Ladies and gentlemen, welcome to Gold Fields' half-year results. Before we get started, in the case of an emergency, there are two exit points, one at the back of the room and one at the front, and then the muster point is at the front of the building that you've entered. I would hand over to Nick Holland, CEO, to get into presentations, and we'll do Q&A afterwards. Over to Nick.
Thank you very much, Avishkar. Good morning, everybody. Welcome to our first half year results for 2019. Very simple messages for you this morning. Essentially, production is up 9% compared to the corresponding period in the previous year. All-in costs are down 5%, and we're cash flow positive from being over $70 million negative in the same period last year. This year, our core operation's $49 million positive, with obviously all of the projects being financed, all of the interest burden having been carried in that number. In particular, Gruyere has commenced production. We're pleased to inform you that we've achieved practical completion at the Gruyere process plant. What does that mean, in essence? It's a technical construction term. In essence, it means we've achieved 96 hours uninterrupted through the entire value chain of the process plant.
The crusher, the SAG mill, ball mill, the elution circuit, the gravity circuit are all functioning steady state for 96 hours. That's really great news for us. That was achieved on the 10th of August. Now we're in the process of ramping up that plant over the balance of the year. As we've mentioned, we're giving a range of production because obviously with all ramp-ups, it's a large process facility. It's over eight million tons a year. That's large in the scheme of process plants. You might get hiccups along the way. We're saying that we should be able to ramp that up over the balance of the year.
Bear in mind, over the long term, Gruyere is a project, as the joint venture announced in a recent joint release, that this is a 300,000 ounce a year mine with long-term costs of about AUD 1,025 an ounce, at least with 11, 12 years to start with. Then, of course, there's potential on the joint venture property and of course, at the mine itself to look for potential to add to that over time. Really a great addition to the group in line with the strategy of adding life at lower cost so that we can be defensive in the face of volatility in the gold price. Now let's talk about the gold price briefly. We've seen the gold price come up. Has it gone too far, too quick? Who knows? It may be volatile in the future.
Nice to have it for now, we're not putting our store on a higher gold price. We'll keep discipline in the business. We are still targeting to achieve a 15% margin at a $1,200 US gold price, at a AUD 1,600 Australian gold price, a ZAR 550,000 rand per kilogram South African price. I think as you can see, those prices on a relative basis to spot are still some distance away from where we are today, which is good. Let's keep that flexibility, that cushion on our operations. Damang, as we've mentioned before, I'll show you a few pictures a bit later, that continues to track ahead of plan. We're on track to really get to the heart of the ore body around about quarter two next year.
That's really the big prize for us is to open up the heart of the ore body and get in there. South Deep, after a very painful and time-consuming restructuring process that included a 45-day strike, a difficult quarter one as we had to recalibrate the mine post that strike, which was only concluded just before Christmas. Really in quarter one, we had to take around about 20 to 30 pieces of gear out of commission, drill rigs, loaders, and trucks. We had to say goodbye to a third of our workforce. We had to obviously recalibrate all of the logistics and consumables. We shut down, remember, 87-1-West and 87-2-West. We suspended the new mine development at the bottom of the mine, and we had to turn South Shaft into essentially a servicer shaft, not a fully fledged operating shaft.
A lot of things we had to do that took the bulk of quarter one to get going. In quarter two, we've got to a better position to the point where production is up almost 70% on the first quarter. Costs have come down to about ZAR 590,000 a kilogram, we've made a modest cash flow contribution of ZAR 71 million for the quarter. Bottom line, that is, after paying all of the bills. One swallow doesn't make a summer. I told the staff this morning when we did this abridged presentation to them, certainly Martin Preece and myself are very sober about this early achievement. We need to build on it, we need to show that South Deep can actually achieve its goals.
That said, where we are today, having produced about 2.8 tons of gold for the first six months, we're on track to achieve our six-ton gold target, bearing in mind Quarter 2 was about 1.8 tons of gold. Far so good. What's particularly pleasing for me is not just to see the headline numbers improving, but seeing all of the things behind it. Improving our ground support is at the highest levels where I can remember. Backfill is at a much higher level than what I've seen for a long, long time. Destress has got up there. Development is way ahead of plan. Those are the things at the front end of the sausage machine that will make sure that if we can sustain these improvements, that those things will be the important components to make sure that we can do so.
We've talked about the balance sheet, the need to basically refinance our debt, given that we have maturities coming up. We've successfully done that over the last number of months. We've issued two new bonds, which has spread the maturities out. We've refinanced our revolvers with a big syndicate of banks. I think we can safely say now that our liquidity is in pretty good shape and very well received by the market. We've been able to refinance our debt at lower cost. We've been able to put in long-term bonds, five and 10 years, at certainly lower cost than what we thought were possible in the planning stages. In line with our strategy of paying out between 25% and 35% of our core earnings as dividends, we've paid out $0.60.
We're very proud of our dividend policy, the fact that it has been a company with a dividend first philosophy. We've said that we'll pay dividends in line with the strategy, and that we'll continue to honor that policy, notwithstanding other commitments in the company. As you've seen over the last five to six years, we've been very consistent in following our dividend policy so that people know when they buy into the company, they can rely on consistency in terms of a dividend. If earnings go up, we'll pay more dividends, as a function of % of profits. Clearly, if earnings go down, dividends will reduce. Hopefully, we're going to see higher earnings for the year. Hopefully, we'll see a good dividend overall for the year. On safety, we continue to believe we have to eradicate fatalities and serious injuries from our business.
