Good morning, good afternoon, and good evening to Gold Fields' interim results presentation for 2021. I'm going to be taking you through just firstly, the agenda for today. Firstly, I'll be running through the highlights, safety and sustainability, and operations. I'll then hand over to Paul Schmidt, our CFO, and then after that, we'll quickly wrap up with an update on Salares Norte and conclusion. Ladies and gents, first, just a few highlights for the first half of this year. As usual, we'll go into much more detail and in-depth conversations over the course of the presentation, picking up more detail on these highlights. Firstly, we had one fatality, which was a shadow over our improving safety performance. We lost one of our colleagues, Vumile Mgcine, at our South Deep operation in April. We had a 30% year-on-year improvement in our total safety recordable rates.
We're very pleased with that performance. We continued the great work that Gold Fields has started a number of years ago with, again, approval of the 40 MW solar project at South Deep, and construction has already commenced. We generated $1.9 billion of value created for all of our stakeholders in the first half. We achieved equivalent gold production attributable to Gold Fields, increased by 2% year-on-year. Very positively, as a result of the strong cash flow generation in the company, we're able to fund all of the CapEx and the 2020 final dividend, all from internal cash flows. We ended with free cash flow of $180 million after the spending on Salares Norte. As a result of the strong cash generation, we saw again an improvement in the balance sheet with net debt to EBITDA decreasing to 0.49 times from an end December position of 0.56 times.
I mentioned that we had strong earnings. We had a 33% year-over-year increase in normalized earnings, or $0.49 per share. Interim dividends as a result of the strong normalized earnings, we declared an interim dividend of 30% of normalized earnings, or R2.10 a share, $127 million. Just as a reminder, Gold Fields is a globally diversified gold miner. On the top left-hand side of the slide, you see a snapshot of the group as a whole. We operate nine mines, one project in five countries across the globe, with attributable production of 1.104 million ounces. West Africa generated 36% of the group's production. Australia, 44%, South Africa, 11%, and the Americas region, Cerro Corona in Peru of 9%. Turning to safety and sustainability. I think everywhere across the globe, all of our lives have been impacted by COVID-19.
We had slight impacts on our production as a result of COVID, and that's been fairly limited. The pandemic has had a devastating impact on the lives of all of the people in Gold Fields. Likewise, right across the world has had a similar impact. I'll point out a few items on both the table and on the graph. I'll start with the bottom line of the table, where you can see that up until the 6th of August, Gold Fields, we had had, since the pandemic started, 18 fatalities. Unfortunately, even since this date of the 6th of August, we've had another one of our colleagues lost due to COVID, now totaling 19.
If you go to the graph right at the bottom, you can see in the 3 six-month periods since the pandemic started, we had 1 death in the first half of 2020 with about 500 positive cases. The next six-month period, the second half of last year, we had 2 deaths across the group, and about 1,600 of our colleagues tested positive. In the first half of this year, we had 9 deaths and over 2,200 positive cases recorded. Now you can see if you add those together, that's only 12 deaths. That means that we've had another 7 deaths just in the one and a half months since the end of the first half. If we go back to the table, the very top line, you can see we've tested just under 130,000 of our colleagues.
Given the number of people employed by Gold Fields, that equates to, on average, 6 tests for every employee across the group. We've had 4,500 positive cases. I think very pleasingly in Australia, shows how well they've managed the COVID pandemic in Australia, we've had 0 positive cases in Australia. On the next slide, I'll talk a little bit more about our support programs to manage both the effect and the consequence of COVID. Turning to the safety performance. On the graph on the right-hand side, you can see both the 1 fatality that I mentioned, and we've been unsuccessful in the last number of years of mining without a fatality. The 1 fatality of Vumile Mgcine, a Shaft timberman who passed away from his injuries at South Deep. We have pleasingly seen a much improved serious injuries in our group.
Still with our target of zero harm, having 1 fatality and 4 serious injuries means that we've still got a lot of work to do. Pleasingly, if you look at the bottom graph on the right-hand side, you can see that we have, again, had an improvement in our total recordable injury rate. That's the solid blue bar. For the 1st half of this year, we had a rate, on the green line you can see, of 1.81. That's a 30% improvement off the comparative period of last year. Very good progress being made in a number of areas, but still work to do with the 1 fatality and the 4 serious injuries. On the health and wellness and COVID-19, all interrelated among each other, it's no surprise that COVID-19 is dominating those conversations.
As I mentioned, we've had 19 COVID-19-related fatalities amongst our employees and our contractors to date. We have had a number of very substantial programs running in pretty much all of our regions, in South America, in Peru and Chile, in Ghana, South Africa. Less so in Australia, just given the impact has been substantially less. We've been supporting our employees, communities, and governments through various COVID-19 programs, which have included education and advice, testing facilities, quarantine facilities, and for those who have tested positive or have been sick, we have provided medical support. We've commenced vaccination programs amongst employees and contractors.
Very pleasingly, Salares Norte have got 99% of their permanent staff have been vaccinated. Over 80% of the contractors at Salares Norte have had their vaccinations. South Deep has had, very recently, a very successful vaccination program with more than 80% of the workforce now having received their first vaccination jab. All of our other sites, perhaps just before I move on, are running slightly slower, but all in line with the government programs that are in place in those countries. At our last results, Nick presented our key ESG priorities. That's work that we are continuing with at the moment, to be able to provide the 2030 targets, as well as the science based on how we're going to achieve those targets. We plan to release those before the end of the year. We'll be updating you accordingly.
Gold Fields has been recognized as one of the leading mining companies in renewable energy introduction. If you look at both the photographs on the right-hand side, which show Agnew solar plant and Granny Smith solar plant, if you look at the bullet points under renewable energy, you can see that at Agnew we have invested in 16 MW of wind, 4 MW of solar, and 18 MW of gas. At Granny Smith, we've invested in 8 MW of solar, 35 MW of gas. All of those now are fully implemented. Agnew's running at 57% of the power needs for the site are running off renewables. Tarkwa and Damang in Ghana have moved over time from diesel-powered generators to gensets that use gas, initially through LPG, and now are moving over to natural gas, which has a lower carbon emissions than LPG gas, and certainly much lower than diesel.
