Integrated Annual Review 2012 Annual Financial Report 2012 Mineral Resources and Mineral Reserves Regional overview  
 

6.3.2 Chucapaca, Peru

Salient features
Overview
  • Planned open pit mine focused on the Canahuire gold-copper-silver deposit in southern Peru
  • Large land holding in highly prospective region
  • Well-established and largely supportive relations with local stakeholders

Mineral Resources
133 million tonnes containing:

  • 6.1 million oz gold
  • 46.1 million oz silver
  • 254 million oz copper

Development stage

  • Feasibility – downgraded to exploration and scoping

Scheduled start of production

  • Not scheduled as yet

Ownership

  • (Joint venture) Gold Fields 51%; Compania de Minas Buenaventura S.A. 49%

Material sustainability issues

  • Addressing community sensitivity around water through innovative reservoir construction programme
  • Commitment to honour all existing community development commitments
  • Currently unaffected by community activism affecting other operators in region – with engagement suggesting largely positive attitudes
  • High community expectations around property prices

Key stakeholders

  • Corire, Santiago de Oyo Oyo and Chucapaca communities
  • Local and national government
  • National Society of Mining, Petroleum and Energy

Progress in 2012

Key points:

  • Completion of feasibility study focused on Canahuire deposit
    – indicating insufficient project returns
  • Downgrading from a feasibility stage to exploration/scoping as a result

Feasibility study

In November 2012, we completed a feasibility study for Chucapaca, focused on the gold-copper-silver Canahuire deposit. This aimed to assess the viability of a large open-pit operation capable of sustaining a 30,000 tonne/day throughput. Feasibility work included the identification of alternative waste and tailings storage sites – as well as 7,000 meters of related geotechnical, geohydrological and sterilisation drilling for these new sites.

Overall, the resulting project economics were not sufficiently robust to warrant a development decision – primarily due to higher than anticipated capital required, as well as sub-optimal capital efficiency for the project given its expected nine-year life of mine and anticipated total ounces recovered relative to the capital of the project. As a result, in late 2012 we downgraded Chucapaca from a project stage back to an exploration/scoping stage. This has necessitated the short-term retrenchment of personnel otherwise earmarked for construction activities.

Nonetheless, we remain committed to unlocking the potential offered by Chucapaca – based on a revisiting of project fundamentals and the achievement of acceptable returns.

Outlook

We remain committed to realising the potential of this strategically significant project – which has a substantial declared Mineral Resource of 6.1 million oz gold, 46.1 million oz silver and 254 Mlb copper. We now plan to carry out additional work to deliver an enhanced economic profile for the project. This will focus on:

  • Mining methodology: Analysis of different mine development options, including a standalone underground operation or a combined open pit and underground operation
  • Exploration: Resumption of exploration drilling – on easily accessible, high-grade mineralisation across 35 drill sites – to provide additional flexibility and extend the current nine-year life of mine estimate. To date, we have already identified a number of prospective targets within close proximity to the Canahuire deposit
  • Cost profile: Optimising capital and operating costs through, for example, moving to a lower throughput model and an associated adaptation of the process facilities to reduce initial capital costs

Licence to operate

Community commitments

Our activities in Chucapaca are supported by formal, five-year agreements (signed in 2010) with the Corire, Santiago de Oyo Oyo and Chucapaca communities – with whom we enjoy positive relations and who we have made aware of the project’s status. Amongst other things, these agreements provide for the delivery of:

  • Health and education programmes, in partnership with the local authorities
  • Other socio-economic development (e.g. training, infrastructure and employment) programmes identified by the communities

Gold Fields will honour all existing community commitments. Beyond this, we are carefully managing community expectations with respect to the potential impact of the latest feasibility results on future commitments.

Community water provision

We are applying an innovative public/private approach to water management, which remains a sensitive issue in this high-altitude agricultural area. It is anticipated that water will be provided to the project from a new 30 million cubic meter reservoir. As the mine only requires a 10 million cubic meter reservoir to sustain its needs, the majority of water from the reservoir will be used to supply local communities – whilst significant excess capacity will be maintained to avoid any supply disruptions.

Plans around the reservoir remain unaffected by the results of the latest feasibility study – although the scale of the initiative does mean its completion will be contingent on mine construction.

Land access and acquisition

Despite strong initial progress, all further land acquisition has been postponed due to high community expectations around land prices – as well as the need for a more robust business case for the project.

Community co-operation around land access will remain essential as we carry out further exploration at the project – including through surface drilling.

Environment

In light of the weak feasibility study results, we have decided not to submit the planned Environmental Impact Assessment (EIA) for the Chucapaca project (originally scheduled for December 2012).

Nonetheless, in December 2012, we submitted the EIA for the new exploration programme aimed at re-engineering the business case for the project – and anticipate approval in March 2013. We also plan to submit an EIA for the 30 million cubic meter reservoir in early 2013

Geology near the Chucapaca project, Peru
Geology near the Chucapaca project, Peru
 
Mineral Resources and Mineral Reserves Overview 2012 - Chucapaca, Peru

Technical Short Form Report 2012: Exploration and Growth Project