Good morning, ladies and gents, and welcome to the Goldfields 2018 Annual Results Presentation. Before we get started, just a quick bit of housekeeping, Fire exits top corner and the front door here. If you have to use them, please do so in a calm manner and meet at the front of the building. So today on stage we have Nick Holland, our CEO and Paul Schmidt, the CFO. Nick will get up and give a quick presentation and after that we'll open up for questions and answers.
Thanks Nick.
Thank you very much. Good morning, everybody, once again. Happy New Year, although it's a bit late to be saying Happy New Year. I think we should just recognize, first of all, the tragic events in Brazil. You've seen the accident with potentially up to 300 people who've lost their lives.
We've also had 84 fatalities in the mining industry in South Africa 2018. Could we just stand, just have a moment of silence please? Thank you very much. All right. So the front page there is we thought quite appropriate to show you that Solaris Norte, a discovery in Goldfields has completed a feasibility study during the past year.
This area here where you can see all the crisscross tracks of trucks, this is Breccia Principal, which is the highest grade portion of the total reserve. This is around about a 500 by 500 meter complex. This is standing on the hill looking down. It's a very interesting landscape. The border with Argentina is on the other side of these mountains over here, 4,500 meters up in the Northern Atacama Desert.
But we have to go where the gold is and there's a lot of gold over here. We'll talk about it a little bit more later on. All right. So what are the key issues? I don't want to blind you with too many stats and numbers.
You can read the book at your leisure to get all of that. Key issues are South Deep went through a major restructuring during the course of 2018. We went through a process which is known as a Section 189 labor restructuring process under the Labor Relations Act and we unfortunately had to retrench up to 1100 employees and around about 400 to 500 contractors in that process. And that was on the back of retrenchments that were done at the beginning of the year. We believe we needed to right size the operation given that South Deep had not achieved production targets over a long period of time.
I think everybody knows that and we had to respond. So we've rightsized the cost base to where we sit today in terms of production to the run rate we had pretty much before the restructuring kicked off. And that's meant that around about ZAR800 1,000,000 a year has come out of our operating cost base and around about ZAR400 1,000,000 a year out of our capital base. And that's going to put us in a much better position to, 1st of all, stem the operating losses, but also to focus on short term delivery. We've severely constrained that footprint.
We've taken out a lot of the lower grade areas in the old scattered mining part of the mine. If you can recall, in the old days when Saartib was conventional, we used to de stress above and below the ore body and then develop in and mine it. So that's not what we're doing now. We're actually de stressing on reef and opening up the ore body and mining a bulk non selective process. So we want to move more towards that into the future.
So a tough process. Fortunately, no one was killed. I thought at some point we might have fatalities because there was a lot of industrial accident sabotage, training centers being burned down, etcetera. But fortunately, we got through that. First time we've done something like this at South Deep.
So I do believe this will set us up to have a new start on the asset. Tarkwa also a major year for them because they moved away from contractor from owner mining rather to contractor mining. I'm amazed that we got through that without any hiccups. Production came in slightly ahead of guidance for the year, so the teams did a great job. And we've done that really to reduce our cost base given that Tarko is extremely sensitive to cutoff grades and given the fact that we just couldn't keep sustaining the high rate of increases that the contractors were that the employees rather were looking for.
So and this is a model that's pretty similar now to what you'll see other mining companies doing. Demang outperformed significantly over the year. We're ahead of plan on the project, which is really good news and they're looking for another really good year ahead of them. Per year is slightly late. What I can say is that as we speak today, we're probably about 93% complete.
So we're getting close. The outstanding work is really electrical and piping. All of the stuff we need is on-site because obviously this is over 1,000 kilometers from Perth. It's a fairly remote site on the eastern boundary of the Yilgarn. So a long way to go, but we're getting close to that now and it really is a first class operation.
I'm sure at some point, we'll be arranging a trip for people to see that. Asanko, we bought 45% in Asanko. Why did we do that? Well, first of all, it's in a country we know well, Ghana, been there for 25 years. We see a very prospective belt here.
We see significant potential on Esaase in particular into the future. Solaris Norte feasibility finished, I'll talk about that. Serra Corona, we've extended mine life and we're looking to do that again. That's pretty important because it's one of our lowest cost producers. It's consistently outperformed.
I mean just last year alone it made $114,000,000 of bottom line cash on the back of just over 300,000 ounces of gold equivalent. So really a super operation that's served us well. Balance sheet, we've taken some strain off the near term liquidity by rolling out a term loan on the same terms, but we'll talk about financing later. Dividend, of course, let's not forget that. Even though it's been a more modest year from an earnings perspective, we've still paid a dividend.
If we look at our track record over the last number of years, we've continued to outperform our cost guidance and we've done it again for the 6th year in a row. This year, we were slightly off in the production, but I guess in the context of South Deep really losing 4 to 5 months really of production, I suppose, to come within 4% of the original guidance is not a bad outcome overall and we've got to give thanks there to the international ops who've come to the rescue there. Looking at our cash. So if we look at the mine cash flow, this is what we like to show people is where's the money made, where does it go. You can see the mines in the group last year made 334.
If you add back South Deep, that figure is somewhere around about 480,000,000. So the international mines made about $480,000,000 very similar to what was made in the previous year from the international ops. And how did we put that to work? We've got the demand investment of 125,000,000 We've got some modest South Deep capital. We've got obviously the Korea project.