We haven't stopped there, we're making further progress. We have a 12 MW solar plant that is under construction at Gruyere in Australia at the moment. We plan to have that operational by the end of 2021, end of this year. Very pleasingly, you would have seen in the news that we have been granted our licenses to generate 40 MW of solar power at South Deep. Construction has commenced, and we should be operational in the second quarter of 2022. On the environment side, also very good news to report. We continue to increase the amount of recycle and reuse of our water. The ICMM have got a target, and in many cases, an aspirational target for operations to achieve 60% recycle and reuse. Of course, 74% is a very strong recycling performance from our operations.
We again had reductions in the fresh water usage by 12% in the first half and have had no level 3 environmental incidents. We continue to generate value that is shared by the governments, the communities, and other stakeholders as being part of our business. We generated $1.9 billion of value created for stakeholders in the first half, and roughly 30% of that value that we have created stays with the host communities around our operations. We're cognizant of the fact that our ESG work is certainly work in progress, and we continuously need to improve our performance in this area. Our ESG achievements to date are an indication that we're on the right track. Just here are some of the recent ESG awards and ranking. I think perhaps let's look at the very top left-hand side of this slide.
This is the Dow Jones Sustainability Index, which is managed by Standard and Poor's. You can see Gold Fields, out of 70 mining companies globally, Gold Fields, last year we were fourth. This year, very pleased to announce that we're now third globally in the Dow Jones Sustainability Index ranking. I won't go through the rest of the slide, but I think it's very important to note that Gold Fields features in almost all of the indexes of various sorts that are now out there relating to ESG. In whatever lens you're looking at the company, we have been recognized for the great work that the company has been doing over a number of years. Turning to the operations for the first half. The group had a solid performance in the first half. Production increased by 2% year-on-year to 1.104 million ounces.
That's attributable to Gold Fields, that despite having five less production days in this half compared to the comparative period last year, where in last year, the production days were equalized with the financial days at the end of the month. We generated off a free cash flow margin of 21% for the group, generated very good cash flow. We generated just under $400 million from the operations. That translated into free cash flow for the group of $180 million at an all-in cost of $1,274 an ounce. If you look at the percentage increases, the all-in sustaining cost was up by 11%. All-in cost up 20%.
What Paul will tell you as he goes through the numbers, that the majority of that impact was from strengthening exchange rates in the countries in which we operate and our unit cost performance was substantially better than on the face of it, those numbers would indicate. I'll quickly run through all of the regions to give you a sense of how the regions are doing, starting with Australia, a steady operational performance. Although the production performance decreased by 3%, that was largely driven by 5% less production days. Again, we had strong free cash flow margins, generating $160 million worth of operational free cash flow from the operations at an all-in cost of $1,189 an ounce. That was impacted by a 17% strengthening of the Aussie dollar to the US dollar.
One of the things that we believe that there's significantly more inherent value in our Australian assets than we believe the market is giving us credit for. What we thought is we'd just give you a snapshot of the current reserve and resource position in Australia. What I'm going to be doing is talking through the 2 tables on the left-hand side. If you look at the table on the top left, I'll just run through 1 of the mines as an example. We bought St. Ives and Agnew in 2002, so that's almost 20 years ago. We started those operations when we bought them, St. Ives at 2.7 million ounces and Agnew at 0.6 million ounces. Since then, we have produced from those assets 9.1 million ounces and 3.9 million ounces at Agnew. That's 20 years of production.
The reserve position at the end of 2020 for St. Ives was still 2.7, 20 years later, and Agnew was actually higher at 0.9, notwithstanding the 20 years of production. We've had a reserve multiplier at those three assets. Granny Smith we bought later in 2013. You can see we've had a reserve multiplier 4.1, 7, and 5 times. That's come from the consistent and substantial reinvestment on an ongoing basis in exploration. We continue to spend between AUD 80 million to AUD 100 million per year on exploration, and you can see that we have been very successful in continuing to replace and have grown reserves, notwithstanding that very long time of production that we've had. We've had conversion costs of AUD 62 per ounce. It's been great business, and certainly significant value is being created by doing this.
You compare that to sort of $300, $400, $500 per ounce that people have been paying for reserves in Australia. If we take that position and we move it down to the left, because this is one of the things generally the market, when they look at, say, the reserve position, they generally divide the reserve position by the production, and they say, on the basis of reserves, that that's the life of mine that we have. Now, we know we've got just having proved to you for 20 years, we have mined on a similar basis. If we show you what resource in addition to that is available. St. Ives has got 8 years reserve left, Agnew 4.5, Granny Smith 10, and Gruyere 9. For the majority of our assets, even on a reserve basis, we have 10 years life.
If you look at the resource and you only need to convert a portion of that resource to believe that we would have significant life beyond 10 years at all of the operations in Australia. Moving on to West Africa. Again, West Africa generated very strong cash generation. Production increased by 5% year-on-year, driven by increase at Damang, generating the best free cash flow margins in the group of 32% and generating free cash flow from operations of $182 million at an all-in cost of $1,114. That was 2% up year-on-year, and that's about the same kind of range that we've had in the other regions if you strip out the impact of the stronger exchange rates. Onto the Americas.
This is the one region that we did at the end of the first quarter mention that we had some challenges impacted by COVID-19, but more materially by the slope instability that was caused due to abnormally high rainfall in Peru in the beginning part of the year that led to some pit slope instability. Meant that we had to stop and rehabilitate that area of the pit. And that was the higher grade area of the pit, so we mined less volume in lower grade areas of the pit, and as a result, had production decrease by 9% year-on-year. We still made good margin on the production that we had of 20% and generated free cash flow from operations of $28 million at an all-in cost of $1,162 per equivalent ounce.