At the leadership level in the company, we continue to invest our time in showing the way and making sure we have the right systems, the right leadership, the right behavior to further drive improvements in safety. We can never relax on safety in our business, as we all know. Looking briefly at the results. At the top there, you can see we've done just under 1.1 million ounces, all-in costs of $1,106. As I said, that's about 5% lower than what we had this time last year. Capital on growth projects is coming down. If you look at Gruyere, we've spent about $65 million in the first half of this year. That will essentially dwindle down from there to very little in the second half because the project is done. That will improve our fortunes in the second half.
Damang spent about $44 million in the first half. In the second half, that'll be probably about half of that. Certainly, that $49 million that we've generated from the business, if all things stay where they are today for the second half, we should do reasonably well from this space, given that that growth capital is down. As you can see, mine cash flow before projects is very healthy. $200 million, essentially, from the business. That's before projects. Which gives you a sense of what the Australian, Ghanaian, and Peruvian business is doing for us. A strong underpin, which has enabled us to finance a lot of our acquisitions and project spend without materially increasing our debt. Remember, over the last two and a half years, between the acquisition of Gruyere, the building of Gruyere, the push back at Damang, we've spent over $800 million.
Superimposed on top of that, the continued investment in taking Salares Norte in Chile to feasibility level has probably added another $100-$150. Our debt hasn't moved that much. I think it shows you a lot of the growth in the business has been able to be financed internally. Some debt, but the bulk of it internally. In Ghana, very good quarter, very good half year as well, 400,000 ounces. We got the addition of Asanko. Remember, we didn't have that in the equivalent period in the six months last year. We have it in this year. Nice to see as well, strong cash flow coming out of Ghana, $72 million. $52 million coming out of Peru. Now, Peru, of course, our lowest cost operation. Copper Gold's a porphyry system.
With the copper byproduct against a gold grade of about 1.1 grams, that helps you to keep your costs down nice and low. South Deep, as we mentioned, for the six months, still up at $1,529 an ounce. If you look at the quarter two, that figure was down at $1,275 on the back of that increased production. Certainly on the right side of the ledger. In Australia, good cash flow before Gruyere for the six months of about $92 million. That's just a good quick summary for you as to where the business sits. Turning cash positive sooner. We certainly weren't planning to be cash positive in this first half.
I think the gold price has certainly been the big factor there. Let's capitalize on that in the second half of the year and push on from there after that significant capital expenditure of 2018, 2017, and, of course, the early part of 2019. The balance sheet, as I've mentioned, I'm not going to go through a lot of this detail. Paul can certainly answer your questions at the end. We know that we've got a bond of $1 billion maturing towards the back end of next year. We'd bought back $150 million of that previously, so there's $850 million to pay. We decided to go preemptively and essentially refinance that. We've split it into two tranches to avoid near-term maturities. Competitive rates. We've got $500 million going out five years, another $500 million going out 10 years. The weighted average cost, around about 5.5%.
That compares to 4.875% on the maturing bond. That was an exceptional pricing we did back in 2010. We parked that money in our revolvers and knocked them off. In the meantime, we've also refinanced $1.2 billion of revolvers. Again, we've split it out three years and five years with the potential to extend. We'll use that capacity to redeem the 2020 bond and make sure that we're covered on that one. The balance of that, of course, will be used for general corporate purposes. We've also sold non-core investments. One of the strategies we've had is to take a royalty portfolio, which had no value in our company, vend it into a royalty company, go for a ride on the fact that royalty companies are trading at multiples, and then cashed in.
Similarly, we sold Darlot to an Australian company called Red 5, went for a ride on them, cashed in. $88 million from virtually nothing. This is a good example of making lemonade from lemons and getting value where there was no value. We've parked that in the debt, that's a nice strategy for us to continue to bring down our debt, which is the key objective of the middle of this year through to the end of next year. We want to make a significant reduction in our debt. A good time to do it is when the gold price is playing ball. There is some accounting changes which complicate our debt position where leases have to be capitalized.
Principally, these are gas pipelines and gas facilities in Australia and Ghana, where essentially you have to treat it as if you own it, even though it's underpinned by a long-term purchase price agreement. There's a few odd things coming through, and we've shown you the figures before and after. Debt goes up and it also impacts assets onto the balance sheet and operating costs, interest charges, that all get amended. We've given you a reconciliation in the books. I won't dwell too much on that. There's the balance sheet. I think importantly, you can see now that we have this maturity over here. We bought back another $250 million of that bond. That bond sits at $600. There's some other odds and sods that will mature over there. We'll use the revolver to knock that down.
We've got the capacity now, we're not worried about that. Essentially, that's finance, that repayment. That's an Australian loan that was used to finance Gruyere, around about $500 million, AUD 450, I think it is. There's your two new bond tranches that are all due. Much better maturity curve than what we've had before. As you can see, net debt on the old basis down to 1.36. That's down from the figure at the beginning of the year. We're hoping that by the end of the year, we can certainly bring that down. Remember, the long-term target was one times. I think over time, Paul and I are quite keen to see if we can bring it down even further. All right. On the projects, here's Gruyere. A good snapshot of essentially this is the process plant you're seeing over there.
