Gold Fields Limited (GFI) Q3 2015 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to the Gold Fields' Third Quarter Results Conference Call. All participants will be in listen-only. There will be an opportunity for you to ask questions at the end of today's presentation. [Operator Instructions] Please note that this conference is being recorded. At this time, I would like to hand the conference over to Mr. Nick Holland. Please go ahead.

Thank you, Harry [ph]. Good afternoon or good morning ladies and gentlemen depending on where you are in the world today. Thanks for joining us to discuss Gold Fields' results for quarter three of the 2015 financial year. On the call with me today, I've got Paul Schmidt, our Chief Financial Officer; and Avishkar Nagaser from Investor Relations -- Head of Investor Relations. We're pleased to report a solid set of results for the quarter, with the group generating $75 million in net cash flow from operations despite the lower U.S. dollar gold price, and just to remind you, that's after all costs have been factored in. Operational and financial highlights for the quarter includes, number one, group attributable equivalent gold production increased by 4% to 557,000 ounces with most operations producing more gold in the September quarter. Two, our ongoing efforts to improve safety allowed us to achieve a fatality-free quarter. Three, all-in costs decreased by 8% to $948 per ounce, that's all-in sustaining costs, and total all-in costs decreased by 9% to $961 per ounce. Four, the group realized a free cash flow margin of 11% at a gold price of $1,103 per ounce in quarter three 2015, compared with 9%, and a gold price of $1,174 per ounce in the June quarter. Five, on the back of strong cash generation we reduced our net debt balance by a further $50 million, and took that down to $1.427 billion. The net debt to EBITDA ratio at the end of the quarter, and that's the key measure that gets looked at, was 1.41 times, and that continues to come down. We have a long-term objective by the end of 2016 to try and get that down to a one to one ratio. And as we continue to make cash, I'm sure that we'll continue to improve on that ratio. Some general comments, as the gold cost continues to languish, we constantly review our portfolio, while the weaker currencies offer some respites in most regions, Ghana is fully exposed to further declines in the U.S. dollar gold price. In particular, demand is challenged in the current environment, and as such, we are considering various options for demand, which include a recapitalization of the mine to expose the high grade ore that sits in and around, and under the original demand fit [ph] that was very successfully mined and made good money for Gold Fields over a period of 10 years. The alternative strategy would be to preserve the inherent value of demand until gold prices recover. Now we're doing an independent review of all of the technical and commercial aspects of these different options, and we should be in a position to make a decision on this in early 2016. Turning to South Deep, that delivered a much improved quarter in quarter three 2015, with gold production up 42% to 55,000 ounces, that's driven by a 30% increase in tonnes mined [ph], and a 13% increase in underground yield. Progress was made on a number of important activities at the mine during quarter three 2015, including a 57% increase in destress mining, and if you will recall, we've often said that destress is very important to open up the ore body and provide flexibility for increased mining volume into the future. The conversion from low-profile to high-profile destress mining commenced in the quarter, and is expected to simplify and de-risk the mining process. Essentially, we'll be opening up these cavities once, supporting them once, and the lead time between opening up these cavities and mining the associated longhole open stopes should be quicker. And that I think will be a good risk mitigation for [indiscernible] in particular. The transition to high-profile destress is expected to continue until early 2017. So in essence, we think to get the entire four corridors across the 1.2 kilometer strike length is probably going to take us around about 18 months from where we are now, but it will happen over the entire frame of that strike length, but will happen proportionately over time. Production for the full year is expected to be between 5.9 tonnes of gold and 6 tonnes of gold, 190,000 to 193,000 ounces, and that would mean that the second half of 2015 would be around 50% higher than the first half of '15. So given the fact that we are almost halfway through quarter four, we have reasonable resolution on these numbers. So 2016, we're in the planning process, but what I can tell you is, that as we also expect quarter four for South Deep to be better than quarter three notwithstanding the 42% increase in quarter three, we think we're going to do better again in quarter four, and also we expect to do better again in 2016. Remember the target we've given of getting the mine to a cash breakeven by the end of 2016. I think we're making reasonable progress towards that goal. The Australia region had another good quarter, generating net cash $64 million. Gold production increased by 6% to 249,000 ounces with all-in costs in U.S. dollar terms 15% lower at $859 per ounce, and that puts Australia firmly in the lowest quartile of gold producers in terms of costs. Attributable gold production at the West Africa operations decreased as anticipated by 2% to 174,000 ounces, driven by lower production at Tarkwa due to lower grades mined. Despite the lower production, the region reported a 7% decrease in all-in costs to $962 an ounce, worth of net cash flow for the quarter of USD32 million. Attributable gold production at Cerro Corona, that's equivalent gold production, decreased by 5% as expected to 79,000 ounces, mainly due to lower gold and copper head grades. Consequently, all-in cost per equivalent ounce increased by 10% to USD731 per ounce, and the mine generated net cash flow of $16 million for the quarter. Now I think if we look at the international operations in totality, recognizing the fact that South Deep is a mine in buildup, the international ops came in an all-in cost of around about $900 an ounce for the quarter, and again, I would just reiterate, that places the international regions of Gold Fields, the three regions in Australia, West Africa, and South America, in the lowest cost quartile in the gold industry. Looking ahead, we expect our 2015 final year production then, including quarter four to be within 1% to 2% of our guidance that we gave at the beginning of the year. However, costs are expected to be better than previously guided, and I think we'd given some indication in the book. So I think with that, we're now going to take some questions from you, which either myself, Paul, or Avishkar will attempt to deal with. Thank you very much, Harry [ph].

