Good afternoon, ladies and gentlemen. Welcome to Gold Fields' results for the six months ended 30th June 2018. Just before we start, there are exits at the front, at the back, and if there's an emergency, you assemble outside the building. I'll hand over to Nick who will do the presentation. We'll do question and answers after that. Thank you, Nick.
Thank you very much, Avishkar. Good afternoon, everybody. Thanks for taking the time to join us today to talk through these results for the first half of 2018. I think first of all, although a lot of the news this week has been focused on South Deep, we shouldn't forget that of course there are a number of other operations in the group that are doing quite well, actually. Certainly, we believe so. Strong performance from the international ops. They made ZAR 190 million after taxes and all capital before the project CapEx. Pretty good performance there. They're on track to achieve their guidance for the year in terms of production, and look like they should as well achieve their cost guidance. Damang in particular is tracking well. I'll talk a little bit about that later. That's ahead of plan.
Gruyere remains on track for first gold in quarter two next year. That's what we said previously. We're still on track. CapEx is a little bit higher than what we said before. It's about 18% up from what we thought it would be, and we're roughly just over halfway through that spend, with physical progress about 60% overall. Tracking reasonably well. South Deep restructuring and the impairment we announced on Tuesday, I'll talk about that again a little bit later on. Balance sheet's good. The Asanko transaction we completed on the 31st of July. We now earn a 45% interest in the Ghanaian operations of Asanko. Got some slides on that, too. In line with our policy, a dividend of ZAR 0.20 per share, which represents around about a third of our normalized earnings. Here's some of the headline numbers.
Production, this is from continuing operations, because essentially Darlot was in the numbers for last year. In terms of our accounting, we take out discontinued operations, this is like for like. Production, just under a million ounces for the half year, about 2% lower than what we had last year. Most of that decline linked to South Deep, also Tarkwa. All-in sustaining costs, virtually flat. All-in costs, slightly higher, that's really on the back of our projects picking up steam, as we expected them to do. Mine cash flow, ZAR 149 million. Remember, I talked about that ZAR 190 million on the previous slide, but if you put in South Deep, there's a ZAR 41 million outflow in the six months. That drops us to ZAR 149 million. Nicely up against the previous year of 108.
The one thing that Paul and I look at more than anything is our cash. For us, we don't get too hung up on the earnings. We're much more focused on how much money we make, how much cash. That for us is the real issue. Nice to see that that's up. Project spending, as I mentioned, that's up to ZAR 192 million. The pickup there is really on Gruyere and Damang, as they picked up. Those are the two main contributors, and pretty much in line with what we expected. Of course then, after project capital, we are cash-negative from the business. This is what we call the core business, ZAR 79 million out compared to ZAR 102 million out last year this time. Also, just to remind you, we said that 2017, 2018 would be cash-negative with the new projects.
We're reasonably comfortable that these numbers are okay. Even though the gold price is coming down, as you'll see a little later, we've got some hedges in place that will protect us over the balance of the year. Normalized earnings, ZAR 43 million. That's the figure if you strip out all of the funnies, the non-recurring items, compared to ZAR 75 million. That's lower than last year, even though our operating profit was higher on the back of the higher gold price. The main reason for that is higher exploration costs have come through and higher social costs which go below operating profit. That's the main reason for that coming through. The dividend I've spoken about. Debt I've spoken about, 1.07. We've always said we don't like to be above one.
As you'll see later with the Asanko deal, if you rebase that on a pro forma basis up to the end of July, that would be 1.19, which includes the ZAR 165 million we've written out to acquire the 45% interest in Asanko. Still reasonably good. You've seen the headline numbers in the group. seven mines, of course, across the group, two projects, 994,000 ounces. If you look at the individual regions, if you look first at West Africa, Tarkwa and Damang, attributable production there of 319,000 ounces. Just a little bit lower than the previous year. Some pluses and minuses. Damang up, appreciably up. Tarkwa down a bit, in line with what we expected it to do. All-in costs, which include all of the project capital at Damang, ZAR 1,114. Slightly lower than the previous year.
If you look at all-in sustaining costs, the region is actually down at around about ZAR 900 an ounce on an all-in sustaining basis if you strip out the project capital. Cash flow before the Damang project, ZAR 64 million, so making good money over there. Americas region Of course, Cerro Corona, very steady, virtually the same as last year. Cost of ZAR 737 an ounce, slightly higher. That's on the back of the higher strip. What we're doing now, as we reposition the mine for the life extension to 2030, we have to progressively move more strip as we reposition the pit for the increased production. The strip ratio was an average of life of mine of about one. It's now going to be more like 1.5 to 2 as we increase that strip to open up those additional reserves, but still very competitive.
Cash flow of $41 million for the half year. South Deep, as we've spoken about over here, production of just under 100,000 ounces for the half year compared to 119,000 ounces the previous half year. all-in costs here, obviously way high, $1,800, and I think that tells you why the restructuring has taken place. It sort of means, and the way I've explained this to the media in a way they understand is, that this operation is cash negative to the tune of about ZAR 3 million a day and has been for some time. That is something that is clearly not sustainable for us. We're not getting enough production, given the high fixed costs. We had a Twin Shafts system down at 3,000 meters, and a process plant on surface, two backfill plants that we can't support all of that.
