Good morning, ladies and gentlemen, I'd like to thank you for taking the time to join us this morning for the Gold Fields Investor Day for 2011. With me this morning, I would like to introduce to you from my right, Nick Holland, the CEO of Gold Fields; and Paul Schmidt, the CFO; and Tommy McKeith, the Head of Growth and International Projects. On my left, starting with Tim Rowland, who is Head of Group Technical Services; Juan Kruger, who runs our South American region for us. Next to him, we have Peter Turner, Head of South Africa; Richard Weston, Head of Australasia Region; Peet Van Schalkwyk, Head of West Africa; and Michael Fleischer, our Executive General Counsel here with us today. I think just in terms of safety, I'd like to just direct you to the exits on your right and your left. In the event that we have an emergency, could I just ask that you exit through those doors and then congregate outside.
I'd like to turn your attention to the forward-looking statements just for you to note. And with that, I would like to hand over to Nick Holland. Thank you.
Nicholas John Holland
Thanks very much, Zakira, and good morning, everyone. It's not often that we're able to get the full team together of Gold Fields but very pleased today to have the heads of the 4 regions with us, our CFO, Head of Growth, Tommy McKeith, and you're going to hear from all of them today. We've set aside quite a bit of time and I hope that we'll be able to run through this as quickly as we can. And we'd like to ask you to make a note of questions, and we'll provide some time at the end for either myself or any particular member of the team that you'd like to direct questions to, to deal with those specific questions.
First of all, I'd like to talk about the overall market, give a macro overview as to how we see the world today because I think that's a good foundation for us to look then at the gold industry and the impacts of what we're seeing in the world today on the gold market and specifically, on Gold Fields. There's no doubt over the last couple of years, we've continued to see a lot of market volatility, a lot of currency volatility, and it's very difficult to see the direction which the markets are going. They're going up and down, they're responding to a lot of the shocks to the system that we're seeing on a day-to-day basis. And it might well be that as we move into 2012, we'll continue to see similar trends. Pressure of political instability, of course, has increased over the last year and we're seeing a number of countries with changes in government also underpinned by financial problems of their own, where they're struggling to balance their own books, where their growth rates are lower than the inflation in those particular countries and struggling to deal with the requirements of the people in the lower ends of the income category, the ones certainly more from the economy. Emerging markets are of course having a much bigger influence on the overall world economy, and that in itself is fueling some growth particularly as we see greater urbanization, people moving into the cities from the rural areas, availing themselves, wanting to improve their own lifestyles. And that is also fueling a lot of demand. Some of that demand of course is generated internally in those countries as opposed to externally, which is helping to sustain certainly the demand we've seen so far. Although as we'll see a little later, it's faltering a little bit too. Sustainability is now integral to business across the world. And I would say 2 or 3 years ago, sustainability was probably a good buzzword, but people said, "Okay, that's good stuff to talk about, but how does that really affect our business?" Well today, sustainability is front and center in all business decisions, and I think rightfully so. And if we look at the image of mining over the last 20 or 30 years, there's no doubt we've had to clean up our act. And the way that mines are built and operated today and tomorrow is going to be fundamentally different from the way that they've been operated over the last 3 or 4 decades. Safety, environmental concerns, assessing whether mining really does make a contribution and sharing the cake more equitably. And that's going to be an issue that we're seeing more and more in the countries we operate. And of course, the burning question we've got to ask ourselves is, is the cake going to be bigger so that we can share more of it or are we going to be into a situation of diminishing returns as more and more of the cake is spread out? And that is one of the challenges that we have, together with community activism. 10 years ago, building mines was pretty much a standard process. Now, if communities do not support those operations, those mines will not get built. And just over the last 2 weeks, we've seen examples of that again around South America, where mines are either going to be delayed or certainly are going to have to relook at the entire engagement process before those operations get built. And that, we believe, is critical to the future success of the mining industry, to get community support for those particular projects. Social norms, we're seeing a change in demographics. In Europe, we're seeing a greater proportion of older people who don't really work and in turn, are creating significant financial burdens on society as their pensions need to be supported. In America, fortunately, I think we are seeing the opposite in that the demographics are probably more positive. So Euroland, I think is problematic, and even China where there's good growth rates. There is concern about the demographics. Concern about the demographics in Japan as well and what impact is that going to have on the overall world economy. A much greater sense of social responsibility, generally. And people at large want to be involved in decision-making on the future of the world, and of course, the future of the mining industry. Changing attitudes to work, and I think all of you in your own businesses have seen this too. People want to have more flexible working arrangements. It's not just pay anymore that motivate the people, it's whether people are in fact empowered to do the job. Whether people now are given the flexibility to grow and whether they can operate from remote sites. And we're moving to a virtual business world, which is happening very quickly. We're seeing it in our own business as well, where we can't really pigeon hole people into specific offices. We're going to see more of that into the future. Technology, of course, is advancing in a very rapid rate. And we've seen an explosion of information, an explosion in the kind of technology that gives us realtime information all the time. And we're seeing things like Facebook, which is increasing communication. And it puts demands on us. We can no longer escape at weekends away from our Blackberries, away from our e-mails, our iPads. And we all wake up on Saturday and Sunday morning, I suppose, and feel guilty if we don't go look at those iPads and see what's on there. I think that's the reality of life today, is that we have to be in tune to everything that's happening. And that in turn, of course, means that information about projects, information about issues gets disseminated much quicker. And that means community activism, for example, is going to happen much quicker, people are going to be much more informed about the issues and begin to act much quicker.
Two-thirds of the world economy remains turbulent. If you look at this graph, it shows you a breakdown by percentage terms of GDP across the world. And you can see the high-risk countries here, the USA, we all know the concern that we've got there about whether we're going to see further quantity of easing, what the impact is going to be, how we're going to stimulate the economy, some of the statements being made about whether we are going to see more stimulus packages or not, and it's fair to say that people are very concerned about what's happening in this particular country. Eurozone, I don't think we have to say too much more. We're reading about it every day in our newspapers. And is the euro going to be held together? What's the cost of it going to be and where is the money going to come from? China, we are seeing growth rates coming back and we're also seeing a slowdown in demand. And what is the impact of that going to be? And what's interesting to me is having visited China not so long ago, we're staggering to learn that a 1% change in the growth rate in China translates to 30 million jobs that are either created or lost. So if they can't fuel the demand externally, it's likely that they're going to be trying to do it internally, certainly. And that means that the economy is going to be turbulent again over the next year or so.
Eurozone, I've talked about briefly. We can see that the Eurozone debt to GDP ratio is climbing, and one has to expect, I think, that we're going to see more of that in the future. And the structural issues we have in the Eurozone are the thing that concerns me the most. As I've said earlier, the demographics are not on their side, the lack of a productive workforce, the very significant pension liabilities, et cetera. And those are structural issues that have been created over many years. And you don't reverse those issues quickly. So it's going to be interesting to see how it all unfolds, but I think the Eurozone are going to be in a very similar position to what the U.S. has been in and going to have to keep the paper currency printing machine moving along. And hence, this comment now about fiat currencies is becoming more, more relevant. And I think that's relevant for gold if people are talking about these currencies as being fiat currencies. I think it tells us that people are going to be looking more and more to gold to try and protect their capital. So the world's growth has been fairly lackluster. And if we look at the world demand, which you see on this blue line over here, not particularly spectacular growth rate we're seeing this year. And you can see that the BRICS countries are what's holding it up there. And if you take those out and you look at the U.S.A. and you look at the 27 Euro countries, very unspectacular. And if you look forward, we're not seeing a significant change in the Euro countries. In fact, there may even be a decline, and the USA is sort of hovering along around, about 2%. Now we all know that's not really going to be enough to make significant change in those particular countries. But if this thing over here, if the BRICS, which of course now include South Africa -- I don't know whether people are aware of that but that's why it's got an S on the end, but if we see any kind of pullback in that particular demand, then I think it's going to be catastrophic for the world economy because that is the one thing that has been fueling commodities. And we're seeing again some comments by leading diversified mining companies about their concern about the pullback in demand in China and the impact that might have. So if the likes of India and China, which of course make up around about 2.4 billion of the 7 billion people we have on this planet today, then we're going to see further problems across the globe in the future. So as we finish 2011 and pause and think about what 2012 is going to hold, it's going to be interesting to see what happens. And of course, if the emerging markets continue to grow at a higher rate than the rest of the world, which does seem likely, then the composition of world GDP is going to change very significantly over the next 20 years or so. In fact, you're going to see more than 50% of GDP being generated by the emerging countries. And that is going to change a lot of the balance of power across the globe over the next 20 years. We've seen it now. If you look at the banking sector, for example, some of the banks that we're seeing today that are quite dominant in the world banking industry weren't even around 20 years ago -- it was the household name that we're all aware of. And in fact, they're now being challenged at the highest levels.