Thank you, Mr. Holland. [Operator Instructions] And our first question is Kane Slutzkin of UBS. Please go ahead.

Hi, good afternoon guys. Just two questions please. If you could just touch on the growth in Australia, particularly at Granny Smith; you shot over 7 grams a tonne there. I know you've spoken in the past that you certainly saw upside relative to Barrick's [ph] old plants. Maybe you can just comment whether you think that grade is sustainable, and how we should be thinking about embedded [ph] into 2016? And then just on South Deep, obviously there's been some improvement there. I was just wondering, is there a possibility you can mine some of the VCR conventionally in the interim, and in that way you sort of generate a bit of cash to further stem the burn or get to breakeven at a quicker rate. I don't know if that's a possibility or if it's economic to do so. Yes, that's it.

Okay, Kane. Thanks. Let me deal with the second question first. So the VCR at South Deep does contain, if you look at the resource and reserve statement, it contains about 5 million ounces at about 10 grams a tonne I think was the declaration last year. If you can recall, we stopped mining the VCR in 2008 when we decided we were going to concentrate on the Elsburg package, given the fact that that was the heart of the ore body. That said though, we have started to look at the VCR again to see what is the viability of us looking at bringing that back. I can't tell you at this stage what the numbers look like, because we're commissioning a study of that, and whether or not that would need to be mined on a conventional basis or not, but the one thing that is clear is that looking at the geological interpretation, it looks very much like an analog of the VCR that you find at [indiscernible], which is four kilometers away, and that's been a very successful ore body as well over the years. So there's definitely something there. We need to do more work. I don't know what the development cost would be to get back into it. We've not mined it as I said for seven years. So it's very, very early, and preliminary views at this stage that, yes, there is potential. Is it viable? What sort of cost will it cost us to get in? What sort of expenditure, investments to get in there? We got to do some work on it. I'm not too sure when that work is going to be finished, but if we think there's an opportunity to fill spare hoisting capacity and plant capacity, which clearly we do have right now we'll certainly give thought to that. What I would say on Granny Smith, look, we're not going to give guidance for 2016 at this stage. We only give that in February, Kane, but I think if you look at where we're mining at the moment, we're starting to get into the zone 100 ore body. If you can recall, that was the deepest of the different horizontal loads that we're mining, and we're getting into zone 100 that is going to become the center of gravity, particularly as we finish zones 80 and 90 over the next year or so, and the grades are reasonable. I think if you go and look at the reserve statement you'll get a good view of that. And Granny Smith has been kind to us in giving us good reconciliations against our ore reserve declarations. That's not to say we'll continue into the future, but so far it's worked out quite well both in terms of tonnes and grade. Wallaby is a great underground mine, and certainly is one of the jewels in the crown. So, yes, good to see, but hopefully we can maintain somewhere within a six to seven grams a tonne range going forward. That's as specific as I can be at this point in time, Kane.

