Johannesburg, South Africa — 03 December 2012 – Gold Fields CEO Nick Holland calculates that the group could achieve a five-year payback on its R35 billion total investment in South Deep “’ the proposed 700,000ozpa West Rand gold project.
“Assuming costs of US$800/oz on a US$1,800/oz gold price, that is US$700 million per year with no tax,” said Holland. Miningmx reports that he was commenting on the viability of South Deep, a mine that is an integral part of Gold Fields after the unbundling of its other South African assets.
There is no tax due on South Deep profits for a period owing to unredeemed capital spent on the project which has been in development, in one form or another, since the mid-Nineties.
In total, Gold Fields has spent R30 billion on the project, including the cost of cancelling its hedge book, which had saved the company US$1.3 billion to date, said Holland.
The capital spend also included the cost of buying control of the mine from Barrick Gold, which had ‘inherited’ the mine from its takeover of Canadian company Placer Dome. It, in turn, had entered into a development joint venture with the late Brett Kebble’s Western Areas gold mining company in the nineties.
A further R5 billion would be spent on the mine improving refrigeration and building a new tailings dam, as well as some R500 million for accommodation for workers’ families in an effort to stem on-mine unrest and violence.
However, an analyst said Gold Fields’ calculation had to be treated with a degree of caution. “They are being quite generous with the truth,” he said. “That R30 billion has to be translated into today’s money,” he said, implying the payback would take much longer than five years.
Source: Miningmx. For more information, click here.