This was always going to be the peak year 2018 on the project spend and it's proved to be. But at the same time, we're getting closer to the finishing line. Solaris, here's all the money on the studies and further in full drilling to prove up the ore body. Also some district exploration drilling as well to look for the next Stellaris around the area we're in, obviously interest on our debt and that takes us to about 132. So I think it's worth putting into context that over the last 2 years, we've spent over $600,000,000 on growth and we funded about 80% of that from internal cash flows, dollars 134,000,000 has been on net leakage.
Paul and I knew this was going to be the case. And in fact, it could have been worse. But this is now putting us in a very strong position to bring these projects through and you'll see later that our capital spend in 2019 is going to come down significantly. Our production is going to go up and that will have a beneficial impact on all of the metrics. You can see over here, here's the capital.
The green is the project capital at the top there, the blue is the sustaining. You can see that project capital picked up a lot over the last 2 years, now coming off. Sustaining is also coming down a little bit as well. So we're looking at a significantly reduced capital spend as we said it would be in 2019. The balance sheet, as we mentioned, we termed out that loan.
What that means is that in 2020, we have a significant amount of maturities. We've got €850,000,000 net on the bond at the end of 2020 and we've also got some other loans around the group. We have an Australian loan that also matures in that period. And as Paul has indicated to some people outside, we will be looking to refinance the bond and potentially also the syndicated facilities during the course of 2019 so that we can push this out. We don't envisage a huge problem with that.
We've had an upgrade in our credit rating last year, which has helped us. Obviously, the markets have got to play ball, but maybe the comments by the Federal Reserve of late are going to help us to do that. But it's not just terming out the debt, we've got to bring down the debt. We've invested heavily into projects. Now we've got to show some of the cash flow coming back, bring down the debt, pay some high dividends to shareholders on the back of high profits and leave something for working capital and other things that we might need.
Hedging, we made some good money on hedging last year, generated realized gains of over $50,000,000 which helped to underpin the big capital spend that we had. We're doing the same in 2019. I don't think you should read into this now that this is going to be a recurring theme. And certainly, we would be extremely nervous to be going out long because it's a guessing game beyond even 6 months here. So we've locked in really all of the Aussie production at a weighted price of just under $1800 for the year and there's upside potential on most of that as well in terms of the collar structures.
We've also hedged just over half of the production forecast on South Deep at ZAR617,000 and that was compared to our planning price of ZAR525. Dollars So that will certainly help us, particularly given that our guidance on Saartip is just under 200,000 ounces at all in costs of about ZAR 610,000 a kilogram. As you can see, putting hedges in on that sort of level is going to help to underpin that performance. So looking at the group then, overall, our production for the year 2,040,000 ounces. That is better than the previous updated guidance we'd given of about 2,000,000 ounces.
So we were able to get almost 40,000 ounces more in the end, which is great. I think if you look at the Americas over here, you can see why the life extension is important, dollars 6.99 all in costs, 314,000 ounces, making $114,000,000 of cash. We look at West Africa before the project, dollars 149,000,000 of cash and of course Australia making almost $200,000,000 of cash U. S. Dollar terms for the year.
So in Aussie dollar terms that translates to almost $300 per ounce of bottom line cash flow. If you compare that against the other Australian producers and we've done the analysis, we look pretty good. And this is where some of the cost reporting I think is a bit distorted. Others will say that their costs are a lot lower than us, but in fact, they don't make any more cash than us. So I think there is definitely changes in how people differences changes in how people define their costs, what's above the line, what's below the line, etcetera.
We all know cash is king. If we make the cash, the cash will tell you it's there or it's not there. Again, South Tier of course, a very difficult year on the back of the restructuring, but we've reset the base and we've knocked our costs down a lot. So reserves, this is the approved numbers. We don't have the mineral reserve and resource supplement ready yet.
That will go out with the annual report at the end of next month. But I think importantly, the takeaways for me is that we've put back a lot of what we mined in terms of total gold reserves, just the 500,000 ounce difference. That's a big takeaway. The second big takeaway is that on the international operations, we're now sitting with about 20,500,000 ounces made up of these three blocks over here, 7.5 in the Americas, 6.5 Australia, similar number in West Africa. And if you look at that in the context of what we've said that the international mines we believe can sustain about 2,000,000 ounces a year for 10 years.
You've got a 20,000,000 ounce reserve to back it up. And remember, there's no Asanko in here yet. Asanko's numbers will come in the second half of twenty nineteen. We have taken a downgrade on South Deep. There's a 4,600,000 ounce reduction in their reserves.
So on an attributable basis, if you take out the minority interest, the BE deal, that's just under 30,000,000 ounces compared to 34,000,000. And that's really three areas. We've taken a more conservative view on our mining recovery factors in our stopes. So that's knocked out around about a third of that reduction. We've worked on a higher cutoff grade.
North of range, we've taken from about 3.8 to about 4.1 grams a tonne, which is meaning that essentially we will go for the better grade stuff. And that's a function of the fact that the production buildup has not been honored over the last few years. We've taken a more conservative view, notwithstanding the fact that we've dropped the costs significantly. And then we've also put in some geotechnical losses. We've seen that there's a number of dikes and faults across South Deep, 2 in particular that we've encountered has been the Gray Ghost Dyke and the Fargo Faults.
We found that we've needed to put bigger bracket pillars around those dykes. We know that they exist through the ore body and we've taken a conservative view using what we know in the areas we've had to bracket as a proxy. We've applied that across the ore body and that has knocked another third out as well. Whether or not that translates into reality in time, we'll see. But I think the team have adopted a cautious approach to that.
We've had this audited as well just so that when you see the R and R report, we've had it externally reviewed this year. That's a robust process. So these numbers are not just our own internal numbers. These are numbers that external parties believe are achievable. Right.
