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West Africa Region - Introduction

    [ West Africa Region ]
    Establishing a stable and sustainable production platform



Peter Turner
Executive Vice-President: West Africa Region
Peter Turner

Despite a number of significant operational challenges during financial 2010, the West Africa Region had an outstanding year, laying the foundation for its objective to have at least one million ounces of attributable gold, either in production or in development, by 2015.

At the Tarkwa Gold Mine, our flagship mine in Ghana, the outstanding achievement during financial 2010 was the commissioning of the newly expanded CIL plant and the subsequent build-up to a new record level of production of more than 200,000 ounces during the final quarter of the year. This sets Tarkwa up to increase its managed production on a sustainable basis to between 720,000 and 770,000 over the next 12 months and beyond.

At the Damang Gold Mine the success of the focused near-mine exploration programme increased the life of this mine to at least ten years. Combined with the successful commissioning of a new secondary crusher early in the final quarter, this sets the mine up to increase its managed production to between 220,000 and 240,000 ounces in the year to end-June 2011, with the potential to boost output further beyond that level.

A stable and sustainable production platform of between 940,000 and one million ounces of managed annual production1 has now been established in Ghana. This leaves a gap of approximate 300,000 ounces to be filled over the next three to four years, in order for the West Africa Region to achieve its one million attributable ounce target by 2015.

1 Between 667,000 and 710,000 ounces on an attributable basis – Gold Fields owns 71 per cent of the Tarkwa and Damang Gold Mines

Capex and operating profit
(R million)
Capex and operating profit (R million)
 
Total cash cost and NCE
(US$/oz)
Total cash cost and NCE (US$/oz)
 

The West Africa Region also had an outstanding safety year with no fatal or serious injuries and a decline in Lost-Time Injuries recorded at both mines. Damang went for 441 shifts without any Lost-Time Injuries and was rewarded for this achievement by again being selected by the Ghana Inspector of Mines as the safest mine in Ghana. Tarkwa, in the same competition, received the award in the most improved mine category. The Group’s safe production rules have been fully implemented in the region and the employee response has been positive, fully embracing the Group’s number one value, if we cannot mine safely, we will not mine. During financial 2010 both mines retained their OSHAS 18001 certification for their safety management systems. During the next 12 months they will participate in a follow-up independent review by DuPont of their safety performance and health and safety management systems and processes.

Both mines also retained the ISO 14001 certification for their environmental management systems after undergoing independent external audits during financial 2010. They are fully compliant with the requirements of the international Cyanide Code, in line with our broader commitment to sustainable development, which forms a core strategic element of our business model. To this end the Gold Fields Ghana Foundation also supports a wide range of projects in the fields of social and economic development, education, and general healthcare.

One area of concern in Ghana has been the increased regulatory and fiscal imposts on the mining industry. During the year under review the government passed an amendment to the Minerals and Mining Act, No 703 of 2006, which raised the royalty rate payable by gold mining companies to five per cent of revenue, effective from 19 March 2010. Gold Fields is presently in bilateral discussions with the government about the royalties. Pending the outcome of these discussions we will continue to pay royalty contributions under the old regime of three per cent. In addition, a new temporary national stabilisation levy of five per cent of profits before tax was introduced from July 2009. It remains in effect. Further proposed impositions include a proposed change in capital allowance rates; a forced dividend declaration by companies in which the government holds shares, including Gold Fields; and a change in the list of mining items exempted from import duties. In bilateral discussions with the government we are urging caution about these moves so as to ameliorate the impact on an industry already under severe cost pressure; retain the status of mining as a cornerstone of the Ghanaian economy; and preserve Ghana’s enviable status as a mining-friendly country with an enabling legislative and fiscal regime.

Of most concern, however, are the proposed new electricity tariffs being mooted by the Public Utilities Regulatory Commission (PURC). While the previously gazetted electricity rate of 9.90 US cents per kilowatt hour remains in effect at the time of publication of this annual report, indications are that the PURC is in the process of gazetting a new set of power tariffs which could increase rates by as much as 100 per cent. Being a registered bulk user Gold Fields is in a position to negotiate a rate directly with the utility companies, and is in the process of doing so. While the full effect of these impositions cannot be quantified at this time, it is clear that, in the absence of interventions to ameliorate these measures, they could have a material impact on the sustainability of mining operations in Ghana.

