Gold Fields Limited (GFI) Q3 2023 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Gold Fields Q3 2023 Operational Update. [Operator Instructions] Please note that this call is being recorded. I would now like to turn the conference over to Martin Preece. Please go ahead, sir.

Thank you, Irene, and good afternoon, ladies and gentlemen, and thank you for making the time to join us for our Q3 operational update for Gold Fields. I'm just going to run with some brief introductory comments, just touching on what is in the book. I think just starting with health, safety and well-being. Tragically, we lost a colleague during the quarter at Tarkwa in a safety-related incident on one of our waste dumps. And again, on behalf of Gold Fields and the executives, we want to extend our heartfelt condolences to the family, loved ones and colleagues of our colleague that has succumbed to his injuries. We did touch on it in August, the Elizabeth Broderick review, which we had rolled out across our business, and we are busy implementing the 22 recommendations from that review, and we'll have a follow-up audit within 3 years. I think very pleasingly, we have announced on the 9th of October that the Board has concluded the search process for the new CEO and pleased to announce that Mike Fraser, who was with Chaarat Gold and previously with South32 and BHP, will be joining us in the beginning of the New Year, in the beginning of January next year. I think Mike brings with him a lot of, I think, really strong experience and capability, and we look forward to Mike joining us and the positive impact he's going to have on our business as we go forward with Gold Fields and build on, I think, the really strong base that's been put in place. Touching on the strong base. Those of you who follow the press, we're really proud of the achievement of being ranked #1 in the Sunday Times Top 100 Business Companies last Thursday evening. And I think it's a great testament to our teams across the globe, who've worked consistently and hard over the last 5 years to translate the strategy into action and deliver this phenomenal sort of update/result and the recognition that belongs to all our people. Pleasingly, we don't want to get distracted with Q3 results, and Paul will touch on some of the bigger numbers a little bit later, but our guidance remains unchanged despite the operational challenges that we have had during the quarter, gold equivalents at 2.25 million to 2.3 million ounces, and the AIC, excluding Windfall, expected to land between $1,480 and $1,520 for the full year. I think -- just on touching on the costs, I think what's important to note is the big impact on costs, and we'll touch on it. We produced 50,000 less ounces for the quarter. That's largely driving the change in all-in cost driven, but there's important attributable to Windfall that's additional. But otherwise, our costs in absolute terms remain fairly flat. The real big impact has been at Tarkwa. We're mining at the bottom of the pit. We took the decision in quarter 2 to accelerate mining there. Knowing that quarter 3 is a rainy season, so we've certainly slowed down in quarter 3, but if you take the combination of quarter 2 and quarter 3, we're dead on target in terms of cost, and that will come to fruition for the full year. Across the business, I think we've also had some challenges with lower grades at our St Ives and Agnew mines in Australia, impacted by some ventilation concerns that's impacted on the ounces. I think very pleasingly, despite the slow start at South Deep earlier this year, quarter 3, they've seen a 19% improvement on recovered. Ghana stays -- we're comfortable with where we are in Ghana and Peru. The important news with Salares Norte. At the end of the quarter, project construction at 97%. Paul and myself sat in reviews yesterday. Construction is now at 99%. And we're pleased to report that on Monday night, they started the Ball Mill. They've run that on Tuesday night. We started the SAG Mill and started feeding material into the mill. We're currently treating better material to just get everything commissioned and running up and first gold is still expected in December, and the project is on track in terms of spend. In terms of the JV announcements that we made earlier in the year, ourselves and AngloGold Ashanti are progressing -- working closely together and progressing with the pieces of work between the 2 parties. We have started engagement with the government in Ghana, but that is going slower than we originally envisaged, but we will continue with that as we do believe that the joined up entity makes sound economic sense for the people of Ghana, for AngloGold Ashanti, and ourselves. I think in terms of the partnership with Osisko Mining to develop the project in Windfall, the EIA was submitted in March. We expect that to come to fruition towards the back end of next year or very early 2025. In that period, we're going to continue with preconstruction activities. We are committed to do certain work. We have already spent in Q3 $25 million this year and making good progress. Just on the ESG part, we've made good progress with our Tailings Disclosure this quarter for our extreme’ and high-risk stance at Tarkwa and Cerro Corona, and there is no material dam safety issues to report. And then all successfully concluded a second sustainability linked loan for our Australian facilities on the same terms as the $1.2 billion line revolving credit facility that we negotiated earlier this year. And again, I think that shows our commitment and belief in the ESG targets we're setting to make sure that we are valuable members of society. We've seen a slight increase in net debt-to-EBIT ratio moving up to 0.48x linked to some of the payments at Windfall as well as the interim dividend. And then lastly, a great pleasure to welcome Jongisa, who joined us on the 1st of September. She's here with us today. We did talk about Paul Schmidt, who will be retiring next year. That process to find Paul's replacement is well advanced, and the Board will be looking at certainly the initial list of candidates next week when we meet. We also spoke on the road in the back end of August about Naseem, EVP Sustainable Development. He reaches retirement age next year. So towards sort of middle quarter 3 next year, Naseem will be leaving us. And then Stuart Mathews also has reached the retirement age will be leaving us towards the end of quarter 1 next year. So the process for those replacements is in place. And lastly, Rosh Bardien, who was our EVP for People and Organization Effectiveness, has also taken the decision to leave Gold Fields, and we will start that search process for Rosh's role. In the interim, Gerrit Lotz will be acting in that position. Just one last thing, and I must apologize to my colleagues for not introducing them when we started. But with me on the call today, we've got Paul Schmidt, our CFO; Jongisa, who I did talk to, who is Investor Relations; Thomas Mengel, who works with Jongisa, and Naseem is also in the room with me. So with that, my apologies to my team. I will hand back to you, Irene, and we can try and deal with questions.