Clearly that's one of the reasons for the restructuring. Looking at Australia, over here we've got the three mines left after Darlot's gone. Very solid again, 442,000 ounces on track, all-in cost of $900, net cash flow, $86 million. We're going along nicely. Balance sheet I mentioned, we're in pretty good shape. I think the one thing that's a little bit of a flashing red light for all of us is interest rates have gone up. If you look over here, we've seen about 1.5% pickup in the base LIBOR rates that we use to pay our floating debt on. In fact, that's flowed through in a weighted average increase of over 1%. I think if you believe what's going to happen in the States with interest rates, it's quite possible we'll see another 1%-2% over the next 18 months.
What does it mean for us? Every 1% is about $10 million in terms of our interest bill. That's the delta. I think as a strategy, we've got to be looking at de-levering over time. Certainly, as our projects come through, and we're just about halfway through our projects now, we should be looking to deploy some of that cash, de-lever the balance sheet, particularly as gold prices are a bit soggy and might be soggy for a while. Particularly given the fact we've got maturity coming up here, we've got a bond coming up there. We are assessing refinancing options, and we'll make a call on that most probably early next year as to what we do. Clearly, we want to make sure we manage the tenor of our debt, and we don't like to have too much that is all maturing at once.
We've got a strategy to think about how best we deal with that in time. Also worth mentioning that we got an upgrade on our debt rating as well, which was nice to see, which marginally reduced our cost of debt just recently. Okay. Hedging. We've taken out some hedging to protect us at times of big CapEx. That's bang in line with our policy. Broadly, we've covered it on costs and revenue. The oil hedge we took out some time ago at a basis price of just under $50 a barrel. As you know, the price today is hovering somewhere above $70. That's proved to be pretty good business for us. It's made some good money for us and protected us against these big increases. We've hedged about 50% in Australia and Ghana.
Those are the operations that are most sensitive to oil and to diesel. On the gold side, we've hedged Ghana and Australia. Obviously, some of these hedges have now been matured and we've delivered on them. Essentially, we're looking at a situation where we've hedged 80% of the remaining production at Ghana for the year and virtually everything in Australia. Ghana has a floor of $1,300. Australia has a floor of about AUD 1,700, a mixture of caps and collars, collar structures, rather, and forwards that have protected us. We have a little bit in South Africa, but nothing of consequence. We've also hedged out the copper in Peru at a base price of $3 a pound, and that's also in the money now. This is giving us at least some comfort that we can fund our capital programs.
People often ask, "Are you worried about the drop in the gold price of circa $100 over the last month or so and your ability to fund our projects?" We're not worried. Our hedges will carry us through. As we get into next year, we really are through the hump of the capital on our projects. Let's look at Asanko and what we've bought into. Over here, this is a map of Ghana, and here's the Asanko gold belt, and it's sandwiched between two big belts on this side. Here you see one of Newmont's operations. There you see Chirano, that's Kinross. Another one of Newmont's operations, and of course, Obuasi, which is over here. These are recognized gold belts. We are in a fairly underexplored gold belt in the middle here.
This is the dark blue, is the lease area that Asanko has. Here's Tarkwa and Damang down here. We're 100 kilometers to the north, that gives you an idea of the positioning. If you look at a higher resolution of that, down here you've got Nkran, which is the main pit source at the moment. They've been stripping the first six months of the year. They're now back into production. They also are mining from two small satellite pits, Dynamite Hill and Akwasiso. The main prize for the future is up here. That's Esaase. We can actually move and show you what this looks like. Here's a bigger picture of all of this. There's your Nkran reserve of 1.4 million ounces. We're using the last published numbers here. Then Esaase at the top there, just under three million ounces.
There's a 30-kilometer distance here. We'll start stripping this pit from January next year. We'll also be considering whether we do road transport or conveyor transport. We have a conveyor option permitted with appropriate support from communities. We'll decide which is the better of the two options as we ramp that up. As we ramp this down, we'll be ramping that up. We have a plant that can do, which is just over here really, 5 million tons a year at the moment, with potential to expand beyond that. It's early days. We've just really cemented the transaction. As you can see, 31st of July. We paid the money. We got another deferred payment, which is likely to be paid at the end of 2019 of ZAR 20 million.
To give you an idea of the production, their guidance is about 250,000 ounces, all-in sustaining cost of about $860 over the next five years. I stress we're going to be going through a replanning exercise with them, and we've started that process now. They are the operators, but we have a strong joint venture agreement that allows us to get involved. They'll be adopting all of our planning protocols and time frames. In February, when we are here again, we'll give you a better feel as to what next year looks like and what the future is. The thing that really excites me, having been up to the site last month, is the fact that a lot of the deposits they're mining are on shear zones, and these shear zones run right through the property.
If you follow this kind of footprint, you're likely to see analogs across this entire lease area. These shear zones run for 100 km. I think it's a fair bet that there'll be some additional ore bodies, hopefully, that will be mineable in the future. As I said, this is an underexplored belt. One of the reasons we got in here is not just what we see now, and I mean, there's a life of mine here in excess of 15 years, but also what we see in the future and what we can bring to bear here. Ghana's a great country. We know it well. We've been in Ghana now for 25 years. We've been operating there longer than anybody else other than the original Ashanti. We do have a good understanding of what it takes to operate in Ghana.
