Gold-mining group Gold Fields is looking at acquisitions of international assets in much higher-risk areas than previously considered in order to meet its target of a 50/50 production split between South Africa and the rest of the world by 2009, according to CEO Ian Cockerill.
Cockerill was speaking on Tuesday during the opening session of the international Mining Indaba conference in Cape Town, where he reiterated the company’s commitment to its goal of producing an additional 1,5-million ounces of gold by the end of 2009, via acquisition, organic growth and exploration success.
“We are looking at assets that are much higher risk than previously,” the CEO told representatives from the world’s top mining companies and governments. “To replace reserves these days one must look at areas that five years ago would have been considered incredibly high risk.
“For example, Ghana in 1996, when we started up there, seemed to be very high risk. Replacing reserves is the main issue facing the gold industry.”
Cockerill confirmed that Gold Field’s international expansion plans remain on track, with its gold production outside South Africa rising to 1,5-million ounces in 2005 from only 60 000 ounces in 1998. The group still faces a shortfall of about 600 000 ounces, he noted, which has to be found from foreign assets within the next three years, either from within the existing pipeline or from new acquisitions.
In early 2006, the miner had finalised its transaction for the Cerro Corona assets in Peru, he noted, where ground is already being turned and production is expected to start from the end of 2007. Gold Fields holds 92% voting rights and an 80% economic interest in the project, which is forecast to produce 4,5-million ounces of gold equivalent over 15 years, or between 300 000 and 400 000 ounces of gold per year.
Development capital costs at Cerro Corona are estimated at $277-million, with cash production costs of about $250 per ounce of gold.
Meanwhile, Gold Fields is in the process of concluding its acquisition of Bolivar Gold in Venezuela, which is also a high-risk country, Cockerill acknowledged. Bolivar has a gold resource totalling 3,5-million ounces and reserves of 1,3-million ounces, with total cash operating costs of about $161 per ounce.
“This is a very exciting time for the gold business. Gold Fields is in good shape and well positioned for the bull market,” the CEO concluded. — I-Net Bridge