Good day, ladies and gentlemen, and welcome to the Gold Fields Operating Update for September 2021. All participants are currently in listen-only mode, and there will be an opportunity to ask questions later during the conference. If you should need assistance during the call, please signal an operator by pressing star and then zero. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Chris Griffith. Please go ahead, sir.
Thanks, Chris. Hi, good afternoon, and good morning to everyone that's on the call. Starting first with safety, we're really pleased again to report that we had no fatal incidents at operations in the Q3. However, we did report three serious injuries. If there's something positive to be taken about that is that the three serious injuries were actually quite low impact. We had two slips and a fall, and a dropped pipe on a foot. So it demonstrates to us that the severity of our injuries is decreasing, which is good to report. As we continue to strive for zero harm, it's also pleasing to note that we had a number of operations, Tarkwa, Damang, Agnew, all of which have incurred no injuries during the whole year to date.
We continued to feel the impact of COVID during the Q3 and regrettably lost eight of our colleagues during the third wave at the very beginning of the Q3. Our heartfelt condolences once again go out to the family, friends and colleagues of those that we've lost. We have accelerated our COVID-19 vaccinations among our workforce. We're collaborating closely with our host governments as we do so. In all of our regions, except Ghana, where access to vaccinations has been limited, but also pleasingly, we're starting to see Ghana now quite rapidly increasing its vaccination availability. All of our operations, other than, as I mentioned, Ghana, have now achieved a level of at least 80% first dose. In the notes, you would have seen that we showed that we were at 72%.
Now we're over 80% of all the rest of the world operations with their first dose. On the production and cost front, Gold Fields had a solid September 2021 quarter, with attributable gold equivalent production for the Q3 of 606 k oz, and so that's 9% up year-on-year. Our all-in costs increased by 18% year-on-year to $1,263 an ounce, and that's largely due to the planned capital expenditure at Salares Norte, increasing from $23 million in the Q3 of last year to $108 million in this quarter.
Just to give you a sense that costs are being well managed, the all-in cost has increased by 3% to $1,050 an ounce if we exclude the significant project CapEx at Salares and the stronger exchange rates. On a like-for-like basis, you can see our all-in costs would have gone up by 3%. South Deep was a standout performer in this quarter. Been a long time since we've been able to say that. With production at South Deep up 30% quarter-on-quarter and over 31% year-on-year to 88,000 k oz, at an all-in cost of ZAR 567,000 per kilogram or $1,208 an ounce.
The group had a good financial performance in the Q3, resulting in a further decrease in the net debt balance to $1,037 million, even after taking into account the interim dividend payment of $132 million in the Q3. This resulted in a net debt to EBITDA of 0.44 x. Turning now to our Salares Norte project. The critical path of the project remains on track, although the Q3 was again impacted by severe winter weather at the start of the quarter, as well as ongoing COVID-19 constraints both on and offsite. Given these challenges, it's unlikely that the project will achieve what I previously guided of 65% completion milestone by the end of the year, but we should see completion of around about 62% by year-end.
Very important to note and to reiterate that all of our critical path items are tracking plan. In addition, more than 95% of our imported components have arrived in Chile, so the project's not expected to be delayed by shipping constraints that are currently being experienced globally. The project remains on track to deliver first gold by the end of the Q1 of 2023. On our guidance, as we look ahead, we believe that we should still have a good Q4, and our production and cost guidance remain unchanged. South Deep in particular is on track to meet its revised guidance, despite what we've planned, critical maintenance on our shaft infrastructure and winders during the Q4.
I think just why we're highlighting this is if you extrapolate the Q3's production into the Q4, you're likely to overestimate our production guidance for our production for the year, just because we have about 28 days of work on the shaft infrastructure and winders that will impact our ability to hoist material out of South Deep. On the ESG front, as we've previously highlighted, we're gonna be coming back to the market in early December with our ESG priorities and targets. Hopefully we'll have some of you on those calls. Just to highlight some of our ESG achievements or progress being made during this last quarter. Construction of the solar plant at Kriel is well underway. We're on track for completion in the Q1 of next year.