Remember, in Cerro Corona in Peru, we generate both copper and gold, and the combination of that is the all-in cost of $1,162. Turning to South Africa. We continue to see operational improvements at South Deep. I think very pleasingly, we saw a 27% increase year-on-year, notwithstanding very significant COVID challenges. The team at South Deep have done a great job. In the second quarter, we had a 14% improvement on the first quarter. All around, I think that's been very positive, continued increase in production that we've seen over the last few years. Also pleasingly, we had a settlement of the wages. We've settled wages at 3 years at an average wage increase of 6.5% per annum. We generated free cash flow margins of 19% and free cash flow from operations of $28 million, with all-in cost of $1,444.
If you look just at the ZAR per kilogram number all-in cost, you can see that that number was up 3% year-on-year. You can see the impact that the 12% strengthening of the exchange rate has had on South Deep. What we thought is I'd show you just some graphs over the last few years to show the encouraging productivity trends that we've seen at South Deep. I think for very good reasons, there's been a lot of concern about South Deep for many years when it's been substantially loss-making. I think very positively, we're starting to see very good increase in performances on a year-to-year basis. Let me take you through just a couple of slides to just give you a sense of some of the underlying improvements in productivity that we're seeing.
Turning to the slide on the far left and top side, that's productivity, tonnes per rig per month. I'm going to be using 2017 as the base because 2018 was the year with the big restructuring and the associated strike that went with it. We had, in 2017, 6,400 employees, 2,000 employees or less, or 2,200 employees were taken out of the business, and we continue to see, as a result of that, very good productivity improvements. We've had 109% improvement in productivity, tonnes per rig per month, from 2017 to H1 2021. On the top right-hand side graph, we've seen a 64% increase in meters per rig per month, showing the benefit of using less people, but also getting more output for both the people and for the equipment that we're using.
We turn to the bottom left-hand side graph, what that shows, you can see that we have now increased. We are forecasting to do 8.7 tonnes of gold. We add the COVID-19 impact, you'll see that we would have been just over 9 tonnes of gold this year. Let's have a look at the green line, because that actually shows how much gold has been delivered per employee. I mentioned that we've taken out 2,000 employees. In 2017, we had 1.37 kilograms of gold per employee. That has improved by 48% to 2.03. I think it's just another indication of the underlying productivity improvements. We look at the bottom right-hand side, the free cash flow graph, all the way from 2010- 2016, we were losing over ZAR 1 billion a year.
In 2017 and 2018, you can see it was ZAR 800 million. You can see the effect of the strike in 2018 and the restructuring. From 2019 onwards, South Deep has been cash positive. That has continued to increase. We generated last year ZAR 550 million of cash. That was for the entire year. You can see that almost 80% of that has already been achieved in the first half of this year. Very positively, we're seeing the cash flow generation increasing from South Deep. With that, I'll hand you over to Paul, who will take us through the finances. Thanks. Over to you, Paul.
Thanks, Chris. If we can go to the first slide, please. On the solid financial performance, as Chris mentioned, our normalized earnings are $431 million, 33% up year-on-year. Free cash flow margin, a pleasing 21%. Interim dividend $2.10 compared to the $1.60 comparative last year, a 31% increase. Net debt, including leases, down to $1,097 million. If we exclude the leases, the true debt, $663 million, a very manageable number. Net debt to EBITDA, 0.49 times. If we can move to the next slide, please. I've just done a schedule here setting out how we got to our $180 million of free cash flow, $399 million from the mines. Pleasing to see that South Deep contributed $29 million towards that. $148 million spent on Salares Norte in the six months. Leaving us with $180 million.
What that $180 million means, it is free cash flow for us that we can use to either pay down debt or pay dividends. If we can move to the next slide, please. This is what Chris asked me to refer to. If we look at our all-in costs, we'll start with the all-in sustaining cost, $1,093, 11% increase from the comparative in 2020. However, if we normalize exchange rates, and just that we understand, last year we used 0.66 to convert the Australian dollar to U.S. dollars. This year it's strengthened to 0.77. For the South African rand, we used 16.50. We are now using 14.54. If we use the same exchange rates as we did last year, our all-in costs would be a 1.5% increase year on year. If we look at all-in costs, $1,274, a 20% increase.
If we use the same exchange rates, 1,164, a 9% increase, and that's mainly due to circa $100 million more capital being spent on Salares Norte. Just to confirm that the all-in cost guidance of $1,310-$1,350 that we gave at the beginning of the year is still intact. Our capital spend that we guided of $1.177 billion, we are still on track to meet that, despite spending an extra $25 million on the solar plant at South Deep and $15 million on the Huni project at Damang. If we can move to the next slide, please. Just looking at the balance sheet. Pleasing to say that we've got about $1.67 billion of committed unutilized facilities. As I said earlier, the net debt down to at 0.49 times. That's all I've got to say. I'll hand back to Chris now.
Thanks, Paul. What I'm going to be doing now is just giving you a brief update on how Salares Norte is going. Just to remind everyone that Salares Norte is we think, one of the best gold mines that is being developed in the market at the moment. Just to give you a sense with all-in costs, just over $1,000. We will be mining at Salares Norte under $500. We'll be producing over 400,000 ounces of gold equivalent from Salares. A great project, very good reason for us to be focused on this and to make sure we deliver Salares on time. The key message I have for you is that Salares is very much on track. If we look at the total project, you can see that we're now about 42% progress at the end of June against the plan of 41%.
Very close, but absolutely still on plan. We were, as you may recall at the first quarter, slightly ahead of that, in terms of above our plan. Some of that has been used up by the challenges that we've had due to COVID-19 in Chile, as well as some very serious weather events. Notwithstanding that, it's great to be able to report that even though we've had these difficulties, still very much on track. The project capital to date has been $230 million, with $133 million of that spent in the first half of this year. I've already mentioned that we've had these difficulties, but very pleasing to be able to report back to you that we're still on track for first production in the first quarter of 2023. Just running very briefly through some of the others.
