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REVIEW OF OPERATIONS – EXPLORATION AND BUSINESS DEVELOPMENT

F2009 Achievements

  • Near mine exploration success at St Ives, Agnew and Damang.
  • Three greenfields projects at the advanced drilling stage.

Tommy McKeith
Executive Vice President: Head of Exploration and Business Development

Gold Fields’ growth strategy is focused on creating our own high quality gold opportunities through an aggressive exploration programme. By leveraging our technical excellence in area selection and programme execution, the Exploration Group aims to improve the likelihood of success and significantly reduce project development timelines.

Our strategy is based on a measured and thoughtful approach when adding new projects to the portfolio. The aim is to strike the appropriate balance between size, quality and the various risks associated with the opportunity. These tradeoffs will continually be re-assessed as a project advances through the development pipeline to ensure its economic potential is commensurate with its technical, commercial, geopolitical, social and environmental risks.

Near mine exploration around our operations in Australia, Ghana and Peru is a priority for our Group. During the year, we advanced the Athena and Hamlet discoveries at St Ives to the feasibility stage and advanced exploration opportunities at all our sites. Near mine exploration is focused on unlocking the option value of our international gold operations and providing a robust platform for regional growth. This is reflected in positive growth trends in annual resource and reserve declarations.

Most of our greenfields exploration is organised to provide the growth pipeline for our international regions: South America, West Africa and Australasia. During the year, Gold Fields advanced this portfolio to the extent where we now have advanced drilling projects in Peru and Mali. Initial drilling projects in Australia and Chile are showing significant potential and we hope to progress these during the next financial year.

Positioning Gold Fields for the longer term, we are establishing exploration activities in a few key prospective geological belts in new regions, away from our existing operations. During the year, the Talas Project in Kyrgyzstan progressed to the advanced drilling stage and continues to demonstrate promise. New exploration search spaces can also arise through the application of new geological concepts and technologies, which we have employed at our initial drilling projects in Canada located within a supposedly mature exploration terrain in British Columbia.

Our objectives are carefully considered in the current environment, and include:

  • Developing a robust pipeline of quality greenfields opportunities capable of generating a Gold Fields development project every two to three years; the goal is to establish a steady state greenfields pipeline by 2014;
  • Establishing Gold Fields’ presence in select regions around the world with the aim of establishing a dominant position in areas containing the most promising emerging and prospective gold belts; and
  • Providing Gold Fields’ international operating regions with a growth pipeline to achieve the targeted production goal of one million ounces a year from each region through exploration success and value accretive business development.

To achieve these goals, Gold Fields has assembled a team of experienced and motivated professionals. Gold Fields has stated that if we cannot mine safely, we will not mine. This principle applies to the exploration team: if we cannot explore safely, we will not explore. We continually strive to provide a safe and healthy working environment at all our projects with the ongoing aim of achieving zero safety related incidents and accidents. From an environmental perspective, the Exploration Group utilises industry best practices that minimise our footprint wherever possible.

To demonstrate this commitment to safety and the environment, the Gold Fields Exploration Group has achieved and will strive to maintain ISO14001 and OHSAS18001 certification at its offices and projects around the world. As a team, we know that the Exploration Group is the first ambassador of Gold Fields in a community. Consequently we always strive to leave a positive and lasting legacy. Our stakeholders can rely on Gold Fields to make positive contributions and be constructive members of the communities in which we work.

Tommy McKeith

INTRODUCTION

Gold Fields operates a disciplined exploration project management system with clear decision gates based on the discovery potential and economics of a target. The different stages of an exploration target’s development are as follows:

  • Target definition;
  • Initial drilling;
  • Advanced drilling;
  • Resource development; and
  • Bankable feasibility study.

To be successful, targets need to be drill tested and advanced to the next exploration phase. There is a strong focus in Gold Fields’ Exploration Group on turning over targets as effectively as possible by drill testing and, where successful, advancing these projects in a timely manner.

Greenfields exploration is generated by reviewing and ranking the most prospective terrains across the world. Highly ranked belts are selected for exploration after a further screen of country risk and strategic fit to Gold Fields. Each exploration region continuously monitors and reviews a variety of exploration and business development opportunities, targeting projects at all stages of development.

When evaluating new opportunities or assessing conceptual targets, we use various metrics, which include reserve and production potential, margin, payback period, initial capital costs, development timeline, net asset value, earnings and cashflow.


Development Stage Africa Australasia South America Rest of the world
Advanced Drilling 1 1 2*
Initial Drilling 4 13 1 3
Target Definition 20 15 14 9

*Includes Arctic Platinum Project.

