Good morning, ladies and gentlemen. Can we get started, please? Good morning again, welcome to Gold Fields results for the 12 months ended 31st December 2019. Before we start, just for safety reasons, if you need to exit the room, there's an exit at the front or the back, the muster point is out at the front of the building. I will hand over to Nick Holland, who will take us through the results, then we'll do a Q&A session afterwards. Nick?
Thank you. Thank you very much. Good morning to everybody. Welcome also to those that are in tune on the webinar system, and I'm sure we'll give you an opportunity to ask questions later. We thought we'd start with this slide. Renewables and ESG issues are obviously more in vogue than ever before. What you're seeing over here is one of the first wind turbines that we've put up at Agnew, a mine where we're going to have average renewable input into our energy usage of about 57%. That's been taken by a drone, and good to see we've got the Gold Fields logo on there in the middle of the outback, about 1,100 kilometers from Perth. That shows you an indication of our seriousness to actually have an impact on climate change. You know what? It's good business.
It actually will be cheaper in the long run to power more of our mines with renewables than it will be with conventional energy sources. It has been an eventful period for Gold Fields. As recently as last night, we've been pretty busy, as some of you by now will know. We've been working very hard on getting this Salares Norte project to a decision point with our board. One of the key lead items behind that was to get the environmental impact assessment approved. That is ordinarily about a two-year process. We were very fortunate that we got that ahead of time. A week before Christmas, I got the good news from the team in Chile that we'd secured that approval. We thought we should move forward as quickly as we can.
We'd always slated to start the project in 2020, but probably press the button a bit later than what we're doing now. Given the fact that we've got that approval, that really is the umbrella approval for the project. Getting this approval means that all of these subsidiary approvals, and there are many, mining, closure, et cetera, are essentially in place. It's just a process now to actually procure the paperwork. We're well advanced with that, and I'm hoping that certainly by the middle of the year or third quarter, we would have procured all, if not most of the key permits. That meant that we should update the feasibility study that we did a year ago.
Given the fact that we've done more of the detailed engineering design than what we had a year ago, we're up to around about 60% today, which is unheard of for a project that you haven't even started building, if you talk to the project experts in the industry. We felt that it was a good time for us to go. We updated our numbers. You'll recall when we did the webinar when I was down in Peru in April, we were talking about a $834 million project. That was in money terms of about 14 months ago. We've updated those numbers because, of course, when you get more detailed engineering resolution, you will pick up certain items that will come in. We're talking about a project of $860 million in 2020 money terms. As you can see, hasn't really changed that much.
We're still talking about around about 4 million ounces of a life that's gold equivalent. We're talking about $552 an ounce, all-in sustaining costs, a 2.3-year payback at a gold price of $1,300 gold, $17.50 silver. A very, very robust project. If you compare this to what's out there, if you look at the current cost curve for the gold industry, and if you look at it faithfully and truthfully, you'll find that the current cost curve is probably about double if you include everything that should be included of what this project is going to be. That gives you an idea of how competitive this project will be in a country that has a proud mining focus, a proud mining history. Mining makes up around 13% of GDP in Chile. It makes up about 52% of total export earnings.
It's a key input into the economy, we've had a lot of strong support for this project at both a national and regional level, also from communities in the nearby towns around us. We think we're good to go. The board has approved the project, that we can start the project. Given that we've been looking at funding sources on this project for some time, that's no secret to you. I've been saying that now for the last six months. We did a fairly exhaustive process looking at all different sources of funding, including potentially partners. At the end of the day, given the strong financial performance of last year, where we knocked off a lot of debt with the strong cash flow generation, around about $300 billion came off. Paul and I thought we weren't going to have any reduction.
Given the fact that our projects have come through strongly, Gruyere in particular, given the current gold price and the prospects for the company, we were more confident to take on a greater piece of this project ourselves. In addition, we felt that a judicious equity raise of our 5% pre-approval, which would contribute around about 30% of the total expenditure, was a good way for us to ensure that we could actually get a funding plan in place that we could put to bed and not worry about. Even if gold prices came down, even if there was a couple of wobbles elsewhere in the group, we could fund this project. At the same time, we could sustain ongoing expenditure on the existing mines.
We could continue paying a dividend, and we could make sure that the team wouldn't have to worry over the 33 months we expect this project to be built. As you would've seen, we did an equity raise last night, which was completed in a couple of hours. It was oversubscribed. We got a lot more demand in than what we needed. I think it was a strong message of support from our shareholders. The other good thing is, between 80% and 85% of this raising went to shareholders. We wanted to obviously focus on the shareholders who are on the register right now. The pricing was pretty tight. If you look at the pricing, it's about a 3% discount to the closing price on the day yesterday, ZAR 90.20 was the price.
If you look at a longer run, 30-day VWAP, it's about a 3.8% discount to 30-day VWAP. Very tightly priced, very competitive, and we're delighted. That's given us around about $250 million that will provide about 30% of the capital for the project. We can get going now on the early works. The early works this year will be expanding the camp. We need to provide more beds, particularly during the construction phase. Starting some of the early works, in particular, diversion channels around the footprint. That's an important key input to ensure that we can start then putting all the foundations down for the plant, waste storage facilities, et cetera, and all of the ancillary equipment that we use. Then putting in some of the long lead items, ordering some of that equipment.