On the construction side, we are now at 31%, again versus a plan of 31%. On the plant, we have our 8%, again versus the plan of 8%. I'll show you some of the photographs in a moment of the plant area. You can see that the leach and the CIP tanks, that progress is underway. The foundations for SAG mill, ball mill, and thickeners have progressed nicely, and we're starting to see structural steel work being progressed at the plant. On the mining side, we're nicely ahead of plan. 6.1 million tonnes has been moved to date versus a plan of 4 million tonnes. And exploration in the district surrounding Salares Norte, again, we're nicely ahead of plan. Just to show what that looks like on a few pictures. Well, perhaps I'll start on the very left-hand side of the picture.
You can see what looks like a whole lot of buildings. That's both the office complexes as well as the accommodation areas. The little building right to the left-hand side, that's the control room, and that's the only building that's still got some work. If you look in the foreground, you can see some of the plant steelwork construction underway. Behind that you can see the tank CIP and the other leach tanks. On the right-hand side of the picture, those little blocks on the ground, those are the foundations for the mills and the other plants related heavy equipment. If we move on, this is the slide you can see now we're starting to make the landscape sexy, and you can see this is the mine under construction, and I mentioned to you that the pre-stripping is very nicely ahead of plan. That's Salares Norte.
I'll just quickly mention, just in conclusion, 2 slides. One is just talking about the Gold Fields investment case. We believe that we've got a solid, uncomplicated strategy, the delivery of which over the last number of years has meant that we now have a very compelling investment case for our current shareholders and for new investors that are looking for exposure to high-quality, cash-generative gold business. We're a simple, pure play, gold-focused company, a well-balanced portfolio with stable operations, with growth potential that you're seeing coming through in the next few years. Our geographic diversification in attractive jurisdictions has been a real success story over the last number of years. The reinvestment program over the past 4 years has placed Gold Fields in a very solid position where we can maintain and even grow our production profile over the next decade.
I've just run you through the near-term development of Salares Norte, a world-class gold asset. It'll generate meaningful growth and significant future cash flow potential. The group production will grow to over 2.7 million ounces by 2024 with the ramp-up of Salares Norte. We're going to be looking, going forward, at ways of preserving that level of value that we have, because we have created that value, beyond this point. What's not on the slide, I think, is we believe that we are amongst the leaders and have been recognized by the sustainability indices as being a leader in the mining industry in ESG. There's more to come. We've already mentioned Salares Norte. South Deep continues to increase, and we believe that there's still further potential to get the inherent value from our Australian assets. On the back of a solid first half, the group guidance remains unchanged.
Attributable gold production to Gold Fields are between 2.3 and 2.35 million ounces for this year. All-in cost, Paul mentioned, remains on track between $1,020 and $1,060, notwithstanding the strengthening of the exchange rates. All-in cost, which includes Salares Norte, of $1,310-$1,350. If you exclude Salares Norte, that'll be $1,090-$1,130. Focus areas for the second half of this year, we've still got to continue to navigate COVID-19. We will continue with the construction schedule at Salares Norte. We have previously told the market that we should be at about 70% project completion at the end of the year. The one thing that we are doing, given the COVID restrictions, and we're only allowed to, we've had to de-densify the amount of folk on site. What we've done is decided to move about 4%-5% of the non-critical project construction.
Things like warehouses and those sort of things. We've deliberately decided to move about 4%-5% into next year so that we can focus the capacity of the accommodation on the site for the contractors that are busy with work on the critical path. Our expectation is we'll be in the region of about 65% complete by the end of the year, as I mentioned, but nothing off the critical path. We believe that that's just prudent management of the project, and we'll still be, as I mentioned, very much on track to deliver Salares in the first quarter of 2023. Lastly, we're going to be, before the end of the year, providing detail on our ESG priorities, the targets, and the science base, the projects behind that, to be able to meet those targets.
Ladies and gents, thanks very much for your time. I would like to, just before I end off the presentation, to thank every single employee at Gold Fields for their fantastic commitment to the company during this period. It's been great, and you've all been fantastic in welcoming me to the company during the last four to five months. Thank you very much to every person at Gold Fields for your contribution. Thank you. Both myself and Paul and Avishkar will be very happy to take your questions. Thanks very much.
Okay. Shall we start with questions from the conference call first, please?
Thank you very much, sir. The first question comes from Leroy Mnguni of HSBC.
Good afternoon, guys. Thanks for the presentation. I've got three questions. The first one is, could you maybe just talk us through some of the inflationary pressures that you are seeing across the group? You seem to have done quite better than your peers in containing costs. With that, maybe also just talk about what competition for labor you are seeing with other commodities in South America and Australia. My second question is, all the sort of key measures at South Deep seem to be trending in the right direction, with the exception of backfill. That has declined year on year for the first half. If you could please elaborate on that. My last question is, given political developments in Chile and Peru, just your outlook on the stability of tax legislation and royalties as well, please.
Okay. Paul, do you want to touch on the inflationary pressures, and then I'll pick up the other two? Both you and I can comment on the third one. Do you want to talk, Paul, to the inflationary pressures we're seeing?
Sure, Chris. I think there's been a mixed bag facing our different regions. In South Africa, inflation continues to be around 10%, which for as long as I've been CFO at Gold Fields, that's what we're facing. The big kicker has come in Australia, where we're seeing inflation at the moment of around 6%, it's largely due to a pickup in the commodity prices of the goods that we're using, as well as pressure on the salaries bill. That's what you referred to earlier on. Are we seeing pressure on the workforce? Yes. When there's a boom in iron ore and nickel, there's always a pull on our employees in Australia, we have to up the ante in terms of our wages. We are seeing pressure there.
In Peru, inflation has been very benign for the simple reason, because of the weakening of the exchange rate in Peru, it's kind of offset any of the inflationary pressures we've had there. Ghana is around 2%, and that's normally the number that we are seeing. I hope that answers that part of the question.