You can see there's the coarse soil stockpile with the stockpile cover on that side. You can see it looks and feels like a mine. There's another picture of the coarse soil stockpile. For those miners in the room, you like to see that. That's nice and full. Basically, that's all crushed. There's your stockpile cover. That's to prevent dust and everything, because obviously you get some winds coming through here. On this side over here's your 2 ROM pads. We've got a high grade and a low grade ROM pad. Frankly, when you're dealing with a cut-off grade of about 0.3 grams a ton, pretty much everything can go through the plant. It's just a question of sequencing the best grade you can get in the early part of the mine's life. Obviously, there's a whole material handling strategy on that.
I was in the gold room, in fact, a few weeks ago, but I wasn't there when they were doing this. I would have loved to have been. Here's pouring the first bars. By the way, these are not just plastic-covered bars, these are real bars. They weigh a chunk of material, that's for sure. Try and pick that up with one hand. That is something. Just over 1,100 ounces produced right at the end of June. We're ramping up, as I've mentioned. Essentially, that test of practical completion was a key one for us, running 96 hours uninterrupted, and we are hopeful that we'll have this plant ticking over at that sort of level as soon as we possibly can. Gruyere's mine have been great, as I mentioned. We're sitting at the end of June, at around about 65,000 tons mined.
Very nice position to be in, to have that amount of ore sitting on the stockpiles ready to go. The plant, now that it's running, we're going to drive this pretty hard. Importantly, capital cost for this project is still in line with what we said, $621 million. Being sort of 99.5% complete, with just the final bits and pieces. We're pretty confident that we're going to stick with that sort of number. Production for this year, a range of 75-100, remember, when we get into 2020, we'll be looking to chase down that longer term target of somewhere close to 300,000 ounces a year. On Damang, another strong performance for the half year with production up compared to the previous year. We're on track to meet our full year guidance of 218,000 ounces. Importantly, we made free cash flow.
With the project capital now starting to come down, with ounce production coming up, we start moving into cash positive territory, which is great to see. Looking at the cumulative project, I'm not going to dwell on these numbers, they're in the book. You can see in all of the metrics, this project continues to be ahead of where we were. Here's some pictures just to show the magnitude of the scale of mining here. This is the west wall of the pit. You can see over here where they are. When we started, they were up there. These are little trucks over here. They're big trucks, but they look like little trucks. You've taken this wall all the way down there. We got to get this mine all the way down to the bottom here.
It's a hell of a job and a lot of material has to be moved, to make this happen. The western wall is more advanced than the eastern wall. There's a reason for that, because the ore body dips that way. You want to get that down first before you go to the eastern side. If you look at the east wall over here, you can see where we are on that side over there. You can see that's much less down compared to that side. That's by design. We've got to get that down there as well. That'll be the target by the middle of next year. We're pumping this water out into another dormant pit we're not using. As the water comes down, the wall comes down.
All of these things, of course, have got to balance each other and operate in sync. This is what mining is all about. Here's from north to south. That's Juno, the old Juno pit there in the south. That is the east wall over there. The tailings pit, old tailings pit, is over there. You can see we've got some cover over there, geotechnical requirements. The west wall on that side. It gives you a good idea for those of you who haven't been up there for a long time. As I said before we started, all of this was up there, all of that was up there. It's a big earth-moving operation. All right, turning to Australia. A good half year overall. You can see production we've pretty much maintained. That's about 1% or so down. It's very close to where we were.
Costs have gone up a sizable amount year on year. There's a couple of reasons for that. We took the decision to go our own way in terms of accommodation at Agnew. Instead of renting accommodation in Leinster, which was around about 35 minutes drive, we decided to build our own camp, which is within walking distance from the offices and the process plant. That's cost us almost AUD 40 million once off. There's a payback there of about four or five years in lower accommodation costs. Improved morale, having our whole team together, has made a big difference. In the previous year, St Ives was mining more than it could process, and there was good reason for that, because there was economies of scale in mining the remaining stages of the Invincible open pit much quicker than what would otherwise have been the case.
We could bring down the unit cost. We did. Mining costs dropped to around about $4 a ton from $5 previously. The net result is we stockpiled a lot of ore in 2018. There's also blending issues because the Neptune open pit is softer material, whereas the Invincible pit is more fresh, harder material. We need a blend of about 75/25, 75 fresh, 25 oxides. We had to stockpile. This year now we're running it all through. All of those GIP credits last year becoming GIP charges. It doesn't really affect the cash flow. It's a function of stockpiles being built up, stockpiles released, and it comes through your costs. The other reason costs have gone up is that now with Invincible open pit almost finished, we're now transitioning to what will be principally an underground operation once stage 6 of Invincible is done.
We expect that to be before the end of the year, and then Invincible will just be an underground operation. It'll be Invincible Main, Invincible South, and then eventually Invincible Deeps. The costs are higher, and over time we have to get the leverage in terms of grade, because underground grade should be higher. Costs will be higher. Overall, on a per ounce basis, once we get to steady state, we think that we'll maintain our costs. Notwithstanding these increases, don't be alarmed. We're maintaining our guidance on costs and on production for the year as indicated to you in February. This is just a function of where we are in the year. Just to give you an idea of how the Invincible ore body has developed. Now, this was on the lake. As you know, we have a big lake, salt pan going through Salares Norte called Lake Lefroy.