We've also commenced construction of the solar plant at South Deep. Again, we should complete construction at the end of next year. We've had two important rating agency upgrades or updates. The rating agency MSCI has upgraded our ESG rating or the ESG rating for Gold Fields from triple B to A for the first time. We've also had rating agency ISS has assigned Gold Fields a top rating of E1 S1 G1. Some great progress being made on the ESG front. With that, I'll conclude my opening remarks and both myself and Paul Schmidt, our CFO, and Avishkar Nagaser on the line, and we're very happy to take any questions you may have. Thanks.
Thank you, sir. Ladies and gentlemen, if you do wish to ask a question, please press star and then one on your touch-tone phone or on the keypad on your screen. You will hear a confirmation tone that you have joined the queue. If you wish to withdraw your question, please press star and then two. Our first question is from Jared Hoover of RMB Morgan Stanley. Please go ahead.
Afternoon, Chris and team, and thanks for the call. A couple of questions from my side, please. I think maybe I'll start with South Deep. Obviously, it's probably the asset's had one of the best quarters in Gold Fields' hands probably since 2006. Obviously driven by the stoping volumes increasing, the better underground surface mix and therefore grade. I'm trying to get a feel for whether this is a one-off. Has there been some sort of underground sweeping taking place, or is there really been some sort of step change in productivity in this Q3 compared to maybe the last four years? I know productivity has been on an upward trend, but has there been a step change now into this Q3?
Maybe if you could quote some of the the metrics that you put up in your recent Denver presentation, like tons per rig per month, et cetera, that would be quite handy. I'll leave it there for now and follow up with a few more. Thanks.
Well, I certainly don't have at hand, Jared, any of those metrics for the Q3. We can certainly get back to you on that. I think why we shared some of those at the Denver conference was actually to be able to do exactly what you've to address the kind of question that you've asked, to demonstrate that we are making huge progress on the underlying productivity measures in South Deep. That's been a trend that's been happening over the last two years since the big restructuring. Clearly, it was not that evident last year when we had quite a big impact on COVID.
If you exclude the COVID impact, you can absolutely see that increase in productivity trend over the last two years since the restructuring, as I mentioned, in 2018. We will update some of those kind of metrics at our year-end results in February just to underpin the productivity improvements. That's why we were able to say that we would continue to see a growth in production between 20%-30% over the next four to five years. We're absolutely on track to do that.
Had it not been for the COVID impact in the Q1 of this year, we would have been very nicely on track to meet the 9 tons of gold that Nick guided. Other than that very small loss in the Q1 around COVID, we've been able to manage the COVID impact at South Deep and continue to increase those productivity measures. You know, even on the quarterly performances throughout the course of this year, we've seen quite big increases in production. I mean, the Q1, we were just around about 60,000 ounces, then we were almost 70,000 oz, and now we're over 80,000 oz. We won't have the same final quarter, but because of the maintenance.
Other than that, we would have had another very, very strong quarter. Jared, underlying performance around development, destress, productivity improvements, all of those are giving us the sense that the production is increasing. You can see from the numbers in our quarterly reports that it's not just sweepings that have taken place. All of the metrics, development, destress, secondary support, backfill, all of those metrics are demonstrating improvements which show, yeah, it wasn't just a whole lot of guys running around cleaning up sweepings. Thanks, Jared. We certainly will update those productivity metrics when we report at the end of the year.
Great. That was quite comprehensive, Chris. I guess maybe just one more before I move on to the other assets. I mean, if I just extrapolate. Obviously, you mentioned you can't extrapolate Q3 or Q4, but assuming this is a steady-state type of quarter, when we don't have any interruptions, it almost seems like you're hitting your three-year guidance right now. I mean, I don't wanna get ahead of the game, but is that how I should be thinking about it? Or are there still sort of tweaks and bits and bobs to come, obviously as you progress over the next two to three years to hit that +20%-30% up on South Deep production?
Yes. I think you mustn't get ahead of yourself. I mean, it's a great discussion to be having. For many years now, we've been you know, folk have been concerned that we are overpromising and under-delivering. Now for the first time in a long time, we've had a comment that's saying, "Oh, aren't you underpromising?" No, we generally. I mean, so you're right. I mean, 2.8 tons of gold in the Q3 would give us in the range, you know, over 11 tons of gold. We do have a slower quarter in the H1, and in the Q1, and we generally have a slightly slower final quarter as well as we come sort of towards the end of the year with maintenance.