Thanks, Leroy. I'll just very briefly talk about South Deep in the backfill. There's actually nothing more complicated than the fact that at the moment we are stoping more stopes, and that's the reason that we just don't actually have places to backfill. There's nothing strange about that. As those stopes get mined out, we'll be able to place the backfill. Actually, I think we're in a very good space and that's a very positive message that we, instead of just getting all of our production from development, we're getting more production now coming from stopes. Then in Chile and Peru, I think we're in the same boat pretty much as everyone else, watching and waiting. We've done a lot of analysis of what's happening in Chile and Peru. We're not overly concerned in Peru. We'll see what happens.
I think most of the focus has been on copper, and we hope that gold will slide under the radar. We're going to have to see. In Chile, whilst there may be some fairly big challenges, we have a stability agreement in place that does protect us from new taxes. I think for a period of time that we actually, notwithstanding potentially some big changes, in existing taxes, we can still see some of that increase being passed on to us, but no new taxes can be applied to the new project that we have because of the stability agreement that we have in place. I think overall, we'll be in the same boat as everyone else. Let's wait and see.
There's a lot of engagement that's happening behind the scenes in both of those countries, and you would have already seen from the early days in perhaps the rhetoric around electioneering, how already much of that has moderated and some of the crazy things that you were hearing are not what is being spoken about now that the government's actually in power. Let's see, but at the moment, it doesn't look too bad, Leroy. Thanks.
Thanks, Chris. Thanks, Paul. That's very helpful. Thank you.
Thank you. The next question comes from Arnold van Graan of Nedbank.
Chris, yes, good afternoon. Three questions from our side, two quick ones, and then just one strategy. It's not about M&A. The first one, the pit failure or the pit issue, not failure, the pit issue at Cerro Corona, it will impact your production scheduling into next year. I guess the question is, how serious an issue is this? Is there a risk of a failure here, or is it something that you are managing and it's going to go away, barring any other adverse weather issues? Second question, very briefly, in Ghana, I see you've extended some financing to your contractors to buy a new fleet. Question is that standard practice? Why don't they just go to some of the OEMs to get financing there?
On strategy, the question is not about M&A, but you talk about part of your strategy is to extract maximum value from your existing asset base. Can you just give us more color on exactly what that entails? On the call earlier today, you talked about increasing reserve lives and those type of things, but is there anything else there that you see, stuff around cost management, or aspects around or any other metrics apart from just increasing the reserve lives? Thank you very much.
Thanks, Arnold. Paul, why don't I start with the pit failure? The pit failure, actually what it was is some of the oxidized material that we had on the eastern side of the mine was very heavily impacted by the groundwater that had risen very substantially due to the abnormally high rainfall. We did have some sloughing of the one side. We were watching it very carefully on the radar, so there was no danger to any people or equipment. The mine was stopped on that side. We have been rehabilitating that progress, Arnold, or that site for the last number of months, and they are actually almost complete with that work. It'll be finished certainly within this quarter, and then we'll be fine. It's not a long-term stability issue.
What we've done is cut back that whole area right back to a much more solid bedrock. I think that the team in Peru have done a great job making sure that we can't have any further production disruptions, and certainly also making sure that it's just a lot more safe. It's not in a long term, not serious. It will affect us this year. We'll lose probably about 20,000 ounces of gold. On an equivalent basis, that'll probably be made up by the higher copper price. We continued with the stripping of the mine, because you'll recall that we lost some ability to do stripping last year. We have upped the game on stripping, but most of that is coming now from the western side of the mine. Other than that, I think we are okay at Cerro Corona.
We should be back to normal next year. Do you want to talk about the financing of the contractors, Paul, in Ghana?
Yeah, sure, Arnold. That loan was made last year. The simple reason, it's not common practice. However, our cost of funding is a lot cheaper than what the contractor could borrow from the banks in Ghana, and he would just push it through to us. It was pure maths for us. If I lent to him at a cheaper rate, he would charge me less. That's the reason we did it. That happened in the first quarter last year, 2020.
Okay, just on the strategy, Arnold, one of the things that we have said is that where we were going to be increasing the focus as part of the strategy is on maximizing the value potential from existing assets. Now, that doesn't mean that we're coming from a zero base and the team at all of the operations have got business improvement plans in place. They have, over many years, extracted good value out of those assets. We have, for example, at some of our, for Tarkwa as an example, this is a tier 1 asset that should operate like a tier 1 asset and probably has, in our view, got more potential, more value that we can drive out, mining with lower costs, having less overheads, getting more production out of existing equipment, out of existing people.
All round, getting better recoveries in the plants, although our plants are actually in world-class standard. Having better maintenance practices, having less breakdowns, having less costly breakdowns, all of those components that a good asset management, asset optimization process will deliver. That's the kind of thing that we're thinking about. Because our mines are actually very different, they're going to be very focused and bespoke asset optimization and business improvement strategies put in place for all of the operations. That's in addition to some of the technology, digital and other technology that we're going to be pushing, I think a bit harder on the back of the work that's already been done in Gold Fields. It's not rocket science, but it is applying really good practice around making sure that we get the very best that we can out of our existing assets.
Of course, the more efficient that we become out of reducing our costs, the more we can bring perhaps other more marginal assets, more marginal resources, into being able to make it under the $1,300 barrier that we've put in to convert resources. Nothing rocket science, but certainly a big focus will be placed in this area in the group going forward.
Thank you. Unfortunately, Arnold's line has dropped, and he will be reconnecting. The next question comes from Raj Ray of BMO Capital Markets.
Thank you, operator. Good afternoon, Chris and team. I got 3 quick question. First one on your 2021 guidance. A steady first half, you're expecting second half to be stronger. Just wanted to get your views on which operations you see the biggest risk, going into the second half. The second question is on your all-in sustaining cost guidance. The consolidated guidance, you're still reiterating that. If I look at some of your asset level guidance, for example, Gruyere, Séninghou, Asanko, Tarkwa, and South Deep, the individual asset level cost guidance has gone up. Just wanted to see what's offsetting those increases for the consolidated AISC to remain the same. The third question is on South Deep. The underground yield was lower, 15% year-over-year.
