Source: Seeking Alpha
"So looking at the quarter, we've achieved 598,000 ounces of goldequivalent for the quarter, that's up 21% against the previous quarter, principally because of the Yilgarn South acquisition, and I'll show you some details of that in a moment. That's the main reason for the increase. If you strip that out, we're pretty flat really across that [ph], but it was a good performance from those operations in the last quarter, we believe".
"There's a lot of confusion in people's minds about all-in costs and all-in sustaining costs. But this is the new metric that we will be reporting going into quarter 1. And the good news maybe for some, and maybe it's bad news for others, these are the only metrics that we are only going to report in 2014. Because it really gives a true reflection of what it costs to produce an ounce in the business. So all-in costs, we've come down to $1,095, and all-in sustainable, if you strip out what we classify as growth capital, and that's really up to South Deep, that's come down to $1,054".
Net cash generated from the core business before financing and any acquisitions, $38 million. That has been a key consideration for us, is to turn this business back to cash positive in the face of an unprecedented decline in the gold price during the course of 2013. And it's a start to where we want to get to, but importantly, it's a big turnaround from where we've come from. Normalized earnings of $14 million. We've paid a dividend in line with our policy, and let me just confirm again our policy has not changed. Our policy is still 25% to 35% of earnings that we'll use as a basis for dividend payout.
Gold Reserves.
We have to run all of our economic models at $1,300 per ounce to do that. That took us a number of months because we had to rerun our reserves. And so that means that we're impairing around about $672 million at year end, and that's principally in Ghana at Damang; $173 million of that is at Damang given the drop in thegold price, in particular, and also in St. Ives in Australia. Those are the 2 big ticket items that we've got. So it's really Ghana and Australia. And these impairments are really on the back of the lower gold price. Given that we were using $1,500 an ounce in the previous year, we're now using $1,300. So it's really gold price related. It doesn't have any bearing on the technical nature of the ore bodies. There hasn't been any material modeling changes in the ore bodies as such, and also we've used higher discount rates and that's a function of a change in the risk-free rates across the world, the risk premiums we apply and also the beater [ph] that applies to the gold industry, so we put those through
We dropped from $1,537 all-in costs in 2012 to $1,312 in 2013. But more importantly, as I said, at the end of quarter 4 2013, we were down to $1,095. And it shows you the scale of change from where we were in 2012 to the quarter 4 of 2013. And I've talked about the dividend.
This really demonstrates what we've achieved in the cost base. We've given you the last 8 quarters here. We've shown you the gold production in the bars, and then we're showing you the all-in costs in the red, the goldprice in the blue. And what you're seeing, really, over the last 2 quarters, in particular, is we've managed to increase the production base with the Yilgarn South acquisition. But at the same time, we've dropped the cost base, the all-in costs in red. We've dropped that down very significantly over the same period. And I think that sets Gold Fields up to be much more sustainable at the current price levels. And we're not restructuring this business hoping that the gold price is going to recover. We're restructuring the business, expecting that $1,300 is what we have to work with for the foreseeable future. In the longer term, I think it will improve. But we have to accept that over the next year or so, this may be as good as it gets.
We've also trimmed our corporate and regional cost structures. We've had a 10% reduction in headcount over that period, which, including contractors, translates to around about 1,700 or 1,800 people. We've rationalized our capital. In 2012, we spent $1.2 billion. This year -- this last year past, 2013, we spent $739 million, and that figure will be lower again in 2014. You might say, "Well, what are we giving away in terms of the future?" And the one thing we haven't stopped is development and stripping outputs to make sure that the future plans of the company are not compromised. I lived through $250 gold in 1999, and I saw what we and what the industry did. We pulled back our development significantly, and we never really got it back. We said that we did, but we actually never got it back, and we paid the price. So the important thing is, let's make sure that we retain the structural integrity of our operation. So that's the expenditure or what I call the good cost that we're going to continue spending".