In response to the proposed fiscal changes and the significant escalation in electricity and other input costs, a comprehensive business process re-engineering programme was initiated at the Tarkwa Gold Mine during the fourth quarter of financial 2010. The main objective is to reduce operating costs for Tarkwa to achieve an NCE margin of 20 per cent until mid-calendar 2011 and, over the long term, a sustainable NCE margin of at least 25 per cent. This programme will be fully implemented over the next 12 months with tangible results expected over the period.

During financial 2010 the new high-pressure grinding rolls (HPGR) pilot project was successfully concluded at Tarkwa and this technology will now be deployed to reprocess the decommissioned south heap leach pads, host to approximately 51.2 million tonnes of depleted tailings material. It is estimated that these heaps contain about 597,000 ounces of residual gold, which could be recovered over the next ten years at an annual rate of between 30,000 and 40,000 additional ounces.

At the Damang Gold Mine about US$10 million was allocated to an aggressive near-mine exploration programme, with the objective of doubling the life of this mine. The project met its objectives and a further US$10 million was allocated to the exploration programme until mid-calendar 2011.

During financial 2010 the emphasis of the exploration programme was on extensional drilling to the south of the main Damang pit and between some of the smaller surface open pits elsewhere on the property. Positive indications for extensional opportunities were highlighted and during the second half of the year the exploration activities were directed at two core growth projects; the Greater Damang project, which extends for about five kilometers from Huni North in the north to the Nyame prospect in the south, as well as the Greater Amoanda project which runs for two kilometers from the Tomento East surface mine to the south of the Amoanda Mine. The objective until mid-2011 is to advance the Greater Damang project with additional infill drilling to support a feasibility study decision on the creation of a new Greater Damang super pit. Indications are that the strike length of the proposed Greater Damang super pit could be as much as three kilometers, compared to the current strike length of about 700 meters at the existing Damang pit. Once the Greater Damang super pit project is finalised, attention will move to examining a similar “super pit” at the Greater Amoanda project.

The exploration programme is focused on the generation of higher-grade, harder, fresh ore as opposed to weathered lower-grade and softer-oxide ore, which was predominantly mined in the past. To facilitate processing of the higher-grade fresh ore it was decided to install a new secondary crusher at the Damang Gold Mine. The previous ratio of fresh to oxide ore was 65:35 and the installation of the secondary crusher will change this to a ratio of 95:5. After the successful installation and commissioning of the secondary crusher during the final quarter of financial 2010, production increased to 57,000 ounces during the final quarter and is expected to stabilise between 220,000 and 240,000 ounces per annum by June 2011. It has the potential to rise to the 300,000 ounce mark over the life of this mine.

The West Africa Region is focused on increasing its greenfields exploration activities to support its 2015 target of a million attributable ounces of gold, either in production or in development. To achieve this, an approximate 300,000 ounce gap between that target and our current attributable production has to be filled.

During the year Gold Fields acquired Glencar Mining Plc and consolidated a large land position in southern Mali including the Komana and Solona projects and the Sankarani project which was formerly a joint venture between Gold Fields and Glencar.

Since November 2009 Gold Fields has completed 23,286 meters of diamond drilling, 14,167 meters of reverse circulation (RC) and 87,320 meters of aircore drilling at Yanfolila. Framework, infill RC and diamond drilling were used to delineate shallow resources over the Komana East and West deposits, as well as to test eight initial drilling targets over five licence areas elsewhere at Yanfolila. The aircore drilling was used to sample the bedrock through the laterite cover, which has outlined new target areas with encouraging intercepts at Gonka, Bokoro North, Bokoro Main and Sanioumale West. Our objective is to complete and identify a two million ounce Mineral Resource and complete a scoping study on a starter project by the end of calendar 2011.