Good to know that we've actually already pre-ordered a lot of stuff that we need. It was just subject to final approval. We'll lock down those prices. We'll also lock down the mining contract price as well. That will start at the end of the year. I think there's a good resolution on the project. We think that we've got a good contingency as well in place, both in terms of time and in terms of amounts that could be spent over and above. 67% of the money is going to be spent in local currency. There's a cushion in there as well if you look at the rate we're using today of CLP 700 in the project versus the current spot price, which is close to CLP 800. That gives us potentially additional cushion.
That's the big news from this week and from last night. Coming back to why we're here today, or why we thought we were here today, is to talk about our results. I think just to say we've had another really good year at Gold Fields. The thing that makes us proud is the fact that over the last seven years, we've essentially made our guidance in terms of production. We've done it at the right cost. We've been there or thereabout. In fact, over this last year, we've produced more than what we said we were going to do. We actually went above the upper end. There's been tremendous performances in every region. I'm not going to go through all of the details of every mine, but every mine has produced cash.
It's hard to understand when we could last say that every mine in the group, nine out of nine, has made cash flow for the last year, but that's what we've been able to do. Sure, we benefited from the higher gold price, but as I always say to the team, "Let's make sure we actually deliver the higher gold price to the bottom line." We'll talk more about these results a bit later on. As you know, we've been in an inward investing phase over the last three years. We've been somewhat counterintuitive at a time when other companies were being pressurized in our industry to reduce costs. We've been investing for the future. Why have we been investing? We've been wanting to bring in new ore bodies that will provide longevity to the company at lower cost.
In that way, we can create a portfolio that will be more robust to ever-changing prices, exchange rates, and cost inputs. We've built two new mines. Gruyere we brought into production in June of last year, happy to say that we've essentially hit steady state mill output of 8.2 million tons a year annualized by the fourth quarter. Really, the production we were getting was much in line with what we expected. Often with these new projects, you do a lot of work on understanding the ore body, understanding the costs, what it's going to look like, then when you actually start the mine, you take another deep breath to make sure that it's going to hit the numbers. It's hitting the numbers. Even though it's very early days, we're getting the grade, we're getting the volume output, and we're getting it at the right cost.
I think we're very optimistic that we've brought Gruyere into production at the right time. On Damang, we're still in the process of getting to what I'd call the heart of the ore body, which is what we call the phyllite. That's the sort of rock type that we should be into by the middle of the year. We've mined that before. We know it's nice, big blocks, very consistent, easier to mine because you have less dilution, less ore losses. That's the stuff we've mined before, so we should be in the heart of that by the middle of this year. I think we'll see Damang take a real step up from where it is. Good to see that it moved from cash negative to cash positive as the project spend has come off. I've talked about Salares.
Good to see that we made cash flow from the operations, $249 million after all of that capital expenditure we've just spoken about. We also sold a whole bunch of non-core investments, Gold Road, Maverix, and also Red 5, and generated some good money, which we thought was important to redeploy that money into the balance sheet, create the flexibility. By the end of the year, we'd knocked off about $ 350 million off the debt. Paul and I at the beginning of the year thought that we were going to be pretty flat on debt. Again, this has given us more encouragement to move ahead on Salares on our own. The net debt to EBITDA ratio, as you'll see, is just marginally above one times. That's, again, beyond our expectations.
We have a dividend policy, which we like to honor over the years, between 25%-35%. The average over the last five years has been about 30%, we're pretty much in the range there. A final dividend of ZAR 1 per share. For shareholders in the room, I'm one, enjoy the money. That means that for the year, we've given you ZAR 1.60. Who knows? If things continue on the current trajectory, maybe we'll even do a little bit better than that in the year to come. We have taken out some tactical hedges to protect the balance sheet. Pleased to say that going into this year, we have some hedges in Australia that will actually give us protection, and at the same time, let us participate up to just under AUD 2,000.
In Ghana, we've got some hedges, again, on 50% production that will let us participate up to $1,460. At South Deep, on 75% of our production, we've got a hedge at ZAR 704,000 a kilogram. This will ensure that we can underwrite a meaningful debt reduction this year. We're looking for about $ 300 million-$400 million. Given the fact that the bulk of the Salares expenditure really only happens from 2021, out of that $860 million, there's probably about $ 100 million that takes place this year, $ 110 million maybe, about $ 500 million next year, and about $ 250 million in 2022. The fact that we're able to generate substantial cash in 2020 will put us in a good position for when we get into the really big spend on Salares Norte. A lot of people have asked us about M&A. There's been some consolidation in the industry.
Are we going to be part of the consolidation game? I think it's fair to say that consolidation in our industry is being driven more by survival than it is by 1 + 1 = 3 . We certainly don't need to adopt those kind of tactics. We prefer to be in charge of our own destiny. We prefer to drive organic growth. Every one of our assets in this group has got organic growth potential. The one thing I've learned in this business over the years is that the best place to find gold is where you're mining it. Usually, the risks are lower and the costs are lower than going into new operations, where possibly the vendor has not been spending the money on the asset that it should have done.
That's one of the big sins in our industry, and that's a sin that we certainly haven't committed, and we don't want to commit that going forward. With Salares coming in, notionally, people have also asked where would we be, and we're very confident that about a 2 to 2.5 million ounce a year profile for at least the next 10 years is a good number to look at. There's upside, both in terms of that number of production and in terms of life from there. That's just highlights of where we are. ESG is critically important to us, obviously starting with safety. Regrettably, we had a fatality at South Deep during 2019 as a consequence of a rock burst. Most unfortunate.