[Operator Instructions] The first question we have is from Adrian Hammond of SBG Securities.

Good day, Martin. Thanks for your update. Just got 3 questions for you. I'd love to ask you a bit about safety. Firstly, safety performance has regressed materially, and I think it's fair to say as a global major that's pretty unacceptable. Could you just give us a bit more color what's going on and why that's happening in the business? And what you would do about it? Because, as you know, safety is a big driver of ratings. Secondly, Asanko gave an update recently from Galiano. They improved the outlook, lower cost, top end of guidance for production, but you didn't mention it. Why is that? And what's the situation with the relationship there and your intentions? And then just on South Deep, what bothers me is the volatility in the grade. Could you give us a bit more detail about how mining has progressed from the fringes and how you're opening up flexibility South of Wrench or plans to do that next?

Again, thanks for your questions. I think safety, I'll start with the safety question. Certainly, as concerning as it is for you, it's deeply concerning for us. Gold Fields has had a great track record with safety. Unfortunately, we had an incident in Ghana this year, and we had an incident in Australia last year. What we are doing about it? We've had a review of our safety performance, our critical controls, and what is falling through the cracks, where we're failing. I think key issues that we believe that we need to improve on linked to safety and the incidents recently is around contractor management. That we might, as much as we've got, I think, a really strong controlled environment in our own operations, some of the activities that have been contracted out have maybe not been managed as robustly as internally. So that is certainly a focus area. What we have done? We are bringing in independent experts from outside to assist with investigations, so that we can get a more robust view. And we've also initiated work with a well-renowned international consultancy that is doing reviews at 2 of our operations currently. And based on those outcomes, to see what we're missing culturally with safety, if there's opportunities to learn. I think as you move further up the curve with your safety performance, those improvements get harder and harder and doing the same old things isn't going to deliver the results. So I think we're trying to get a step change. I think the last aspect that we're doing, we've certainly recognized the need. Safety is typically being managed in each of the regions and we're in process of appointing a group safety lead, so that we can try and get the learnings shared a little bit better across the business. I think second question related to Asanko. We're fairly advanced in our discussions with Asanko, how to take the asset forward. We certainly expect an announcement, hopefully, before we close for Christmas this year. Where we're going to go with that deal? I think we've reached a lot of common ground and we had a fairly advanced stage of discussing where we are with Asanko. And obviously, at this stage, once we've finalized our discussions, we're happy to update the market. Paul, do you want to talk to the South Deep?