I've talked about this really. Esaase is the next part of the equation that we'll start developing from next year. As I say, exploration potential, well, there it is. Very little has been done over the past few years, so it's all ahead of us. Prospective ground. Damang, as I've mentioned, is doing well. 26% ahead of the plan year-over-year in terms of tons. Contractors are performing well. We're getting down much quicker than we thought we would. This is the key figure I look at. What is the vertical rate of advance? 6.3 m a month. The basic plan we put together as part of the reinvestment plan was just over four meters. That's one of the KPIs I like to track. Are we getting down into the base of the ore body quickly enough? That's a key determinant.
So far, we're ahead of the game, but we know as we get deeper into the pit, it is going to get harder. The material gets harder. Obviously, your drill and blast practices will have to be spot on. Geotechnical compliance, spatial compliance, all those good things when you're advancing down into a deeper pit have got to be on it. Capital up slightly. You can see $73 million spent as against $61 million the previous year as the project ramps up. Amoanda is a hidden gem that seems to be emerging for us here, and I'll show you why. First of all, here's a picture of Damang. That's looking north. That's north up there. This is the western wall, and that's the eastern wall. I think you can see the western wall, this is the ramp over here.
The western wall has come down a hell of a lot more than the eastern wall. We've only got about 30 meters to go here to the base. On the saddle side over here, we've got about 70 meters to go. Over here on the main Damang pit, we've got about 130 meters to go. We'll be in ore over here next year. That's part of the plan in the saddle area. We'll be in ore over here in quarter 2 2020. That's the plan over there. You can see for those of you who were at Damang a few years ago, this is unrecognizable. I mean, all of this over here was right up here. They've moved a lot of material over this period of time. Good to see the progress over here.
If we look at Amoanda, again, I'm looking north. That is Tomento over there, Tomento East up top there, which is there. That's the section view. This is Amoanda Pit 4 over there, Pit 3 over there. Here's a section view. We've been doing some drilling here, and the thing that has surprised us is we thought this was just a paleoplacer ore body, Witwatersrand-style mineralization. Fairly continuous, like Tarkwa. Continuous, uniform, very average grade. What we've actually found is that now we have a hydrothermal underprint. These drill holes over here are actually picking up two styles of mineralization with visible gold intersections coming through. As you can see over here, the strike over here is probably about three or four kilometers. This is turning into something really, really interesting that we never thought existed.
We mined Amoanda out, the original Amoanda, which was somewhere over here, about seven or eight years ago, and we thought that was it. It shows there's something else there. This is on the same trend as Damang, just further south. Follow the shear zone, follow the trend, you find the mineralization. The potential here is very significant. We're excited about this as an addition to what we were going to do at Damang. Gruyere, we've brought in an independent third-party review. We were concerned that the project was running a bit behind. The joint venture partners, that's ourselves and Gold Road, brought in this review. We've completed that work, and we've done a reassessment of the capital forecast. That's now coming in at AUD 621 million compared to the initial plan of AUD 532 million.
That's got a fairly high level of confidence assigned to it, as you can see. We've had an AUD 90 million change in estimate from where we started. About a third of that is force majeure and scope change costs. We had some really bad weather at the beginning of the year, which has stopped us. We've also had some changes in estimates with the main EPC contractor. There were some provisional sums that were included. We've now got final estimates. That's probably another AUD 30 million. We've got a much better resolution on this. As I mentioned earlier, we're around about just over halfway through on the spend, and we're about 60% through in terms of the overall project. So far so good. As you can see at the bottom here, 61%. Engineering is basically done.
This is always an area that can cause variations when you do your detailed engineering. As you can see, that's just about there. We don't expect major surprises from here. Here's a view of the complex. In the distance there you can see that's the tails dam. The circular dam. That's not uncommon in Australia. Here's the process plant, leach tanks, et cetera. You can see a lot of activity has taken place over here. Making good progress. Good to see too, all of the key things are on-site. All the long lead items have been procured and delivered to site. This is one of the ones that we worried about. There's the mill shell. That's a big piece of gear as well. Power plant's been done. That's all in place. There's another view of the CIL tanks. There's the coarse ore stockpile.
There's your reclaim tunnel underneath there. Very well engineered, designed, reinforced. That's a key component, that reclaim tunnel underneath. That's all been done. I must say, although the project is costing a bit more, the quality of what we've got here is top-notch. We're very pleased about that too. Australia production, steady as she goes. 442,000 ounces, cost AUD 900, making cash. Exploration's looking good. I've got a couple of slides on that too. The one project that is bubbling under we haven't told you much about, there's a pre-feasibility study on the Palaeochannel project at St Ives. Palaeochannel is essentially thinned riverbed-based material, largely. Sort of alluvial-type gold, but also we do have a super gene component, which means it's not all river sand. A lot of it's actually in situ. It's always been there.
There's potential here for between 2 million-3 million ounces. We're going through a study here. This will have to be mined almost as a discrete project because we won't be able to get all this material into the plant. Already, Neptune is a Palaeochannel in essence, and we have to blend 25% of Neptune with 75% fresh from Invincible and from Hamlet underground. We'll need something different here. This looks exciting. Potentially two grams a ton plus. We'll have to find a bulk mining method to move quite a lot of waste on top of that. It won't be able to be mined conventionally. We'll give you more on this as we learn, probably at the end of the year some more. Agnew, a number of you have asked me, "Isn't Agnew dead in the water?