We had an old drill hole that went back to 1994. I think we had a gram at about two meters. Not too spectacular. What we didn't know is underneath all of this is two and a half million ounces. It looks like it hasn't even finished yet. This could grow further. This is where we started. We had some initial resources. Okay? We added That was the open pit. We added some resource and reserve. You can see the reserve is in the darker color, the resource in the lighter color. That was 2013. We added some more in 2014, 2015. You've got to go through this quickly, I'm told, to see it properly. I'll just go back. That's where we are. As you can see, what's happened over here is it's growing laterally. This is a fault. That's not a problem.
We've actually already punched through that fault, sent a development drive through. It's opening up deeper. What we're finding is when we mine this, we're getting more tons, in many cases, slightly lower grade, but more ounces. If we can actually optimize our cost base, this is going to be something really special for the future. The mainstay of Salares Norte, certainly for the next number of years. There's another way of looking at it that just splits it into the different areas. I suppose if you look at the total strike length over here compared to that scale, gives you an idea of how big this is and why we're saying this is 2 million ounces plus, and we're not done yet with this. If we look at Agnew, we've come leaps and bounds on this operation over the last 12 to 18 months.
In particular, Waroonga North is expanding laterally, and it's going down further. As you can see over here, it's still open. We're going to see a lot more out of this. It's too early to say it's an analog of Kim, which was a fantastic ore body. That was a million ounces at about 10 grams a ton. It looks very promising at this stage. That's just on the existing operations. If we look at the Redeemer Complex, now this is an old mine over here. That's a surface mine that was backfilled. We did some work over here, but we didn't find too much. Offset from that, we found two areas, what we call Zone 2 North, Redeemer North, and something called Barren Lands. This is looking very exciting.
Much so that we believe we're on the cusp of declaring a maiden resource and possibly even a maiden reserve for this area and could even be mining this in two to three years' time. This could be a very significant addition to Agnew. It's been sitting under our noses for some time, but it's a function sometimes, just spending a bit more time. These orogenic ore systems are time-consuming in terms of drilling. You need to do the appropriate geophysics and geochem work. A lot of it's undercover, so you don't find it easily from surface work. There you are. This looks like it'll be an important addition.
One of the reasons, again, we decided to build a camp at Agnew and also put in renewables over a long-term period is we're pretty confident this is going to be around for 10 years and probably more.
What is the depth there?
We're down here to around about 400 or 500 meters. Very acceptable depth. Not a problem at all. Bearing in mind, mines in Australia are getting down to two kilometers. By comparison, this is pretty shallow. Okay. All right. Turning to the Americas. Again, Cerro Corona, steady as she goes. A great operation, as you can see. Good production. Very low cost. Makes a really good cash flow. Now, for a mine making 280,000 ounces a year, roughly, $52 million for a half year. Very nice cash flow. That compares to amongst the best on a cash flow per ounce basis. We've done a feasibility for life extension. Sorry, we're in the process of finalizing. We did the pre-feas. No real issues at this stage. We're quite comfortable that that project should go.
If you can recall, that is accelerated mining in the pit, stockpiling strategy, and then in-pit dumping. One of the best way to deal with tails, in-pit dumping, safer, more cost effective. You don't have issues of tails dams running away from you, which I know we've seen issues recently elsewhere. We're doing in-pit dumping as well elsewhere in the group. We're doing it at Agnew. We're doing it at Salares Norte, and certainly, we've got some good experience on that. Salares Norte in Chile, you've seen we declared a maiden reserve, about 4 million ounces, around about $500 an ounce, all-in sustaining cost once it's in production, with around about 11 years of production. Part of a major district that we believe will get bigger over time. The next process here is to get the EIA complete and signed off by the authorities.
We're in the second round of questions that we've answered. I'm hoping that we'll, by no later than the middle of the year, next year, we'll have approval. We'll take the final project to the board. If all goes well, we'll start building this project towards the end of next year, subject obviously to board approval and a board-supported funding plan. That's been a topical issue. It's an $800 million project. That's a lot of money. You'll be spending that money over about 26, 27 months. It's a lot of money to spend quickly. We're looking at different options as to how we fund that, and we'll give you an update on that, I'm sure, over the next three to six months. Looking at the district, we've got very encouraging results at a nearby deposit called Horizonte, which again, I think reinforces the camp potential in this area.
We bought a 16% interest in Chakana. I'll come back to that now. Just to give you an idea, this is the greater area, part of the greater area. There's the Salares Norte deposit and here's Horizonte over here. That's less than 20 km trucking distance from the proposed plant site. In fact, the ground package over here is at least twice the ground package of Salares Norte. We've got 4 million ounces over here. Who knows what might be here. We'll see in time. We've done about 12,000 m of diamond drilling here so far this year. We'll continue into next year. Bear in mind, Salares Norte took around about 170 km of drilling over 10 years now. Finding these greenfields deposits, particularly these kinds of epithermal systems, takes a lot of hard work. Let's see how we go.