Q2 and Q3s are generally better. I think it's a little bit ahead of perhaps expectation to expect we'll be at 11 tons. And we'll give guidance in the first when we do our final year results. We absolutely will seek to have a step-up in production again next year.
Great. Thanks for that, Chris. Just moving to Damang. I think in your interim results, you did have lower grades, and you alluded to that potentially being persistent. It looks like it's even stepped down now into the Q3. I'm just trying to get a feel for how we should be thinking about this to sort of end of life of mine at Damang. I mean, at 1.5 g, should I be extrapolating that, and therefore there's downside in 2022, 2023, 2024, et cetera? And if that is the case, do you think you can offset it with other assets in the group?
Yeah. Look, I mean, what we're not gonna be doing now at the Q3 is giving guidance for next year. We'll be doing that at the year-end results presentation in February. I'm not gonna be giving guidance around that. What I did do at the half year was saying that this year would still be a step down on last year. We'll still have a fairly high year next year, but thereafter we are gonna start seeing a decline at Damang, as we contemplate whether we've got any further cutbacks or whether we've got any potential to go underground. All of that work is happening now.
You will see this year will be slightly lower than last year. Next year will be slightly lower than that again. We'll update all of those guidance at the beginning of next year. Yeah, I mean, Damang is sort of in the peak period of the cutback, and we are starting to decline. We will have still a big year next year, but also the decline on this year. Jared, I'll update you more comprehensively in February next year.
Great. Perfect. I was hoping I can just squeeze one more in. I'm sure there's quite a few other questions on.
I think, Avi's gonna start abusing you in a moment. I'll take this final question, then I think we must give others a gap. Go for it.
Yep. Sure. Just on Agnew, obviously you flagged labor shortages impacting productivity. I just wanted to find out if there are any other issues like mine constraints that's also troubling you with movement of material. Because that is something that's being flagged by a lot of the Aussie-centric producers. If those labor shortages do persist, do you have any plans on how to mitigate that into 2022? Should we be thinking like another 6% increase on wages? I'll leave it there. Thanks.
Yeah, I mean, look, our Aussie team overall have been able to keep the production going in the way they have with the labor shortages that we've had has been nothing short of a miracle. I mean, this is absolutely in the face of the labor shortages difficulties in Australia. I think the team have really done a fantastic job. The area that we've been most impacted is Agnew. It has impacted some of the other areas in Australia on things like development. The reality is, until they open the borders to international labor and into labor from, you know, like the East Coast of Australia, we are going to be challenged.
I mean, you know, we hear from all of our peers in Australia that on the West Coast that in Western Australia that everyone's struggling with labor. I think our expectation is that early on in the new year, we're gonna start seeing some increases. Western Australia, because they've had such success in the sort of border closures, they've had much less COVID impact. But because of that, they've also had lower vaccination uptake. Now that they've introduced some of these mandatory vaccinations for fly-in fly-out sites, we are seeing now quite rapid increases in the vaccinations in Western Australia. We think early on in next year, we should see the borders start opening.
I think we're still gonna face some difficulties next year with higher labor inflation than the inflation rate in Australia. I think it absolutely is gonna impact us. Everyone's fighting to keep their labor. Yeah, I think we're likely to see some increase in costs, but most importantly is can we keep all of our people and can we get back the shortages, in particular amongst the contractors? I think that's where our big challenge lies, and I think we should start seeing during the course of the H1 of next year some of that normalizing. I think we could still have a tough H1 of next year. I think for us, the fact that we've been able to keep our guidance and stay on track has just been remarkable from the Australian team.
Thank you, sir. Ladies and gentlemen, just a reminder, if you wish to ask a question, please press star and then one. The next question is from Raj Ray of BMO Capital Markets. Please go ahead.
Thank you, operator. Good afternoon, Chris and team, and congrats on the quarter. Good to see company they're continuing to deliver on their guidance. Just a couple of questions from me. First up on Damang, I just wanna follow up. You mentioned in the Q3 there was you could not access the bottom of the pit, so should we expect a strong pickup in grade in Q4 at Damang?
No, we're not gonna see a pickup in grades at Damang in the Q4, no. No is the answer, Raj.
Okay. That kind of moves over to the next year, is it?
