See Teleconference Details Below
JOHANNESBURG, Nov. 15 /CNW/ - Gold Fields La Cima, which is 80.72% owned
by Gold Fields Limited ("Gold Fields") (NYSE: GFI), (JSE: GFI), (DIFX: GFI),
today announced a four month delay and a revised capital forecast for the
Cerro Corona gold/copper project in Peru.
The construction costs for the project was previously estimated at
approximately US$343 million and the treatment of ore was scheduled to
commence early in the March quarter 2008.
The construction costs has now been revised to US$421 million, which
includes an additional contingency of US$20 million, and the treatment of ore
is now scheduled to commence towards the middle of the June quarter 2008.
The delay is mainly due to two issues:
- Deficient progress on the construction of the tailings management
facility (TMF) caused by poor rock quality in the project quarries,
and inadequate material delivery rates required for the construction
of the TMF embankment; and
- Underperformance over the past two months by several contractors
responsible for the structural and mechanical installation of the
Commenting on the announcement, Ian Cockerill, Chief Executive Officer of
Gold Fields, said:
"While we are disappointed with the delay and the increased construction
costs, Cerro Corona remains a robust project and will make a significant
contribution to the future of Gold Fields. We have thoroughly reviewed every
facet of this project and I am confident that the required steps have been
taken to ensure completion within the revised project schedule and budget."
The first significant cause of the delay is the recent poor progress in
the construction of the TMF, which was previously highlighted as the greatest
risk to the project cost and schedule. Clearing and preparation of the
embankment footprint was completed in June 2007 and construction of the
various zones in the embankment commenced in early July. The materials
required for the construction of the embankment, which are sourced from
quarries on the project site, must meet strict geotechnical, geochemical and
structural standards, some requiring significant processing to generate proper
size gradations. Two crushing and screening plants have been erected on-site
for this purpose. Since the commencement of the construction of the embankment
in early July, production of acceptable construction material has been
substantially slower than anticipated due to poor rock quality encountered in
the quarries, and a slower than expected ramp up in the optimization of the
crushing and screening plants. Both of these factors have now been
incorporated into a revised project schedule, leading to the delay in the
completion of the Project.
The second contributing factor to the delay is poor construction
efficiencies achieved over the past two months by several contractors
responsible for the construction of the concentrator. Despite an acceleration
plan developed to complete the construction of the concentrator in December
2007, certain tasks were not timely completed in the last eight weeks,
particularly with regards to the completion of critical early commissioning
areas of the plant. This has led to knock on delays to the electrical
contractor, hence the overall impact on completion timing.
There are four main causes of the increase in construction costs:
1. The delay in the completion of the Project attracts significant
additional costs in terms of management and engineering personnel, as
well as attendant indirect or support costs such as the maintenance
of the remote onsite camp and other services such as bussing and
2. An increase in the construction costs for the TMF due to higher unit
rates for mining and crushing of construction materials.
3. Poor ground conditions have been encountered in the construction of
the various facility platforms as well as mine and access road
construction. This has necessitated additional cut and fill
activities to ensure the stability of the various structures.
4. Continued escalation of commodity based products, such as electrical
cabling and power lines as well as the piping and mechanical and
electrical components of the tailing management systems, has had a
significant impact on the overall cost of the project.
The Cerro Corona gold copper project is located 80km from the City of
Cajamarca in the highlands of northern Peru. A decision was taken to commence
with this project in January 2006 following approval of the Environmental
Impact Assessment in December 2005.
The Project involves the development of a single surface mine producing
6.2 million tons per annum (mtpa) of ore at a life of mine stripping ratio of
0.58. This ore will be treated in a conventional milling and sulphide
flotation concentrator treating 6.2 mtpa of ore and producing between 100,000
and 140,000 tons per annum of copper and gold containing concentrate, which
will be custom treated at smelters in Japan, Korea and Europe.
The Project currently has reserves of some 3.2 million ounces of gold and
1,089 million pounds of copper, equivalent in total to some 5.9 moz of gold
equivalent. Resources are 5.0 million ounces of gold and 1,869 million pounds
Average life of mine metal production is projected to be some 140,000
ounces of gold and 27,000 tons of copper per annum, though production levels
will be somewhat higher in initial years due to high grades encountered in the
shallow portions of the pit.
Cash costs in the first four years of the mine life are projected to be
between US$300 and US$330 per gold equivalent ounce in real terms and based on
current market conditions.
The cost trends that have been seen in construction of the TMF, discussed
earlier, have been projected in the estimated life of mine capital cost for
this facility and are expected to increase life of mine capital costs from
approximately US$10 per ounce to US$30 per ounce of gold equivalent
production. Work remains underway to develop alternative methods for managing
the tailing, with a view to improving this cost.
(*) Reserves reported at 31 December 2006, using prices of US$500/oz gold
and US$1.25/lb copper and resources using prices of US$650/oz gold
and US$1.75/lb copper.
Slides available on website at http://www.goldfields.co.za
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