That's captured a lot of the attention of both the senior management and the board of directors, where we've looked at the operation with management on the mine to figure out how we can make it a lot safer. I think we've implemented measures that will reduce the risk further. Good to see, though, that serious injuries are declining. Our focus in Gold Fields is to eliminate fatalities from our business and to reduce serious injuries. We believe that is where the big focus has got to be. Let's stop people from having really serious disabling injuries that knock them out of the operation, put them at home for a long period of time. Let's get those out of the business. Fatalities are an absolute no-no. We spent a lot of time on behavioral-based programs.
We've got something called Courageous Safety Leadership, which has been applied by a number of international mining companies. Vital Behaviours, which has already been rolled out in Australia for a number of years. Those are the behavioral issues. Leadership is about visible leadership by the whole team. It's getting out there, seeing what's going on as well. Closure, I'm proud to say that we're one of the few companies that do undertake concurrent rehabilitation. A lot of companies will do nothing over the life, and all of a sudden at the end, whoops, there's a big liability that we've suddenly got to think about. If you actually remediate during the life, it's going to be much cheaper because you can use existing facilities, existing resources. You don't have to demobilize people, bring people back. We've made excellent progress on that.
No level 3 environmental incidents for the year, which is great. That's the first time for a while, so we want to keep that record. We've worked very hard on recycling of water, on reducing our freshwater withdrawal, reducing our carbon, and I talked earlier about the renewables. One of the best ways to reduce carbon is to adopt more renewables across our operations. We commissioned a solar farm not only at Agnew, but also Granny Smith in Australia. 20,000 panels producing 8 MW. It's quite something to behold when one goes out there and sees that. That's just some of the ESG issues, which is not a sideshow, it's integrated into the business and will be more so into the future. I'm conscious of time. I'll go through some of the key issues here. Cash flow, as I mentioned earlier, really good year.
If you look at the mine cash flow, if you add back those projects that we were talking about, take off the interest and other costs, we made over $500 million from the operations over the last year. I think that shows you that the core engine machine is working and has enabled us to fund these projects as it has done over the last couple of years, and keeping the balance sheet pretty much intact over that period. We've spent over $ 1 billion, in fact, since 2016 on buying Gruyere, building Gruyere, taking Damang forward, and advancing Salares. We've funded the vast majority of that from our internal cash flow. It gives you an idea of how robust the portfolio is. Balance sheet I've talked about. We did do a refinancing during the past year.
I think we talked about that at the middle of the year, whereby we raised another $1 billion in two tranches in the bond market. $500 million out to 2024, the other $500 million out to 2029. That's enabled us to retire all of our existing short-term debt and create headroom to retire our bond that comes up at the end of this year. We've improved the tenor, we've dropped the overall cost of our debt, and we have significant undrawn facilities. It's not often you have $1.5 billion, ZAR 4 billion, AUD 260 to play with. Hopefully, we can keep it in the war chest and not use it. It's always nice to know it's there. Obviously, the banks want us to use it, but we'll see how we go. All right.
On reserves, as I mentioned, we had a great year in reserves. The key number to look at really is that number over there, attributable gold reserves compared to that. In essence, what we've done here, this is all stated at a head grade before metallurgical recoveries. We've in essence put back about 2.5 million ounces. Normally to put back 2.5 million ounces into reserves, you normally work on a conversion ratio of about 50%, so you'd need to find 5 million ounces of resource. That's in essence what the global teams have done here. It's a fantastic achievement. We do spend money on exploration. We spend about AUD 90 million a year in Australia. In Ghana, we're starting to spend money over the last year, that got up to about $10 million-$ 15 million.
You can see the benefits. Some of the notable highlights is a 31% increase at St Ives as the Invincible complex grows, 38% increase at Agnew, which includes a maiden declaration on Redeemer, which we think is going to be a significant new position. For the first time in many years, Tarkwa's put back everything that they've mined at [Aniba]. That's not easy for a 500,000-ounce-a-year operation. The numbers that are not in here are Asanko. At Asanko, we're still working with our joint venture partners to finalize that reserve statement, and we'll let you know in due course. If you look outside of South Africa, I think the key thing here is we have over 20 million ounces in reserves outside of South Africa. Often we've been criticized. People said, "Well, you don't have a lot of reserves outside of South Deep." It's growing.
If you compare that 20 million ounces to the peer group, that benchmarks quite well against the top 10 producers across the planet. Just to show, I talked about Agnew, how it's grown. I think this gives you an idea of how the Waroonga underground mine has built over time. So that bath type structure at the top, that's the old open pit that's mined out. These are all of the declines, access ways, and levels we've mined. Look how it's evolved. If this works. Let's see if it works. How it's built over time. You can see Waroonga North and Kath coming in. FPH has come in. Waroonga North's getting bigger, getting laterally further away and getting deeper. Kath's coming in. Look at that.
Over the last year, we've seen vertical extensions, and we're starting to think that this is starting to look more like this is the Kim lode. Kim produced 1 million ounces. Here's a bit of arm waving. 1 million ounces at about 10 g a ton over 10 years. We're seeing very similar structures over here. I was talking to one of the geologists the other day, who knows? It's early days, but the potential is there. We've just got to keep drilling, and hopefully, we'll continue getting lucky. If we look at the Invincible complex, now this is on the Lefroy Lake at St Ives. If you flew to Australia to Sydney on Qantas, they actually used to show the Lefroy Lake as part of their safety ad with some guy on a motorbike riding across it.