A part of that reason mentioned was the higher volume of destressed tons due to a change in mine design. Is that something that is just focused on the particular area that you were mining, or do we expect that design to have an impact on grade going forward as well? Thank you. That's it for me.
Okay. Thanks, Raj. You talk about, Paul, the all-in cost guidance. I'll talk about the production.
Yeah. You go, Chris.
Okay. Thanks, Paul. I'll take the first one. The production guidance, I think normally in any event, even in a very normal year, you would see the second half have higher production volume in Gold Fields. It's pretty much standard in the mining industry, but Gold Fields in particular, Paul confirmed this morning that's the case. You will see that in any event. Pretty much across all of our regions, we're expecting better performance. South Deep had a very slow first quarter, big impacts from COVID-19. I think the team have brought in some extra staff, have brought in particular skilled resources in some areas to help the team manage, and that's why you saw a much better second half, even though the COVID-19 impact on South Deep was much higher later on, and also into the first month of this quarter.
South Deep will contribute to the increase. West Africa will contribute. We had just over 440,000 ounces, plan to be just under 900. Cerro Corona will have a better second half in Australia, in particular with some of the assets that have got higher grades coming in the second half, and that we had some challenges at Gruyere with the conveyor belts and some of the plants. As we start pushing the plants harder now, in particular with the hard ore, we're starting to find some challenges, and the team are working through that. That's not unexpected for a new plant getting to its full stride.
Overall, I think the answer to your question, Raj, is you'll see a second half, just normally there's better production in the second half, but also overcoming some of the challenges we had in the first half, you should see better production from those assets. You want to talk about all-in cost, Paul?
Yeah. In terms of the all-in sustaining and the all-in cost, you are right in terms of some of the assets they are above. Remember, when we give group guidance, we do build in a range. That, if you want to call it gives us a bit of fat on either side. For example, if we end up on an exact number of 100, we must probably guide 95 to 105. That's why we've got it. Also, as Chris said, because of the better second half in terms of production, we are going to see lower all-in sustaining costs in the second half of the year.
On to South Deep, there's no long-term move to a lower grade, so the normal grades apply. It just happened to be where we were moving through, that we had lower grades. There's no change to the underground grades at South Deep. The new mining method is really just directional changes as opposed to going to mine new areas. I think what we have is over time seeing that mining in a certain direction, we have because the stress that's being applied to the pillars is not coming vertically but at an angle. What we are seeing is that angled stress was pushing over some of the pillars and just changing the direction, and putting the pillars in line with the stress has changed quite a bit, has positively addressed some of the challenges that the team were facing underground.
We find much more stability in the direction that we're mining at the moment. No, we're still mining the same areas, just in a different direction. No change to the grade.
Thank you, Chris and Paul. That's it from me.
Thank you. The next question comes from Tanya Jakusconek of Scotiabank.
Good morning, everybody. Can you hear me?
We can hear you, Tanya.
Hello?
We can hear you.
Okay, great. Thank you. Can you hear me, yeah?
Yeah.
Okay, perfect. Thank you. Thank you for taking my question. Just two quick ones, just to finalize the inflation question. We talked a little bit about sort of the jurisdictions you're seeing inflation in on labor. I just want to confirm that you're seeing inflationary pressures also obviously in energy, steel, explosives, freight. Is there anything else I am missing that you are seeing inflation on?
No, Tanya, as I said, it's mainly salaries in Australia. The commodity basket, we're seeing inflation in South Africa and in Australia that's making up that mix. Obviously, South Africa, we're going to have the hardy annual 15% increase that comes from Eskom, which is out of our control. That's how South Africa gets to the 10% basket. Remember, Chris said we had just settled wage negotiations between 6% and 7%. Wages aren't the big inflator. It's the 15% coming through for 15% on the power. Also, we're seeing in Ghana and in Australia, fuel increases coming through, obviously with the oil prices going above $70.
Okay. Perfect. I wanted to clarify, and thank you, Chris, for talking about Peru and Chile on the taxation and potential increases. Is there any other place in the world where you are operating that you are hearing about further increases in taxes in Africa, Australia, or royalties?
No, I think is the answer. I think most countries, for example, Ghana, I think the government are trying to find additional help because the pressures that have come from the COVID pandemic, that's no different to Chile and Peru. But we're not hearing in Ghana any changes or suggested changes to taxes. Other than Peru and Chile, in South Africa, we're not, in Australia, we're not, and we're not in Ghana.
Yep. Clearly.
Okay, perfect. Thank you. Then just, Chris, my last question is for you. You made a comment about looking at maybe growing on non-producing or producing assets to keep your production rate over 2 million ounces beyond 2030. Can you talk a little bit about sort of what type of assets, what's your criteria for those types of assets? Jurisdiction-wise, you've mentioned good jurisdictions. I'm just keen to see what you consider a good jurisdiction. Does Canada fit into that, which was something that previous CEO found expensive? Also given your background in platinum palladium, whether we're sticking to gold or are we open to platinum palladium also? Thank you.
Thanks, Tanya. I think let's first cross the last one off. At the moment, our focus is not on other commodities. Our focus is at the moment on gold and in some of the assets we get by-products that come with that copper and silver, that's fine. At the moment, we're not seeking to change the focus of Gold Fields from a gold company. That doesn't mean that we never will do that, but at the moment, we don't think that's both what our shareholders and the market want. That crosses that off. I think the type of assets that we're looking for is really to actually build on the type of thing that Gold Fields's been good at over the past number of years. Gold Fields has been really good at buying assets.