I'm hopeful we'll add another ore body here within the next five years. All right. Chakana. Given that we've been in Peru for a long time, around about 15 years, built up some experience, what better way to leverage off a great operating team platform and look for something else? We've taken a 16% interest in the Soledad project, which is a series of breccia pipes, which, copper gold as well, similar to Cerro Corona. It's in a great part of the country, Ancash. Easier to operate there than where we are. As you can see, we're up here. That's down here. It's early days. A lot of the money that we've subscribed for in the company is going into exploration. Again, this could be one for the future. We think Peru is one of the best destinations to be in the mining industry and untapped.
The Andes region up the western perimeter has not been properly explored and we believe hosts many polymetallic style ore bodies. Not too much gold on its own, but if you're happy to mine gold, copper, maybe a bit of silver, you're going to be in the right terrain to look for that. Certainly, we've been successful mining our copper-gold mine at Cerro Corona for the last 10 years. Right. West Africa, as you can see, a big increase in production. That's mainly because of the addition of Asanko in this first half, which wasn't in the previous half. You can see as well, nice increase in cash flow. That's what I like to see. Damang's capital comes down, as the production comes up, and we start seeing the cash. Asanko, we've been in this for a year.
I guess the agreement we've come up now with our partners is that let's get to an operation that can make good money for us over at least the next 10 years. That's just the start. It's not the end. At the same time, let's work out an exploration strategy for the greater camp. This is lodged in between Newmont's operations on the one side, Ahafo Kim and Obuasi AngloGold Ashanti's operations on the other side. A large piece of ground that has been sitting there waiting for someone to come in. Share-hosted deposits, which is the two main deposits we have at the moment, Nkran and Esaase, and we're seeing many potential analogs of that. We haven't invested enough exploration. A two-pronged approach. Let's get Esaase up and running. We're just mining the top of the hill now, which is soft oxides.
That's going to be the main source of ore over the next 10 years and beyond. Let's crank up the exploration and let's get a new camp. Again, I think this could be something really special over the next 20, 30 years in Ghana. That's why we bought it. All right. I'll try and run through the rest quickly. Tarkwa, a Wits-style ore body. If you take the Wits space in here in South Africa and you could actually superimpose that on the surface, that's what you've got at Tarkwa. A stack conglomerate package of reefs which are very consistent. We've been here a long time. If you look at what Tarkwa has mined to date and what it has on the books, 20 million ounces. How many 20 million ounces deposits do you have in the world? Not too many.
All right, here's the outline of the pits over here. What's interesting, if you look at these sort of mauve shaded areas, okay, these are the possible extensions that we're drilling out now. It proves what we've believed is that these kind of ore bodies, these conglomerate packages just continue, and they're stacked packages. There's a number of them, obviously interposed with waste. You have to strip out the waste, then you expose the reef. When you've got multiple packages, there's quite a lot of meat on the bone to go for. We believe this is something worthwhile. Early days, we're seeing potentially up to 20 kilometers. I was talking to our geo just the other day. There's potentially 20 kilometers of additional strike here that we could add. Pretty exciting work to do. Tarkwa has been a great mine.
It's the biggest producer in our portfolio. Over 500,000 ounces a year. Makes good cash. If we can have this for longer, fantastic. Let's see. All right, South Africa. As I've mentioned, I think I've said pretty much all of this. In quarter two, as you can see, gold up 67%, 57,000 ounces for the quarter. We've dropped our cost to ZAR 590,000 a kilogram. That's $1,275 an ounce. We've made some cash. As I mentioned earlier, all of the front-end things that support production are looking reasonably good, and if we can keep that going, then we'll be in good shape. Here's a good example of how decluttering the mine in terms of equipment and people has helped. We've increased our productivity from 37 meters per rig last year to 55 this year.
We still think 55 is very modest, not by international comparisons, but by South African comparisons. There are operations in South Africa that are doing close to 100. If we can get this up some more, I think this shows you. Stoping tons have doubled over the equivalent period. As we mentioned, these are short-term stats. We've got to build on it and prove to you and to ourselves that actually this will be a good mine for the future. ESG, very briefly, I've talked about safety. It's a big focus of our business. What we're doing with the ESG issues now is we're integrating these into the business. Let's make sure that we manage these things in conjunction with the business, not on the side. We have an eye on these things in everything we do. We want to be sustainable on all fronts.
The safety stats are here. I'm not going to dwell on them, but I can assure you this is a big focus for the business. If we cannot mine safely, we will not mine. Similarly, on ESG type things, we have an eye on this in particular, environmental incidents. We don't want to pollute the environment. We don't want effluent or dirty water to be discharged off the property, and that's all of those important things. On renewables, we've done a lot of work in Australia, and I was recently down at Agnew, standing in the middle of 10,000 solar panels, which will give only four megawatts, but it's a start. We will be building now 20,000 solar panels at Granny Smith, which will give eight megawatts.
With the technology changing all the time, in fact, you can now track the sun on both sides of these panels and keep moving them backwards and forwards. Battery storage is evolving as we speak, and I think within three to five years, we're going to see a lot more renewables. We will be putting up our first five wind turbines at Agnew, and they'll be commissioned by the middle of next year. This will bring down our costs, it'll bring down our carbon footprint, and there's a good business case all around. Okay. I think with that, possibly taken a bit longer, but I think we still have around about 20 minutes for question, which I'll ask Avishkar to manage between Paul and myself and the team. Thank you.
Okay. We'll take questions from here first, and then we'll go to the conference call.
Thank you.
Patrick?