Yes. Adrian, I can talk to the grade. Martin can talk to the South Deep. And the grade is not -- you've got to have a look at the underground reef grade. And that's been fairly consistent, 6.5 versus 6.77, and even if you compare it to the corresponding period last year, the grade was around 6.4, 6.5. So the yield, that depends on how this stuff is loaded and then obviously taken to the plant and you can get variations. But the mine gained has been fairly consistent over the last period. I think some of it is just odd timing what ends up from stockpiles, what ends up in silos underground as we manage this lower ground from underground to the stockpiles and as it's impacted by be it load shedding or other events. And we've had some of those poor ground conditions that we reported in quarter 1. So you end up getting a slightly different mix. But as the ground comes through, there isn't huge variations of grade at South Deep. I've said it a couple of times, you've got to start at 1 end and plow through to the other end and you're going to get a bit of upside here and there. I know the team is finding a bit of grade at the moment, but there's no mining sequence.

Understood. Well, well done. The tonnages seem to be holding good ground. And I think if you get the safety right, it's a good value on the stock. Good luck.

And just on South of Wrench. I think we had talked about it before, Adrian. We are steadily moving towards South of Wrench. That was originally planned to sort of start down in 2031, I think, if I'm not mistaken. As we've reported before, we'd rather go there slowly now. So the team is slowly sort of loading out, developing certain ends, but that gets us there a little bit earlier. And I think it's linked to your questions you've asked before, opening the South of Wrench earlier taxable for critical part, and it will start giving the mine a bit more flexibility of mining areas.

The next question we have is from Martin Creamer of Mining Weekly.

Martin, I'm a little worried. I think when I listen to your presentation these days, I hear about the lack of skills. While we have to be listening to people in Canada, when we're listening to people in Australia, all over the place, skill set dead. What are you going to do to about it. There are a few of those smallest book juniors who have opened school of mining in the Northern Cape. There's no effort by the bigger company. What are you going to do about the lack of skills?

Martin, thanks for the question. So I think it's -- we're tackling it in different ways. Certainly, in Western Australia, the Western Australian government is certainly reducing entry requirements and making easier for us to get experts in. The challenging Western Australia is a little bit different to what we find at South Deep. In that, you basically got 97% employment in Western Australia or 3% unemployment. And the view is that, that 3% unemployment is not people looking for jobs, it's people that can't work or don't need to work. So what you do is you have a market that doesn't have surplus skills. You've got big infrastructure spend in the cities, which is attracting people. Because they're not on FIFO, they can go home every night. And then you're competing with the big bulk miners, who sometimes make in a month what we make in a year. So the ability to attract talent with reward is a lot easier than us. So the Western Australian government is certainly relaxing and facilitating entry for experts and for people to take up residence. Some of our colleagues from Ghana are actually moving to Australia, but we're obviously retreating from other parts of the world there as well. I think at South Deep, the problem is slightly different. It's not a broad skill shortage. It's a skill shortage in long-haul operator skills and with the artisans that maintain that equipment, that big treacherous equipment underground. We're losing those skills to the other bulk mines in Central Africa and some in South Africa. The view that we've taken there certainly with operators is we've employed additional people. We will train way in excess of what we require. And hopefully, we'll saturate our market and not lose too many, but if it means losing a couple, at least we keep ourselves strong. We're doing the same with our training center for artisans, trying to upskill artisans. The challenge again with artisans is a bit of a longer time frame. Artisan can take anything between 3 and 5 years to get trained and that certainly they leave with a qualification and ability, but operating or maintaining those fancy pieces of equipment needs a couple of years' experience as well. So in addition to recruiting and training artisans, we've built a fit-for-purpose, I suppose, building, where we've put these machines in and we are teaching artisans sort of on the ground fault finding and simulations and how to repair and fix those machines. That will take us a bit longer, but we've just got to invest in training additional people, Martin.

And just my final question. When we spoke last, you said, in 2024, there might be some new moves in renewables. You said you're investigating things for South Deep going into wind and solar for 2024. What have you done on the renewable trend in South Deep, or what are you going to do? And what about renewables elsewhere?