The unfortunate thing is they didn't say that was Gold Fields at the bottom. Anyway. This is Invincible, how it grows on the lake. This is the start. You can see further drilling. It's extended further down to the south, and at depth. You can see we're getting more resolution, getting bigger. That's 18, getting bigger. We're hoping that we can join the dots over here. We're hoping we can join the dots over there, and we're hoping that continues. We're talking now about an Invincible Far South. This whole complex is going to be a lot bigger, from one fairly modest drill hole, 1994, to something that is now looking like it's going to be somewhere between three and four million ounces conservatively, maybe more. There you are.
Granny Smith as well, if you look at how that's grown, when we bought Granny Smith, we were sort of mining up here in 2013. Okay, just bear that in mind. This is as of 2015, so we'd already extended the ore body further down. As you can see, it's a bunch of horizontal loads interspersed by waste that tend to replicate themselves. Quite interesting that it does that. Right, so let's move forward. 2016, you can see we're starting to see the beginnings of the next load. Bear in mind, all of these loads are looking like they're about 2 million ounces in situ per load. I'm not talking small stuff here. There's 2017. There's 2018. That's the maiden reserve at Zone 135. 2019, you can see now we're starting to see 150 emerging.
Obviously, there's a bit of a challenge in going deeper, and we have to work on improving volume, debottlenecking, potentially looking at an additional decline. There's certainly a lot here for us to work on. A lot of the resource is not yet reported to reserve, therein lies a potential for us over here. A phenomenal ore body, the Wallaby Mine at Granny Smith. There's more to come here. Tarkwa. The one thing that's interesting about Tarkwa is that we didn't do a lot of drilling for a while. We had a big reserve. We probably didn't need to. We started looking at extensions to Akontansi probably makes up about 50% of the feed. We'v++e got Kokrobite, we've got Pepe North, these are the main sources.
If you look at these sort of unclassified sort of pinkish stuff, magenta pink, this is the kind of stuff we're now seeing that could extend. There's the distance, and that's one of the reasons why we've put back over 500,000 ounces into Tarkwa. We're only starting to do this. The potential here is very significant beyond what we've seen. There's the potential. Down-dip potential, 22 kilometers. Some people might say, "Well, the problem is it goes too deep. There's too much waste." You're actually seeing multiple stack conglomerate loads within the package. Even though it goes into what we call the anticline, you're seeing multiple stack conglomerate packages, which mean it can carry the additional waste. If it was only one package, it couldn't.
Given that we're seeing it replicate in a number of packages, and good thickness too, 5 to 10 meters, this is going to be something special in the future. Tarkwa's still got some legs in it for sure. All right, we're getting close to the end. Avishkar will be flagging soon. Gruyere. I think I've said we've done extremely well. I must give credit to the team. We've come in under on the capital, $ 610 million versus $ 621 million, the revised estimate. We've ramped up much quicker than what we thought. We've mined a lot of material ahead of us, we've got some nice stockpiles. It's always good to have a mine that has lots of stockpiles ahead of the mill. When you go there and you see the ROM pad full, you see the coarse ore stockpile full, that gives you a good feeling.
You can see the ball mill and the SAG mill turning. You know that you're producing gold. That's what we always tend to look for. This is going well. Annual production about 300,000 ounces. Over life, about 1,100. We're very lucky in the sense the gold price at the moment is what, AUD 2,300? That's not a bad time to be producing cheap gold in Australia. That translates to about $700, $750 over life. That puts you in the lowest quartile of cost. We're pretty sure that there's more here. We're pretty sure that there's the potential for us to go deeper into the ore body. That's one of the things we'll have an eye on into the future, is how much bigger could we make Gruyere? Of course, we have some satellite deposits we shouldn't forget about as well.
That's gone exceptionally well. This is Damang. If you look at the photograph over here, that is the west wall. This is looking from north to south. That's Juno in the south there. We mined that before. That's the east wall over there. This is not the latest photograph because I can tell you this has come down a bit more. As we sit today, we're about 50 meters from the water. Now, the water's also come down, and we're pumping that out. That gives you an idea of what we're moving down to. When we move down to that, we'll be getting into this phyllite lithology, which will give us the high grades, so we're not too far away. We've gone through some patchy stuff, though, before that.
We've gone through a piece of ground called the Huni Sandstone, which we've had some issues with before. The grade's been a bit patchy. That was only about 8% of the reserve to start with. Given we have mined a lot of it out, it's about 4% that we have left. I would say middle of this year, we should see a really strong second half. It is a year of two halves for Damang. Although our guidance is giving just under 220,000 ounces. A lot of that will be in the second half. Just bear in mind, for those who like to look at quarterly results and extrapolate, don't try and do that here, because the first half is going to be a lot lower than the second half as we see a big pickup in grade.
Salares, I've talked about the key highlights. Just to remember is that 11-year life, roughly the CapEx I've talked about, 33-month period, average annual production 450,000 ounces in the first seven years. That's because we accelerate the mining, we stockpile, and we preferentially feed the highest grades in the early years. Very competitive IRR at a conservative gold price. If you run that at spot, well, you can do the math. The website has a detailed presentation that we did with Max Combes and the team, who is in the room here, by the way. Max, you can just put your hand up, show people. He's come all the way from Santiago to be with us this week, and they've done a lot of good work here to get this project to where it is. That's the breakdown of the capital.