Thanks a lot. It's Patrick Mann from Bank of America, Merrill Lynch. I just wanted to ask on Australia, it's obviously a very prospective region, and you've got large tenements in place. Is there a way for you to bring forward some of your drilling or increase the life of mine by spending more? Or is it just a case of these things take time and whether you throw more money at it's not going to increase the rate? The second thing that caught my eye was just around the potential for a shaft haulage at Granny Smith as you guys go deeper.
Yeah.
Just what the thinking is around that and when that would have to come in and whether haulage costs are getting too expensive there.
Maybe I'll start at the back end, if I may. In fact, your question is opportune because I was at the bottom of the mine about five weeks ago when I was down in Australia, where we're actually doing development in Zone 120. In the light vehicle, it took us a little bit over an hour to get out the mine. Bearing in mind, we've got light vehicles and we got trucks going up the spiral inclines out, and that's at 120. Imagine we've got Zone 135. It's a package that's like a replica. We've got Zone 150, which is down to 1.9 km. It's clear to us that if we're going to capitalize on what we think is somewhere between seven and 10 million ounces here, we have to think differently, both in terms of material handling and mining.
One of the things we'll be doing over the next year is a mining and material handling study. Material handling study is code for a shaft. All right. Let's be clear. We're going to be doing a study on a shaft, and work out at the same time how we can crank up the mining. If we're going to put a shaft in, we want to be able to increase the ore. The ore at the mine at the moment is about 1.7 million tons a year. You know as well, Patrick, that the process plant can do about 3.5 million tons. If we can get more ore up, one, we utilize more spare capacity in the plant. There's economies of scale.
If you're going to spend money on a shaft, which is no small check to write, you want to get the volume up. I don't want to overpromise on behalf of the Australia region, but clearly we want to be looking at something over 2 million ton ore. Bearing in mind what we believe sits towards the bottom of Granny Smith. Bear in mind, it's still open even beyond 150. A study on that. It's 12 to 18 months, as you saw in the book, and we'll come back on that. In terms of exploration, the one thing that sometimes surprises me is geologists will always want more money. If you offer them more money, usually they'll take it.
It's interesting that the geologists say, "Don't give us any more money, because if you do, we're going to waste it." The thing with this exploration, because of these orogenic green stone style of deposits, you've got to do it sequentially. You can spend a whole lot of money in drilling out like crazy and find you missed the ore body. They pinch and swell. They're discreet. They appear in clusters. You've got to actually have a program that goes in a sequence. Let's find things that matter. Let's have a second follow-up program. When you get into diamond drilling, which is trying to get reserves on a balance sheet, it's fairly expensive, particularly if you're doing it from the surface.
I'm afraid to say, although we believe the potential of Senise, Agnew, Granny's is to go longer, and you want to see it reported in reserves, I'm afraid to say, although we could probably add a bit here and there, it is what it is. We're confident that we'll keep replacing. Last year, we replaced reserves in Australia, the year before we did. I think this year we're reasonably confident that we'll replace again. $90 million is a lot to spend. We're drilling out 400 km. I think we're doing about a third of total gold exploration in Western Australia. It's a chunk of change. Let's get some success and see how we go. If we bring a Redeemer in, that could add significant ounces. If we can bring in resource conversion at Granny's, we can add more. Let's see how we go.
I'm afraid it's a complex geology. It's not like the Wits Basin again, where you put a few holes in, and bingo, you've got a big reserve.
Thanks. Michael?
Nick, it's Brendan Ryan, Miningmx. You, the last five years, you've been a strong supporter of gold's prospects despite what the market has been through. You've now got the gold price going in the right direction. Could I have your assessment of what's going on? Is this a flash in the pan, or do you think there's something more fundamental at work here in the gold market?
I think the one thing you learn about being in the gold industry for a long time, Terence is just smiling next to you because he knows what I'm going to say. I've been in Gold Fields now for 22 years, and the longer I'm here in the industry, the less I know about the gold price and what it's going to do. There's so many different factors impacting the gold price, Brendan. We just don't know. Day traders will tell you today it's going up. The same day trader next week will tell you it's going down. It's very volatile. Paul always says our fortunes lie in the dollar. I think that's still his view. It'll go up, it'll go down. It's going to be volatile. At the moment, it looks like it's pretty good. Let's enjoy it. Let's not get carried away. Let's be cautious.
I'll ask Paul to add because I know he has some strong views.
I think a lot of it is sort of the interplay in what the U.S. is doing in the dollar. Remember, your two big investment vehicles, U.S. dollar, gold, and how people move to it. At the moment, I think there's a perception that gold's more of a safe haven, so gold is running us toward all the political instability. You don't know. We're all guessing.
Let's be cautious.
Yeah.
If we're wrong being cautious and we make more money, that's not a bad problem.
Could I throw a follow-up in on specifically South Deep, the rand? What do you think is going to happen to the rand? That obviously has a huge impact on South Deep.
Well, I think as South Africans, we are worried about the balance of payment issue, the national debt going up all the time. We are emerging market. We get caught up in the trade wars. We are a victim of trade wars, potentially. Added to our own sort of fragile finances, the rand could be under pressure. The one thing Paul and I have also learnt is a weakening rand in our game is like an interest-free loan. You're going to pay it back. It's a question of, are you going to pay it back in 18 months or 24 months? The inflation follows behind. The other thing about South Africa that worries us is your energy costs for us are probably going to double in five years. Just us are spending about ZAR 500 million a year on energy, okay?