Increased fiscal demands. Nothing could be more topical than this particular issue. And these are the 4 regions that we're currently operating in: South Africa, Ghana, Australia and Peru. And we're seeing increasing pressures across all of these regions for higher imports or taxes, whatever you will, and in whatever form of additional parts of the cake that can be extracted from the industry is a risk for the industry. And I suppose the natural response to all of us if we're going to continue to sustain production in whatever industry it is, whether it's gold or whether it's copper or coal, is that the commodity prices will probably have to respond if additional taxes are going to be levied. Carbon tax is now a reality in Australia. And in fact, they have implemented the new carbon tax around $23 per tonne. So that's going to be levied as from July and that will impact our business, as Richard Weston will tell you later on when he talks about Australasia. Fortunately, the gold industry in Australia has so far escaped the dreaded rent resource tax for now. Whether that's going to be sustainable over time is going to be difficult to say, but so far, we're out of it. Ghana, of course, have announced some draconian proposals in terms of tax, which have been legislated by Parliament as recent as yesterday, I'm told. Whether or not those taxes are implemented is going to be interesting, and certainly, we're making representations to government that it's going to have a negative impact on our own projects. And Peet will talk about that a bit later when we cover West Africa. Peru has also just gone through a change in regime, but I think the collaboration between industry and government has come up with a win-win situation. And I think for now, certainly, we do have a situation where we can create sustainable mining into the future. Other countries are of course watching. And are we going to see a rush in countries outside the group, I've talked about here for additional taxes. That remains to be seen. Of course, we all know from history and analysis people have done that a nominal increase in tax rates generally results in a lower tax take in absolute dollar terms. But when you've been in this business long enough, you realize that certain of the same mistakes get made again and again, and we might be on the cusp of another era such as that.
Input cost pressures. The gold price doesn't rise by itself, I'm afraid. And while we've had the benefit of a rising gold price 3 or 4x what it was 6 or 7 years ago, it hasn't come without cost increases. Some of these cost increases are demand pull. In other words, the gold price goes up and it tends to pull other commodities with it like oil. And historically, there's been a relationship of somewhere around about 15 or 16 barrels of oil for an ounce of gold. I think we're still seeing that today. And other pressures just like cost push, where costs just get pushed up by inflation generally. We're seeing both of these particular pressures at the moment, and electricity in particular. And you can see Ghana here has had a massive rise in electricity. South Africa, of course, had a very significant rise. And I think over the future, as the population of 7 billion struggles to be supported, the cost of power, the cost of water, the cost of food are all probably going to grow exponentially over time as we try to support a 7 billion population. Social attitudes, I touched on briefly earlier. Safety, I think now is considered paramount in any operation. And that's a good thing that's happened, that safety is considered so important. And I think it's great to look back at the success in Peru last year, where 33 people were successfully rescued. And I think it shows the care, the innovation that we put in to making sure that people are safe compared to, for example, the Panama Canal some decades ago that caused so many people to lose their lives. Community activism can stop mines and we can see here an example of the Tia Maria mine in Peru that has been stopped. If you don't get community support upfront for projects, then you won't get these projects built. So whether you have the free prior and informed consent enshrined in your laws or not, the principles have to be adhered to. People want to be consulted, people want to have their say and they want to know that you're going through the proper process before you build these operations. Actually, we don't have a problem with that. And if we look at the way we built Cerro Corona in Peru, we were very successful in achieving exactly that. Growing demands for sustainability, I talked about. And we all know that the 7 billion baby was born recently, and it's interesting to look back. In 1930, the world only had 2 billion people. Today, the world has 7 billion people and we don't have enough space on this planet to support those people. Particularly the other countries like China, which have a lot of rocky terrain areas where it's not suitable for arable land or crops, et cetera. So that's a major concern that we have right now. We need 5 earths to support the people we have today. We only have one. That's going to be a major challenge for us. Quite scary.
Let's look now at the market in the context of what we've seen from a macro perspective. I'm a great believer that demand is going to drive the gold price, that the gold price is demand-driven. And if you look at China and India over the last couple of years, the significant increase in demand is coming from those 2 countries. And you can see for the first 3 quarters of 2011, India and China made up 46% of world demand. Now that's very significant because just remember, those were the 2 countries that are growing significantly compared to the rest of the world. Both countries have a strong affinity towards gold. And I think that does provide a very positive and strong message for the gold price. If we can continue to see that kind of demand for gold in those 2 countries. And as we see more and more urbanization and more people increasing their income brackets, you have to believe a lot of that extra money that will be created for them, the disposable income increase, will end up finding its way into gold. So that, in my view, is most significant underpin for the gold price.
Now remember that slide I put up earlier where I talked about how the increase in GDP is going to be more concentrated in the emerging market countries, that bares out what I've just said. Is that as further growth and income is created in those countries, we can see more of it finding its way back into gold. And there's India, and there's China. And although India has pulled back a little bit over the last quarter. On a year-on-year basis, September this year to September last year, they are still buying more gold than what they did a year ago. And that's despite gold prices having increased. Remember 2 or 3 years ago, we always used to say that demand for gold is inversely proportional to the gold price. When the gold price went up, demand in volume terms went down. What we're seeing now is that trend, in fact, has turned. And over the last 2 years, we've seen increased volumes and increased prices. Now that is a very, very significant structural change in the demand market.
Central banks, of course. Paradoxically, central banks tend to buy gold when the price goes up and sell gold when it goes down. So the fact that they're buying gold, I think, is very positive. And in the first quarter of 2011, the central banks globally bought more gold than they did in the last 3 quarters of 2010. That just gives you an idea of the significant increase that we're seeing from that particular source of demand. And another interesting aspect is that percentage of reserves made up by gold in the advanced economy you can see is quite high, but the countries that are growing, developing Asia and so on, the percentage of reserves that are invested into gold is actually quite low. And if those economies continue to grow, then conventional wisdom would suggest that we should see a further increase in the percentage of their reserves that are invested into gold.