That webinar, by the way, is on the website. It gives you chapter and verse. It hasn't changed really that much from April to now, which tells you the project has high resolution. Right. Salares, it's not just the project we should be thinking about. Agua Amarga North, 130 m step out, we're seeing some very good intersections. 8 m, 8.7 m at 2 g, 9 m at 3.6 g. That tells you there's something here that we haven't captured yet. We're going to be doing more work, and it's pretty shallow as you can see as well. Also, in Breccia West, geophysics and geochem are identifying very similar anomalies than what we have over here, so in Breccia. That's targeted for drilling in the first half and second half of this year. There's potential to grow the project area as we see it.
That's not the end of it, though. If you look at Horizonte, which is somewhere between 15 and 20 km away, that looks like it's very similar in structure to what we're seeing at Salares Norte. These high-sulfidation epithermal systems, and in particular, the thing that the team brought to us recently is these two intercepts over here, 43 m at 4.6 g gold. That's pretty spectacular, okay? Also recently, 16.6 m at 2.9 g. For the geos in the audience, which are pretty shallow as well, you'll know that these are very good holes. That's one of the other reasons we were keen to keep this project to ourselves, because in partnership discussions, the key issue is often, well, we want to have full exposure to the district. Would we be getting value for something that we don't know today? Probably not.
That also influenced why we felt it was better to go alone. We can see the potential here for another Salares, but it will take some time. It took a long time to drill out Salares. This will take some time. We got time, and we'll keep going and make sure that the team in Chile have a generous, at least I think it's generous, a generous exploration budget. Diego's smiling, so hopefully it's generous. Right. That's the time frame. I'm not going to dwell on that. I'll leave it to you because I am overrunning a bit on Salares. Regional overviews. Australia's done incredibly well over the last year. We've hit our numbers. What I'm really excited about, however, is we're getting our costs down. Costs are coming down to AUD 1,350. Why is that?
Gruyere's coming in, we had some one-off expenditures last year. At Agnew, we built a camp. We built the renewable project. There was some expenditure for us on that. We had some significant strip at Salares. That's good to see. There's about $100 of exploration there. If you want to benchmark that against the other guys in Australia, I think we would come out pretty good, maybe in the top quartile, or sorry, the bottom quartile of cost comparisons. More of that will be great going forward. The Americas, steady as she goes. You know that we've extended the mine life to 2030. That's not the end, though. We're seeing potential for a further pushback to the east, and we're exploring that now.
We still believe that the input tails facility that we will be using from about 2025 onwards has further capacity. It's really a tweak, if you will, to the 2030 study, and I'm hoping we'll get two, maybe three years. The Americas region is quite good at underpromising and over-delivering, so hopefully they'll continue. Right. West Africa. Tarkwa's been fantastic. Steady performer. We've made some really nice cash flow out of the region. Damang, we're heading into the right area. We're cash positive for the first time. I'd expect 2020 to be a really good year for the Ghana region. I've talked about Asanko, that we are working on getting out the new Life of Mine plan and reserve soon and working with our partners to really optimize the asset. South Deep has had a tremendous turnaround.
We have gone way beyond our guidance and our expectations for the year. We've returned it to cash positive. If you just look at quarter four, we made ZAR 300 million. That's close to $20 million in quarter four. That gives you an idea. With the right discipline, what can be achieved. There was never a question of the ore body not being here. When you mine this operation with the right volume, you mine it spatially correctly, you get the grade. You can rely on the fact this is a 5.5 , maybe 5.75 gram per ton ore body over the next five years. Long life, let's not forget the reserve grade's five and a half. The key here is let's get the volume. How do we get the volume? Let's get stoping.
Stoping is where you get the volume. That means you've got to destress, you've got to develop, you open up the cuts, and you get in there, and you start stoping into these big cavities. We're getting much better at mining these big cavities. Our resolution between compliance to plan and the plan is improving significantly. We were just talking the other day, some of the stopes now are getting very close to 100%. That was unheard of a couple of years ago. We've got some hedges in place, which will underwrite this year as well. At the guidance of about 8 tons for 2020, we've got a ZAR 700,000 hedge price on 75% of the production. Costs are ZAR 625,000 a kilo. We sort of arbitraged, if you want to put it that way, ZAR 75,000 a kilogram on 75% of the production.
I think we're going to be making money here in 2020. You can remind me about that promise at the end of the year. That's it. These are all indications. We talk about gold and cost. These are things that happen behind it. There are some of the benefits, stoping tonnes per rig, how we've actually improved as well, secondary support, destress, development. If you get all these things right and you get them in the right areas, the gold will come. Hedging, we have done some hedging. I've talked about it. We're not long-term hedgers. Some people have asked, "Are you going to do 2021?" We're not going to do 2021. This was done for a very specific reason, to underwrite debt reduction.
Paul and I are comfortable that by the end of this year, we should be in a much better position on the balance sheet, and this will do what it's intended to do. I'll leave you to look at that. The outlook for the next year, if you look at the midpoint of our production, we should be up about 5%. If you look at the midpoint of the cost, we should be down about 5%. If you exclude Salares, little bit of license here like some of the other companies do, if we exclude Salares, actually, that's what the rest of the portfolio is looking like. Let's see on an all-in basis, soup to nuts, with no dropouts below the line. Let's see what everybody else can do. I think we're going to be very competitive compared to the industry this year.
I've taken a lot of time. I think with that, we will bring that to a close, and Avishkar will coordinate the questions for us. Thank you.
Okay. Shall we start in the room first? Shilan. Just wait for a mic, please.
Morning, guys. Shilan Modi from UBS. Congrats on a strong set of results for FY 2019. Just a couple of questions from my side. Just maybe explain the rationale for the book build last night, plus paying a dividend, the two combined. I know it's related to Salares Norte.