No, I think we are seeing just generally lower grade than we had anticipated at this time. I think one of the things I did say when we did the presentation at Denver is actually if you look at the overall volume of ounces that we've produced from the cutback has actually been in line with what we said we would. We had some slightly higher grades in the beginning, and we are definitely seeing as to the bottom portion of the pit, where just generally it was much more difficult to get, you know, the kind of precision that we would ideally have liked. We are just seeing lower grades than anticipated in the bottom part of the pit.
Okay. Thanks, Chris. As a follow-up, quick follow-up on South Deep. Can you guide us what the percentage of the ore you're starting to draw from, or you're drawing from the North of Wrench versus the current mine, currently?
I don't have that number with me. Avi, do you have that number available? If not, we can get back to them, to you, Raj.
Okay, thanks.
Yeah, I'll come back to you.
Okay, no worries. Lastly on Salares, you mentioned that all the critical path items remains on track, still targeting Q1 2023 for first production. I know it's almost a year and a bit out, but is there any risk you foresee in terms of the ramp up subsequently? Whether it's having all the equipment and machinery in place, whether it's have skill availability or just the stripping and the grade control drilling you have been doing. Anything that is of concern to you at this point?
No, I think overall one of the things, Raj, is that there was some concern about whether we're gonna have enough ore ahead of the plant or whether the stripping would be in place. You know, I think one of the positives, even under this very, very difficult circumstances that the project team are facing, is the fact that the mining is ahead of plan. We're not concerned from a mining point of view. We are recruiting people and training them as we speak. That's currently not expected to be an issue. I think in this coming year, I think we're gonna get a much better feel for that. At this point in time, we're not worried about the ramp up.
I mean, we are currently scheduled to start production, you know, in April of next year, and currently that's still the case. You know, at the moment, I can say that with the major projects in South America, all the projects that I've seen, bar our project, is way behind plan because of the impact of COVID. We are really struggling, everybody, to get the right level of people onto site, and in particular with our construction, you know, various construction subcontractors. That has certainly been the case. What we have been able to do is make sure that, you know, pretty much everyone is short of labor.
What we've been able to do is direct our labor onto the critical path and move some of the non-critical path items out, which is why we've got less capital spend this year than we'd anticipated and more into next year. Look, you can't do that forever, and eventually some of those other items will be also on the critical path. We've got all sorts of remedial action underway to try get more people, get more contractors, split up some of the work that we've given to some of the larger contractors, to contractors that are finishing off some of the, their smaller projects. You know, things like that, we're putting in place retention measures for our people to make sure they don't end up with, you know, someone who's paying a few dollars extra next door.
With the current impacts on projects in general across the world, but in particular in South America, has been massive. Again, I think our team have done really well. At this point in time, mining's ahead of plan, exploration's ahead of plan. We were ahead of plan, which I think has helped us in the Q2 and Q3. Where we were ahead of plan, we lost in the Q2.
We're a little bit behind plan overall because of the Q3, but it's in the summer months now, so we don't have the kind of winter effects. We are seeing less effect from COVID, but we are not at full complement anywhere, either you know in the production of you know items at you know off-site or even on-site. We're having to manage in very difficult circumstances. At the moment, we're still positive and we're not just hoping that that'll all get better. We've put a whole lot of mitigation measures in place to be able to increase the tempo during the summer months, so that as we go into the winter months, you know having learnt what we've learnt now during this winter.
Although next year we'll be in a very different phase of the construction. We won't be so exposed to the winter. We are still hoping to increase the tempo, and we have very pleasingly seen in the last two months now a change in the rate of construction. So I think that gives us some positive, you know, feeling and you know I think overall the team are doing well and we're managing the difficult situation. I think very, very importantly, the point I mentioned, that the majority of the seaborne material is in Chile.
We're not getting impacted by the shipping constraints at the moment, which is, I think puts our project very different or in a very different league to many other projects that are being impacted not only by COVID, but now also by shipping. Ours is in a very different space. Quite a long answer because I wanted to just give a sense of the work that we're doing to be able to maintain this focus on the critical path and maintain the overall schedule. At this point in time, we're still on track for the Q1, and hopefully if it doesn't get too much worse from COVID. The difficulty about COVID is we don't know what happens in the following waves. At this point in time, we're still in good shape. Thanks.
Yeah. Thanks, Chris. Thanks for the additional color. That's it from me. All the best.