If that doubles in five years, that's another ZAR 500 million for us. What about the rest of the industry? How are they going to cope? We're fairly modest in terms of what we use compared to the big conventional gold mines and the platinum mines. How are they going to survive? The structural inflation here is a major concern, and wages as well continue to go ahead of inflation and have not been matched by productivity enhancements. If anything, productivity has gone down, wages gone up. We've got some serious structural issues here to deal with.
Thank you.
Can we see the questions on the conference call, please?
Yes. We have a question from James Bell from RBC Capital Markets. Yes. Good morning, thanks for the call. Just two quick ones around South Deep. Do you think the asset can attract capital when you compare it to some of the other projects and exploration you have in the international portfolio? Secondly, given your closest peer is potentially looking to exit South Africa, both from an asset and a listing point of view, do you think it's time now for you to have a look at strategic asset, strategic options around South Deep or a potential exit from there?
Let's deal with the second part of your question first. I think we wouldn't have gone through the massive pain of a restructuring allied with a strike if we were checking out on South Deep. I think that gives you the answer. We have restructured the operation. We've taken about ZAR 1 billion a year out of the cost base. We've improved the discipline on the mine. We've improved the quality of the management. That is not the signals of someone who's checking out. On the first half of the question, one of the beauties of South Deep is we've actually spent a lot of the money on the fixed infrastructure. Remember, we built the plant expansion, we built the backfill plant, we put in a significant amount of additional cooling ventilation. We deepened the vent shaft. The real thing ahead of us now is development.
We've got to develop the ore body. We've got to open up the ore body, which is not dissimilar, actually. If you look at Wallaby underground gold mine at Granny Smith, in order to access down to level 150, we've got to open up the ore body. That is the bulk of it. Obviously, there's infrastructure maintenance that will continue. It's not like we have a mountain of capital ahead of us. It's really development that will be the key thing. Obviously, replacement of equipment. As you know, we've taken a lot of equipment out of surface, out of operation rather, and are parking it up on surface. That will also defray a lot of the necessary replacements which would otherwise have to have been effected.
We've done a lot of the hard work here, James, and we'll get back into new mine development towards the end of the year. In addition, a lot of the team that we'll deploy to that, we redeployed into doing ground support and backfill. In fact, we'll leverage off just redeploying people back to restart those activities. That will actually mean that the incremental cost won't be as high as it would otherwise have been. Hopefully, I've answered your question.
Yes, that's very clear. Thanks, Nick. Just one more on Salares Norte. If we see spot prices persisting at these higher levels, do you feel like that's a project you can go alone on? Is your strong preference still to look at a partner to help you around the CapEx bill and the construction there?
James, I think we're still considering all our options as to how we will bring this to account and how we're going to fund the project. That's in process at the moment. Obviously, we'll need to come to a decision by the middle of next year, but we're working on it, and there's various streams of work going on as we speak.
Thanks. The next question we have is from Johann Steyn from Citibank.
Thank you very much. Thanks for taking my question. Nick, you've been very successful. If you strip out the South Deep situation over the past decade, you and your team have been very successful with kind of bolt-on acquisitions and disposals, and I think you've created a lot of value for your shareholders through that and probably something that you guys don't get enough credit for every day. In this current environment, it seems like you've opted now to go more towards greenfield development as opposed to further bolt-on acquisitions. Is that a correct assessment, or is it just the fact that the bolt-on acquisitions have now just become too expensive?
That's a good question, and I think the one thing we must remember in this global consolidation, which I think is going to gather speed over the next year. One of the Canadian analysts sort of asked me the other day on a call, what did I think the gold industry would look like in a year's time, and who would not be here anymore? I'm not going to mention names here, but what I did say is I think it's going to be different. I think consolidation is a means of trying to deal with the fact that the gold industry has been under-capitalized for years.
The strategy here is, let's keep the least under-capitalized assets and get others to pay a premium at a $1,500 gold price to buy the more under-capitalized assets with shorter life, looming closure obligations, and hopefully then we can take the money we get from those investment sales, recapitalize our own business, smaller business, lower cost, and move on. These companies who want to do this are obviously hoping that other companies are going to give them attractive prices for the assets they don't want, because they're not going to put the best assets on the block. We've been counter-cyclical. We invested in new assets three years ago when everybody else was retiring debt and making their costs look better by not spending. We were still spending. Now that we've finished spending, we have 8-10 years ahead of us.
We don't have any major production gaps. We're happy with what we've got. We've got Salares Norte coming. As Paul has just mentioned, we're looking at funding options. Clearly, we're going to compromise our funding options if we go and buy other assets that maybe are inferior. How many assets can you buy that can give you a two-and-a-half-year payback and $500 an ounce costs in this environment? I don't think anyone would want to sell assets like that. They'd want to keep them. Organically as well, Johann, all of our mines have potential. We have potential on all of our existing mines to extend life, and particularly given the fact we have the sunk capital spent in the infrastructure. It's lower risk because we know the ore bodies. The best place to find gold is where you're mining it. I think that's lower risk, high return options for us.
Never say never. We continue to run the rule on everything that's out there. Less likely, I think, given solar is coming as well, and the fact that we want to pay down our debt, show some cash, that we would be a participant in this process.
Did you say anything?