So what is the global growth for exploration highlights? And what we tried to do instead of giving you a whole bunch of slides with intersections and various colors of different lithologies, we're just going to give you some brief highlights. So if you look at Australia, Granny Smith, we've grown the resource by 4,500,000 ounces since we bought it, reserves by over 2,500,000. We're sitting here now at about 2,300,000 ounces of reserves, but we're sitting with about 8,000,000 ounces of reserves. We've got to start converting more of that resource to reserve.
So the focus now will be more on the infill drilling over the next couple of years, particularly as we look to convert portions of 135, 2,500,000 ounce block and eventually 150,000,000 into reserves. But certainly, there's significant potential out of Wallaby still ahead of us. We're looking outside of Wallaby because strategically we have a 3,500,000 ton per annum plant that we're only putting through about 1,700,000 tonnes a year. So if we can find more to put through the plant by looking at opportunities around us, that'd be great. I'm afraid it's a long game though.
I'm not going to be able to tell you that next year or the year after, we'll find stuff. But I think we should work on the next 5 years and hopefully we'll have something that will come in to supplement Wallaby. At St. Ives, InvinciBull continues to grow. We've got over 2,500,000 ounces to find in Invincible.
We're seeing that Invincible continues at depth. It continues on strike. We've now got InvinciBull South that we're developing into and we've got InvinciBull Far South that we're into and we've got multiple anomalies, visible goal intersections on the 30 kilometer speedway trend that runs through the lake. We're also doing something different. We're going back to the old mined areas.
Victory was a large complex that was mined around about 10, 15 years ago. And what we've done there is we've done a seismic survey to identify structures that are very similar to the structures that we mined. That will enable us to target framework drilling, get a better color in those areas and I think we'll find more. The best place to find gold is where you mine gold. So we're not done in this area.
And I'm really excited about the fact that we did the joint venture with Lex, a listed company. So that's added another roundabouta third to our land package to the east. And we're seeing very similar kind of structures, shear zones, which host a lot of the ore bodies in Sennheiser. As you know, most of the ore bodies at Sennheiser found on the 3 parallel shear zones that run through the property. We're seeing anomalies like this replicated in the LEX property.
So a whole bunch of framework drilling is going on there. I think we're going to find a whole lot of new targets for us in the future. Agnew, I really thought Agnew was going to be a dead duck a couple of years ago. And now I think it's going to be a fantastic mine for us for the next decade. Why?
Well, a lot of focus and a lot of exploration. The more you explore, the luckier you get. And certainly they found an analog to Kim called Virunga North, which is 500 meters away. The beauty is we can use a lot of the same infrastructure to get in here and that's extending further down and laterally. Redeemer, which again is an old pit we mined, we backfilled it and then we found an offset to Redeemer underground and that's starting to grow to between 500,000 to 1,000,000 ounce deposit.
And I'm hoping that we'll get an inferred resource of sorts declared at the end of this year. New Holland continues to give. In Ghana, remember that Tahquah is a paleoplaster style ore body, simply put a whole bunch of stacked conglomerate reef packages on top of each other, very similar to the Wits Basin. What do you know about the Wits Basin? It keeps going.
Similar here. We're seeing around 3 to 5 kilometers of additional strike and the total strike length of all of the pits here is probably of the order of 12 to 15 kilometers. That gives you an idea. Tarko has been a 20,000,000 ounce ore body for us so far. It's truly one of the premier ore bodies on the globe.
So I'm very pleased that Taco got a mention when Barrick and Randgold mentioned their deal, we got a mention. So good to be recognized by somebody else. Great mine, I'm pretty sure this is going to be around for a long time. Demang, there's further extensions to the north of Anawanda. I've got a slide.
Also we still have the potential to go deeper. As Sankar talked about, it's really about getting a SASE further up the curve, but also starting to drill the targets in the area. They've only explored around 7% of the land package and we've seen some good intersections on ground that we picked up. Peru, we need to go beyond 2,030. We think we can.
We've got a study now going on for 2,040 and we should have some results on that towards the end of the year. Right, so I'll go through this reasonably quickly. ESG highlights, regrettably, we had one fatality at South Deep during the year. That said though, we had our best ever safety year across the group, a 24% improvement on our total injuries across the group. So that is the best performance for the company.
And if you look at these injury rates now, they're probably about 60% better than what they were 4 to 5 years ago. We are spending a lot of time and effort on host communities, particularly in the areas of procurement and local jobs. And let me just talk about tails dams. Obviously, this is a major risk for the mining industry and one that is on our radar. We've had all of our tails dams reviewed.
There's a guideline from the International Council of Metals and Minerals. We are a member of that. We're one of the few companies that is a member in this country, one of the few mining companies. So we've had it certified against that. If you recall the dam failure in Brazil, it was a decommissioned upstream dam.
Essentially, those are dams where you build the dam on top of tailings, okay. We only have one active upstream dam, which is Granny Smith that we're watching very carefully. The rest of our dams are downstream, which essentially also means you use the topographical contours around you to provide the base and the stability. That's good news. And then the other thing is Solaris of course will have very little moisture in it because it will be dry stack tailings.
I do think the landscape on tails dams is going to change. I think you might find that upstream dams could be outlawed. I think over time and I'm part of the ICMM Council 30 other mining CEOs across the globe. We do want to move away from conventional wet tailings over time and I think that program will get more impetus on the back of not just the accident in Brazil, but there was a previous one in Brazil and there was obviously one in Canada prior to that as well. The other thing that's really good to see is we're able to use old pits for tailings and we're doing that in Australia at the moment and we'll be doing that also at Serra Corona.