Thank you, Raj.
Thank you. The next question is from Tanya Jakusconek of Scotia. Please go ahead.
Yes. Good morning, everyone. Can you hear me? Or good afternoon.
We can hear you fine. Thanks, Tanya.
Okay, great. Thank you. Chris, just wanted to come back. Appreciate that you're gonna give guidance for 2022 next year. Can you talk a little bit about how directionally we should think about your cost and capital with inflationary pressures? Can we talk a little bit about what you're seeing inflation-wise, percentage-wise in your cost and capital?
Yeah. Certainly, Paul, feel free to come in on the back of this. Look, we're doing our business plans as we speak, as you can imagine. We are absolutely seeing higher than normal inflation. The mining inflation is higher in Australia, in South Africa, in Ghana, in South America. I think you could expect above our basket of inflation a few percentage points above that. We will give further guidance. I don't want to do too much more than that because otherwise the rest of the market won't have the same information. I think what we've been seeing this year is a little, you know, a few percentage points above normal inflation is what we're likely to see for the group next year.
Okay. Given inflation, it just varies, you know, just in different parts of the world. Most mine operators are seeing between 3%-6% cost increases. Would you be in that range?
Yeah.
Just overall for Gold Fields?
Yeah.
Yeah.
Yes, we are, except South Africa, which will be higher because we have Eskom.
Yeah.
-which is gonna 15% or 16% increase. Yeah. I think you're spot on with the rest of the group. We're trading between 3 and 6. South Africa closer to 10 because of the pull from Eskom. Yeah, you're right.
That's helpful. You know, is there anything beyond the normal labor you mentioned in Australia, you know, energy, consumable freight, is there anything else that you are seeing, inflation-wise beyond those components that I should be aware of?
No, that sums it up. I mean, obviously fuel is. It's the basket of consumables, your cyanide, your copper, your steel ball. You know, gas is linked to, unfortunately, it's also linked to fuel prices. But yeah, you've summed it up. There's nothing else that we can say, oh, that's abnormal. It's our consumable basket, wages and then fuel. That's got the big impact.
Okay. As I look at your reserves and resources for year-end 2021, maybe, Chris, you can talk a little bit about whether you think, you know, you're going to see reserve replacement at your operations this year and your resources potentially, are they growing?
It's too early for us to say that, Tanya, and certainly too early to give an indication. Again, if I do that now, I will have to go back and advise the market. We will be out in the normal time early next year. I can say we're doing all the normal things that we have always done. We haven't cut, for example, exploration anywhere. You're unlikely to see any big difference from what we normally do. Perhaps that's the best way I can explain. We haven't done anything that should materially change. We haven't doubled the amount of exploration, but neither have we cut our exploration costs.
Okay. Maybe Chris, like you've had a chance I think now with South Africa opening up to visit some of the operations, some of your operations. Maybe you can talk a little bit about the ones you've actually got to and sort of your impressions. I mean, you know, looking at things on video and on paper is different than actually being at mine site.
Yeah. Actually I haven't been able to get to any of the other sites. Chile is just starting to open up. Australia's firmly shut down. Ghana, we've just been able to get out there, but with very low vaccination rates, we've decided to take a slightly more cautious approach. Yeah, I'm hoping to get out to Ghana before the end of the year. No, actually things are only recently starting to open up for travel. They're not open yet in Australia. Yeah, I haven't actually, and I've got plans to in the very near future to start. Yeah, hopefully the next time we talk, we can start. I can start giving you more than just the video view.
Yeah. Maybe when you come out with your guidance in, I guess early 2022, are we thinking that it would just be a one-year guidance for 2022? Or are you thinking of providing like your peers longer term? I know you've supported, you know, having a higher production level longer term. You've given us a base, but more details, let's say in the first three years, how are you envisioning that? 'Cause this will be your first time giving, you know, official guidance.
Yeah. I mean, we know that this is a particular bugbear of yours, Tanya, and we've been taking that into account.
Yeah.
Let's see what we're able to do. I think it's a bit soon to expect us to go from a sort of our one-year guidance to a much longer guidance. In some areas we may be able to give a little bit more guidance, but in other areas, I think the way the group is set up and the nature of our assets is that we likely to probably disappoint some of your expectation that we'll give much longer guidance. Let's see what we do in February next year.