All right. Thank you, Nick.

Our next question is from Adrian Hammond of Standard Bank. Please go ahead.

Hi, Nick. Well done, and a good improved performances from South Deep. I have a few questions on South Deep just to clear up [ph] my understanding. So correct me if I'm wrong, you are now rolling out a new high-profile five by five destress method?

Yes, it's 5 meters vertically, 4.5 meters width; 5 by 4.5.

Five by four, and has this been tested?

Yes, we've done some pilot work that we started earlier in the year. We've done a few areas, and it looks like it's okay. We've got our Geotechnical Review Board. These are the experts that we've brought in from different parts of the world to come and assist, including South Africa. They are at the mine at the moment, and they review all the work we're doing. So, yes, we've done limited tests on a pilot basis, but a lot of the design work is based on numerical modeling of what they think is the right size, the crush pillars that will be needed, the mining spans, et cetera. So we've got some pilot work, but I wouldn't say we've got a lot. But nevertheless, we've got enough confidence we believe to move the entire mine onto the high-profile basis based on the work that they've done.

And how is it going so far?

Well, it's early days, it's -- I think progressing reasonably well. The [technical difficulty] we're getting is quite positive from the team, but there's a lot of work still to do. We've got 12 to 18 months of [indiscernible].

And initially, I think it was four by four, and it was highlighted that there were concerns around rock mechanics at 3.5 meters, how is this now possible at five?

Well, they've got crush pillars. They've increased the size of the crush pillars, the localized crush pillars. Under the previous destress methodology, we had 2.5 meter crush pillars. Now we're on to 4.5 meter crush pillars. The other thing is we have reduced the mining span across the four corridors. We were at 240 meters. We're now down to 180 meters. So we have got a much stiffer system throughout the mine. And I would say, they've put this into all of their black boxes that they run, and they have come out with these numbers that they feel quite comfortable with. And as I say, they've been on the ground looking at the early work that we've done. And so far, we're not getting any red lights. We're going to get these guys, Adrian, to be with us through this whole journey. We're not going to bring them in right at the end and say, how does it look? They're going to be coming out on a regular basis. They'll be here again in January to see what the progress is. And what we're going to do is some of the low-profile destress cuts that are very mature, okay, that are nearly done, we're going to continue doing low-profile. It doesn't make sense to convert those, but the cuts that are fairly immature, early stage cuts, we'll convert those as well. So I think [indiscernible] is quite comfortable that based on the pilot work done so far that we can make the conversion. And the other thing is we're not doing this whole scale upfront, we're doing it in a staged process. So if we see anything we don't like or some modifications we need to put in, we can obviously do that.

And then –- thanks, just on the workshop, has there been progress on that? And the congestion issues, has that complemented the performance in the last quarter in any way?

No, I don't think so. But the workshop is being commissioned. So, it's almost fully commissioned at this stage. I think the thing that's helped us in the last quarter, as we got a lot of gear in. Remember, we bought 27 pieces of category 1 equipment, drill rigs, trucks, loaders, the bulk of that is now commissioned. And of course, new fleets always has good availabilities to start with. I wouldn't say that we've cracked the code on the maintenance. It's far too early to claim victory there. That is an area that's going to require quite a lot of work still. But on the new equipment that's come in, that certainly improved the availabilities, and helps us. And I think the other thing that has made a difference is we've concentrated on making sure that the daily and weekly plans are honored and that we properly resource up, in particularly the open stopes. Now the open stopes are the meat and potatoes of this particular operation. So the team has spent quite a lot of time making sure that we're manning out the open stopes. We're executing properly, we're not under breaking, we're not over breaking, and we're mining online on grade, and that's been a big focus for us. And it comes through in the grade when you do things correctly.

Great. Thank you very much.

Welcome.