That's part of the life extension exercise. And at South Deep, we are actually mining the old tails to put through the plant to create some backfill while we get the underground arisings into equilibrium. That's another way of getting rid of the liability. But watch that space. So approaching the inflection point, 2019, we believe is going to be a positive year in the context of all of the work we've done over the last 2.5 years.
Our project capital comes down by half, as you can see here, from $290,000,000 to $143,000,000 We expect the business to turn cash flow positive in the second half, particularly as Korea comes into production, as we see demand ramp up as well. So that's certainly going to help us and as that capital comes off significantly after the first half of the year. So all of those things come together. Greer First Gold, I'll set quarter 2 and we start getting into the saddle area of demand in a big way even in quarter 1, never mind quarter 2. Solaris, we have to work through the EIA process, environmental impact assessment.
That's going to take us at least until the middle of next year. If all goes well and we get approval, we could start building the project after the winter of 2020, which essentially would be right about October. It's not far away. In the scheme of our business, it's actually incredibly close. I've talked about the how the global portfolio, how the regions are now getting to critical mass.
You look at the top companies around us outside of maybe the 2 big ones now that have merged, you're in good company with that kind of number even without Safdie. All right. So on Demang, I think very quickly a picture tells all the stories. This is the Western Wall. This is the Eastern Wall.
You can see it's come down a lot. This water at the bottom here will be pumped out. So for those of you who go up to the mine for a visit at some point in the future, you'll see a very different demand from what you see today. And the bulk of our mining will be around these areas. We'll take these down and get down to that center point.
And of course, it's still open at depth. We haven't found the bottom of this particular ore body. So what's good about 2019 is our guidance 218,000 ounces, which is up about 40,000 ounces from this year. Importantly, all in sustaining below 800 as the grades go up, all in costs down $400 an ounce to $1100 the last project capital of about $69 to be spent. So we're looking at the unconstrained.
There's at least 2,000,000 ounces here. There's a resource of over 4,000,000 ounces remaining. That's I think conservative. And on Amawanda, which is on the same trend, Amawanda is on the same trend as this up to the north. We are seeing further extensions and I can show you here.
So there's a cross section. We finished mining that pit. We're mining that pit. We'll be getting into here. We're seeing further extensions over here.
And you can see if you look at a plan view, there's pit 5 over there. We've done some drilling there. That looks promising. Done some drilling there, drilling to be planned here. That whole area there is about 1.2 kilometers of strike, which is longer than what the whole pit is.
This has given us somewhere around about 300,000 to 400,000 ounces. There's potential here for the same again over time, which is not in our numbers. On Gruyere, you can see a picture of the bottom there of a lot of the plant construction points. There's the tails dam in the background. The circular tails dams are not unique to us.
It's quite a commonly used methodology in Australia. So we're getting close as I mentioned. Our total forecast on the project is 6.21 $1,000,000 If you look by the end of the year, we've spent most of that. We're getting close to the end of the spend. We're still good for that number as we speak.
And as I say, we'll look to finish the project and ramp up in the second half of the year. So we've given guidance of around about 118,000 ounces from a total project basis. Of which our share is around about 59,000 ounces for ourselves. So the remaining project capital there, dollars 129,000 that's 100% basis out of the $621,000,000 As you can see, we've spent about 80% or so by the end of the year. Remember, it is a 12 year life.
We've upped the production to 300,000 ounces a year and we were able to do that because we put in a ball mill that had spare capacity. So we're taking the annual throughput from 7,500,000 tonnes a year to 8,250,000 tonnes a year. And at the same sort of grades, that will give you higher production and it will come in with costs of just over $1,000 Bear in mind the spot price today is $1800 That's not a bad almost $800 an ounce margin on this project with significant upside potential in the resource and the inventory around us. So nearly there. Downer have started mining, which is the contract that we're using.
They've done all the initial strip and they've already stockpiled about 120,000 tonnes of ore. I think when we do commission the plant, the ramp up hopefully will be reasonably quick. All right. Solaris, I've mentioned a lot of this already. The feasibility study was finished.
Breccia Principal and Agua Marga, again, there's that photo again of Brecher Principal. Agua Marga is just to the back here of that. So what are we looking at 11.5 year life, maiden reserve declared 21,000,000 tonnes at 5.1 grams. To get a 5 gram open pit anywhere in the world is unique. Normally open pits are like between 1 grams and 2 grams if you're lucky.
This is 5 grams. We've got a silver credit, which is good and bad, good in the sense that it gives us a higher equivalent gold reserve of 4,000,000 dollars Bad in the sense that we have to put in a separate process flow to capture that. Otherwise, we'll suppress the gold recoveries. So it's Merrill Crowe process, your classic zinc precipitation, commonly used in the industry, been around for years. And then the tails from that go through a conventional carbon and pulp process and then filtered compressed tails and then on to the tails dam which is built on the waste.
The waste would be the base, dam on that lined with sufficient bundles all around it. I mean, it's probably over engineered. I don't think it's going to be a big risk. It is front ended because what we're going to do is we accelerate the mining. Why do we do that?
Because it's the best economic outcome to try and mine as quickly as you can. So you probably mine over around about 7 years. You stockpile and we've got enough space to stockpile and then we preferentially feed the higher grade through and that gives us the best economics, notwithstanding obviously mining quicker gives you a working capital investment, the higher grade upfront more than offsets that. We've done zillions of iterations of these numbers over the last year. So we're pretty confident.
Good project. I mean, this will be in the lowest quartile of costs. As you can see over life, we're talking about $5.45 an ounce. If you include the upfront capital, dollars 7.85 So I mean this can work at much lower gold prices and the reserve is very inflexible to lower prices. This pulls up at significantly lower prices.