There has been considerable progress over the last year on Gold Fields’ exploration portfolio. For the first time in the Group’s history, we have three advanced drilling exploration projects underway at the same time:

  • The Talas joint venture with Orsu Mining in Kyrgyzstan, where we are advancing a resource delineation drilling programme at the Taldybulak copper-gold target as well as testing other promising targets within the belt;
  • The Chucapaca joint venture between Minera Gold Fields Peru S.A and with Buenaventura in Peru, where recent drilling intersected significant gold with copper grades and this resulted in approval to carry out an aggressive resource delineation programme on this discovery; and
  • At the Sankarani joint venture with Glencar in Mali, we are aggressively exploring several significant mineralised trends. Subsequent to year-end, Gold Fields made a successful offer to acquire the entire issued share capital of Glencar, which includes Glencar’s advanced Komana prospect.

GREENFIELDS EXPLORATION

The table above provides a breakdown of the number of targets in Gold Fields for each of the first three stages of project development as of 30 June 2009. The table does not include near mine exploration projects at Gold Fields operations in South Africa, Ghana, Australia and Peru.

During F2009 Gold Fields spent a total of US$90 million on exploration, which included US$48 million on greenfields exploration projects and US$42 million on brownfields exploration projects, of which US$34 million was capitalised. The exploration budget for F2010 is substantially higher at US$80 million for greenfields and US$40 million for near mine, reflecting the quality of our portfolio.

At the East Lachlan joint ventures in New South Wales, Australia, we have signed an additional agreement with Clancy Exploration Limited on the Myall property and are now earning into an 80 per cent interest on four separate joint venture projects. During the year, initial drilling of bedrock geochemical and geophysical targets confirmed the presence of large porphyry systems on two of the properties analogous to the nearby Cadia and Ridgeway mines. Drilling on several targets returned significant intercepts of strong alteration and encouraging mineralisation.

At the SBX joint venture project in Chile, we are earning into a 90 per cent interest in three claims held by SBX Asesorias e Inversiones, and 100 per cent of a claim held by Aguas Heladas. During the year we completed geophysical surveys, bulldozer trenching and a reverse circulation (RC) drill programme on two of the properties. Positive results were returned from the Pircas prospect and a follow-up drilling programme is planned for the next field season.

We have signed a letter of intent with SBX Asesorias e Inversiones to earn up to a 70 per cent interest in the Ojo de Maricunga project in Chile. A definitive joint venture agreement should be executed soon and planning for the next field season is currently underway.

We entered into definitive agreements with Mindoro Resources Limited in the Batangas region in the Philippines which allows us to earn up to a 75 per cent interest in a large area with known copper/gold porphyries and epithermal gold prospects. A community relations programme and field work commenced at the end of F2009 with the objective of defining targets for initial drilling in F2010.

A definitive agreement was signed with Cascadero Copper Corporation, that allows Gold Fields to earn up to a 75 per cent interest in the Toodoggone copper/gold project in British Columbia, Canada. An airborne magnetics survey was completed during the spring and field work commenced in June 2009, which includes ground follow-up geophysics and geologic mapping. Initial drilling started in August 2009.

A definitive agreement was signed with the Woodjam Partners (Fjordland Exploration Inc. and Cariboo Rose Resources Limited) to earn into a 70 per cent interest in a 40,500 hectare property covering several known porphyry targets in south-central British Columbia, Canada. Field work consisting of core re-logging, geological mapping and soil sampling has commenced. Geophysical surveys and initial drilling started in August 2009.

ADVANCED PROJECTS

In late 2008 we announced a joint venture agreement with Orsu Metals Corporation for the further exploration and development of the Talas licence area in northwestern Kyrgyzstan. The agreement gives Gold Fields the right to earn as much as a 70 per cent interest in Orsu’s Talas licence area. We assumed operatorship of the Talas Project during F2009 and continued an aggressive drilling programme through the winter months to delineate the resource potential at the Taldybulak copper/gold porphyry target as well as testing other promising targets within the belt. Results continue to be encouraging and work is progressing to complete an in-house conceptual study by Q4 F2010

Our wholly owned exploration subsidiary, Minera Gold Fields Peru S.A., has exercised its backin right with Compañia de Minas Buenaventura S.A.A. to earn a 51 per cent interest in the Chucapaca project located in southern Peru. The option was triggered on the back of the Canahuire discovery on the Chucapaca tenements where drilling intersected significant gold and copper mineralisation associated with the margins of a diatreme breccia. Operatorship of the project was transferred to Minera Gold Fields Peru S.A. during F2009 and an aggressive drill campaign commenced to delineate the extent of mineralisation of the Canahuire deposit as well as to test several other prospective targets in the area. Results have confirmed and expanded the potential of the deposit and work is progressing to complete a scoping study in Q4 F2010.