Okay. No, no disappointment, Chris. My expectations have been, are low for most things. No worries.
Great. Thanks, Tanya.
Okay. Thank you.
Thanks, Tanya.
Thank you. The next question is from Catherine Joint of Columbia Threadneedle Investments. Please go ahead.
Hello. Thank you very much for the call. My first question is on Salares Norte. You gave some very good insight into how it's been going and the various delays. Given the various mitigation measures that you mentioned, has there been an increase in cost and, which has sort of led to an increase in CapEx overall, or is CapEx still on track as originally planned?
Yeah, it's a great question. Thanks, Catherine. The answer is we're not expecting any capital increase. I think up to now we have been very disciplined around using any contingency. I think the expectation is that we're gonna be using more of our contingency to deal with some of these issues. Actually, fortunately, that's what contingency is for, not for big scope changes. Because of the amount of engineering design up front, we've had very little scope change, and that has meant that contingency can be used for proper contingency management. The expectation is that, yeah, we will be using contingency, but not our project plan. Our project capital is not anticipated to change, our forecast.
Okay. Chris, if I can just add. I just wanna remind everybody, when we announced the project, we talked of a contingency of around $90 million, and I've also explained to the market we put the hedging in place, which is used as a cross-currency. To date, the hedge has paid out close to $40 million. You know, as Chris said, we haven't really dipped big into the contingency. Plus I've got to date the $40 million that's actually paid into the bank account from the hedge. I think the 860 that we guided is still, it's achievable, definitely, and maybe a little bit less than that, by the end of the project.
Okay, great. How much of that CapEx is left to come through? Is it 860 left or is that the total?
Did you get the question, Paul?
I think there's what. We've got. Is it about $360 million left, I think, Chris? I'm just trying to think what we've got left in the plan. I think it's circa $350 million for next year and 2023 that's left to go, if I can give it to you in years.
Yeah. Perfect. Okay. Thank you. Just one more question from me. In terms of the project progress, I understand there'll be a lot more detail in December, but you mentioned the construction of the solar plants at Granny Smith and South Deep that are gonna be finished. In terms of how much of a reduction in cost that's going to make eventually, is it particularly South Deep there to sort of reduce the impact of Eskom? What sort of percentage of energy will these solar plants provide?
South Deep is absolutely going to reduce energy costs. About 20% of our electricity will be solar. Of that, about 1/3 of the cost. It's 1/3 of 20% of our power. 2/3 of 20% of our power. Power is just over, I think, 10% of our cost. Is that right, Paul? You can work out what the cost reduction in the first year will be.
Yeah. Correct.
Great. That's similar to Gruyere as well? Or is that?
No, Gruyere is not going to be, we are not funding the capital. We have a service provider, so we have a power purchase agreement. We have very little. We do have about a 10% reduction in the power cost overall over the life that we have the power purchase agreement in, which I think is about 10 years. We can just confirm that. It's about 10 years. Then the cost reduces materially over that. That's exactly the same principle that we've applied at both Agnew and Granny Smith. We have a small reduction in costs because of the power purchase agreement. The one is a 10-year life, the one's a 15-year life.
Once we've done that, then we have a massive reduction in the power cost because we've then paid off the cost of the power purchase agreement, and then we own the infrastructure, and the cost is only a little bit of operating cost. That's different at South Deep where we chose to invest all the capital ourselves. We don't have capital at Gruyere, but we do have ZAR 660 million worth of capital that we are investing, and we'll have a five-year payback on that capital.
Great. Okay. Thank you very much.
Sorry if I can just add to the CapEx. It's $350 million next year and circa $100 million in 2022 for Salares Norte. It's about $450 million that's left. Sorry, I just gave you the first year's numbers. It's about $450 million left.
Okay. Brilliant. Thank you very much. That's great.
Thanks, Catherine.
Thank you. The next question is from Rene Hochreiter of NOAH Capital Markets. Please go ahead.
Hello, Chris and Paul. Can you hear me?
We can hear you fine. Thanks, Rene.
Hello, Chris. Yeah, well done on your first six months, is it, on in Gold Fields. I see that five of your projects are in the lowermost cost curve quartile, and then the other four are in the lower half, which is great going. My question is Asanko, at $1,500 an ounce AISC, what is the chance of getting it into the lower half part of the curve, which is below $1,250 an ounce? What's the chance of keeping South Deep at around about $1,200 an ounce?