Capital of $834,000,000 that's in real 2018 quarter 4 terms. And as I say over the 1st number of years, we'll get about 450,000 ounces or so over the 1st 7 years and your costs will be somewhere around about $4.65 an ounce. So it will be a short payback, 2.2 years, IRR of about 25%, NPV of $650,000,000 This is recognized globally as one of the top discoveries in our space and I can assure you there are no shortage of other gold companies that would love to get their hands on this. So obviously, we have to get the EI process complete. We've got to work out a funding plan because it is a lot of capital to spend and we'll have to make a decision, do we go on our own or do we go with a partner or do we do some innovative financing structure that can take the sting out of €800,000,000 being spent over 2 years.
And that's going to be the job we have to do. On-site diesel power because we're far from the grid. We've got water secured. We've got 3 times the water we need in surface boreholes about 12 kilometers away. I wouldn't let the guys proceed with the study without that because if you don't have water up here in this dry arid area, you have no project, you can have the most wonderful grades, but no water, no mines.
So we had to get the water, took 2.5 years to get the water discovered and permitted, in fact even more 3 years. So I'm glad we got that done. So that's where we stand on the Solaris. So here's a cross section, here's the breccia itself. Breccia is basically fluids coming up under extreme pressure and then being broken up and being disseminated back in here.
And you can see the higher grade areas are the purples and the reds and the orange and then lower grade areas are the yellow. Here's Agua Marga. That's a flatter ore body that sort of runs. And if you could see this 3 d, it doesn't quite run through it, it runs alongside it, behind it. That's the front over there.
That's about 500 meters. This is probably about 1.5, 1.7 kilometers in total. Some people have said, well, okay, it looks good, but is it enough to keep going or to stop? Well, besides the fact that it's a 25% return, here's Solaris over here. This is a 20 kilometer distance.
The green and the red are properties we either own or have options on. And we've got some interesting drill results in some of these properties. And this has got all of the potential to be a camp, very similar to other high sulphidation epithermal style ore bodies that have been discovered and mined in this whole Marikunga Belt that straddles Chile and Argentina and many mines and you will know them if you look around. So but it takes time. We are spending about 40% of our budget this coming year on drilling some of these targets so we can add to that 4,000,000 ounce reserve base, but it will take years.
It's not a 1 year journey. All right. So I'll leave these for you to go through. Here's the tons treated, the gold grade, all it costs. The tax regime is you write your capital off of life.
Tax rate is 30%. There's a 1% third party royalty and there's 0.5% royalty based on mining profits to the site. So hopefully this gives you enough to try and model this out and do your own numbers if you so wish. Asanko, I've talked largely about what we're trying to do here. Esasi is up here and Unkram, Dynamite Hill, Aquacisa are down here, the plants down here.
So this is the potential that exists in the north here. Of course, we've got 30 ks of distance between Esaase and the process plant. Process plant can do about 5,000,000 tonne a year. We're quite pleased with the work they've done in getting that process plant to where it is. It's in pretty good shape.
Recoveries are good, plus 90%. Processing costs are pretty good. They benchmark well against what we know. I think we've got to find what is the best solution here. What it comes down to is if Esaase is going to be quite large, I mean, let's assume for argument's sake, it's going to be a 3,000,000 ounce plus ore body, significant tons, then you may decide to do a conveyor option down here.
If it's going to be smaller and you go for higher grade with lower tons, then it might be more suitable for a trucking solution. In town. And tracking in Ghana, 30 ks is by no means impossible. Obviously, you have to clear away some jungle and trees and so on, but it's not impossible. So we're looking at those options.
The idea is we'll come back in the second half of the year with our joint venture partners and figure out the best way for us to go forward. So here's a photo of Esaase. I was up there in December. We sort of stood at the top here. This is the ramp going up.
And one thing we found when we did the ramp, that was all mineralized. When we got to the top, the ore body was not supposed to daylight, but then we did some grade control drilling, back to ore body daylights to get mineralized intersections, which are quite good all the way down. And you can see it's very soft oxides to start with. So it's going to be fairly cheap mining for us. There's the ROM top out over there, so it comes down here.
It's about 100 ks north of Domingue. And then from there, it goes on the road at the moment. So this year, we're going to do about 1,500,000 tonnes out of Esaase. That will go on the road as we look for longer term opportunities. All right, South Deep, I think I've talked about most of this upfront.
But if you look at the beginning of the year and the end of the year, this is actually what we've done in totality. We started the year 2018 with almost 4,000 employees. We ended with under 2,500 because there was other restructurings too. Contractors, we started with 2,300,000, we ended with 1700,000,000 but in fact by quarter 1, quarter 2 that figure will be 1500,000,000. So will be 4,000 in total from something like 6,000 to 6,300.
That's a big reduction in people. We've obviously cut the fleet. Having too much fleet could be a hindrance as opposed to a benefit from 98 to 66. What Martin is doing is, which I think is very sensible, he's going to bring them out the mine and he's going to have them locked up and I think the key will be somewhere in his top drawer. Nobody else would be able to get to it.
And that will enable us to recondition, refurbish a lot of that fleet and stop spending a whole bunch of money down the road on buying new fleet. So it's going to have the added benefit of reducing further capital, but at the same time, better focus on short term maintenance and operating. If you've got less to play with, you're going to be more careful with how you deal with it. Low grade sections, as we mentioned, have been taken out. That is a big footprint we've reduced.
That has meant that we can take the south shaft and actually turn it into a single shift shaft with any services. The backfill pipes have to go down, various water articulation, etcetera, cuts a lot of the costs out. And the new mine development, we were ahead. We're quite happy that we could take a breather while we consolidate our position. So 800,000,000 euros is out of the operating costs, about 400,000,000 out of capital.