Our next question is from Andrew Byrne of Barclays. Please go ahead.

Hi, good afternoon guys. The first one, I know you kind of haven't finalized [indiscernible] plans for next year, and I know you don't like to give out guidance too early. But just kind of a big picture, given that some of the pushback is around your - the sustainability of CapEx levels, not particularly at Gold Fields, but across the industry as a whole. I was wondering if you could just highlight if there's any major CapEx programs that need to take place anywhere next year that would be a big delta. And then secondly, I was wondering how the exploration program in Australia is going, given the spend that you've got there?

Yes. Look, we're not in a position to talk numbers for 2016, Andrew, as you can imagine. I am not sure that I would say there's anything really significant at this stage other than if we decide to press ahead with demand. Now, I think if we decided to do the demand pushback, okay, and go under the original pits and expand around the pits into the saddle as well as the demand pit cutback too, clearly there will be significant expenditure to do all of the waste stripping. But as I've mentioned earlier, we're doing the studies, so that will dictate whether or not that goes ahead. So that would be the one item that I think is in flux at the moment. But other than that, I think it's pretty much the sustaining capital that we'll continue into the future. I don't really see -- Paul, anything from you [indiscernible]; not really. No, big ticket items we can think of at this stage, Andrew, but obviously in February, we'll give you chapter and verse. So I think the exploration in Australia has gone well, and that we've drilled down a lot of meters. I think between all of the four mines, we estimate that we'll drill about 450,000 meters, which is an all-time record. So we're still collating now most of the results. So the trick now is we got to get everything assayed, then we've got to populate all of the geological models, and then see where we pan out. So I wouldn't really want to say too much, except to say that at all of the mines there are some very interesting things coming out. But I know that it's a big issue for investors and analysts. And I suspect what we'll do is, when we give the year-end results and the guidance of '16, we'll give a more comprehensive explanation update once we've collated all the results, and populated the models. But certainly there's some interesting stuff coming out, which I think looks good for the future. Sorry I can't be more specific at this point.

No, that's all right. And then just a final question from me, obviously with the cost environment varies from region to region, and you've [indiscernible] benefits in West Australia, Ghana is kind of as you were, if you like, with the exception of kind of electricity, but one of the big deltas is obviously around oil price. You hedged through much of 2009. Could you maybe give an indication of what you expect your fuel bill to go down 2016 versus 2015 on a global basis?

Andrew, and again, we haven't completed the plan for next year. It's going to be difficult. Obviously we're expecting a reduction, but it's a small reduction. As you said before, in Ghana and Peru there's a regulated market by the government, and it's not very easy to try and calculate how much they will release. We have seen a release, especially in Ghana, but not to the full extent of the gold price -- of the oil price. Because, as we said, when the oil price went up we didn't feel the full brunt either. And now it's payback time to the governments, where they [indiscernible] again to try and build up their subsidies that they'll use in future. So maybe when we give the ops plan, in February, we'll try and give you more indication of what the impact of the lower oil price is.

Okay, great. Thank you very much.

[Operator Instructions] Our next question is from Patrick Mann of Deutsche Bank. Please go ahead.

Hi there guys, good afternoon. Just following on from the earlier question around the rock mechanics, and managing to do the high profile destress. You were mentioning the pillars -- the crush pillars kind of increasing quite significantly in size. I mean, is this going to -- getting the longhole stoping to work and the destress mining, is this going to reduce the total volume over the life of mine that you can take up? I'm just trying to reconcile what happens if you have these larger crush pillars. And it feels like a smaller tonnage that you can extract using this method? Yes.