Oh, yeah. Thanks, mate. Those are all the questions from the line, sir.
Okay.
Mr. Holland, you mentioned one of the risks you had was electricity supply. Looking at Eskom and their ability to underachieve targets that they've set on an ongoing basis, how much can you actually access from alternative sources, and how much of a problem would that be? How much of a setback would it be if they continued to take even longer than expected to get the new operations going?
We've done a study on a 40 MW solar field at South Deep, which we think is viable. Bearing in mind, you can't use solar when it's dark and the battery storage is limited. That could probably add, on average, about 20 MW. We are using somewhere between 60 MW and 80 MW. That's quite a material change to our power composition. We have a process. We're in the regulatory process now. We need approvals from the likes of NERSA and so on. We believe there's quite a lineup of people in as well. If we can get approval, we will implement that in stages, because on a cost basis, we believe that makes sense from day one. Bear in mind what I've just said is that if Eskom continues getting 15% a year, that you're going to double your costs over five years.
It'll be even more in the money in five years' time. We think it's an imperative, and we'd like to be in a position, if all goes well, to start the first stage of that early next year.
Sorry, we do also have standby generators. Martin, correct me, 10, going up to 12 at the end of the year, of 12 MW that we've already got on site. Good point, yeah.
Thank you. May I ask another question?
Yep.
When you look, having the South African operations, we had a number here, gold production increases on, under South Deep. We're looking at $1,275 an ounce. Looking at the volatility of the gold price, which has been immense recently, how far down could that go before you actually said, "Sorry, we've got to cease operations or slow down operations considerably"?
Yeah, well, look, the fact that we've already brought our costs down significantly in the second quarter, I think you're showing, in fact, it's going the other way at the moment. Off a very high-cost base. Clearly, we've said that Gold Fields franchise assets, we want to get to as close as we can to $900 and make a 15% margin at a $1,200 gold price. That's the task for the South Deep team, is to drive us down there. If you look at an increase in volume, look what it does. You've dropped your costs 30% plus just by getting a modest increase in volume. We're still only using these sort of production levels, a third of the installed capacity. We've got capacity here. The marginal cost of extra tons will be lower, quite a sizable amount lower than the all-in cost.
That's why it's a volume. It always has been, always will be. If you can get more open stoping through, which is your big volume. Development and destress is on reef, but it's slow volume. Get your open stopes through. That's really where you're going to see the leverage here. Let's see where we go. We're encouraged by where we sit today.
Thank you.
Andrew?
Nick, following up on your comments on South Africa, could I ask you for your overall assessment of what's going to happen to the gold industry here? Given AngloGold wants out, Harmony wants to go to PNG, and even the PIC says it wants to invest in South Africa, what is the future of gold mining in this country?
West Africa.
Sorry, West Africa.
Okay. Well, look, I've been saying for a long time that the gold industry is in decline in South Africa. Recently we were eclipsed by Ghana, as you saw. Ghana now is the largest gold producer in Africa, and I think South Africa now is down to sub 130 tons a year. I think the die is cast because if you look at increasing depth, declining grades, increasing costs, that's a combination altogether that is a real storm against you. I think the rand, when it weakens, it gives you some respite. We've seen this over the years. The rand weakens a bit, you get a bit of a respite, inflation comes up, then you get the combined effect of increasing depth, more capital required to access depth, more ventilation, more cooling, grade comes down.
The gold industry is in decline, and it will continue to be in decline. We're only now 1% of GDP, the gold industry. How relevant are we in terms of the economy? That's the reality of where we are.
Okay, let's get one from the webcast. Please can you unpack the impact of the hedge and the potential impact going into 2020?
Well, it's in the book. As we said, the mark-to-market loss at the end of June was $120 million. We've basically hedged half of Australia's production for next year, half of Ghana's production. We've hedged 75% of South Deep. One of the main reasons is your concern you raised earlier. We've got hedges of around 680,000 ZAR a kilogram for South Deep for next year. That is to give Martin a bit of headroom to get the mine up to the cost level where we want it. Yeah, the reason we have taken out the hedges is not that we're trying to guess the gold price. Our planning assumptions for next year are $1,200, AUD 1,600, and 555,000 ZAR a kilogram. When we embarked on this hedging exercise, it was about three and a half months ago. You need to remember where the prices were then.
What we did is we had a draft ops plan for 2020, we had a certain cash flow, and we were requested what can we do to improve it. The value of these hedges, let's ignore the mark-to-market. Visibly, what we saw as the planning process adds about $130 million of free cash flow post-tax to our proposed cash flow for next year. That's the reason we took it. As we said, we don't know where the gold price is going. We really don't know. We saw some very attractive prices, and we said, "Let's take some of the money off the table." We are not strategic long-term hedgers. We will only hedge for one year in advance, and that's what we have done. It's underwater at the moment, who knows where it will be at the end of the year.
Maybe it's worse, maybe it's better, but we're not trying to guess it. I at least now know when I finalize my plan for next year, which we're doing in the next three months, I can put in some definite numbers. We're good on production. We're good on cost. We always were subject to gold price volatility. We've locked in a lot of it now, so we can basically know what our cash flow will be for next year when we do our plans and complete it in three months' time.
Thank you. Is there one last one here? Nope. With that, thank you very much. Media, the roundtable's upstairs. Thank you.