And we're going to work on a basis here, we earn the right to spend from here. Let's get short term delivery, we earn the right to spend and invest further. That's the way we'll move from here. Okay. So key enablers, these are the things that will make the difference.
These are the lead indicators. Backfill, you don't backfill, you can't mine. So you have to backfill. Ground support, you have to make sure your ground support follows on. Improved drill and blast, what we mean here is actually making sure that it's per design and that we create nice cavities, nice smooth hanging walls, side walls.
If you don't get that right, it makes it hard to do ground support, it makes it hard to mine from there because we use that platform to create the open stopes. Fixed infrastructure, we've got to keep an eye on the fixed infrastructure, make sure that the shafts, water, reticulation, power, tips, boxes, all passes, look after all that stuff. Improved fleet availability and utilization by pulling it back, I think we'll be able to achieve that. Flatter organizational structure we have moved towards. Performance management, making sure people understand what they got to do and deliver it.
Those are the key things. Right. So for this coming year, we're looking to get up to as high as 7% higher than what we achieved in 2018 as you see those growth projects. It is a tale of 2 halves. The capital will come down in the second half, production will go up in the second half as projects come through.
All in sustaining then, around about $9.80 ish. All in costs around about $10.75 but as I say, a tale of 2 halves. So focus areas, South Deep, we've talked about Grier first goal quarter 2, let's ramp it up demand, let's ramp it up Asanko, let's work out the longer term solution for a very exciting addition to the portfolio in Solaris. Let's advance the detailed engineering. Let's do as much of the planning we have upfront.
That will reduce the cost in time later, come up with a funding plan, get the EIA process done and then we'll see where we stand. Just briefly at the end, I'll leave this for you to read. We are a member of the ICMM. Why is this important for us? Because this is the cornerstone of how we run our operations.
We focus on 10 sustainability principles, 7 position statements focusing on health, safety, environmental stewardship, stakeholder management, human rights, diversity, you name it. And we report on those things and we have them externally assured and you'll see that when you read the annual report. Good. I think that's probably as much as we should say. And then I think we can leave it to any questions that people may have.
Thank you.
Questions here and they will take on the conference call and webcast.
Thanks, Abhishekhar. It's Yiti Shanti from Macquarie. Nick, three questions, 2 on Salt Deep and 1 on Solaris. Just quickly on the Salt Deep slide that you put up on Slide 25. Some of those bullet points we've seen on numerous occasions.
And perhaps also directed to Martin is, although you've done the restructure, what confidence do you have in the current employees and management on the mind to actually for some of those material for those points to actually materialize, things such as improved fleet availability utilization has always been a recurring theme, fixed infrastructure. These things have been there for a while. What makes it different now? And then just secondly on South Deep, when we talk about the international operations, a lot of companies, including yourselves, talk about being assets being a 900 all in sustaining cost number. If you look at Salt Deep, what would be your long term all in sustaining cost number that you could provide us with?
Okay. Well, I'll answer the second question. I think Martin is here, so it would be good to let him give his perspectives on the first question, if you're okay with that. Look, we want to get South Deep down to 900 as well. That's the longer term strategic goal of this group.
And it's stated in the annual report from last year, and I think you'll see it again in the annual report for 2018. That's where we need to get to because gold prices will be volatile, whilst people may be talking gold prices up. Over 20 years, you know that they'll go up and go down. So we think that's the minimum or the maximum amount of spend per ounce we need any asset to be at over time. So that's no different.
That's ideally where we'd like to get to. In terms of the initiatives, Martin will talk to it now. But I guess it's focused on the execution side that we're tightening up. We've always known what we had to do with the execution. And Martin's got a number of particular initiatives that he's putting in place.
Maybe we can just give him a minute or 2 to talk about those.
Thanks for the question. It's an old story and I think difference is this time is that I think the nature of the restructuring. We've taken I think very bold steps to completely relook at the business we started the early part of last year looking at senior structures on the mine and followed that restructuring at the bottom. I think we've taken complexity, updating a lot of the low grade areas. We talk about infrastructure, a key component of our infrastructure is the SouthSoft which now will only be used for servicing.
These have come to maintain and look after that properly. I think through our selection process, one of the focuses was fewer, better people. So we've tried to retain the better people in our teams with better capability. And my past experience and what we're seeing now is we take complexity of taking 30% of your feet out allows a lot narrower focus. And in supporting that we brought in 2 organizations, Australian organization maintenance specialists to help us get the right focus on particularly the fleet maintenance, but all the maintenance across all the infrastructure.
And then coming out of the restructuring, we've got a big drive on what we call with principles embedded. Nick spoke about the performance management stuff, getting teams to take charge, understand how their objectives get to go to the organization's objectives.
So no, any pushback from the Aussies coming in? Any pushback from labor or organizations that the Aussies are now coming in to help fix our deep
It's 3 people that have come in from Australia, these consultants that are helping us put a maintenance management system together. They aim for a very short duration in the long term thing, just helping us build the background. I think in terms of organized labor as much as it was I think it was fairly acrimonious during the restructuring. We built up I think it all ended well. We worked well with the national and regional structures of the National Union of Mine Workers after that, shown great maturity, helped us prepare for a deal towards the end of the year.
And we've been one of the conditions of the settlement agreement was renegotiating a host of our collective agreements. That's progressing well and it's progressing very constructively, I think.