Yes, look, what it will do, Patrick, it will allow you to advance quicker having bigger crush pillars. And the key here is to get a greater advance going forward so you can access the open stoping horizon if that's one of the benefits. And then the other thing is you know all of this gets mined anyway. We're all on strike here. It's a question of sequence. Remember that the way the mine is mined, we have primaries and secondaries, we mine the primaries, and we have a secondary next to it. Once we've finished mining the primaries we backfill, and then we come back and mine the secondaries. So it all gets mined over the life, except obviously for the stability pillars between the corridors. That will also probably get mined, but that will be mined much later. But the crush pillars will get mined down the road. So it's really a function of trying to advance quicker. I mean, the one thing that I think sticks out from this is moving to a five meter by 4.5 meter destress cut. It's all on strike, right, so it's on reef. So the other benefit you might get of having bigger destress is not that we avoid mining it three times, which is what we're currently doing. We mine it once, and support it once. But also, you should be getting more tonnes per meter advanced because the cavity is bigger, and that's on reef. So that's one of the other benefits which could offset some of the lag effects of leaving some crush pillars behind until later. But look, to be frank, we don't have a strong resolution yet on what the likely state-to-state profile is going to be. Hence the reason we've said we're not going to give you a new long-term plan until early '17. Until this whole transition is rolled out, it's going to be difficult to estimate the full impact of this. So you can imagine, in '16, it's a transition year. We're going to be moving stopes across high-profile. It seems you're going to have to get used to it. But those are some of the benefits of moving to these. We'll move quicker with bigger crush pillars. And of course, we'll mine once instead of having to come back, mine up a hanging wall, re-support, and make the whole cavity bigger before we can access the open stopes. All of that now goes. We have one cavity, we do it once. So I think when we do the February results we'll spend a bit more time on this. Because I think by then we'll have a better idea of how the transition is going.

Great, thanks. And then one more if I may. I thought the plan at Damang was to bring in contract miners, and kind of use the cash inflow from the fleet to fund the capital expenditure, and fund some of the stripping. Has that fallen or is there kind of option to move to contract in mining? Has that fallen away completely? Or is that still -- form part of the kind of potential recapitalization plan, and potentially help fund it?

It's all part of the same package of work we have to do.

Okay.

So it's not off the table. But we need to understand the economics of moving quite a lot of waste before we can access the ore depth. And then on top of that, if it makes sense from a financial perspective, moving to contract in mining might enable us to partly fund some of that upfront expenditure. So it's all part of the package.

Great, thank you.

Sure.

Our next question is from Justin Chan of GMP. Please go ahead.

Hi gentlemen. Just so touching on Damang again, understanding that a feasibility study hasn't been done yet, do you guys have a sense of timeline regarding how long it might take for you to access the higher grade sections of the ore body should you decide to recapitalize?

No. We don't have that information with any degree of certainty. So until a study is done, I'm going to keep in touch on that, because until we get resolution it would be difficult to estimate. I mean, we're not talking years. It's a question of whether it's -- well, let me give you a range. I suppose I could give you a range. Maybe it's somewhere between 12 to 24 months, somewhere within that range. But, again, I'm just saying that's a high level estimate. It might change. So don't hold us to that, please.

Yes, absolutely. No, that's very much appreciated. A secondary question would be, so right now you're going through a very high grade section of Granny Smith. And going into next year, is that expected to continue or is the scheduling now moving on to a different part of the ore body? And, likewise, [indiscernible] what are your expectations on grade going into next year?

Yes, look, we're not going to get specific on 2016 until we give the guidelines on that. But -- and as I mentioned earlier, we had a question on this earlier. I said that Granny Smith would probably be somewhere between 6 and 7 grams a ton. But it's all over the Wallaby underground. On [indiscernible], I'm not going to be specific because we are changing the mining mix there, with [indiscernible] coming out, invincible picking up, Neptune stage two coming in. So it's going to be a different profile. So I'm not in a position to talk about 2016's [indiscernible].

Okay. And my last question, so this quarter we've seen CapEx come down from the two quarters previous. And notwithstanding any capital projects going forward, which we've discussed, should we expect that -- is that reflecting current market conditions and that would be a new space run rate going forward? Or is that just -- was that part of the original plan, and going forward we should see something maybe more similar to previous quarters?

Well, what I will do is reiterate, that on a all-in cost basis, which includes capital, we're within the guidance we previously gave. We're lower than guidance…

So we did guide there around $650 million of capital for the year, and that's still on track. What we're going to do next year, I can't tell you now. That we will tell you in February, but, yes, we're still on track for around $650 million for 2015.

Great, good. Okay, thanks guys.