It's only got two years of reserve. How long are you going to persist with Agnew?" I think Agnew's got a lot of legs in it still. This is the area that excites us the most, Waroonga North. This is on a shear zone that is essentially parallel to the main Kim shear zone. Kim has given us about 1 million ounces of 10 grams a ton over a 10-year life. It's been a fantastic mine for us. The indications are this is looking like another good mine. Open at depth, open laterally. We haven't found how big this is yet, but we'll start mining this. We've got about three drives in here. This can be easily accessed and mined from the existing infrastructure. We can share the ventilation as well. Not a huge amount of money to get in here.
That's part of the future. FBH continues to get bigger down here. We're seeing extensions up, down, and laterally. Lots to be enthusiastic about at Agnew. Lawlers side of Agnew. This was the old Lawlers operation. Again, we're seeing some new trends over here. Sheba South, Lawlers, Sheba North, Lower Genesis. This is about two kilometers of more than just anomalies. We've actually got drill holes in here. Genesis as well. A lot coming out here into the future. Pleased to see that too. Something that really surprised me. We mined an old pit called Redeemer way back when. This is a long section that's plan view. Backfilled it, gone. We always had a small resource here that was never economic.
We started drilling it again, and it's not underneath the old pit, it's offset to the main pit, and we're finding some really good drill results underneath that. We put select drill results in here, but in fact, we haven't had any bad ones yet. Normally, the geologists will only give you the good ones. Normally for every good one, there's about three bad ones, but so far this has been pretty good going. We're building something here. We think there's potential here for another million ounces on top. A lot more work to do. I mean, this is not something we're going to be mining tomorrow, but over the next year, we'll do some more work, and this will be something hopefully that will be in the future of Agnew. At St Ives, you all know about Invincible, the open pit, the different phases here.
That's been a fantastic mine for us. Sadly, probably going to be at the end in another year to 15 months or so. We've started two portals here into the underground mine. Underground mine is already into its first stopes and building up production nicely. You'll see in the book we indicated what the increase in the ounces were coming out of Invincible underground. That's not the end because we've got Invincible South coming on the other side of the Alpha Island Fault, we've got Invincible Far South, but they now call that Jasper. I don't know where they get these names from, they've called it Jasper. That continues down trend. At the deep side, we're seeing more.
For those of you who want to see the drill results, for the geologists, that's a blow-up of some of the drill results at deeps. As you can see, I quite like that one, 10 meters at eight grams. That looks pretty good. 12 meters at 11 grams. Not bad at all. If this holds together, we're going to be seeing something really special. 14 meters at eight grams. Some interesting stuff here. Seven meters at 45 grams. Definitely something here. Hopefully, it holds together. Time will tell. Granny Smith, remember this was the Barrick acquisition back in 2013. When we bought this mine, it had 670,000 ounces of reserve. It had around about 3 million ounces of resource. Today, we've got 2.2 million ounces of reserve, which obviously excludes what we mined in the five years.
We're sitting on a resource now of just over 7 million ounces. We're quite excited about what we have here. The center of gravity at the moment is here. This is where we're mining. Most of the mining is coming out here. You'll see we're doing a lot of the mine definition drilling for zone 110, 120, zone 135. That's going to be the mines of the future. You're looking at anywhere between 1 million to 2 million ounces per load in situ, of which we probably extract around about 60% of that. That's the one part of the program is doing mine definition drilling for the future, and then doing extensional drilling, because what we've seen as we mine these loads above, they keep getting wider. We're seeing more and more and more.
That's the other part of the equation is seeing how far it extends. We've got a view that extends out here. That's brilliant because if it does, we can maybe go out laterally before we go down further into the mine itself. This has been a fantastic operation for us and has made a lot of money. Got a payback of just over two years, lots more to come from Granny Smith from Wallaby. That's really the upper part of the mine. If I just go back for a moment, up over here, zone 250, 60. We went back and had a look. This wasn't mined by us. This was mined by the previous owners. We went back and had another look, and guess what? We found some more up here. You're seeing a couple of drill holes going in here.
Again, some interesting stuff. We think we're going to augment from the shallow part of the mine, which will be cheaper as well because it's not far to get down there. Right, South America. What can you say about Cerro Corona? Just continues to be a fantastic operation. It's been 10 years now. 10 years in production. It's made a lot of money for us, and there's a lot more to come here, we believe. The feasibility study for the life extension to 2030 is going well, but we're not ending there. We have an objective to go way beyond 2030. We're doing a scoping study. There's potential for more tails capacity, there's potential for different tails, and there's also potential for a pushback on Corona as well. That's the work that we're going to be doing.
We can see this going beyond 2030 if we're successful with that scoping study. Salares as I've mentioned, on track for the end of the year. EIA finally accepted. The clock is ticking. Could be 18 months, could be two years. We'll see. That's the key decision point. Once we've got that, we're good to go. Just to remind you, we've got a resource, 23 million tons at 4.9 grams gold, 66 grams silver, 4.3 million ounces of gold equivalent. That's virtually all in the indicated. There's very little inferred in here, and virtually all in oxides. 10-year life, 3.5 million ounces produced, that is front-ended. CapEx of $850. We can see about a 3-year payback on this. We're doing more work on the district around us. We have many other options on properties. Properties we own, properties we've staked.