Okay. Thank you. And sorry, Nick, then just the other question on Solaris Norte. On the €850,000,000 CapEx that you've indicated to us, on the processing side of things, will the processing plant be built on a modular basis given that you're going to transition from oxide transition to sulfide? So at some point, is there going to be another bit of CapEx coming in as the sulfide ores come through?
[SPEAKER CARLOS GOMES DA
SILVA:] Okay. So just to be clear, there's no sulfides in here. This is only oxides, okay? There is a sulfide potential ore body at depth. I think the thing there is we would need significant modifications to the process configuration to deal with that.
And to be frank with you, I'd rather go out than down at this stage. I think if we can stick to oxides, that will be better. To answer your question though, it's not a large plant. I mean 2,000,000 tonnes a year is not big. I mean you look at Tarkwa, Tarkwa is 13.5, Korea is going to be 8.25, 2,000,000 tonne is not big.
So yes, we have done it on a modular basis. So if we wanted to put in another line, we could do so. So if we're lucky on the exploration side and we could see in time, let's say for argument's sake, I'm not saying there is, but if there was 8,000,000 ounces here, then clearly we'd have to look at whether in fact instead of mining that over 25 years, whether you bring it forward, you get economies of scale, etcetera. But I think that is for another day. So just to be clear, no sulfides in here.
The plant is adequate. There's no further capital required to deliver what we've said here. This is all in the study.
Okay. Thank you.
Adrian?
Thank you. Mr. Holland, you mean this is my turn?
No, you can carry on at the time, carry on and then we'll go You can carry
on, Ruby, you're in.
Can I go?
Yes.
Mr. Holland, you mentioned that this year you would be refinancing your long term debt. It needs to be pointed out that non current liabilities went up EUR 340,000,000 from the year before. So I'm assuming that the portion that you intend refinancing is
the €1,587,000,000
from the years before. What are the current arrangements for repaying that? And to what extent do you intend extending the terms of payments? Because I'm assuming that's the refinancing portion you're referring to since it's highly unlikely that you'll get a better rate of interest.
Ruby, we're going to finance refinance the bond. There's $850,000,000 outstanding on our bond, our U. S. Dollar bond. That will be done during the year.
And we also have a term loan in our RCF facility of about $1,270,000,000 that will also be refinanced. We're looking to do a minimum of 5 years. So we'll extend the maturities out to around 2024, 2025, and that's on the full amount. You refinance the whole package. So the bond, obviously, is totally drawn because that's the way the bond works.
And on the loans of the $1,200,000,000 about $500,000,000 $600,000,000 of the group debt, that will be refinanced. But we refinance the
whole package. That's how you do
it with the banks. You don't only do it on the DKK 1 portion. You do it on the whole package that they give you. So we'll be looking to refinance the €875,000,000 and we'll be looking to refinance the circa €1,200,000,000,000 1,300,000,000 of bank debt.
To extend what your answer, does that suggest if you are unable to refinance, would have difficulties or challenges, as they now say, in
Ruby. And we've got other facilities that we could draw down to pay those if we had to, but we intend refinancing this year. There's no issue with refinancing.
Thank you.
Adrian?
Adrian Hammond, Standard Bank. Good morning, Mick. Three questions, none on South
Deep. Thanks.
Just a bit of a more macro question. We've seen 4 of the top gold producers do mergers in the last 6 months and then there was speculation around you and AngloGold merging. What is your view on consolidation now? Do you think that brings value for shareholders? And have you considered any opportunities that could be realized if you were to merge with someone like AngloGold?
Yes. I think it's interesting that we are seeing a flurry of mergers and I think it is going to be a very active year and there'll be more. But I think a lot of it comes back to many of the things we've been saying over 5 years is that there's a dearth of new discoveries, projects are not being built, the production profiles of the major companies are in decline, etcetera, etcetera. So if you look at that against the backdrop, the capital has dried up. It seems when you tick off all the other alternatives, that's what you're left with.
So I'm not surprised we're heading there. I believe that we saw this coming a few years ago and we said, let's look at ourselves and what have we got to do to make sure we're well positioned for the future. And we took the conscious decision in 2016 that we're going to run this company cash negative for 2 years to actually build a pipeline of better projects that will give us life extension and give us growth and give us better costs. And I think you're seeing that coming now. So we're sitting in a position where we've got 10 years of 2,000,000 ounces or even more.
I mean, Solaris is not in those numbers. If Solaris has done way beyond that, that's even before South Deep. You've seen the reserve position. I think that will grow some more. So we don't feel compelled to do anything except focus on our projects.
The other thing with big deals, and I remember when Gold Fields was formed in 1997 and I was part of the team that formed the company, It took us 3 to 5 years to bed down the culture between the old Genkor and the old gold fields of South Africa. It's not easy. These big deals often don't have synergies. You look at some of the big deals being announced now, I mean, how many mines have they got? They've got far too many mines.
They are going to have to offload assets. They might think that people are going to pay them big numbers for those assets. Time will tell, because they won't offload the best assets. And that will offload the ones that are running out or that have big reclamation liabilities or need significant capital input. And there will be people who will step in, but at what price.
So I'm not going to comment on any speculation about what certain people think we're going to do. We don't respond to speculation on specific potential transactions. But just to say, our focus is delivering our strategy that we've set out and started with. In fact, we started the strategy in 2012 when I stood up in Australia and said the industry is focusing on the wrong metrics. We've got to focus on making money and not just on ounces on the balance sheet and growing production, etcetera.
And our steps in 2016 are a natural extension to that process. So we're quite comfortable, Adrian, to be where we are and let's deliver this value and see what it means for Goldfields going forward. Never say never. I mean, you can never say you will never consider anything, but it's not our focus right now.