So Martin, at South Deep specifically, we are busy with the wind study to put up those wind turbines. It's certainly delivering very positive, I suppose, results on the tower we put up. We put a net mass up to measure the wind, measure the bird life, bat life. We are currently busy with the environmental permitting for the wind facility. That should be close to complete sort of quarter 2 next year. At the same time, the team is doing the positioning of where those turbines would be. We've got the Board earlier and we're busy doing the engineering, design, detail and costing on the wind turbines. And so hopefully, we can make a sensible argument to the Board about advancing that project in fact to the Board towards the back end of next year for approval. Paul has made provision in our long-term costing for that. But obviously, we need to produce a business plan. In terms of other renewables at our mines in Australia, we have approved additional solar at Granny Smith and Agnew mines and we're busy finalizing a big study to take our St Ives Mine to about 72% renewables. That will be going to our Board before year-end for approval, that's over $200 million investment, U.S. dollar investment, not Aussie dollar, that will be spent over the period of '24 and '25. I think we know about Cerro that's now on renewable electricity. The only other piece that is new is the Windfall project in Canada. We have just been, in the last week or 2, been granted allocation by Quebec Power, which is a fully renewable source from hydropower. And we are obviously constructing the power line in from the bell to the mine, that's about 80% complete. And so early next year, we should be able to switch Windfall on to a renewable source of electricity from hydroelectricity that I was commenting about. And then the Salares project that we're busy commissioning, the EIA has been approved for the date, but we've still got to do the study workout. I think it's more important right now that we get the molds mills turning and some gold coming at the back end than people focusing and losing focus with solar panels.

And if you remember what you think you'd have at South Deep for wind?

We must probably going to be somewhere between 50 megawatts and 80 megawatts. We haven't planned the exact number for South Deep on the megawatt shed.

The next question we have is from Ed Stoddard of Daily Maverick.

Yes. So Martin, I'm just kind of interested if you can give us an update on the ESG front on the chinchilla project in Chile. Has the new attempt worked keeping the rodents be gone.

Thanks, Ed. So in terms of where we are with that, the compliance program or what you call the PDC, we got that back from the regulator earlier this year. We've been busy preparing for the monitoring and preparation of that location. We've increased our cameras in building night vision capability from 35 to 158. We have to do all the monitoring of the areas that's up at 35% now. Importantly, one of the learnings, we've increased our veterinarians on site from 3 to 5, 2 shifts. So that's basically 10 vets in total that we have on site and 12 during the relocation phase. We've identified the buffers and we're busy demarcating those and we'll have everything on site ready to start relocation by December. We will start relocation in January, and we expect to first capture, in the first 2 weeks of January. We're starting in an area called R3 with 8 chinchillas, and then the plan is in terms of to liberate to rocky, it's a minimum of 40 days. You do 10 days of capture, 20 days of observation, and then another 10 days of capture. And then obviously, there's a release. We'll start with areas of R3 with 8 chinchillas and R5, those are about critical part in quarter 1 next year. As you know, we're stopping winter. And we'll then recommence in September with areas R8 and R10. That's 2 chinchillas there. And then early '25, in areas R7 and R6, which is a total of another 11 chinchillas. So that will allow us to commence pioneering activities in quarter 1 2025, because we'd have cleared the areas R5, R8 and R10, and we are looking at pit redesign to make sure that we can get that going and start prestrip in quarter 2 2025. So that's where we are at. We're certainly significantly more monitoring, more veterinary staff on site, and so a clear plan that's aligned to the critical part that we will now actively push, but not aggressively push.

Just as a follow-up. So you're saying you've got 10 veterinarians on site. That's about 1 veterinarian to 2.5 chinchillas, if I'm doing my math correct. And then also, have you decided to reconfigure the pit? Are you going to go underground?

So we've done the -- as a plan B, and we'll keep on progressing the underground study, that also comes with permitting issues. But I think we've got to do things in parallel. We can't say either this or that. We still -- there's a viable case or business case for the open pit, we'll keep on doing the underground study as we've discussed before, but I think we can't sit and wait for the underground study before we start the relocation of the chinchillas.

Okay. And just again, on the vet, I mean if you have 10 vets on site, that must be costly. I mean, I'm guessing that the whole project has now gone beyond its initial $400,000 estimate?

Well, it's significantly more. But I think it's important. This is something that's important to us. I think it's important to our stakeholders. And so do you count that in money? Or what is the right thing to do?

The next question we have is from Raj Ray of BMO Capital Markets.