Now of course, we need to talk about the ETFs. And just reading up on some of the latest information the World Gold Council put out literally about 10 days ago, it's interesting that the total investments in ETFs on a mark-to-market basis now make up about $160 billion. It's incredible to think that from zero in 2004, we've created a new listed vehicle that is now worth $160 billion. Now that's like 3x Barrick, for example, that we've created over 7 years. And a lot of people will tell you, well, it's all over now. Everyone's invested too much. It has to be unwound at some point, et cetera. But 2 things. First of all, ETFs only make up 1% of total global funds under management. When I say ETF, I mean gold in total and not just ETF bars, coins, et cetera. The total investments in gold measured as a percentage of global funds under management, only 1%. So I would've thought, particularly when we talked to more and more generalist funds who are looking to get a piece of gold into their portfolios, there's got to be more opportunity for that to increase over time. And I remember when we first launched the World Gold Council GLD product back in 2004, which was the first of 19 exchange credit funds that we currently have, we thought the demand that we could create here was about 500 tons. If we could create 500 tons of demand, that would be an absolute blowout. So we're now 2,200 through 19 funds, and are we at the end? I don't think so. I think there's potential for more. But let's assume that we are at the end and that maybe there's not going to be more demand into ETFs. Remember, it slightly makes up 9% of total demand. It's not the major driver of demand. The major driver of demand is your investment and jewelry. And I come back again to India and China being the principal contributors to increased demand. And if you believe that the gold price is going to be demand-driven, then you should believe that if they continue to invest in gold, that's going to be the driving influence. Of course, we have a benign interest rate environment, both in the U.S. and globally right now, so that is supported. But even if interest rates go up, it's not going to change the investment behavior of people in China and India. They're going to continue to buy gold even if there are some liquidations of the ETFs.
How has supply reacted to a 4 or 5x increase in the gold price over the last 6 or 7 years? Well interestingly, if you look at the major producers, top 8, which makes up about 40% of the sector, you might be surprised to see this, but there's been a 1% compound annual growth in primary gold supply over 6 years. Now we all studied economics when we were back in college and university, and we all thought that if prices went up, then supply went up. And prices have gone up 4x. Where is the extra gold? And I remember going into investment conferences as I've done in Gold Fields for the last 14 years, where everyone's productions over those 14 years was going to the moon. But where is it? What's happened? Well first of all, a lot of those projects didn't go. And secondly, a lot of those projects that did go, in fact, replaced and didn't grow their existing portfolios. So it's interesting to see that the supply side from the gold producers is not responding as much as you would've thought. And that's why recycling has increased. And there's a massive drive, gold traders are going around trying to buy little old ladies' jewelries in the U.K. and et cetera, to try and make up for the deficit to meet the incremental demand. Now of course, if you read everyone's reports over the next 5 to 10 years, everyone's production is also going to increase significantly. I think let's see what happens. It's going to be very interesting, particularly against the backdrop of a lot of the issues we just discussed about social activism, fiscal taxes and the cost of building projects, which has increased exponentially as well.
Discoveries. Now what this graph shows you is the size of discoveries over the last 30 years or so, and the blue bar in particular is the 10 million-ounce plus deposits. And you can see how they've dwindled over the last few years. And the yellow line shows the grade of discoveries. And you can see today, people are finding ore bodies that are maybe a gram. If we find a gram ore body today, that's about the average of what you find in compared to what it was 30 years ago. You were finding 8- to 10-gram ore bodies. The cost of discovery on a per ounce basis is also rising significantly. So finding these deposits is not easy. I think the message I'm giving you is gold is becoming a scarce commodity. And the cost, of course, of producing an ounce of gold has increased significantly. And I don't think the industry, in fact, has communicated this information as well as they should have. Particularly when we all stand up at investment conferences and we talk about our cash costs of $300, $400, and then in fact the governments say, "Well, then you can afford to pay more taxes." What people really need to look at is what is the all-in cost of producing an ounce of gold? And here, you can see, by the September quarter, and again, this is looking at the majors, the cost is around about $1,300 per ounce, all in. That's what it is. People don't know this. And it's interesting reading a letter that was sent into the Financial Times in London about 2 or 3 weeks ago. Someone said, well, gold isn't above all because the cost of producing an ounce is like $400 an ounce. The gold producers are making massive amounts of money, it's not sustainable. Well, it shows even people reading those publications and sending letters in don't have a good idea of what's really happening out there.
And there it is. For the September quarter -- and this information has been prepared by JP Morgan as you can see at the bottom here, verified by us. And you can see Gold Fields has got an NCE. NCE is Notional Capital -- Notional Cash Expenditure; operating costs, brownfields exploration, capital expenditure, the all-in cost in other words, of producing an ounce of gold. And while we focus on that, that's the best proxy to determine whether you're going to make cash flow or not. And you can see over here, Gold Fields, $1,200 an ounce. But the peer average for the top 8 companies in the sector is $1,371. That's what it is, all-in cost. And we can make this information available in more detail for people to see if they want to. But that's what it is. Then, verify it yourself. So I think it shows you, first of all, Gold Fields is pretty well positioned compared to everyone else and that the all-in costs are significantly more in producing an ounce. And this is the kind of information that governments around the world need to see to get a better idea of what the gold market's doing. So the conclusion I'm driving with all of this background is that the fundamentals for gold continue to be positive. And this is a graph that we reproduced courtesy of Paulson & Co., which I think is one of the most persuasive graphs and I think emphasizes this issue about fiat currencies. You look at the increase in the U.S. monetary base over the last few years, that's staggering. And the question you got to ask yourself, is that the beginning or is that the end of the beginning? Are we going to see a lot more value in the future? And if that's the case, then I think from a sentiment basis, gold should continue to be underpinned. The fundamentals we've discussed with you, supply is fairly subdued, demand is good, central banks are buying, so the fundamentals are good. So whilst we don't give predictions on the gold price, we do believe that the positive factors significantly outweigh the negative factors. And I'm pretty cautious by nature, but I think it's time for us to believe in our product. And it's time for us to mold our strategy accordingly.
Right. Let's talk about Gold Fields and what that means for us in terms of our strategic framework. Our vision is to be the global leader in sustainable gold mining. Leader means we want to be the best at what we do, not the biggest. And that's what we strive for. We want to make a good margin from our existing assets, a 25% margin after capital expenditure but before taxes from our existing assets. That's the minimum we want to make. We want to continue replacing reserves and adding life to our existing operations. In other words, optimize those assets so that we create a strong foundation to help finance growth and finance dividends. We want to continue to reengineer our business from the pit right through to the plant and make sure that we get further optimization in everything that we do, right through the value chain. From a growth side, we want to get to 5 million ounces either in production or in development by 2015. And we've been a bit loose on that because we don't know whether we're going to have all these projects in production. Some of them are going to be in the process of being built. How long is the permitting going to take, how long is it going to take to build. But we want to have these projects in development, which means the bricks and mortar are actually on the ground and being placed. We want to continue to diversify the portfolio. We're not averse to M&A, but it's not going to be the core strategy for growth. And Tommy will share with you later the costs of acquiring ounces versus the cost of discovery and building mines yourself. And he's very persuasive which way you're going to go, particularly in a world where it's very difficult to find ounces. We want to grow our production on a per-share basis. Obviously, we're not keen to dilute shareholders. We want to try and grow this company of our existing capital base if possible. And we want to increase our margin per ounce. It's not just about ounces. And when I talk about the 5 million ounces, if we couldn't add the 5 million ounces in a way that improves the overall cost position, we'd look at a lower target. So getting ounces for ounce's sake is not the game, it's getting more profitable ounces. And sustainability is integrated into the business model, which starts with safety. This business is all about people, by the way. And the one thing we've decided as an executive unanimously is that, that is the most critical input into our business, is the right people, doing the right things and getting the right results for the company.
So here's where we want to get to. We're currently at 3.5 million ounces. We want to get to 5 million ounces in production or in development by 2015. And we have 6 kicks of the can, if you like, to get us there, 6 interesting projects: South Deep in South Africa; Chucapaca in Peru; the Damang Super Pit in Ghana, which is the Branfield expansion; the Yanfolila Project in Mali; Arctic Platinum in Finland and the very exciting newer addition to the portfolio, Far Southeast in the Philippines. Now I think 5 years ago -- 3 years ago rather, when we talked about our strategy of 5 million ounces, I think in all honesty, we didn't really have the pipeline in front of us to do it. It was a strategic objective and I made that point at the time. Today, we've got the projects to fill the pipeline. And here is the team, and most of them are fortunately with us today. Here's the team that could help us to do it. We've got a great team, they've got the skills, and I think they can deliver this company to new heights over the next few years.
