
Thanks. Just checking on Operation Chinchilla again. I'm just wondering, how big a team is there now? Can you give an update on that?
Mike Fraser (CEO)
Sorry, what was that question? How many?
Ed Stoddard (Freelance Journalist)
How big a team is there?
Mike Fraser (CEO)
Do you know how many vets and the, yeah?
Ed Stoddard (Freelance Journalist)
Yeah, we'll get back to you. There's a large number, but I don't have the number at my fingertips. Sorry about that.
Mike Fraser (CEO)
I recall a number of 10, but we can get the exact number and get back to you.
Ed Stoddard (Freelance Journalist)
Okay, thanks. So about 1 vet for 3.5 chinchillas-
Mike Fraser (CEO)
Something like that.
Ed Stoddard (Freelance Journalist)
that we, that we think are there.
Mike Fraser (CEO)
They're on rotation, though.
Ed Stoddard (Freelance Journalist)
They're on rotation. Okay. Okay, thanks. And just to be clear, so the rockeries that you're removing, you have permission to do that, and you're just the rock, like, the next one that you plan to remove, you've not found any evidence of chinchillas there. And so I also just take it, I guess, the chinchillas aren't coming to the baited traps. Is that correct?
Mike Fraser (CEO)
Yeah.
Ed Stoddard (Freelance Journalist)
Just for clarification.
Mike Fraser (CEO)
I think there's a lot of hypothesis. They might have just moved on.... Yeah, there are-
Ed Stoddard (Freelance Journalist)
Right. Okay, but you do have baited traps out there, is that correct?
Mike Fraser (CEO)
No. No, we have camera traps and then physical traps that, if the chinchilla are identified, then traps are put out for them.
Ed Stoddard (Freelance Journalist)
Okay. So you haven't identified any since you relaunched in late January, is that correct? And so, yeah, you haven't needed to put out the physical traps, is that correct?
Mike Fraser (CEO)
That's correct. Yeah. Yeah. And, and this is only and we've been focusing on rockery three, because that's the priority, and then we'll move on to the next one. So we're doing these sequentially.
Ed Stoddard (Freelance Journalist)
Oh, okay, okay. So the focus has been on rockery number 3, is that correct?
Mike Fraser (CEO)
Correct.
Jongisa Magagula (EVP of Investor Relations and Corporate Affairs)
That's correct.
Ed Stoddard (Freelance Journalist)
Okay. Okay, and then you'll move on sequentially. So rockery number three is the rockery that's now going to be removed by a loader?
Jongisa Magagula (EVP of Investor Relations and Corporate Affairs)
That was because it was closest to the waste dump area for Breccia Principal, where we're currently mining, so that's why it was prioritized.
Ed Stoddard (Freelance Journalist)
Right. I got you. Okay. And then, but in terms of the other rockeries, I mean, have there been chinchillas observed there in the past couple of months at all?
Jongisa Magagula (EVP of Investor Relations and Corporate Affairs)
As Mike said, because we're doing it sequentially, we will now move on to, I think it's rockery number seven, to do the observation and the camera traps.
Mike Fraser (CEO)
But that'll only be in August.
Ed Stoddard (Freelance Journalist)
Okay.
Jongisa Magagula (EVP of Investor Relations and Corporate Affairs)
Yeah, post the winter season.
Ed Stoddard (Freelance Journalist)
Okay. Okay, so the focus since late January, I just wanna make sure I got all my facts straight here, has been on rockery number 3, and that's now cleared for removal. And then, when you relaunch in the spring, the focus will be on rockery number 7.
Jongisa Magagula (EVP of Investor Relations and Corporate Affairs)
We'll give you the sequential program in terms of the sequencing. Sven will send it to you.
Ed Stoddard (Freelance Journalist)
Okay, great. Appreciate that. Thank you very much.
Jongisa Magagula (EVP of Investor Relations and Corporate Affairs)
Thanks, Ed.
Ed Stoddard (Freelance Journalist)
Thanks.
Operator (participant)
We have no further questions from the conference call.
Jongisa Magagula (EVP of Investor Relations and Corporate Affairs)
I do not see any questions on the webcast either, and we are just on time. So, Mike, I don't know if you want to-
Mike Fraser (CEO)
Great. Look, I think just firstly to say thanks, everyone, for joining in. We did, as I said earlier up front, we combined the Q1 report along with our annual ESG update. Fully conscious that the quarter one was probably not as smooth as we would have anticipated. We know that we're gonna have a hard run for the remainder of the year. But I think we are very clear of where the challenges and opportunities are. And you know, at this stage, don't believe there's anything material afoot that lead us to believe there's anything should change our position. But thanks, everyone, for dialing in and for your continued support. Thank you.