We bought the assets in Australia, we bought the assets in Ghana, we bought the Cerro Corona asset in Peru. Rather, we believe that that's the right way for us to go at the moment as opposed to trying to go buy companies. Now, having said that doesn't mean that we would not talk to other companies and we wouldn't be talking about in-production assets. The things that we're looking are at, and we've got time to do this, is to look at assets, either in-production assets or assets that perhaps are no longer wanted because they're starting to go underground. I think we've demonstrated in Australia, as an example, a very good ability to materially improve on the productivity and efficiency of assets that others folks have sort of written off. It could be a range of the following things.
It could be increases in our own assets. Secondly, it could be in the regions around which we currently operate. Thirdly, it could be new jurisdictions and they could be a combination of both of in-production assets as opposed to new companies, but also for assets that are projects in development. I think more than that, we haven't done that much. We've done a lot of analysis of what's out there, and we can see good opportunities, but most of those look very expensive at the current prices. I think the great place that Gold Fields is in is that we don't need to chase production, we don't need to chase ounces. The company's in good shape. We are building up over the next couple of years to 2.7, 2.8 million ounces.
We've got a bit of time on our hands to find the right assets and not overpay. I think I've been very careful to say that we want to sustain the value that we've created. Now, if we can't find the right assets and if we can't find the right price for those assets at this point in time, we would be comfortable to let the volume that we have created drop down a bit because we actually have got long life assets still, and easily over the next 10 years, we can operate at over 2 million ounces, perhaps even as much as 2.3. We're not under pressure, and we've got time and we've got the balance sheet, and as we continue to increase the cash generated from the assets, we'll be able to be very disciplined about capital, including increasing returns to shareholders.
All round, it feels like we're in a good space. The comment that I made is having created this value, we certainly believe that we can maintain that value because we've got time on our hands and we've got the right balance sheet. Thanks. Your question about Canada.
Okay.
In time, Canada could be a good jurisdiction. That would certainly be a good jurisdictional place for us to be. As you say, assets in Canada are not cheap at the moment.
Yeah. I was just interested if you would grow in South Africa and then maybe just lastly, and pass it on to somebody else. Other companies have targets of, we want to be assets of over 300,000 ounces, mine life of 10 years, cost XYZ. Do you have any of those targets for yourself?
The one thing that we have seen over time with Gold Fields is that the focus on the portfolio, so not having portfolio all over the world in quality jurisdictions and quality assets, and we have reduced the all-in cost of this company, over $200, $300 per ounce over the last number of years. That focus has meant that the value of Gold Fields has increased over time. We don't want to go mess that up by just chasing volume. We do have criteria. I mean, generally, we would like to find assets with a 10-year life. When we bought the Australian assets, they didn't have 10 years life, and we have now mined for more than 20 years on those assets and still have the same life as we had when we started them.
We'd be very careful about just on the face of it, chasing those like a 10-year life. There may be assets that might have less, but we believe that we can create longer life assets out of them. They've got to have the potential of improving the cost position of the company, and they've got to have an ability to not just create more production now, but a greater problem with the diminishing tail in a number of years from now. We want to be careful that we are looking after the long-term portfolio of Gold Fields. Yeah, we want to chase, everybody wants the lowest cost asset. They want to pay very little for it, and it must be in the best place. You don't get all of those in any assets without overpaying for them.
Great. Thank you so much. Any comment on South Africa? Would you grow there?
No, I don't think so, other than we would just continue growing. We're not looking for new assets in South Africa. South Africa's gold, the jurisdiction of South Africa as a gold commodity growth area, I don't think it's mature now. We would absolutely. We sit on one of the best assets, the third biggest gold asset in the world. We have, I think, managed most of the difficulties that have constrained that asset for many years. We're on a upward trajectory from Gold Fields, from South Deep, and we will continue that trajectory. That's not going to find new gold assets. For now, I think let's continue growing South Deep out of what we have, and I think we're well on the way to doing just that.
Thank you so much.
Thank you. At this stage, I'd like to hand over quick questions from the webcast.
I suppose let's start with South Deep. We have a question from Ahmed at Oasis. He says, "Congratulations and welcome to the company, Chris." He goes on to ask, the first question was related to inflation, which we answered. The second one is, while South Deep performance has improved and is commendable, with the uncertain history, and to some extent, the negative market perception of South African deep-level gold mining, how do you feel the asset fits in the portfolio, as you look to unlock value for shareholders?
Okay. Look, I think the best way for us to unlock value for shareholders is to continue growing the amount of cash and the margin we make at South Deep. At the moment, if we try to sell that asset, we would get substantially less than the value that we can see for it, and that would be a bad outcome for our shareholders. I think we know exactly what has to be done. We are already getting some credit for the cash generation over the last few years. Certainly, the value that has been ascribed to South Deep by analysts over the last few years has been increasing. We absolutely know that the full value for South Deep is not yet reflected in the value of the company. The best way for us to do that is just to keep doing.
Martin and the team at South Deep are very conscious of this. They know what needs to be done. They are improving that asset. On every half year, we see improving productivity, improving efficiency, and improving gold, and managing the costs well. We just need to keep doing that, and eventually, the market will give us credit for the work that we're doing. We know that full value is not in our share price. I think the best way for us to deliver value to shareholders is not to sell that asset now. I think we've got over the very negative position that South Deep was facing in the group. It has all the hallmarks of a franchise asset. It's a long life asset. It's got good grades. Yes, it has some challenges at depth, but it's not a narrow reef at depth gold mine.
We certainly can mechanize that operation to be more efficient, safer. Yes, it's got some challenges of depth, but the fact is, I think the mine has mostly overcome those. If it can continue doing what it's doing and can continue growing the way that we have forecasted it to be, another 20%-30% growth over the next 4 to 5 years, if we continue doing that's what's going to deliver value for South Deep. It has all the hallmarks of being a Gold Fields asset.
We have one from Sandile, from Umthombo Wealth. Are you expecting steady ore grade at Damang for the rest of the years? That's the first one. Secondly, what impact are high steel prices having on Salares Norte project costs? Linked to that is, do you see risks of cost overrun at the project going forward?