Tough, nice tough questions, Rene. Thanks. Look, you know, we are very focused on the costs. We know that Asanko in its current format is not delivering on expectations from either Gold Fields or our partners, Galiano. Actually, incidentally, this morning, Paul and myself and a big team from all over the world, we're reviewing some of the future of Asanko, and we are thinking about what the opportunities are. Clearly we're gonna be discussing all those opportunities with our partner. Look, for now, I think it's likely that that's gonna be still a high cost asset. That's just a fact. Whether or not in the long term we can materially change that, I think that's a work in progress.
For now, we're not gonna, in the very short term, see a big change around on that. That's just, unfortunately, the case. There is much more long-term potential there. We have to think, Rene, about, you know, how can we get to the long-term potential and what's the pathway to get there. That's absolutely work in progress and us as well. Hopefully we can bring some of our expertise to bear because, you know, as you know, we're not the operators there. Yeah, so that's, I think, a long answer to say it's high cost now. We know it. We're not happy with it.
There is a potential pathway to make it a much better operation and how can we execute that pathway over the next few years. It's not gonna be quick, and it's still gonna be a high cost asset. South Deep, we've had a fantastic quarter, and then I think some of the questions from Jared saying, "Look, are we, you know, is that sustainable, that run rate yet?", I think it's not yet an annualized sustainable run rate. There's still a pathway to get there. I think a sustainable $1,200 is probably where we're gonna be at the end of the four or five-year journey. You know, I think we've had a fantastic quarter, but it's not sustainable yet to $1,200. But that's certainly our plan.
I mean, our plan is to get South Deep into that region of $1,200. If we can do that in four to five years time with the kind of volumes that we're expecting and that 20%-30% up on where we'll be this year, you know, I think then South Deep is gonna make good money and it'll compete with, you know, with certainly anyone in our portfolio and it'll compete with global mechanized mining assets, and it's gonna make some good money for us. Not quite yet sustainable at $1,200, Rene, and that'll get us when we get to the end of our 20%-30% volume uplift on the 9 tons of gold.
That would have been normalized for this year had it not been for COVID. That's how we've sort of explained it to say, "Look, we've said 8.7 and, you know, we're hoping to be a bit better than that, but we've maintained our guidance at 8.7." We're hoping to be a bit better than that. Normalized for COVID, we would have been 9 tons for this year, 20%-30% up on that over the next four to five years, I think is a fairly conservative sort of appropriate way of thinking about South Deep. You know, we're pushing hard and are not giving up on doing better than that. When we get there, then we'll be at about $1,200 is the way we think about all-in costs for South Deep.
Rene, can I just add one caveat there? You've got to make assumptions on the rand. If the rand at 14, 15, I think Chris is right. If the rand went to 17, then $1,200 becomes easier. But the converse applies as well. If the rand strengthens, it goes. You know, a year and a half ago, we were at 18 and we weren't far off from $1,200. We were actually dipping. All of a sudden, you know, we screamed when the rand went to 13.50. So you've got to also look at the rand costs and make your assumptions on the dollar exchange rate, because I can't control that.
You know, I can go look great because of the exchange rate, and I can look terrible. We've got to try and control the rand costs around ZAR 700, approximately. That's what we've got to focus on, 'cause that's all we can control. I can't control the exchange rate.
Sure. No, understood. Don't you think that where you are now at with South Deep is like a really nice optimum production level and trying to push it higher might actually be counterproductive?
No. I think that because what we're not doing, Rene, is throwing money and labor to try and get extra volume. We are focusing on efficiency improvements. There will be some labor increases, but we definitely don't have a number in mind that we then screw up the value by chasing a number. We do think that getting close to sort of 350,000-360,000 oz with productivity, with like big focus on productivity improvements is not out of the ordinary and something that we think that we can do.
I think some of the earlier numbers of trying to get to 15 tons of gold, you know, I think some of that was doing what you're afraid that we might do. No, I think, we're not at the expense of value. We are not chasing volume.
Okay, great. Thanks very much for that, Chris. Good job so far.
Thanks, Rene.