We can see the potential here for a camp. West Africa, 319,000 ounces. Very similar to the previous half year. Costs down. All-in costs down. Going well. I'm very happy with the Ghana region and the work that we're doing here, this is in really good shape. South Africa we've talked about. Production being lower than last year. New shift arrangements and labor restructuring probably had a hangover effect and hurt us. We've also had some ground conditions that have meant we've had to pull things out of mining that we weren't going to mine. As always, this happens in the high-grade part of the mine. The composites as well is right up against the western side in the wedge up against the shoreline.
Fairly broken up ground that we've again had to go slower on and couldn't mine it this year, it's not gone. The important thing is we will get back into those high-grade areas in time. The Section 189 notice, I think you know about, affecting 1,100 employees, 460 contractors. That's about 30%, 25%-30% of the workforce. Regrettably, we started this process. Remember, it is a consultation process. No final decision yet, but the clock has started ticking yesterday as the notice was served. We'll engage with the unions. We briefed the minister. I saw the minister myself on Monday and briefed him. He's up to speed with where we are. Obviously, it's not the kind of news people want to hear, we've thought long and hard before moving into this.
Some people think this is the beginning of the end. We think this could be the beginning of a restart for us by getting this right, decluttering the mine of machines and people in the mining area can make a big difference. Often people have come to us and said, "If you could mine the operation with less fleet, less people, your productivities will improve, your logistics will improve. You'll get more people, you'll get more ore out of the mine, you'll get more productivity from your people if you do that." Let's see how we go. We've done the impairment as well on the back of the lower production assuming that lower production is extrapolated into the next year. Okay. This restructuring entails us shutting down a big part of the old mine.
Although it looks like a big part, it was only giving us about 600-700 kilograms a year. We can take out a lot of infrastructure costs by taking that out. We can redeploy those crews into the high-grade areas further down here, where we can get a much better output with the improved infrastructure that we've put in. We can actually stop servicing all of the mining areas from Twins and South Shaft and just service all the mining areas from Twins, thereby having a much more efficient mining schedule and logistics. We're losing money and we're ahead on our development in the new mine, we're going to take a break on that and rather just focus the strong performing teams over here in improving our gold winning over here. We can come back to that later.
We do have the flexibility to do this. The immediate concern for us is to stop the cash burn. We've had a cash burn of ZAR 1 billion a year now for too many years, which as I say, translates to ZAR 3 million a day. Continue to embed proper mechanized mining practices. We still believe we have a hangover effect from legacy conventional mining practices, particularly given the fact that you've got to integrate all of your activities of your mechanized mining together. Your development, your stoping, your cleaning, your backfilling. If you don't get all of that in sync, you run out of ground to mine very quickly. We still haven't perfected that, and we're working on it. The team does know what the problems are. The important thing is we understand the issues. We believe we know what the solutions are.
We need more time to fix this. Obviously, the mine is disappointed a number of times. There are no guarantees this is going to work, but we do believe this is the best course of option to give this mine the best possible chance for the future. We've got to get into the North of Wrench. That's the area we've set up with much more efficient structures, redundancy with additional ore passes, crushers, conveyor belts, the kind of things that mechanized mines across the world have, that we will have for the future. That's the bulk of the ore body that we'll be mining over the next 20 years. This part here is only about one and a half million ounces. This part here, close to 10 million ounces. That's where the future lies. All right.
In conclusion, we did say 2017 and 2018 are reinvestment years as we look to build new projects that will underwrite a better future for us in terms of a longer life for Gold Fields at lower costs, particularly important given volatility in the gold price. We're 18 months through what is essentially a 30-month profile, so we're more than halfway. The international portfolio continues to be strong, and it's important that we continue to look after that. It's the underpin of the company. The balance sheet is reasonable, and we are engineering a better solution at South Deep for the future. Thank you very much.
We'll take questions from the audience first and then we'll go to the line. Brendan?
It is Brendan Ryan from Miningmx. Nick, you stressed there the importance of getting into the North of Wrench area, and that is where the future of the mine lies at South Deep. You previously indicated that was going to take some three years before you knew what you had there. Does that mean that irrespective of what happens at South Deep from your restructuring, and you are not giving us any targets, irrespective of what happens from your restructuring, are you going to keep this mine going for the next three years until you have got into and can assess North of Wrench?
I think the first and most important objective, Brendan, is to improve what we are doing at the moment. If we are going to be flatlining at the production rates that we are now, we have got to right-size the cost base to that. If we do that, I think we can buy ourselves time. We have spent a lot of capital in opening up the North of Wrench. We do know what is there, but it is a question of getting to it. The thing that is worrying us here is, although we see a future there, we cannot afford to be burning the amount of cash that we are currently burning while we wait to get there. That is why we are taking the steps that we are taking now. I still believe in the future of South Deep, because if we did not, we would not have selected this option.
The team believes in it, and they want to give this a go. We recognize, like you, there has been many missed forecasts and targets, and we are conscious of that too. We need to make sure that this is something that has got a better chance of working. Certainly, carrying on as we are and losing ZAR 3 million a day is not a good option for us. This buys us time to get into what we hope will be the promised land.
You say losing ZAR 3 million a day is not an option for you. What would be an acceptable rate of loss while you strive towards this strategic future?