I apologize in advance if you already answered some of these questions. There was a bit of a trouble dialing in. But Martin, first up on the Australian operations, the one takeaway we had from the site visit last year was that there's a lot of upcoming underground development and infrastructure development that's needed and also extension of resources that's needed at the underground operations. With the skill shortage that you are having, how are you tracking with respect to your underground development? And looking forward to 2024, is there any impact on operational flexibility at those operations, if you can comment on that? And my second question is regarding the Asanko asset. Wanted to see where Gold Fields is with respect to making a decision on that?

Raj, thanks for your questions. Certainly, the development pressure we're under now, we have stress-tested that leading up to our business plans that are being presented next week. There's certainly no risk for next year. The impact has been, part of it skills, but part of it also ventilation following the incident. So we obviously have to review how we raise more. That has obviously delayed some ventilation. We do believe we've got the flexibility we need for next year, but it's something we've got to keep our fingers on. And we can't let it sit for another 2 years, but we've stress-tested our plans. I think Stuart and his team have had enough development in place and are very comfortable next year we're not going to feel pain due to the performance this year. In terms of Asanko, we had fairly advanced discussions with Galiano, our JV partners there on the way forward with the asset and we certainly are hoping to be able to make some sort of announcement before year-end on the way forward with Asanko. I think that's the answer that we've got on that.

[Operator Instructions] We have a follow-up question from Adrian Hammond of SBG Securities.

Yes. Thanks very much. Martin, just briefly on Salares. What critical items remain to get to first gold? What's still left to be commissioned? And just give me a sense on how quickly you can ramp up? I mean, as I understand, you must have all of next year's gold above ground already. So does that suggest you could get to a steady state within the first quarter? Or are there other critical items in terms of the processing that need still to be commissioned or fully ramped up there?

Thanks, Adrian. So I think by the year-end, we can have more than next year's gold on stockpiles in front of the process plant. There will be 600,000 ounces. We're calling 400 to 450 next year. The magic sort of number is about 50,000 ounces when you get to steady state a month for this initial period. So obviously, we want to get the ramp-up done to get to that 50,000 ounces a month as quickly as possible. What's outstanding, so basically the combination circuit upfront is basically 100% constructed. That's basically your primary crusher, your stockpile, your mills. We are busy running better material through the mills. We stopped putting that into the leach tanks and thickeners. That's all working. That's all sort of watering for a while. And that's going to allow us to start getting sludge to the filter plants, which are basically ready, but waiting for material to come through. The last sort of 2 pieces is the Merrill-Crowe, which is, as we've said before, about 85% of the metal with reagent tanks and facilities to dispense reagents into the final process of busy being stocked and we've just got to finish the construction commissioning of that. There's bits and pieces of equipment to go with that. We certainly need that by the end of this month. And then the carbon circuit at the back end, which is the last 15% of the metal, will be done also with the intention of being finished during the sort of middle back in December, which will then give us the full capacity of the plant. I think ramp-up from a mining perspective, not a risk at all because the material is on the ground. I think Max and Lucho on the team have been quite smart and rigid. We've been handing our plant to the operational team as the construction guys commissions. So the general manager of the mine basically owns a combination circuit this week; and next week he'll be taking charge of the leach tanks and thickeners; and the week after, the filter presses. So what we're doing is with operational teams that are there, they're starting to operate, own and run that. We believe that's going to go some way to mitigate, I suppose, the snag list and the things that can go wrong. Typically project teams, they finish them and they hand it over. And then it's the operational team's baby. I think as you're doing it in parallel, you're upping your probability of success, because you're running -- there's our operational team running parts of the plant while the construction guys are finishing.

Thanks for the detail. So all going well, when do you think 50,000 ounces per month is achievable?

It is quarter 3. We get to commercial levels in quarter 2, and quarter 3 is when we get to the 50,000 ounces a month, Adrian.

It seems at this stage we have no further questions. And I would like to hand it back to Martin for any closing remarks.

Thanks a lot to everybody for joining. We certainly look forward to closing our year out. I'm sure you have had as long a year as we have. And we're fairly confident. Paul and myself spent yesterday with our teams across the globe assessing the sort of full year guidance reported. We believe that's intact. So we're looking forward to reporting a good set of results in January or February when we talk to you next time, and thanks to my team that's here with me. And all the very best to all of you. We won't get to you again for the festive season and may 2024 be a fantastic year for you. Thanks, Irene.

Thank you. Ladies and gentlemen, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.