Okay.
You want me to talk to Salares quickly, Chris, and then you can deal with the other one. As we said when we announced the project, we've got just over $90 million of contingency made up of cost contingency and time contingency. We also took out a Chilean peso/USD currency hedge that is proving very fruitful for us. We've already had about $30 million paid towards us. At the moment, yes, we are being impacted by the steel prices, but it hasn't changed our forecast. We're starting to use some of our contingency, but we're on track to meet and most probably beat the $860 million that we guided in February last year.
Thanks, Paul. The grades at Damang, what we are seeing is some Huni Sandstone, which is a lower-grade material in the grades at the moment. The team are doing a lot of work to try and understand what the longer-term impact of that is and are we going back to more normal grades. It does seem to be the kind of grades that we're seeing now are likely to be the grades that we're going to see going forward. We'll, I think, be able to give better guidance at the end of the year. My expectation is that we're going to have slightly lower grades than we had anticipated. At the moment, the team have been making up some of that by additional mining, which of course, does bring some of the life of mine closer.
Over the next few years, again, the team will be looking at whether there's opportunities for the further next cutback. This is just normal, looking at the further cutbacks that go with a mine that's sort of coming towards the end of its life. There's underground opportunities that we're looking at, and the team will probably have a better sense of what some of that looks like by the end of the year, early part of next year. In the meantime, it does look like we could see slightly lower grades than we had previously anticipated.
Okay, thank you. There's one from Siphelele at Excelsia Capital. Do you think there's more chance of consolidation in the industry? If so, at what price can this be triggered?
I think it's a very difficult question, is that we've already seen consolidation. There's been lots of talk of consolidation. Are we likely to see some more consolidation? I guess the answer is yes. At what price that happens, I don't know. This is a pretty tough price at the moment to find good deals, but that is not just a question of price. It's a question of whether you've got two partners that want to dance. I think because there's less appetite, I think, in the market at the moment for hostile moves and paying very large premiums. If that's not the case, I think you're trying to see merger of equals type deals. Those require partners that want to work together. My answer to you, I think there is likely to be more deals, less hostile deals.
It is a very full price at the moment. My expectation is that you might see that consolidation taking place over longer periods of time. Very difficult. I mean, it's hard to know what other companies are thinking or saying.
Okay, thank you. There's 2 questions on hedging. One from Herbert at Investec and similar question from Dimitri at Jefferies. What are you thinking about hedging going forward? Do you intend to be unhedged from 2022?
Paul?
I do, yes. Remember, the hedging has always been in line with our hedging policy. It was protect years of heavy capital investment. That's why we hedged last year. That's why we have got some hedges in place for this year. As we stand, we have no hedges in place for next year except for our oil hedges, and a little bit of the currency hedge at Salares Norte as we complete the project. It just depends on where we are, but in the normal course of business, we wouldn't hedge. It would be mainly when we have got big projects that we need to ensure we've got a gold price to cover the cash outlay for that.
Okay. We've got a couple questions from Adrian Hammond. Another one for you, Paul. Are you comfortable with current gross debt levels?
Yeah, more than comfortable. I mean, would I like it to be nil? Yes. It makes my balance sheet stronger. Where we are, as I said, the pure number is a very manageable number. The net debt is around $600, excluding leases. More than comfortable with that number. As we continue to make money, we will pay down debt, together with paying nice dividends to our equity shareholders.
Okay. Please can you comment on how Asanko has performed relative to your expectations? What are your opinions on the asset? Does it require reinvestment?
I think Asanko at the moment is probably work in progress. It's an asset that I probably have the least confidence in just that I just don't know as much as I do about the other assets. It hasn't performed as well as we would have expected. This quarter had a good quarter, had a not too bad a quarter, less so. I think we're expecting to have a slightly weaker second half. We don't manage that asset. They have had quite a few management changes. I think at the moment, work in progress is about the best description. We are just looking at how we can help and how we can engage with our partners. At the moment, there's work to be done.
In the very short term, I think this is the work that's underway at the moment, is what is the capital requirements that are required? Do we need any big cutbacks in the areas that we're moving to? All of that is actually work that's being done by the mine at the moment, and is work in progress, and we don't have an answer as to how much capital we're going to need to invest in big cutbacks at Asanko.
Okay, thank you. Last question. What do you intend on doing with free cash flow after consideration of Salares Norte and your baseline dividend?
It's simple. Let's pay down the debt, and then we can discuss it further. The dividend policy has served us well. Everybody has said when you make more money, you're going to change your dividend policy. We've said no. As you can see, if our earnings are more, the dividend will be substantially more, and you've seen the increase in our dividends over the last three years. Once we're debt-free and we don't have sources to apply it, and as Chris said, we may be investing in some of our projects down the line. We'll cross that hurdle when we're there.
Okay, Chris, I think back to you.
I think just to build on your point, Paul, the fact is we want to remain disciplined around capital. We'll continue to invest in the company. We'll continue to pay shareholders. Shareholders are not at the back of the queue. Paul says we'll investigate other options, paying down debt. All of that increases the returns to shareholders. Then we're disciplined. If it's nothing to do with the cash, we absolutely would like to pay more cash to shareholders. That disciplined capital approach that's been in place in Gold Fields for a number of years is not going to be thrown out the window because you've got a new CEO. The plan is for us to maintain capital discipline, and a very important part of that capital discipline is returning cash to shareholders.
Okay, I think that's it. Chris, back to you for final comments.
Okay. No, I think all round, I think we've had a very solid first half. We're very pleased with the performance of the company so far. It's been a very welcoming place to come into Gold Fields. On the back of a very solid legacy left by Nick and the Gold Fields team, we've got a great base to build on. We plan to do just that. We've got a great next few years, and we plan to build on top of that and maintain the value that we've created, looking for new opportunities to create value. The team seem very energized to me at Gold Fields, and I think we're in a good space. Thank you very much.