CAPE TOWN (Business Day) -- Ten months after taking hostile bidder Harmony [NYSE:HMY] to task for overstating its gold reserves, Gold Fields [NYSE:GFI] yesterday announced it was cutting its end-June gold reserves by 18%.
"The quantity of reserves that any mining house has is the single most important measure the market has of valuing a company. Therefore, misstatements in, or manipulation of, reserve statements are generally viewed in a very serious light by regulators and shareholders alike...every ounce of reserves published by Gold Fields is supported by an independent audit opinion," Gold Fields said at the peak of the takeover battle in November.
But yesterday, Gold Fields itself announced it also had to revise its reserves downwards, from 79 million to 65 million ounces.
Total attributable resources also fell to 174.5 million (199 million) ounces.
The group said it used a three-year average gold price of R92,000/kg in SA, A$560/oz in Australia and $375/oz in Ghana.
The group has been exploring two extension projects at Kloof, the Eastern Boundary Area (EBA) and the Kloof Extension Area (KEA). As a result of updated results, it has reduced the size of KEA by 1.5 million ounces to improve the economics of the project and reduced the 10.9-million ounces of reserves at the EBA project to the status of resources because the project needed to be re-engineered and costed.
A feasibility study at the KEA project was being completed and the project would be presented to the Gold Fields board next month for approval, together with phase one of the Driefontein Depth Extension project, it said.
In a trading update yesterday, Gold Fields CEO Ian Cockerill said the revision was in line with standards that should be applied consistently across the industry. Planned extensions to its Kloof mine were changed by new geological information.
Cockerill said Gold Fields' latest reserves and resources declaration had been audited and signed off by new external consultants and used a gold price in line with Securities and Exchange Commission recommendations.
Asked about a review of the South African Code for Reporting Mineral Resources, in which Gold Fields is participating, Cockerill said it was important that a gold price was stated at which all reserves were viable.