Next is, can you maybe talk to the risks at Salares Norte, specifically related to water and labor? With South Deep, you had a very strong turnaround last year. Maybe talk to the process that you went through to get there, and maybe talk to us about why it's different this time. There's been a lot of rebase plans for South Deep. What gives us confidence that this is the new performance metrics for South Deep?
Okay, you've asked us about four questions there. Paul will have a crack at the first one.
Yeah, I think, Shilan, as I said earlier on when we were in the room upstairs, I think the dividend and the capital raise are two separate issues. The dividend is based on the results for the year. We honor our policy of 25%-35% of normalized earnings. We've done that. We've paid a ZAR 1 dividend. The capital raise was to part-fund the Salares Norte project. It's about a third of the project. As I said, we deemed it prudent to lock some of the funding away ahead of the big spend. The big spend comes in 2021, and that was a good time to go and do a capital raise on the announcement. Obviously, our share price was strong as well. We believe we can fund the project from cash resources. Worst case scenario, we'd have to dip into our debt.
At current forecast, we'll fund it out of cash from the operating mines.
In terms of risks on Salares water, one of the things that was very critical for us is to get the water rights early, because no water in the Atacama region, no project. Unless you're going to bring water up from the coast, which is extremely expensive and treat it, you need to get local water. Luckily, we got local water. That happened some years ago, and we had that separately permitted. It took us a long time to get it permitted. We had to do a full catchment study, we got it permitted. We got more than enough water. We got about three times the water we need. Only then were we prepared to start the feasibility study on the project. Obviously, the risks are the altitude. The risks are inclement weather. The risks are fabricating stuff offsite, bringing it in.
Obviously, de-rating people's performance. At 4,700 m, de-rating equipment. Costs can change, there are some cushions. We've got five months of contingency in it. We've also got some cost contingency in as well. The peso is a little bit weaker than what we're using in our studies, there's a bit of cushion there as well. Bear in mind, the fact that we've engineered to this point, about 60%, it puts us in a very strong position. That figure will be 100% by the year-end. What we're learning is, the more front-end engineering design you do, the less the risk of a blowout down the road. Our project director has got a proud history of building mines and never overrunning. I don't think he's going to blot his copy book at this stage.
Just on South Deep.
South Deep, sorry. On South Deep, what's different? Look, the restructuring was a pivotal moment for us. We've never gone through a massive restructure at South Deep. We've tried to re-engineer things. As you know, we retrenched 1,500 people. We took out a third of the equipment. We shut down probably about a third of the footprint in the lower grade areas that required a huge amount of effort for questionable results. We stopped the new mine development, and we could afford to do it because we were ahead. We took all of the focus back to, what are we doing today? Let's improve what we're doing today and every day, and not get ahead of ourselves. Make sure that behavioral interventions are in place. There's a lot of good work that's gone on.
The one thing I've learned from this is, there's actually a lot of good people at South Deep, and always has been. It's just, we need to enable them to perform and facilitate them to perform. I think that's what we're doing now. That's what the management on the mine is doing. There's no rocket science here. This is just doing the right stuff every day and doing it safely. That's what the team is trying to embed, because we've just said we don't want to get a great year in 2019 and then we fall over again in 2020. Otherwise, it's not worth it. We've got to build on this, and we've got to consolidate this. That's the challenge for the team. I think they're up for it, and I think they'll surprise us again at the end of 2020. Thank you.
Thanks very much.
Thank you. Ian Cruickshanks, Institute of Race Relations. You just talked about redeploying 1,500 workers. What sort of grade levels are these people at, and are you seeing that they are redeployed in productive operations? Another question, but going similar to there, we talk about the brain drain in South Africa. Is this making it more difficult to access quality mining staff?
I'll start with the second part first. There's no doubt that we need to be cognizant of potential skills shortages in South Africa. Particularly as mining elsewhere in Africa is picking up, often, we can be an area for companies further north to try and attract skills. That is a concern to us. That's a specific HR intervention that we've got at the mine to retain our skills, attract our skills as well. In terms of the 1,500 people, Ian, regrettably, they were made redundant. We did offer them the potential to learn additional skills. We call it portable skills training, which some of them took up. It was a vertical slice. We actually started with the senior people. Normally these exercises, they start with the bottom people, they leave all the senior people in place.
We started with the senior people and then worked our way down. We obviously tried to limit the losses to as little as we could. Look, certainly, there could have been an argument for more, we tried to do the minimum we could do because we're cognizant putting people on the streets is not an easy thing. We have to also protect the other 2,500 jobs now that we have on the mine. Regrettably, that's what happened.
Thank you. If I may just ask in addition to that, are you finding any government intervention trying, whether successfully or not, to put pressure on you not to carry on with this program?
I had a lot of pressure. Yeah. There was a lot of pressure from the Department of Minerals. We explained our position numerous times, and we've stuck to our position. Clearly, the government doesn't want to see industry retrench people. I think as you know, in the mining industry in this country, there has been a lot of retrenchments. There's going to be a whole bunch more. We're one of the few mines that have a growth profile as opposed to a declining profile. I do think we could be a shining beacon in an otherwise fairly bleak outlook. Now the rand's gold price is great, but our experience in this industry is it often provides a respite for a period, and then you're back to pressure.
That's why we have to improve the productivity, improve the cost base, and be resilient to cost increases, particularly from the likes of Eskom and other cost inputs like labor.