Let's talk about some of the achievements. When we did our last Analyst Day, we set out a number of objectives that we wanted to achieve. I'd like to go back and reflect on how we've done against those promises that we made. Material infrastructure rehabilitation at the South African operations. We said there's a lot of work to do to catch up on some of the maintenance that has been deferred over the years. We've caught up significantly on a lot of that maintenance. Now we've given a green and an amber block here, which means we haven't completed everything, but we've completed a lot. We've actually stopped one of our major shaft systems for 6 months, and that's one of the first things I did getting into the job, which was a big thing to do, but we had to do it for safety. We've caught up almost 100 kilometers of additional support in the tunnels underground, which has really paved the way for creating sustainable operations over the next 20 years.
Business Process Re-engineering over the last year or 2 has delivered over $1 billion of saving to us. And we talked about cost initiatives before, that the work the team has done over the last 3 years is the best that we've ever seen over many years. And you can see that when you look at the costs. If you look at the South African cost base, and I hear more and more when I go in the road, particularly in the U.S., the South African costs are rising so much. If you look at September 2011 cost base in South Africa and rand million terms compared to September 2010, it went up only 2%. 2% despite the national utility increasing power by 27%, despite 10% increase in wages, the team have delivered. The team have done a fantastic job in containing their costs.
We think we've done better than the industry. If you look at nominal inflation in the industry, you're looking at around about 10% per annum over the last 5 years or so. And in fact, some fund managers are projecting that, that's going to be even higher going forward. So we've substantially undercut the inflation that we've had to face. Owner -- and Paul will show you some numbers later when he compares on an index basis, costs in the different countries we operate in and how that moves on a relative basis. Owner mining conversion. We've converted to owner mining at Damang, at Agnew and at the St. Ives underground operations. And we're in the process of completing owner mining conversion on the open pit operations at St. Ives. So we're almost there in terms of completing that target. I talked about a 25% NCE margin. We've achieved it in the last quarter, we were 29%. You might say, well, the gold price has got you there. The point is the gold price doesn't move by itself. We've managed to increase the margin despite the input cost pressures we faced at the same time the gold prices gone up. We've replaced and grown our reserves at the international ops. We've had a much greater focus on retaining and attracting people. We devolve a lot of the operational and management decisions to our regions, and slimmed down the corporate structure as well. So all of those have been achieved over the last 3 years. NCE margin, 3 years ago, we weren't making any. Today, we've surpassed the 25% target that we set for ourselves. We're now at 29% from the existing assets. And this is critically important because for 2 reasons: One, it's going to help us to finance the growth pipeline in the company, and two, it's going to help us to fund dividends. And we're keen to make sure that shareholders can enjoy some of the benefits of the high gold price in the form of improved dividends if we can continue to replicate this performance going forward.
Now we talked about replacing and growing reserves at the international ops. And this is a very interesting slide, and as we go back 10 years and look at what we had, this is what we had at the international operations. We had 2.1 million ounces in June 1999 at Tarkwa. That's all we had. What have we got today at the international ops? 16.5 million ounces. And over that period, we've actually discovered 22.5 million ounces at a cost of $33 per ounce. This is growing and extending the life of our existing operations. And in fact, over the last 3 years, we found about 40% of that. So about 40% of that 22 million ounces, as you'll see as we go through the individual presentations, is what we found over the last 4 years, particularly as we've stepped up the exploration spend of the existing operations. Now when people are buying reserves at $400 to $500 per ounce, I think this is great business. And it's enabling you to really leverage the sunk capital that you put into the infrastructure into the existing mines that we built. And we want to continue to do that. So growing the company, we have diversified further over the last 3 years. And we've really created a global company today. I think 3 years ago, I would say well, "We have an aspiration to become a global company," but we really were very exocentric. With some assets offshore today, it looks and it feels like a global company, and you'll see from the portfolio split. We've got that target now backed up by projects. The 5 million ounces is now supported by projects. And we, as an executive, have often asked ourselves, "Are we doing the right things? Do we have the right strategy?" And we're convinced now that if we can execute what we have ahead of us, the value creation can be very significant. I was very pleased that we were able to buy out minorities and consolidate our position in our existing assets in Ghana and Peru. And that's not withstanding some of the tax changes that we're seeing there. I think over time, we will overcome those issues. We're very excited about the option to acquire the 60% interest at Far Southeast, and Tommy will talk more about that. And the South Deep project has made very good progress. If you look at the fixed infrastructure development over the last 4 years, there's been some amazing work done. And we've increased our production by 50% over 2 years. Peter will share more of that with you as well. And here's what the international portfolio has done. Effectively on an annualized basis, we were about 1.2 million ounces a year back in 2008. And if we look at our annualized production, up to September this year, we're close to 2 million ounces. So we've added something like 650,000 ounces over the last 3 years. And it's not just adding ounces for ounce's sake. Look at the margin. The margin has increased significantly. Now when you saw the overall margin of Gold Fields' portfolio was 29%, bear in mind, the international margin is 40%. So it tells you we're getting more and more production at a lower cost, which is improving the quality of the portfolio progressively over time. And we'll continue that strategy.
Now here's an interesting graph. If you look at the South African gold industry overall, this is not us. This is the gold industry over the last 3 years. And you can see it's declined significantly over that period. And that's not a big surprise for a lot of us because we knew that the grades were declining in the country, we knew that some of the mines were becoming deeper, further away from the stations, from the shaft infrastructure. And we've obviously been impacted like everybody else. But what we've been able to do is despite that, between 2008 and 2010, despite having to absorb those drops in production which were endemic in the South African industry, we've managed to nonetheless increase the overall production in the portfolio. And we've added better quality ounces as I've mentioned earlier. And we believe strongly, and Peter will talk about it too, that we can allay some of the decline in South Africa. We've got some strategies, which I believe are better than what we've ever had to allay or certainly slow the decline in production in South Africa. And Peter will talk more about that as well. So there it is. You can see 2008, that's what we had. 62% of our production was from South Africa, overexposed. It's not that we don't like South Africa. We're putting $1 billion into South Deep. And if we didn't like South Africa, we wouldn't do that. But we don't want to be overexposed to any particular region. So you could see today, this is what we're looking at, 49% from South Africa. So over 2 years or so, 2.5 years, there's been a massive change in the mix of production from South Africa to where it is now. And we're, in fact, now below 49%. And we're well on the way to achieving or even surpassing the objective we set for ourselves by 2015, with 1 million ounces coming from each of the regions and then 2 million ounces from South Africa. Here's the projects we had in 2008. So the project pipeline and the coveted projects looked pretty bare. We didn't have a lot ahead of us. This is what we've got today. The Chucapaca project in Peru, where we've gone from nothing in 3 years to 7.6 million ounces of resource, of which 7% is already in the indicated category. And we're very close, we believe, to getting a feasibility study completed for that project. In Mali, we've consolidated our position and we're making very good progress to getting our starter project going. In Damang, we've got a wonderful opportunity to increase production to triple the size of our existing Damang Super Pit and drive economies of scale in that particular area. South Deep, we're making good progress on building up to our target of around 700,000 ounce run rate by the end of 2015. The Arctic Platinum project in Finland continues to show promising results, particularly as we're looking at new metallurgical processes to produce metals on site. And Tommy will share with you some of the good work we've done there and some of the encouraging results. And then of course the Far Southeast project in the Philippines, which, in our view, is a very, very significant asset that should in all likelihood be added to the portfolio when we come to exercise the option sometime in the first quarter of next year. Tommy will cover these in a lot more detail.