I'll leave that to my Chief Financial Officer over here to answer.
Brendan, I think we've got to work through the next six months. We've got to get through the restructuring if that does happen. The short-term goal is to try and get the mine back to an all-in cost of ZAR 525,000 a kilogram, which that basically implies it's almost cash neutral. A lot of work's got to be done over the next six months. We've said we'll come back to you in the new year with probably a forecast for 2019. That's about it. At the moment, we just need to do what we need to do with the restructuring and everything and reset the mine.
Can I also just ask, Martin Preece is here, who's been working day and night to get us to this plan and working day and night to try and buy us a future. Maybe we could just give him two minutes to give his perspective on how we build a future. I don't know whether you need a microphone.
Thanks, Nick.
No worries.
Thanks a lot. I think Paul and Nick have summarized that we've got to, I think, move and take a step change to move out of this conventional mindset into a mechanized mindset. We've got a good team on board, and I think Nick sort of touched on it lightly. I think that he's committed and believes that they want to go the course to land this. The one thing that's really important, I think, is it's more an engineering endeavor than it is a mining endeavor. What's really pleasing is we've got a really strong mining guy in our strong engineers, been around a while, and we've parked them in offices next to each other. We've put a door between the offices, and more and more I see them, they're kind of joined at the hip, and I think that's the hassle.
The necessary supporting thing. A lot of effort's going to go into how do we structure our teams, and build on some of the work some of the other mining companies have done to drive that frontline productivity and get frontline people to take ownership and own their outcomes. That it's not a one-man decision place. It's people at the front end who are driving their own destiny.
Nick, one last question then I'll shut up on South Deep. Given the history of the mine, you can understand there's a tremendous amount of negative and cynic viewpoints on South Deep. What is it going to take for you to say, "Okay, guys, this isn't going to work. We've had enough. We're going to sell it or shut it down"? What has to happen before you say, "We can't make this work and we're out of here"?
Yeah. I think certainly, let's assume we get through this restructuring, and I think this restructuring is not gonna be easy. Let's assume we could fast-forward and we're sitting here in February. We need to know that we've got a credible plan that we can meet, and that we're starting to see that on a week-by-week basis, a month-by-month basis, we meet whatever we say we're going to do. That, number one, the team on the ground under Martin can build up their own confidence, and two, that we can. I think the thing that would cause Paul and me to lose more confidence is if we continue to miss targets. I think whatever we set out for ourselves, post all of this, we've got to hit, and we've got to build some momentum. I don't even want to add to that.
That's great. No, go ahead, Nick.
The next six months are critical?
Yeah. Critical.
Hi, it's Yatish from Macquarie. Just to touch back on your South Deep progress. In terms of assuming the worst-case scenario that your production is significantly hampered going into the second half on this restructuring, what levers do you have on your other assets to actually make up your annual guidance between 2.08 and 2.1 million ounces?
Look, the one thing we don't like to do is push people out of a long-term plan. All of our mines have a long-term plan, and spatial compliance is important. If you get out of your spatial compliance and you over-mine a nice high-grade area, you're going to pay the price next year. I think we've got to make sure that the international mines keep doing what we're doing, because we also want to make sure that 2019 is a good year and 2020 is a good year. I think what we'll do instead is we're curtailing some of the capital expenditure, as you've seen on South Deep. We can curtail stay-in business and growth capital. We will see some impact on the operating costs.
Let me just say, we are not saying that people must down tools today and sit on the ground for the next two, three months waiting for this to happen. People have got a responsibility to work. They're being paid a very good wage to work. We would expect all of our teams, from our managers all the way down to the face, our expectation is for people to keep working, to make sure they don't create an even worse future for themselves. Assuming the worst case, you're an analyst, so you have to assume the worst case. It might be that our production is going to be a lot less in the second half than what it was in the first half if things don't go well, and the first half wasn't great either. That would mean the cash losses could increase.
Fortunately, we are making good money on the international operations. We've got a strong balance sheet. Paul, I think, is comfortable with our overall financial position. I think we've got to run those assets optimally, and we've got to do the best thing we can do here.
Yep.
Yeah. Just to follow up on, in terms of where, assume again, looking at where the gold price is today and looking at your funding requirements at your other assets, is there a concern that, again, with South Deep off the table, you're going to run into a bit of a balance sheet constraint going in towards year-end?
You can answer.
We are basically hedged at fairly much most of our production at the international operations for the balance of the year. Australia is hedged 100% of the balance of the production with a floor of AUD 1,700. Ghana, we've hedged circa 80% at a floor of $1,300 of our production. Peru, the copper is fully hedged for the balance of the year, and we've got a small hedge in South Africa, even for South Deep, with a floor of ZAR 600,000 in a kilogram. For the balance of the year, the gold price will still be good for us because of our hedges.
Nick, hi. It's Bruce Williamson, Integral Asset Management. Nick, just looking or listening to what the guys have said, talking about structured teams operating like others, which, I'm assuming other trackless mining operations, people taking responsibility. If you look what the mine's been through, over a long period, your psychometric testing of your workforce, are you guys sure that you actually have a workforce that is correct for what you're asking them to do?