Ian, just for clarity, this actually happened in December 2018 already. It's over a year ago, we completed the whole restructure. You seem to be thinking we're going to do it now. This was completed over a year ago. Thank you.
Thank you very much, and congratulations on the extraordinary year.
Thank you so much.
Okay, we've got a whole bunch of questions from the webcast, so I'm just going to ask them one at a time, and then Paul, lots of them are for you. Are you guys still planning to bring your leverage down to one times even after pursuing the Salares Norte project?
Correct. Yeah.
Will you need additional debt to fund the Chile project?
No. As Nick mentioned earlier, we redid the bond this year. We did a five and a 10-year bond of $1 billion in total. We renewed our bank facilities. We've got a 600, 3 + 1 + 1 , a 600, 5 + 1 + 1 . I'm talking $600 million facilities. In total, we've got $1.2 billion of bank facilities that are undrawn at the present. On current forecast, we don't even need to draw into our current facilities, never mind requiring additional facilities. The way we see it, with the capital raise, we'll fund Salares Norte out of current cash flows from mining operations.
Okay. Can the Chile CapEx be delayed if gold prices decrease significantly, or will the company be happy to increase its leverage?
We can always delay a project, but there's two sides of every coin. If we delay the project, we obviously have to keep the team intact. There's a natural burn rate of the project. We also got firm tenders on various pieces of equipment we need to buy. We got a firm tender on a mining contract. These things go stale and often have to be then renegotiated, and there could be extra cost in that. Our point of view is we can't see a reason why we need to delay the project. We're in a very good position. Let's get this project built as soon as we can. The value is there. When we start generating revenue, we'll look back and say, "Thank goodness we went ahead when we did so." It costs more money. You can lose key skills as well.
You delay a project, people can be redeployed from the EPCM contractor. We could lose key skills in the project team. There's a lot of downside issues, and let's remember, the gold price is doing well. Let's make hay while the sun shines.
It's also one of the main reasons we did the capital raise, was to de-risk the project in case of lower gold prices coming down the line.
Okay. What is the hedging plan for 2020 and 2021?
2020, we've completed our hedges. Nick alluded to earlier, we've hedged 50% of production in Ghana and in Australia, and 75% of production at South Deep. At the moment, there's no intention to hedge in 2021. However, we may look at some put to protect the downside for Salares Norte, but those are one of the options we're exploring. We will be taking all upside will be given to shareholders if any new hedging is conducted. It will only be downside protection we'll be looking for.
Where do you see group CapEx for 2021 and 2022?
We're only giving guidance for 2020, and it's in the book.
Yeah. I would just say to try and give people a guide, we've said before that sustaining capital, which if you take out the Salares project and just look at sustaining capital, we believe it needs to be somewhere between $250 and $300 per ounce, sustaining capital, in order to sustain your business. I'm talking here about ongoing stripping, ongoing underground development, additional waste storage facilities, tails lifts, your normal maintenance, CapEx, et cetera. Work on that. Again, I would say if other companies aren't sort of in or close to that range, I would ask them why they think they can do that, because it probably means they're not spending enough. That would be the guide I would give.
Is the $ 110 million CapEx for 2020 part of the $ 860 capital budget?
Yes. Yes, it is.
Okay. What is the net leverage that you'll peak at during the capital build?
At current prices, the net leverage stays very much where it is at around 1x .
Okay. Another one. You mentioned every asset in the portfolio has organic growth. How do you balance this organic growth with increasing your investment in Gruyere or Asanko versus the investment in Salares Norte?
Well, we are actually capitalizing on organic growth as we speak. We are actually adding to the portfolio consistently and deliberately every year. It's not like we suddenly switch off. A good example is if you look at the Invincible complex where we showed the build slides, we're continuing to develop into extensions of Invincible, both at depth and laterally. It's in the current spend already. It's not like we've got to crank up the capital machine and start doing that. At Agnew, we're seeing that we're extending the footprint of Waroonga North vertically along with Kath. That's opening up mining horizons we'll be mining within the next year or two. That's already in the capital. I think it's only major structural shifts on the assets that I would actually say we should be thinking about. If you look at our portfolio, right now, we're okay.
There's nothing in the immediate future we need to be concerned about. I don't think that's going to add a serious material risk to the ability of the group to fund Salares and have other competing capital requirements in the short term.
Okay. Does the capital raise alter your thought around a strategic partner? Are you now comfortable to take a bigger share of the development risk?
Well, after the capital raise, we believe we have a fully funded project. We don't need to come back to the equity markets. We're done. We have funded now 30% of this project. As Paul has mentioned, we're very comfortable that we can fund the remaining 70% from robust cash flows and dip into our debt facilities temporarily for a period. You've heard Paul say, we don't think we'll go much beyond 1x net debt to EBITDA. Very comfortable to do this after the equity raise on our own.
Okay, one for Paul. To what extent will the company repay the outstanding $ 600 million 2020 bonds using unutilized debt facilities?
Most of the bond, the $ 600 million, is to be paid out of cash flows. There's obviously a lot of cash was generated last year. It's in the regions at the moment will be brought up to pay down debt. It'll be from existing cash flows with almost no drawdown on the big bank facility.
When does the company expect to refinance the Australian dollar facility?
We expect to do it during this year.
Okay. Nick, I think this last one for you is, what is the path forward for local power generation and what is the budgeted amount?