Securing our future. Safety underpins everything. And that is the core value in the company and will continue to be. We've managed to convert all of our old order rights in terms of the new mining charters in South Africa. That's all behind us. And we're very proud of some of the recognition that we have achieved for the work that we're doing on really integrating sustainability into all aspects of the business, where each of the regional heads you're going to hear from today are factoring it into all of the things that they do. And we've received a number of awards across the world. I'm not going to go through all of them, they're in your pack, but we're very pleased in particular about being the top out of 300 companies in the BRICS competition in terms of our information that we give on carbon emissions disclosure. Fatalities, I've talked about. 43 was the number for the financial year to June 2008, shocking and unacceptable. We've got that down to 18 year-to-date, still shocking, still unacceptable, but the trend is improving. And I must say, a lot of the work that's been done over the last year in particular, where we look into really engineer out risk, improve the safety environment underground and investing money into protecting our people. I'm sure it's going to yield good results for us in 2012 and beyond. And the next big objective is to get the hearts and minds, to get people to believe that we can operate safely. I must say 3 years ago, when I went underground at the operations in South Africa, I didn't get the sense that people felt they could operate safely. Today, I'm seeing success story after success story where people in particular areas have operated even without an injury for months and months on end. That was unheard of 3 or 4 years ago. The Beatrix Methane Project, lastly in South Africa, I think is a great example of sustainability work where it's the only carbon emission project in the gold industry and the only one in South Africa that is fully certified. And that project is now flaring methane. It's creating a much safer environment underground as we collect that methane and bring it to the surface, which is very important to not leave it underground. And at the same time, it's taking lemons and making lemonade and getting income for that particular project. And we've received recognition again at the COP 17 conference in Durban, South Africa. And we showcased this particular project.
And I think on that note, I'm going to hand over to Tommy McKeith, who's going to take you through our philosophies and also the work that he's done to take this wonderful growth project portfolio we have to the next level. Thanks, Tommy.
Thomas David McKeith
Thank you, Nick. It's always my pleasure to come and talk to you about our maturing growth pipeline. And as Nick just said, back in 2008, the target we set ourselves of 5 million ounces in production by 2015 had no meat to it. And really, what I'd hope to show you today and demonstrate is that we've now filled our portfolio with projects capable of producing that target for us, as well as setting a base for a future way past 2015.
So as I said, our immediate target is the 5 million ounces in production or development by 2015. Importantly, we have to do that on the basis of stable production. So we've got to continue to replace and grow the reserves at our mines, which we've been successful at doing. And we've got to continue to support the regions where their growth objective is through greenfield exploration. Back in 2008, we had a $40 million exploration budget. Next year, we're looking at spending $110 million. And that's our commitment to growing this portfolio. We're not just planning to grow the portfolio for the sake of growing it. The objective is to diversify both geographically and operationally. That is we want to move, and for that reason, we're spending all of our greenfield effort outside of South Africa in operations that would not be deep-level, labor-intensive type operations. It's important for us to bring in new projects that are better than what we currently got. We're looking for higher quality projects. We like to measure that on a NCE margin per ounce. So basically, qualities that are -- quality ore bodies that are able to bring in projects and mines into the company that will improve our margin per ounce. And we're very, very focused on growing on a per-share basis.
So for that reason, we believe that we need to follow our discover and build philosophy, rather than a pure acquisition philosophy. As we said, our mantra is no M&A heroics. That doesn't mean we won't do M&A. That means we're going to be very disciplined, and we're going to be opportunistic. And we're going to make sure that when we do anything in the M&A side, it's going to be on a value-accretive basis, and we're going to grow the company on a per-share basis.
The discover and build has got challenges. As Nick has already said, we've got a commodity-constrained world. Gold is one of those commodities that's getting more and more constrained. I've spoken about it a lot. And in fact, Nick showed you a couple of graphics about it.
Discoveries are declining, notwithstanding ever and ever more investments in exploration in gold. So it's getting difficult, and the competition to buy quality resource ounces is increasing. That's causing the price to go up.
And with that, the other commodities are all blooming at the same time. That's causing capital cost inflation for us to build our projects. And the scarcity of skills, the retention and attraction of skills, when everyone needs those same skills, is difficult. And we are all facing significant delays, and service industry can't keep up with a boom that's going on, and we're seeing drilling assays, engineering consultants all holding us back. Then you add with that all the other complexities that Nick has already spoken about, the governments and the communities asking for more and demanding more of us, regulations all the way from our listing authorities to environmental conditions on the ground are becoming more and more onerous. This is causing increasing delays. So it's difficult to -- it's expensive and difficult to build projects.
But if you compare that to buying projects and buying resource ounces, what I've got here is basically acquisition cost per resource ounce of developing companies. That's companies without production. So it is really just trying to look at what the resource ounce would cost to discover it or to buy it. And you can see back in 2000 to 2003, there were 3 deals for developing companies in this database that we've got at about $60 an ounce per resource ounce.
Now if you look at the more recent data that we've got here, 2008 to 2011, 11 deals, a lot more deals. Companies are becoming more and more aggressive in buying resource ounces, but you can see the cost now is closer to $200 an ounce. And I think you can see where it's going. If you compare that to what we've added in ounces last year, 2010, at 3 of our projects, we added just over 10 million ounces for about $8 an ounce in resource, and we paid about $5 an ounce to acquire some of those projects. So for a total of $13 an ounce, we're adding resources that other people are buying for over $200 an ounce.
If you look at production, these are now acquisitions made on production companies. Back in 2000 to 2003, you are looking at the -- this is our reserve ounce now, you're looking at about $150 an ounce, is what the acquirers were paying. In the 2008 to 2011, it's closer to $500 an ounce. And again, I think the trend is fairly obvious. So what we put here is just an estimate of what we think it's going to cost us to explore, study and build our projects. And of course -- and that's about $130 an ounce, and you can see the gap between if we went out and bought that production ounce versus building it ourselves is quite big and compelling.
Of course, there's risk in us getting these projects off the ground, and we aren't going to do them in that cost, and we're probably going to take a bit longer. But I think we've got a lot of room to play with. And if you're buying ounces in other companies, you take a lot of risk as well, you don't know what you're buying mostly. So for us, it's a compelling strategy, and it's one that we've been employing.
To that end, we've consolidated our exploration and our capital projects group into one group, which is now called the Growth and International Projects group. And the reason for that is that we can have an increased executive focus on this discover and build culture that we're building in Gold Fields. We want to have seamless management of the growth right from the discovery all the way to handover of mine to the operating regions. And we want to take the discovery culture that we already have in the company and combine it and grow it with the construction culture so that we can basically repeatedly and reliably grow the company through this discover and build method.
Our task is to build these mines that I'm going to talk about now but, more importantly, to set the platform at post-2015. We would like to always see one mine in construction within Gold Fields going forward. Our track record of delivery is building. Nick has already spoken about the -- our reserve growth at our international operation. We've done that at just $33 an ounce.
Last year, I've already said, we added 10.5 million ounces for about $8 an ounce of resource. We've now got a maturing pipeline that I'm going to talk about in a lot more detail that is capable of delivering into that 2015 objective we set ourselves. But even more importantly, we've got a developing pipeline. We've got the next projects that are going to become part of our maturing pipeline in the future so that we're going to be able to continue to build and grow this company reliably going forward.
Next year, we're looking at drilling about 660,000 meters in both our Greenfields and near-mine explorations. That's nearly double what we're estimating we're going to complete this year, 370,000 meters. So the drilling activity in Gold Fields is picking up, and that's how you add resources, that's how you add value for shareholders.