At the 51 per cent owned Sankarani Joint Venture with Glencar Mining Plc (Glencar) in southern Mali, positive initial drilling results over the year defined extensive mineralised trends with economic gold grades over significant drill widths at the Finguana, Bokoro and Sanioumale sheer-hosted orogenic gold targets. Additional field work and follow-up drilling will commence in F2010 following the rainy season with the aim of progressing this project to the scoping study stage.

We announced in July 2009, that we had reached agreement with Glencar on the terms of a recommended cash offer for its entire issued share capital. The offer was accepted allowing us to consolidate 100 per cent ownership of the Sankarani Properties and Glencar’s advanced Komana Project where Glencar has delineated a 1.25 million ounce resource in two separate ore bodies. Gold Fields plans to complete an extensive drill-out of the Komana Project to include in a scoping study during F2011.

At the Arctic Platinum Project in Finland, positive results from preliminary metallurgical tests, using a hydrometallurgical process, have justified additional engineering work to finetune the cost estimates for using this process on a commercial scale. The hydrometallurgical process uses pressure oxidation to take the base metals and precious metals in concentrate into solution. The metals are then recovered from the solution. During F2010 further work will be completed to assess the economic viability of the process and a decision will be made on pilot plant testing by Q4 F2010.

SINO GOLD MINING LIMITED

Towards the end of the financial year, we announced that agreement was reached on the sale of our 19.9 per cent stake in Sino Gold Mining Limited (Sino Gold) to Eldorado Gold Corporation (Eldorado) for a total consideration of about US$282 million, paid in Eldorado shares. Gold Fields received a share exchange ratio of 48 Eldorado shares for every 100 Sino Gold shares, which resulted in Gold Fields holding 27,824,654 Eldorado shares; about seven per cent of the outstanding shares of Eldorado on a fully diluted basis. Subsequent to year end, Gold Fields disposed of its holding in Eldorado Gold for a total consideration of C$323 million (US$293 million).

NEAR MINE EXPLORATION

At the St Ives Mine in Western Australia, the main focus was resource conversion and extensional drilling at the Athena and Hamlet deposits, located adjacent to the Argo underground mine. Athena is a new discovery and, subject to feasibility study, is the next underground mine at St Ives. Step out drilling has confirmed continuity of the main lode to 600 metres below surface, and infill resource definition drilling demonstrated consistent widths, grades and geometry. The drilling for the Athena conceptual study has now been completed and a full feasibility study will be completed by mid F2010. At Hamlet, which is showing both open pit and underground mining potential, drilling was focused on near surface resource definition and also at extending the lateral and depth extents of the known mineralisation. The strike length of the resource is about 500 metres while deeper drilling between 200 and 400 metres below surface is returning positive results. Drilling will continue testing along strike of these deeper results in F2010.

Drilling at the Leviathan complex will be aimed at testing extensions to the open pit resources in F2010.

At the Agnew Mine in Western Australia, underground extensional drilling and resource conversion at Waroonga was the main focus for the year, specifically at Kim South and 450 South. The objective at Waroonga is to drill test and convert an inferred two million ounce mineral resource position and establish a five-year reserve base for Agnew. Surface targets within 10 kilometres of the gold plant were tested including the Cinderella and Cinderella NE blocks, where the style of mineralisation is gold associated with flat veins.

A major programme of drilling to clearly define the gold potential of the Mine Central Corridor (MCC) shear zone was also started during the year. This programme will systematically explore and model the full potential of the MCC between five on-lease, major gold deposits along a 20-kilometre length of the shear zone. Historical drilling outside of the known and mined deposits is shallow and only tested within 50 to 100 metres below surface.

At the Damang Mine in Ghana, the emphasis during F2009 has been on extensional drilling to the south of the main Damang mine and between some of the smaller surface mines. Positive results are being returned from the Nyame and Tamang prospects and suggest that the Damang mineralisation may extend for at least two kilometres south of the Damang pit cutback. To the south of Tamang, extensional drilling between the Amoanda and Tomento East surface mines, and between Amoanda and the Rex surface mine further to the south, is also starting to show promise. These initial drilling results are supported by an extensive, lease-wide gravity and IP geophysical survey which is scheduled for completion by Q3 of F2010.

At Cerro Corona in Peru, district exploration continues in the 50:50 joint venture between Gold Fields La Cima S.A. and Compañia de Minas Buenaventura. At the Titan-Arabe copper/gold target, negotiations are continuing with the local communities to gain drilling access. Should we obtain approval from the communities, the drilling programme will commence in F2010.