It's one of the issues we've looked at in some detail. There are gaps. I think for us to say that we've got a fully fit for purpose workforce in terms of world-class mechanized bulk mining, no, we don't. We've got work to do. Training is a key part of our program. We are training a lot of people in the classroom, and the training facilities are giving some good results, but our ability to translate that into the workplace is somewhat absent. That's another part of the exercise we're doing here. Again, I think I'd like for Martin to add a bit more color to the answer because he's been working in detail on this for many weeks and months.
Thanks, Nick. I think that is a big area of focus. It was a big exercise that was conducted before I joined, getting the managerial levels psychometrics done, because I think it goes across the board. We're reaching agreement on doing psychometrics on entry-level positions as well, and I think it is critical. I think it goes beyond psychometrics. One of the key things with operators, there's a test called a Dover Test Which relates to ability to almost operate in a 3D spatial environment. We're moving into that space. Nick did make the point around classroom training and actually transitioning that into the can-do attitude at the face. It's taking the theory into the practical. We've done a lot of work. I've been through with our head of HR. We've brought in independent people to look at our training processes. They're comfortable. I've sat with them.
The process is good. The material and content is good. We're seeing a marked improvement in skills acquisition. What we've got to drive now is skills application.
Certainly, I would identify that as probably your most critical thing to get right.
Yep.
Can we go to the conference call to see if there are questions?
Are there any questions on the conference call?
Yes, we have a question from James Thomson of RBC Capital Markets.
Thanks for the presentation and taking my question. Just two on the international portfolio. Firstly, on Ghana, are you able to comment on some of the press reports that the government are unhappy or looking to shake up the mining royalty and tax regime? Secondly, on Australia, some of the domestic producers, we've seen reports have talked about inflation, and labor shortages and contractor issues, et cetera, coming back into the industry. I mean, is that something you think could have an impact on your cost base looking into next year? On the hedging side in Australia, is that something you're going to look to continue to do next year and going forward?
Yeah. Just dealing first with the second part, James, on Australia. We are starting to see an increase in turnover rates of critical skills, as mining starts to recover in Australia. It's something we watch quite carefully. I do think there is gonna be a big play on skills, as projects come through. We've seen this before when you often find the worst of all worlds is when iron ore and nickel are going up and gold is going down. We've still got to pay the same wages that they offer, and it puts us under tremendous pressure. I've lived through that in this company before. That is a real risk. We've had very benign inflation in Australia for a while, but it's changing.
Had we started the Gruyere project today, I'm pretty confident that the total cost of that project, if we started today, would be a lot more than when we have started. We're catching the back end of that cost inflation. Certainly, that's a risk for us, and we've got to watch for that. Just in terms of Ghana, obviously, there are some fiscal pressures in the country. Remember, we do have a development agreement that pegs our royalties and our taxes for life of mine. We are protected there. Obviously, we watch carefully developments as it unfolds in the country. For now, I think we're okay. On hedging, look, we have taken some opportunistic currency hedging into next year already, and you'll see it's in the book on Australia.
Just to make sure that if the thing that would worry us greatly in Australia is if the Aussie dollar came back to parity with the U.S. dollar. Since we've operated in Australia from 2001, I've seen the Aussie dollar as low as AUD 0.45 and as high as AUD 1.25. That's a hell of a wide range for the Aussie dollar against the U.S. dollar. It can be volatile. That's just the one area we just want to protect ourselves. We're nibbling away there. We'll see how that goes in the future. It seems to me it's going the other way in the markets because, the U.S. dollar is something of a safe haven at the moment. People are piling their money there in the midst of all these trade wars and so on.
Maybe we're going to be proved wrong and that the U.S. dollar continues to be strong. Time will tell.
Okay. Thank you.
The next question comes from Johann Steyn of Citigroup.
Thanks, guys, for taking my question. Nick, just regarding the whole thing about skills at South Deep. I do find it somewhat puzzling given everything that you guys have done there. In a sense, I think that South Africans will also find it a little bit insulting. It either does point to something like you're just not getting the skills, which ultimately should come back to management because it's management's responsibility to fix that. It's a convenient way of hiding behind something much more fundamental, like this mine is just technically too challenging to mine, and it's a convenient excuse. Which one is it?
Okay, here's how I would look at that. You've mentioned this before to me, I think it was you, I'll revert back to what you said before, is that one of the things that concerned you is the multiple management changes at South Deep over the years. One of the issues there is when there's a change in leadership, there's a style of working that comes in and other people come in, teams are built up, and then you get changes in management and often
You find that the mine changes. I've seen that in the other mines that we used to own that now became Sibanye. A mine might be doing well, the mine manager changes, it can come down a bit, and then you've got to resuscitate it. A similar issue here. I think the mine manager changes and the leadership changes have not helped. On this kind of operation, we need to get stability on the leadership. Sure, you could point fingers at us as the leadership of Gold Fields that that hasn't happened, because that's our job, is to get stable leadership in. I think, though, without the stable leadership, it's been quite difficult to embed the appropriate mechanized mining practices and culture that we need, particularly when there are so much changes.
If we could get a period of stability, I'm pretty sure that we could improve on that. In terms of, is it just too difficult to mine? I had the same thought in my mind some years ago. What we did is we brought in a team of professors, who are professors in geotechnical affairs and rock mechanics, to come and work with us. There's a couple of them from Australia, there's one from Canada, there's one from South Africa. They've been working with us closely for about four and a half years. The questions we posed to them is, can we make this mine work? Do we have the right mining method? Do we have the right support practices, protocols, et cetera? They've been working with us and guiding us to the finishing line.