You've already seen this graph. I think what's really important about it is a lot of the people have missed the fact that Gold Fields has actually added over 20 million ounces through exploration at its international operation over its life. I think that's a phenomenal effort at $33 an ounce. As we add these Greenfields projects, and we add those to reserved ounces, I'm quite convinced that number is going to drop significantly, that $33 per ounce, as we add these new projects. So again, that's just adds to, in my view, the compelling nature of the discover and build philosophy.
You've seen this graph already. These are the projects that we're not going to talk about. All the ones in blue will be the ones I'll talk about. But really, what you can see is they're all supporting the regional growth objectives. Here in South America, we've got the Chucapaca project that's in feasibility already, and we've got 2 of our new expiration projects. One in Chile, Salares Norte; and one in Argentina, Taguas. And these are the next projects that are hopefully will come up behind Chucapaca.
In West Africa, we've got the Damang expansion that we'll talk about, as well as new exploration projects, Yanfolila and Kangare in Mali, which are hopefully the next generation that you'll see there.
Australasia has got Far Southeast, which is really massively exciting project for us, and it's one that we're starting to get our arms around and starting to understand. I'm going to go through all of these projects in some way or other and hopefully give you a lot more information.
Just under the timing, and this is why we believe we're going to meet the 2015 target. You can see I've listed here all of the projects. In blue is the projects already in construction. Obviously, South Deep is already in ramp up. In green is the exploration and study periods that we're looking at. In gray is the development period, which is basically a development decision at the end of exploration which is largely a feasibility -- a definitive feasibility study. We'll make a development decision. That development decision allows us to go and do land acquisition and allows us to go and do early construction activities, and it allows us to go in and order long-lead items.
So we're looking at development decisions on all of our projects before -- during 2013 or before, and construction decisions in 2014 or before. So if you add up just the minimum of each of these ranges that we've put up there, we'll easily go over the 1.5 million ounces that we need to add to our current 3.5 million ounces to get our target. So we're becoming more and more confident that we have a portfolio that can deliver that production target.
Okay. So moving to Chucapaca. As Nick already said, we discovered that in September 2008 with our partner, Buenaventura. And since then, we drilled other resource, and we're hoping to complete a feasibility by the mid next year. That's a phenomenal feat in a project in the high Andes of Peru. You can see there some of the drilling activities and what it looks like. It's in Southern Peru, so it's quite distant from our Cerro Corona mine. So there's no physical synergies, but we certainly are benefiting from our operational knowledge in the country and how to deal and build projects. You've got to remember, we built Cerro Corona 3 years ago very successfully, and that's one of our best operating mines. And we're using and benefiting all of that experience in bringing forward this Chucapaca project.
The areas of the joint venture is that green -- those green blocks shown over there. It's a -- we own 51% and operate the project, and our partner Buenaventura owns 49%. It's a new style of mineralization, gold mineralization, in Southern Peru, and both us and Buenaventura recognized that early, and we moved quickly to consolidate a large land position around the joint venture area to make sure that we could capture any of the potential that we saw in the area. And you can see our position in red, and we also have a bunch down here, and then Buenaventura's tenements in blue. So between us, I think we've tied up the majority of what we would see as a prospective area.
Since that 2008 discovery hole, we've drilled 100,000 meters. And we've declared the resource in September this year of 7.6 million ounces gold equivalent. This is a gold, copper, silver ore body, but it's -- about 80% of the after recovery metals are -- is gold. So it's a gold deposit. You can see here the blocks shown in different colors are graduated on gram per ton gold equivalent, and the sort of pinker colors are the high grade. And you can see there's an apparent plunge here towards the West. So the ore body is getting deeper towards the West, and our resource is a bit constrained. So that green shale over there shows you the constraint of our resource, and there's already significant blocks outside of our resource model right now, showing you that there's a lot of potential to extend this resource model -- and resource and hopefully one day mine.
I don't think it will be from the open pits. I think it's most likely that this shale that you're seeing here is at the maximum open pit. It's already big enough. It's about 1.3 kilometers in strike and nearly 450 meters deep. That potential that we see, and we've got some drilling up to 200 meters to the west of the pit, with some pretty interesting results, 62 meters at 5 grounds. I think will demonstrate that there's definitely potential in the future for an underground operation here.
That's our resource statement. As Nick already said, about 70% of it is indicated. Since the resource statement, we've drilled another 30,000 meters into the resource. So a large portion of the inferred we'll probably convert when we next put out our resource statement. And we're completing a resource right now for the feasibility study. That will be the basis of the feasibility study. And when we deliver the feasibility study, I guess it will come with a much larger indicated resource, and maybe we can convince them even the reserve.
It's very, very robust. The current resource is at 0.54 gram per ton gold equivalent cut-off grade. At that cut-off grade, we're looking at -- those tonnage is 133 million tons, at nearly 1.8-gram gold equivalent. All you do is move that cut-off grade to one. We dropped tons significantly to about 80 million tons, increased grade significantly and, importantly, our mental content does -- only drops about 13%, while the tonnage drops about 40%. So that shows you, I think, quite graphically the robustness of this mineralization and the ability for us to be quite flexible in how we go about mining this.
I mean, I'm a geologist, so this is the stuff that excites me. When we discovered the Canahuire deposit on the Chucapaca tenements, which is just a small part of that bigger tenement block that I showed you, that attracted all of our focus. We needed to drill 100,000 meters to go and get this into the status that we have now so we can complete the feasibility study. But we knew and we recognized a number of other targets similar and of different style within the area that we haven't been able to explore. And specifically, there's some really interesting targets beneath the Chucapaca dam and what we call the Katrina's that come off the Chucapaca dam. But one that really interests me is the one just to the west here of Canahuire.
Canahuire is this breccia body here, the mineralization is on the flanks of the breccia body. And what we've seen in our geophysics, as well as some of our drilling, are signs of the similar breccia and a similar style of mineralization, and the geology setting is exactly analogous. So this is only about 2 kilometers to the west of Canahuire pit. So as soon as we are able to get back on the ground and start drilling again in 2012, we'll certainly -- we're busy putting together a program to drill these other targets. If I was a betting man, I'm pretty sure we're going to find a lot more ounces here.
Okay. So where are we with the feasibility? These are indicative numbers. We're in the middle of the feasibility. We're going to finish the feasibility mid next year. So this is where we're at, at that moment, just to give an idea of what we're thinking. There is the resource that we've already spoken about, which is the resource that we're using. The mining inventory that we're applying in our current work assumes a lot of the inferred materials included. Hopefully, the drilling that I mentioned, the 30,000 meters, will convert a lot of that before we finish the feasibility study. So we're looking at about nearly 7 million ounces in the inventory at about 2 grams gold equivalent. Strip ratio is about 5.8 of that pit. We're just looking at conventional open pit mining, very similar to what we're doing at Corona. We're looking at a 30,000 tons a day throughput. It will be a gravity floatation and flow CIL on the tail of the float. And we'll have a very high-grade copper concentrate that -- we'll have very high-grade gold with it as well as part of that -- the products.
Our recoveries, these are the ranges that we're looking at right now. Those are not optimized. We're right in the middle of thinking about how to improve those, so I would be hopeful that we'll be coming up somewhere to the mid to the top end of those ranges by the time we finished optimizing. And that would give us annual production rates of between 400,000 and 500,000 or 400,000 and 600,000 ounces per annum. Water in this part of the world, if you recall that diagram -- or the photo that I showed, is the biggest issue. It's very connected to the community. It's a dry part of the Alta Plana in Peru, and water is at a premium. We're fairly fortunate about 14 kilometers south of us is a fairly significant river. And what we're looking at doing is building a reservoir on that River. That will be able -- it's going to be about a 13 million cube reservoir. So that would be capable of producing all the mine water that we'd need, an equal amount of water to the local community and have enough water to make sure that we continue the downstream flow of the river. So far, the community has been very supportive of that idea, and we are currently in the permitting stage of that reservoir.