Thank you. The next question is from Dominic O'Kane of JPMorgan. Please go ahead.
Hi, Chris. I had two quick questions. The first is on Chile. In the past, you very advantageously hedged the currency, as you mentioned. Given the recent weakness, are you likely to potentially hedge more of the peso? My second question, again, back to South Deep. South Deep evidently has been a beneficiary in Q3 of your lack of international travel and has had a very good quarter. In the past, Gold Fields had mentioned you would kind of reexamine the ownership structure once South Deep was on a firm footing. Could you just maybe comment on, you know, how you're thinking about the value opportunity of South Deep? What's the best way to realize value in South Deep?
Can I answer Salares’ question? No, because it actually works the other way around. We hedged because we had to curb the cost of stuff coming in. Once we go into production, if the peso weakens, it's to our advantage because remember, we will be realizing the price in the peso. No, this was to offset the capital cost that we didn't get caught on that side. No, once this hedge is completed and we expect the Chilean peso to weaken, and we've seen it going from, it was probably the 730s to over 800 where we are now. You know, once you go into production, if it goes to 1,000, it's to our benefit.
It's the same as I said earlier, a weaker rand, you know, helps us definitely on the realized gold price in the country we operate. Same in Chile. A weaker peso will help us on the CapEx because our capital will be spent in that.
Okay. Thanks, Paul.
Thanks.
Dominic, no, I have at the interim results. I did give my view on the ownership of South Deep. Our view is that we can turn around South Deep. Our view is that we can deliver and make a lot more money for our shareholders, us being the owners, than if we try to sell it. Our view is that we should retain South Deep. Our view is that it can absolutely be a franchise asset within Gold Fields. We have decided that we would retain South Deep. Our focus is on not distracting the team with are we gonna sell you? Are we gonna do this? Let's just get the team to feel that they belong in Gold Fields and that they must deliver.
They're like any other asset. They're like any mine. If they don't make money and they don't deliver, then they'll be on the chopping block. I think what we want to try and do with South Deep is let them perform as a normal mine. The expectations are if you deliver, if you make money, then you've got a home in the company. If you don't, then you don't have a home. At the moment, the team are really coming to the party. I can tell you that it's certainly you flatter me, Dominic, by saying that because I'm not traveling, that I made a big difference. It hasn't been me at all. It's been the team under Martin's leadership, under Benson's leadership. The team are really focused.
They're focused on all the right things and not chasing today's volume, but by putting in place all the practices that'll deliver sustainable volume growth going forward. I think Martin and Benson and the team at South Deep, we have over the last number of years materially improved the bench strength of the leadership there. I think the capability that we've got there has built on the work that's gone before. I think we've got a mining method that's in good shape. It may not be the final mining method as we learn. Each time we learn and we make some changes, we're in a better shape than we were before, and we learn and make changes. The changes we're making are much smaller tweaks.
I think we're learning how to mine a mechanized mining layout at depth. We still got lots to go. The productivity of the labor force there is certainly not where we expected, but it certainly hasn't been my work, Dominic, it's been the team at South Deep, and they've done a great job. Our view is that we'll retain that asset. It forms part of our portfolio. Like any asset, it's, you know, it's never forever. For now, we will own South Deep, and we'll make money for our shareholders by being the owner.
Excellent.
The operator. Thanks, Dominic.
Does that answer all your questions, Dominic?
All good. Thank you.
Thank you very much. We have no further questions in the queue. Would you like to make some closing comments?
Yeah, I think the closing comments. We've had a very good quarter. I think it's been a solid quarter. We know that it traditionally is our strongest quarter. We still, you know, should have a good quarter. Things are looking good so far this quarter. And you know, I think very importantly we can say is that our that we are absolutely focused on the cost. Our current cost is not out of control, and it's because we're spending on one of the best mining projects in the world at the moment, which absolutely is gonna be to the benefit of Gold Fields and its shareholders. We have our guidance remains intact, safety, ESG, all making good progress.
I think overall, we remain very nicely focused on delivering value, and that should start coming through into our share price. You know, we're working very hard on that as well and our existing shareholders should get the benefit of that. Yeah, those are my closing comments. I think all things are pointing in the direction that we said they would. Thanks.
Thank you very much, sir. Ladies and gentlemen, that then concludes this conference call, and you may now disconnect your lines.