Well, we have submitted an application for a 40 MW solar power station at South Deep back in 2017. As people would know, there's somewhere around about, I think 1,500 MW of renewable applications sitting on the minister's desk, which he alluded to at the Indaba. He has undertaken to urgently push along the necessary legislative amendments, approvals that need to take place, and I would hope that we'll get a green light, maybe around about the middle of the year to third quarter. We're looking at different options, whether we do this over the fence, whether we do this on our own. This would be phase I. 40 MW would be phase I. We're not optimistic that Eskom's problems are gonna be solved anytime soon. In fact, things are probably gonna get worse before they get better.
I think we're being drip-fed the bad news, there'll probably be more bad news coming. We're taking a very conservative approach. This would give us probably about 20% of our requirements. It will take some time, however, about 18 months, to get into construction or into operation rather. In the meantime, we do have some gensets on site, and we're looking to increase the gensets that we have. We're talking about it now with the mine about the best outcome and have that synchronized with the grid. In the event that we have the more modest load curtailment requirements, we can still operate. The one benefit we do have, there's always a silver lining, is we're operating this mine at about a third of installed capacity.
We do have the flexibility to switch off the plant and do hoisting, stop hoisting process in the plant, unlike maybe other mines that are trying to operate at full production. We've got a bit of flexibility in the short run, but we've got to get this done to ensure the long-term sustainability. I'm sure we'll give more information on this at the next results presentation to all of you.
Okay. Can we just check the conference call, please? Are there any questions?
Yes, we have a question from Adrian Hammond of Standard Bank .
Good morning. Just on South Deep, please. Nick, do you envisage South Deep as part of your future portfolio? Could Salares be replacement for it? Is South Deep saleable?
Adrian, our focus at the moment is to improve the short-term performance of South Deep. That's our key focus right now. I think that will inform options down the road. We're not thinking beyond improving the short-term performance, and we want to give ourselves some time. We don't think there's a big rush if we've turned the asset around and we're making money, and we think we'll make some pretty good money again in 2020. I would say we'll keep a strategic view on this. For now, we're focusing on the short-term performance, and we'll keep our options open for the future. Salares and South Deep, don't mix the two up. They're totally different opportunities. Salares is something that has been coming along a long time. This is not like a portfolio switch. They're two separate assets at different stages of evolution.
Thanks.
Thank you. There are no other further questions from the line.
Okay. Is there anything else from the floor besides Shilan? Leroy?
Thank you. It's Leroy Mnguni from HSBC. Mine is a follow-up question on Adrian's one. There's been a lot of debates amongst investors around whether the global gold miners that are associated with South Africa trade at a discount to their peers because of it. Firstly, do you agree that they trade at a discount? Do you see an opportunity to unlock value in selling South Deep and exiting South Africa completely? Is that something that is still on the table or that you consider from time to time?
I would just say two things to you. In terms of the SA discount, it's interesting that it comes up from time to time. If you look at how we've performed last year, look how we've performed. We've been one of the top performers in 2019 in the gold industry. If you remember when we unbundled and created Sibanye back in 2013, I think they were the top-performing gold stock in 2014 across the global universe. A lot of it comes down to investors look at different companies, they look at the potential. Can you make money? Can you generate a good return? That's what they're after, first and foremost. The thing about multiples is an interesting one, and one you can't guarantee that can be achieved, because multiples could be driven by a whole bunch of different things.
When you actually make business decisions, you've got to make them based on industrial logic, not on perceived multiples versus the multiples you're getting now. I think our focus is going to continue to be what we've done in 2019, is continue to deliver this portfolio of assets and generate superior returns for shareholders. Let's see what we do if we can achieve that.
Okay. The last question goes to Shilan, and then I think we're done.
Hi, it's Shilan from UBS again. Just a question on your portfolio. After including Salares Norte, how are you thinking about the portfolio? What do you think it'll look like in three to five years' time? Where I'm leading to is some of your competitors are potentially selling assets. Is that something of interest to you? Would you be interested in M&A?
Yeah, look, three, four years out is a long way away. What is the market going to look like? Some of our assets, three, four years out, we'll have to think about whether we're going to recapitalize some of our assets. Damang, obviously, when we announced the Damang reinvestment plan, it's a seven-year plan. There's essentially five years of that left. We'd have to think about what we're going to do with Damang. That is a key decision point for us. On the Australian mines, I think if we continue doing what we're doing on the exploration, I don't see any reason why we won't continue being successful on all of those mines. I think they all got the potential to extend their lives. I think we're seeing some tremendous quality exploration results coming out across the piece. Australia, I think, looks good.
We know that Corona's got a fair time ahead of it still, so no immediate reason for us to think about. Tarkwa, I think, as you've seen, has got potential to be here in 10 years' time or even longer. South Deep, as we've discussed, our focus at the moment is, let's see what we can achieve here. That will help to inform the strategies. The one thing I can say about South Deep that I'll rule out completely is a fire sale. Okay. We won't be doing any kind of panic sale. We will do anything that we do on that mine from a position of strength. I just want to clarify again, the options are open. The team has done well.
We want to give the team time and reassess with the board where we stand on the operation again by the end of the year. I think that covers the portfolio for you, hopefully.
M&A?
M&A, look, we don't need to do anything. I think in particular on M&A, we got Salares. If you look at the stuff that's being bought out there at the moment and the prices that are being paid, and I'm not going to talk about specific assets, but you can figure it out. I think for us to be going out and using our firepower on some old, tired assets, at the expense of new assets that have really unquantified upside, I think you know the answer. Thank you.
Okay. Thank you for your interest. Thank you for your time. Yeah. Media roundtable's upstairs in 10 minutes' time. Thank you.
Thank you very much.