Our next question is from Tanya Jakusconek of Scotia Capital. Please go ahead.

Yes, good afternoon there gentlemen. I have a question back on Damang. Did I hear you correctly, Nick, that one of the options could be to put the operation on care and maintenance if the economics don't pan out on the other front?

You heard correctly, Tanya, that's exactly one of the options.

Okay, and if we were to go on care and maintenance, what would be involved at that site?

Well, obviously there will be people who are affected. We have 1000 employees. We have 1000 contracts. Now, one of the thoughts we've had is to continue to process the low-grade stockpiles on the mine through the plant and keep the plant going. We would also obviously continue with administration and security arrangements on the site. I think we would continue some low-level geological work, and in terms of the rest of the people, we would have to sit down and have a proper discussion with all the stakeholders. We've started that debate already. So all of the stakeholders have been informed including the governments, the trade unions. They are all apprised of the current financial position and the prospects. So that whole process would gather momentum if we decided to elect to go to care and maintenance route.

Is it mainly -- would it be safe to assume that this would be something that would be decided clearly if we went under $1000 gold, it would be quite stress on the system?

Yes, I think under $1000 gold, the gold industry will be looking at itself quite closely. I mean even at current prices, Tanya, question is we've got a good ore body at depth, it's good grades, we have seen very similar grades to what we mined at Damang over the last 12 years up until when the pit was closed. The question is can we absorb the upfront cost…

Yes, I know exactly, yes.

Pushback, I think once we are in it I think we'll money at low prices. The question is can we get a return on the strip of these prices, and I am not too concerned about preserving the optionality of these five process. It's good ore body, but it may not work at these processes, and we'll obviously do our best to limit the impact on all of the different stakeholders.

Okay. We will wait for the -- I guess your studies early next year. Maybe just on Q3, can you let us know what the impact of currency and fuel was on your cost structure versus your guidance for your budget for the quarter?

I can't tell you what the fuel impact was, but the impact of the currency on all-in cost decreased quarter-on-quarter of $98; $28 was because of currency. The balance was because of increased production and lower cost globally.

Okay. And just coming back to South Deep so that I understood correctly, Nick, the 1.2 km strike length that you were talking about, you think you'll have all of these destress block opened up in 18 months, so sometime in 2017?

Yes. What we will have by then is we would have converted the mine to high-profile. So in other words, across the entire strike length, there will no longer be any low-profile destress. There'll only be high-profile destress.

Okay. Thank you.

Thank you.

Our next question is from Leroy Mnguni of RMB Morgan Stanley. Please go ahead.

Hi, good afternoon guys. Just two questions from my side is obviously in Ghana we don't get the relief of the currency, you'll be watching the cost side carefully, and with that, what are you expecting for labor increases, because I know that that was something that was being negotiated about a few months ago. And then second, just on Cerro Corona, t seems like your increase is attributable to weaker grades. How long would that cycle be expected to continue, and are you expecting those grades to go back up to the previous quarter's level?

Okay, on the first question, Ghana wages are still being negotiated. So we don't have an answer for you at this point in time. On the second question, I think on Cerro Corona, you have to look at the reserve grades, and we've often said although we've had a positive reconciliation against the reserve grades for seven years of operation, ultimately we'll start migrating back closer to the reserve grades, and I think that's what you've seen this particular quarter. That said, I still think the next two or three years will be pretty good, and we maybe able to do a little bit better than that. This is a function of where we are in the pit. Remember, we have to take out the pits in a sequence. We have to take out all of the pits to a certain level. And depending on where you are in the pit, you get higher or low grades. There is a barren core in the middle. And typically when you get more volume, it's closer to the barren core for example, the grades can decline. Sometimes when you're mining on the periphery of the ore body, the grades can decline. So you should look at that in relation to where you are mining. But ultimately, I would guide you back to reserve grades that we've published in the report.

Perfect. Thank you.

Our next question is from Leon Esterhuizen of CIBC. Please go ahead.

