GOLD FIELDS - Quarter and Period ended 31 December 2010

Gold production decreased from 323,400 ounces (10,058 kilograms) in the September quarter to 310,600 ounces (9,661 kilograms) in the December quarter due to lower volumes mined and processed. Production in the quarter was affected by unplanned crew moves due to a fire during the previous quarter, adverse environmental conditions, lack of face length flexibility and power failures.

Underground tonnes milled decreased from 1.37 million tonnes in the September quarter to 1.35 million tonnes in the December quarter due to a decrease in stoping volumes. Underground yield at 6.6 grams per tonne was similar to the previous quarter and was as a result of excessive dilution due to ore handling constraints. Surface tonnes milled decreased from 1.26 million tonnes to 1.18 million tonnes due to mill downtime. Surface yield decreased from 0.8 grams per tonne to 0.7 grams per tonne due to the impact of rain on higher grade ore sources.

Main development increased marginally from 11,955 metres to 11,976 metres and on-reef development increased by 4 per cent from 1,979 metres to 2,058 metres. The average development value decreased from 2,106 centimeter grams per tonne in the September quarter to 1,868 centimeter grams per tonne in the December quarter, due to lower Carbon Leader and Middelvlei Reef values.

Operating costs decreased from R1,949 million (US$265 million) to R1,861 million (US$269 million). This decrease was mainly due to BPR initiatives, a decrease in employees in service and lower electricity charges, partially offset by an increase in stores cost. Total cash cost was well contained at R191,088 per kilogram (US$859 per ounce) similar to the previous quarter’s R190,863 per kilogram (US$807 million).

Operating profit increased from R948 million (US$129 million) in the September quarter to R1,057 million (US$152 million) in the December quarter.

Capital expenditure decreased from R680 million (US$92 million) to R586 million (US$85 million) due to lower spend on various projects including the Driefontein historical tailings dam project.

Notional cash expenditure decreased from R261,334 per kilogram (US$1,104 per ounce) in the September quarter to R253,286 per kilogram (US$1,138 per ounce) in the December quarter mainly as a result of the lower cost and capital expenditure. The NCE margin increased from 9 per cent to 16 per cent.

Gold production decreased from 102,900 ounces (3,202 kilograms) in the September quarter to 99,000 ounces (3,080 kilograms) in the December quarter. This was mainly due to health and safety stoppages by management. This followed the fatal accidents at North Section and South Section during the quarter which resulted in lower volumes.

Underground tonnes milled decreased from 686,000 tonnes to 666,000 tonnes and the underground yield decreased marginally from 4.5 grams per tonne to 4.4 grams per tonne. Surface gold increased from 126 kilograms to 155 kilograms as a result of milling 362,000 tonnes of surface low grade material this quarter compared with 251,000 tonnes in the September quarter.

Main development decreased from 6,486 metres in the September quarter to 6,192 metres in the December quarter as planned. The on-reef development decreased from 1,850 metres to 1,622 metres and the average main development value increased from 961 centimeter grams per tonne in the September quarter to 1,044 centimeter grams per tonne in the December quarter, mainly due to the value variability of the zones being developed.

Operating costs decreased from R627 million (US$85 million) in the September quarter to R606 million (US$88 million) in the December quarter. This decrease was mainly due to lower electricity costs. Total cash cost increased marginally from R191,599 per kilogram (US$810 per ounce) to R192,630 per kilogram (US$866 per ounce).

Operating profit increased from R294 million (US$40 million) in the September quarter to R322 million (US$46 million) in the December quarter.

Capital expenditure increased from R145 million (US$20 million) to R160 million (US$23 million) with the majority spent on infrastructure upgrades and ore reserve development.

Notional cash expenditure increased from R241,037 per kilogram (US$1,019 per ounce) in the September quarter to R248,799 per kilogram (US$1,118 per ounce) in the December quarter due to lower production and higher capital expenditure. The NCE margin increased from 16 per cent to 17 per cent.

Gold production at South Deep increased from 70,700 ounces (2,198 kilograms) in the September quarter to 75,500 ounces (2,349 kilograms) in the December quarter, due to higher underground mining volumes. This increase in production was achieved despite a 10 day strike during November 2010. December production set a new mechanised mining record of 164,000 reef tonnes broken, primarily due to increased production from long hole stoping and benching.

Underground ore processed increased from 370,000 tonnes in the September quarter to 442,000 tonnes in the December quarter. Total tonnes milled, which included 89,000 tonnes of surface sources and 75,000 tonnes of off-reef development, increased from 495,000 tonnes in the September quarter to 606,000 tonnes in the December quarter. Yield decreased from 5.9 grams per tonne in the September quarter to 5.1 grams per tonne in the December quarter mainly due to lower production from the higher grade 95 3 West area due to the temporary unavailability of the associated ore pass system due to maintenance being performed.

Development increased from 2,982 metres to 3,096 metres for the December quarter. The new mine capital development in phase 1, sub 95 level, decreased by 3 per cent for the December quarter from 935 metres to 908 metres. Development in the current mine areas above 95 level increased from 1,774 metres to 1,987 metres. Development below 95 level was negatively impacted by the industrial action, while current mine development improved primarily due to an increase in drill rig availability and utilisation. Raiseboring decreased from 273 metres in the September quarter to 201 metres in the December quarter as most of the major raiseboring below 95 level was close to completion. De-stress mining improved from 5,342 square metres in the September quarter to 6,975 square metres in the December quarter.

Operating costs decreased from R499 million (US$68 million) in the September quarter to R497 million (US$72 million) in the December quarter. This was mainly due to lower electricity costs and tight cost controls. Total cash cost decreased by 7 per cent from R223,294 per kilogram (US$944 per ounce) to R208,514 per kilogram (US$937 per ounce).

Operating profit increased from R134 million (US$18 million) in the September quarter to R214 million (US$31 million) in the December quarter.

Capital expenditure increased from R492 million (US$67 million) in the September quarter to R511 million (US$74 million) in the December quarter in line with the project plan. The major capital expenditure was on development, the ventilation shaft deepening and infrastructure, as well as construction of the new tailings dam facility.

Notional cash expenditure decreased from R451,137 per kilogram (US$1,907 per ounce) in the September quarter to R428,948 per kilogram (US$1,928 per ounce) in the December quarter due to the increased production.

South Deep will continue to focus on delivering the planned development metres, completing the Twin shaft infrastructure and the new tailings dam and increasing production and development, in line with the build-up plan.

South Africa region