Other infrastructure issues are well in hand. There's a power from the grid about 50 kilometers from us. So we're looking at getting a power supply in through that supply, and we've got a number of options for our tailings facilities. It's a fairly -- well, those are high up deposit. The topography is fairly straightforward, and there's a lot of very nice areas. Initially, capital costs, we're looking at about $1 billion to $1.2 billion range. Remember, all the numbers I'm speaking about here are 100%. So 51% of this is attributable to Gold Fields.
Operating costs are $25 to $30 per ton, similar kind of costs to what we're seeing at Corona. So I think if you see -- if you -- when Juan shall talk about Corona, I think you can kind of think quite a lot about how the numbers looked in this project. The tax rate, Juan shall talk a lot more about that, I guess. As we've seen an increase in tax rate and what we're modeling right now at this range which includes all the royalties and kind of gives us the flexibility depending on our profitability at this operation. And what we're hoping for is the feasibility to be completed mid next year and then the development decision fairly soon after that. And the development decision will allow us to start construction on the dam, and once we have that permit in place, allow us to do -- order long-lead items. And we're currently already in negotiation with the communities to buy the land. So this project is really -- it's ramping up. It's robust and, I think it's got a lot more exploration potential that we'll be addressing during 2012.
The Damang Super Pit in Ghana, Nick already said it, the changes mooted in the tax environment in Ghana are likely to affect this project. So everything I'm going to show you here are pre any changes in the tax environment. And I'm not kind of sure what -- we're still trying to find out what the tax conditions are going to be eventually. And depending on what they are, this project is going to look different to what it is here for sure. So what -- in 2010, December 2010, the Damang Pit itself had a reserve of 1.1 million ounces, and there were other reserves on the property of 0.8 million ounces, for a total of 2.1 million ounces. The geologists recognized that beneath Damang there was potential to increase -- to see the continuation of mineralization beneath the pit, as well as the 2 adjacent pits, Huni and Juno. And to demonstrate that, they did basically a cut and paste. They took the grade control model and they stuck beneath the current model and say what would that work is a mine, and we floated a whittled pit on it, and it did. And we got a conceptual model that showed us it was very robust. So we said, okay, we need to go and test that, we need to go and put in a couple of holes and make sure that it does continue beneath the pit. And we did a program of 107 holes for 25,000 meters, and that showed us that it was extremely robust. The model did continue at depth. And we were able to put out an exploration target of 80 million tons for 4 million ounces of gold for the Damang Pit. So that's already above -- that includes the 1 million ounces, so that's 3 million ounces additional.
Since that target statement, we've gone and started our resource delineation drilling and, in fact, we finished 157 holes for 38,000 meters. And hopefully, that's going to be sufficient to get us some indicated resource with our geological understanding. We finished -- we did this all in one year. So in this year, we built the concept, tested the concept and then went and did the resource delineation, which I think is a phenomenal feat, and the guys in Damang, the mining guys specifically, to have 6 rigs in the bottom of their pit while they're trying to produce gold, was a phenomenal feat.
So this diagram here shows you a section through the ore body and some of our Proof of Concept Drilling. This is the current pit. This outline here is the -- that conceptual pit that was based on the current pace of the grade control model. And you can see we've drilled far in excess -- so far deeper than the conceptual pit, and the mineralization continues at depth. So it continues way past where our pits have optimized. So I think there's potential to either expand the pit further or look at some sort of bulk underground mining in the future.
The mineralization is robust. It's 350 meters of just over a gram bulked out. But if you look at the individual intersects down the bore hole, it's showing us exactly the same type of mineralization that we see in the pit at Damang, same grades and widths of the load. So looking longitudinally now at -- looking from south to north over here with Huni in the North, Juno in the South, this is a Proof of Concept Drilling and some selective results of it. I'm just showing you that basically that's not a one-off there. There's a number of similar wide and robust mineralization. Each of those we could split up into the individual loads at higher grades.
You can see, this is 3 kilometers long, and at its deepest part, it will be 500 meters deep. That's why we call it the super pit. It might not be as big as some other pits around the world, but certainly our super pit. This is flipped around, so north is now to the left of the picture. But really this shows you more graphically, I guess, the effect of what we're talking about. The yellow shell here is the current pit, that's where it is today. The green is the extra million ounces reserve that we're looking at in the December 2010 reserve, and then the purple is the conceptual pit that we put beneath it.
Now remember, our drilling from the pit floor went way deeper than the conceptual pit, and the mineralization continues beneath it. So again, this is a -- we're looking to complete our pre-feasibility during the first half of 2012. We're right in the middle of the pre-feasibility. We've just finished the resource drilling, completing the resource modeling. The target that we've got on Damang itself, the Damang and Huni, Juno pits is 4 million ounces, and that's hopefully what we're going to be able to put into resource soon. That's inclusive of the 1 million ounces that's currently in reserve.
And then if you look at the other nearly 1 million ounces in the satellite pits, our pre-feasibility is currently looking at a conceptual inventory of about 102 million tons at 1.6 grams for about 5 million ounces. So that's what we're looking at currently, and we'll hopefully be able to justify that with our drilling and our pre-feasibility work. Strip ratios are about 6 to 8:1. Again, conventional pit -- remember, this is an operating mine. So for us, this is a very low-risk opportunity. We're currently operating; we've got a number of the permits in place; we've got a number of the -- a lot of the infrastructure in place. We know the character of the ore body, and it's just doing more of the same.
Importantly, we think if we can prove out that resource statement that we've given or that resource target we've given ourselves, we'll be able to add another 5 million tons of capacity to the 5 million tons that's currently there; refurbish the 5 million tons there and have a fairly productive 10 million ton per annum throughput.
Standard CIL, very good recoveries. I think the metallurgical test work we're doing now for the pre-feasibility is showing us that we might have some opportunities to even improve the recovery of the current plant now that we understand a bit more. And we're looking at annual productions of about 400,000 to 500,000 ounces per annum. So it will be additional to what we currently do, the 200 to 240 we currently do. The capital that we'd be looking at is somewhere between $500 million and $700 million to add the 5 million tons capacity and refurbish the existing 5 million tons, and bring in the mining fleet that we'd need. And we're looking at operating costs in the range of $35 to $45 per ton. That's the Ghana tax rate as it was. This in under review and, clearly, if this changes significantly, it will change our response to this project and depending on how far changes, how far we'd have to change this investment, I'm not sure at this point.
Thomas David McKeith
Thomas David McKeith
Thomas David McKeith
Yes. We already have started the early part of the permit application, yes. I guess, right now, as I say, with the pending tax rates, we are sort of holding back and saying, well, let's get the tax rate settled before we know what we're going to do. We can't go ahead with this scale of project, with the tax rates that they're proposing. Far Southeast. Okay. This is the big daddy. It's in Australasia region. What it is, it's a gold-copper porphyry deposit. It's in Luzon Island, the Northern Philippines, about an hours flight from Manila, the capital. It's up in the Cordillera, which is a nice tempered climate of about -- sort of about 1,000 to 1,500 above sea level in a very nice mountainous terrain. When we first looked at the project, there were about 88 holes already drilled into the porphyry that defined a very high-grade copper-gold porphyry. That attracted our attention. It did. We then signed an option to acquire 60% with Lepanto Mining, which is the company that owns it. And it's been mining in that area for 75 years now above the ore body in various operations. So there's a lot of existing infrastructure. There's an existing tailings, so there's a lot of capacity to expand it, and there's a very supportive community. The community has been involved with mining for 75 years in this area. The catholic church, all of its parishioners are miners. So it's a very supportive community around this operation.