What they've said to us, and again, they were here literally six to eight weeks ago, is it can work provided that we improve our mining practices. In essence, what we've got to do is we've got to open up the ore body quicker, we've got to mine it quicker, and we've got to backfill it quicker. In essence, that's what it comes down to. We've been taking too long between all of these things and activities. What's the result? The result is that you get deteriorating ground conditions. You have to come back and rehabilitate pillars and sidewalls and haulages. It slows you up, and you're not advancing quickly enough, then you don't open up face. That's been the issue for us. That comes down to, do we understand from an integrated fashion what we've got to do?
We understand the problems, and I think we've understood the problems for a while, but it's now getting all of our levels of management and our teams focused on that. We believe we can achieve that, but it's going to take some time. Obviously, we've had multiple disappointments along that pathway. I'm going to also ask Martin Preece, who's here, to just add his perspective to that, because it's quite a fundamental question that you raised.
Thanks, Nick. I think that's the question that plagues us all. I sat with the team on a teleconference, I think, yesterday morning. We asked ourselves the question again. I think there's broad consensus with the team that focusing on the right things, this is doable, and this is why we're taking the pain we're taking now. It's a long, hard slog. I think Nick has touched on the integration, and I think it's the integration in the planning. It's the integration in the execution. I think that has been lacking. We started taking the steps to address that integration at a planning space. We've brought in external people to come and sit and help us build the plan together.
In terms of organizationally, the restructuring we undertook earlier in the year was also aimed at trying to get single points of accountability, which would drive that integration at the front end.
Thank you. The next question comes from Tshepo Molefe of Value Capital.
The team, thanks for taking my call. Nick, I think you know from the tone and actually how this conference call is going, it seems like you're passing back to Martin passes back the bat to you, and it's all gibberish and garbage that you guys are actually feeding everybody else. Last time when I spoke to you on the phone, you were quite arrogant when I pointed out to you that this mine has sucked up some 30-plus billion ZAR of shareholder money. You were dismissive of it. You didn't take accountability for it, and neither did you subsequently or your team release some kind of a technical view or overview of exactly what's bedeviling South Deep.
The question I want to put to you, out of the $20-odd million U.S. dollars of actually share compensation that is actually in the income statement, how much of it is yours, of that $20 million? How much does it relate to you? That's the 1st question. Secondly, are you and your team able to release the expert reports that you guys are keeping referring to so that everybody else can actually read them and make a view about what's happening at South Deep? I think those are my 2 first questions, and I'll wait for your response.
I think on the 2nd question, we'll take that under advisement. We hear what you're saying in terms of transparency. Thanks for the suggestion of being transparent and even more transparent on some of the stuff we're referring to. We'll take that under advisement. The 1st question I didn't quite understand. Could you maybe just repeat that 1st question?
Of the $20 billion U.S. dollars in share compensation for the first half year of FY 2018, how much of that $20 million U.S. dollars relates to your compensation? I will talk to her first.
That is for the whole group. It's for six months. Nick sees a fraction of that number. That's for the whole group. It covers all the regions, corporate office, the 4 operating entities. It's a minute portion of that.
No. What is minute? How much? Minute is a figure number. That's why you can put $20 million
It's a calculation-
-on the Income Statement.
It's a calculation that's done on an overall basis, not on the individual basis. When this pays out, you'll see what he gets. At the moment, it's a global calculation done for the whole group, and it's valuation methodology. It's not done on an individual person at the moment. It's done for the group based on the metrics that have been set in the share scheme. When it matures, and they mature each year in February, you will see what each person gets, and Nick's will be disclosed then. At the moment, I cannot tell you what his is, but I know there's lots of people in that scheme, and there's no person that accounts for a huge portion of it.
Okay. Thanks for taking my questions.
There are no further questions on the lines.
One for you, Paul. Could you detail the quantum in terms of the debt that matures in 2019, and what's the plans for the maturity?
It's the ZAR 380 million term loan that expires. We'll consider our options as to how to refinance it in the year coming up. That's it. It's ZAR 380 million that expires.
What's the cost of that debt, interest rate?
The cost of that debt at the moment is just probably about 3.75 if you take it. About 2.4, 2.5 above LIBOR.
Okay. Brendan?
Nick. Brendan Ryan again, Miningmx. You mentioned in your report that the Ghanaian government wants to enforce its right to buy up to 30% of your gold directly. Can you elaborate on that, please? What's in it for them, are they gonna try and force you to sell at a discount?
Brendan, I'll answer it. It was a letter that was sent to the chamber. That's all we've seen. It was literally a one-page letter. We replied yesterday as a chamber. We need explanation. There was no information on how, if, why. How are we gonna be paid? When are we gonna be paid? What it's gonna be based on? US dollars, cedis. We have no idea. We are waiting now for explanation from the government as to how they would want to implement it. We thought it was prudent that we notified ourselves and said we have received this as an industry, and Gold Fields being one of the members. We've received this letter, and we put it up. We don't understand the implications of it because we have no more information.
It could be negative, depending-
We don't know. Could be. We really don't know until we see the terms as to what they propose to do.
Thank you.
Okay. Any last questions here? On the call, is there anything else? No. Well, thank you very much. We'll see you again in six months time.