And something just a bit more specific. What is the free gold percentage at Asanko? And what are you finding at Esaase relative to the corporate? And then for Paul, your AIC guidance, the sustaining cost guidance for this year is the same as it is last year despite demand Gruyere, Usenka coming into full swing. So why is that the case?
Look, there's obviously pluses and minuses. We have increases in costs in Australia. Costs have gone up in Australia because of deeper mining at Granny Smith. But also it's a particular year at Granny Smith where we're into a low grade area. The grade we're mining this year is I think it's an aberration in the longer term grades at Granny's.
We've finished mining the higher grade Invincible pit, albeit we've got one more stage to go, which is small. That had high grades. We're still transitioning into the underground. A lot of the grades we're getting now are development grades as we open up stopes, which are lower. So Sonaeos is more in a transition.
At Agnew, we're building a camp and a power station that will have a good payback and lower our costs because we were actually using a campsite in Linster, which is quite some kilometers away. Now we've got an on-site camp, which we own. So it's $30,000,000 of non recurring capital going into Agnew. So I think a lot of those things are impacting the costs. Paul, I don't know if you want to add anything.
Those are the main ones?
Mainly in Australia, yes.
Mainly in Australia. So some of those will be non recurring. Some of them are a function of increased depth. And clearly as Granny Smith gets deeper at Wallaby, we know that the cost will be higher, but we've got a double whammy this year with the lower grade. As we get into the core of Zone 110, 120, we think the grades will pick up potentially 0.3 grams to 0.5 grams a tonne and that will make quite a difference on that.
So that's where but again, it's quite difficult to look at the numbers for the whole year. In the second half, you'll see I think you'll see a step change now. Thank you.
On the free gold there, the same?
Free gold, sorry. Yes. So gravity gold going through the plant is probably around about 40%. So there's a fair degree of gravity. We're very early in the stages of mining Esazi, but the bulk metallurgical test work is showing we'll probably see similar gravity gold.
The guys at Asanko have seen this. So they have got the Nelsons in place, so we can capture this. And if anything, I think the potential of the grade here is quite good for us to improve. Look, the costs are still high because they've got a big strip still in Nkran, which is the bulk of the ore. But as that moves out and we transfer more of the center of gravity to Assasi, we'll see lower grades, higher costs.
So it is in transition. I think you're going to see by the time the end of the year comes Adrian, we're going to be giving you a longer life different plan. We didn't buy this mine for $11.50 costs. That is not our strategy. We bought this because we can see the potential for this to hit that 900.
That's where we see this. And remember, we came in at situation where the company was under significant duress needed to refinance the facility. It come down from almost $1,000,000,000 to something like $180,000,000,000 we came in. Now we do see long term value. I'm sure by quarter 3, we'll be able to give you something more concrete on this.
Thank you.
Can we take any questions from the conference call please?
No questions on the conference call.
Okay, thanks.
Two questions, Nick. One is Eskom. What does Eskom mean for your people and looking forward into the future? You haven't mentioned that so far. Secondly, it's now 12 years you guys have been in South Deep.
Does there come a point where you say enough is enough?
Yes. I think the second question I'll answer first, spot on. And we've asked ourselves that question and our board has asked us that question. And I would say had we not gone through what we've just gone through, this major restructuring, which we've never done before, Probably the answer would have been, it's just too hard. But I think given what we've gone through now, we've significantly reduced the cost base.
We've constrained the footprint. We feel that we've got to give this a go. But that's not to say that that means we can continue just putting money into this month after month. I have no appetite to do that. I'm also a shareholder in this company.
And if we're going to have a repeat of that, there won't be a future. There has to be a step change and soon. So that's on that one. On Eskom, yes, it does worry us. The silver lining, of course, the fact that we're mining I mean, our mining plan this year is premised on about 100,000 tonnes a month.
We've got installed capacity of 330. So the silver lining in all of that is we can move things around. We can schedule hoisting in different times and stockpile on and around. We can campaign mill through the plant if we have to. So I think we can work around it, provided we stay at the current level.
If we go to Stage 4, then we're going to be in trouble. But I think the whole country is going to be in big trouble. What are we going to do about it? Look, we saw this coming and we worked on a renewable solution over the last 2, 3 years, but we paused on that given the restructuring we were doing. So we do have a solution that could provide up to a quarter of our power needs through solar at lower costs.
Over the fence, so no sort of capital to us. I think we're going to dust that off now and crank that up again. In the short run, we can schedule things. And if we have to bring in additional power by renting in units, whether it's gensets, whether it's mobile units. We'll do what we have to do.
So we've got a multi pronged strategy. My feeling is though this problem with Eskom is a big problem. It's not going to be solved quickly. And I think the silver lining again here is finally we're going to start getting renewables being taken seriously by the government because they're in trouble. And I think someone was saying this morning, all of a sudden permits are now being given more quickly than what they were in the So I think the solution is that half of Eskom's baseload is way past midlife.
It needs to be decommissioned over the next 10 years. Nuclear is a pipe dream. It's going to cost far too much money And business is going to have to create their own solutions. If we wait for the government to fix Eskom, we're going to be waiting a long time. We're going to have to fix our own situation.
So I think we're going to move aggressively over time. Look, we've got 60 megs we need. I mean, we are one of the big users. I mean, 60 megs is huge. So it's not that Eskom is going to blow up, but I think we're going to have to get used to the fact that we're going to have less power, step change down in power than what we had before and we've got to bridge the gap.
We can't wait for that.
Okay. Any last question in the room? If not, media, the roundtable starts at 11:15 on the 1st floor. Otherwise, thank you for your time. We'll see you in 6 minutes.