Hi, guys. Just a quick one; on the tonnages at South Deep, you had quite a nice jump this quarter, but I see you're only doing like 130,000 tonnes a month anyway, and I just want to check with you, is the mine at this stage fully booked to handle 300,000 tonnes a month? Is that the capacity, number one? And number two, just judging by the numbers you reported this quarter, it looks like if you go from 130,000 to 160,000 tonnes a month, you would be at breakeven. So, I am trying to get a handle on the sort of volume growth at South Deep. How many more of these bulk stokes are coming online? How fast do they come online? And, it just looks like you are going to get to breakeven a hell of lot quicker than I think you were guiding to before? So just those if you can address that please?

Sure. Hi, Leon. So I think concerns of the infrastructure, the infrastructure certainly gets to 330,000 tones as it has been for awhile. Now I think on the hoisting side, there is a minor modifications we need to do, which we haven't done because the volume was always going to come up bit later. But that's going to take a lot of time and money. But the area that is not ready to go to 330 is obviously we need to open up the ore body to get to and sustain that level of production. And we're some years away from that. And in part of our message to you as analyst and of course to shareholders is that we are going to try and give you a better long term feel by the end of next year as to what we see the volume has been like when we build up what we get to et cetera. And whether or not we can actually fill the capacity of the mine and the plant, I don't know the answer to that question now. And I think the conversion as well to high profile does complicate the issue because we got to be going through another year of transition whilst at the same time trying to get some sort of resolution on what the long term is. So, few moving parts around here. But that said, we do want to continue the momentum. We are focusing heavily on making sure that the high grade open stopes mined especially correctly of course are brought online as soon as possible. And there are a number coming through this quarter we are in and obviously into next year as well. And as I have said before, we want to continue the momentum into quarter four. We think we will. We think quarter four will be better than quarter three. And we expect 2016 again to be better than 2015. And who knows let's see what happens whether or not we can get to the breakeven at or earlier than the end of next year. We will see what happens. Thank you.

Thanks, Nick. Thanks.

Our next question is from Allan Cooke of JPMorgan. Please go ahead.

Hi, Nick. Hi, Paul. Just two quick questions please. On the demand pushback, when you are looking at it, is there any opportunity to look at or negotiate a stability agreement with the government? I know you guys have been trying to do that in Ghana for some time, but is that something that will improve the returns on the pushback of demand and is it something that's possible?

Yes, look, we've continued as you know the discussions with government have been going on for a long time on stability agreements. They continue to go on. And of course, any kind of more preferential tax and royalty arrangements similar to what other companies in Ghana are getting would be beneficial for sure. There is no doubt about it. We have been in discussions for a long time. It's hard to predict whether or not we would be successful. And clearly, we think it's important. We made that point to government, but we don't control the process. What we can do is keep talking and see where we end up. But I know that this is a debate that is going on with other companies, so let's see where we go.

Okay, thanks, Nick. And then just last one, on the fleet composition and the mix in South Deep, it seems like there is going to be some changes there again as you move from low-profile to high-profile, are we going to see more CapEx for the high-profile fleets and what might the cost be on an estimate basis, and does that mean we'll see more scrapping to come through on that low-profile fleet as you take that out to over the next 18 months, please?

I mean capital at South Deep will be similar year-over-year. That's what I can tell you. [Indiscernible] probably -- what you say [indiscernible] yes.

Okay. So we shouldn't be thinking of additional CapEx over and above…

No, no, no, there are not many [indiscernible].

Thank you very much. Thanks.

Ladies and gentlemen, we have come to the end of the allotted time for questions and answers, and Mr. Holland, back to you sir for closing comments.

Well, I just want to thank everyone for dialing in. We've had a good attendance today looking at the list. Thanks for your time. Thanks for your interest. It is a difficult time for the gold market, and we're not too sure where the gold price is going to go over the rest of the year, particularly with the risk of rates increase in the U.S. I think the view that Paul and I got is the sooner we get certainty on that the better. But I just want to wish all of you a festive time of a Christmas, a safe time with your families, and if you're on the roads, please be careful. Thank you very much, and bye-bye.

Thank you. On behalf of Gold Fields that concludes today's call. Thank you for joining us. You may now disconnect your lines.