So we signed the option agreement back in September 2010. At that point, we paid the option fee plus a down payment of $54 million. We made a second down payment in September 2011 of $66 million. That was after doing a Proof of Concept Drilling program to confirm what we believed was there for the 88 holes. So obviously, we liked what we saw, so we made the second payment. And now final payment of $220 million is due in quarter 1 2012, but it's subject to getting an FTAA license, which might take a little longer than the quarter -- the end of quarter 2012 -- quarter 1.
As I just said, it's a copper-gold porphyry. This pink outline here or this pink body here is the outline of the porphyry deposit. It starts about 500 meters below surface, so it's definitely an underground mine. The area was drilled with 88 holes sort of largely through it and confirmed a very high-grade core part of the deposit. What we've done since then is we've drilled from the 700-meter level, and we've drilled across the deposit to confirm that earlier work and to expand it. And what we've done now to try and break this project into sizable chunks and to understand it is we're looking at delivering and delineating this resource target down here of 900 million tons at just about 0.8 grams of gold and 0.5% copper. At about a 0.8 grams gold equivalent cut-off. Just between this area here, between 200 -- sorry -- 350 meters above sea level and minus 200 meters below sea level, so about an area of 550 meters vertical extent. The ore body is open in all directions. It's open at depth, it's opened in all directions. That's big, 52 million ounce equivalent in just that exploration area that we're looking at.
If you look at these blocks here, they're colored again on gold equivalent. The warmer colors are the high grade. You can see that high-grade core sitting in the middle, and that was delineated by that earlier work. Our drilling coming across it confirmed largely that high-grade core. But what was really important for us is it also confirms significant lower grade mineralization at the border of that high-grade core, as well as evidence of other high-grade cores. So there's more than one high-grade core.
I mean this kind of intercept here is what geologists like to see, 800, 900 meters at over 2 gram equivalent material. This is a significant ore body. To try to give you some understanding of the significance of it is this is a cloud model now, based on our drilling. It's just an inventory, it's not any way near a resource at this point. You can see the existing drilling with blue, and the red drilling is our drilling that we've been drilling across the ore body. And this is showing you the rough extent of our target statement here, the 900 million tons. So it's between 350 million and minus 200 million. So it's between that area there, our target.
The important thing that I think that I take away from this is how -- the width of this ore body, it's about 900 meters by 900 meters. And if you look at the ounces per vertical meter, so the ounces of gold equivalent per meter that you go deeper, we're on average about 75,000 ounces per vertical meter across that target area. What's important in an underground mine about ounces per vertical meter is capital efficiency. For every meter that you drop your shaft down 1 meter, we're getting 75,000 ounces of metal. And I think if I you compare it to other big copper-gold porphyries like the ones in Mongolia, the Hugo Dam it owns, that Ivanhoe and Rio Tinto drilling, the Golpu, that New Crest is drilling, I think you'll see that this has got a much higher ounce per vertical meter than those projects. And I think the capital efficiencies will then be important going forward. It's also got a high-grade core.
So there's opportunity for us to mine this thing because it's so big and there's so much opportunities in it. We can mine a lot of the high-grade and bring that forward. And what I'm just showing you here is that -- there's the cut-off, sorry, 1.5 grams cut-off grade over there. We're looking at nearly 1 gram of gold and 0.7% copper. Very, very significant. That's sort of similar grades to those other deposits I just mentioned. And then there's the real high-grade core in the middle, and this is what was originally spoken about by Lepanto. And you're looking there at a cut-off grade of nearly 3 gram gold equivalent, but it's giving you significant grades of 2.3 grams gold and nearly 1% copper. And there's a very big tonnage in that area.
Those are the significant deposits. So how do we go about tackling it? Well, that's what we're working out. We're currently doing a scoping study. We're right in the middle of it. So again, these are just indicative numbers; they're not final numbers of that scoping study. That's our exploration target. Remember it's only a 550-meter vertical extent. We haven't looked further than that. There's already 52 million ounces in there alone. We're looking at a number of different opportunities from a -- in a bulk mining, underground mining scenario. We're looking at anywhere between 4 million and 25 million tons per annum. But I think it's pretty easy to see it does scale -- the scale of mineralization that we're looking at, the likelihood is we're going to be at the top end of this range to make this thing work for us. Whatever we do, we're going to need 2 declines and 2 shots, and we're busy looking at the geotech of that right now and fighting those shots and getting that work done.
Metallurgy is going to be simple from the early work that we've looked at. We're expecting it to be similar to Cerro Corona. It's actually a very similar ore body to Cerro Corona in it's gold-to-copper ratio. So it's one of the high-grade gold-copper porphyry, so in the universe out there. So it's really interesting that I think right now we could actually almost take the Cerro Corona plant and put it at Far Southeast.
Recoveries are looking -- are going to look good. We're seeing 90% copper and 85% gold. And we're looking at all the infrastructure issues. The infrastructure issues are no mean feat. We've got a good start with the current operation, but to build a project of this scale, there's going to be a lot of infrastructural issues. We're looking at putting a pipeline underneath the existing road, which has got a lot of precedents in the Philippines to do that. There's good power in the grid, in the Luzon grid. And we're talking to power providers right now. And we're looking at how we're going to expand the existing TSF first and then, obviously, in time, how we're going to grow that TSF. But we're looking to finish the scoping study in the first half of next year and hopefully declare a large amount of that exploration target as resource. So that's what you should look out for in the -- by mid-year next year.
Yanfolila, and this is back in West Africa, we acquired Glencar Mining back in 2008, the end of 2008, early 2009. And by doing that, we ended up with 95% of this project. So this project is a share hosted gold project in Southern Mali, near the border of Guinea. So over there. Near the border of Guinea. And what we've already discovered there is 2 gold deposits, Komana East and Komana West, and we've done a lot of drilling and some satellite deposits, Sanioumale, Kabaya and Solona. In December 2010, we declared resources on these 2 of 9 million tons of 2.5 grams for 740,000 ounces. So quite modest resources for the initial work. But since then, we've done a significant amount of drilling, both on those resources, as well as on some of the satellite projects. And what we're really hoping to do is to get the resource up to about 1.5 million ounces, 2 million ounces so that we can start a project on this area, and it's one of these areas that's like our St. Ives Mine. I think this is going to take continual exploration investment, and you're going continually find new deposits. It's all undercover, and it's all within a 25-kilometer radius of the sort of center around the Komana area that we'd be looking. And we basically have a lot of gold pits being tracked into a centralized mill is the concept we're looking at.
Currently, we're drilling Aussie and diamond drilling program of 57,000 meters that will be completed by half year next year. And what we're hoping with that drilling to have enough resources to be able to kick off the start of project. If you look at Komana East, and this is why we like this project so much, you can see it's just down to a depth of maximum of 200 meters of this pit. So it's a very shallow pit. The first 60-odd meters of that is totally oxidized and free digging. So the mining costs for that are going to be very, very cheap, but what we really like about it is the grade. The average grade is 2.5 grams a ton, but there's significant areas of high-grade plunges that I think even our drilling today probably hasn't defined properly. So as we go in and mine it, we'll have hopefully some positive surprises.
So these kind of pits will make a lot of money in this type of environment. The resource there, as I've said, this is the scoping study which we have just completed. The scoping study assumes some resources in the mining inventory from some of the satellite deposits that weren't classified yet as resources, so it's just an inventory. And we looked at about 14 million tons for just under 2.5 grams a ton in the scoping study -- that's diluted. Strip ratio is quite high as ore bodies are narrow and fairly vertical. And again, it's very easy conventional open pit mining. The throughput that we're thinking about is somewhere between 3 million and 4 million ton per annum. And that's very simple metallurgy SGML and CIL with a large portion being recovered in gravity. But we're expecting recoveries of over 95% out of these deposits. So that will give us production somewhere between 180,000 and 250,000 ounces per annum.
Infrastructure-wise, it's really, really quite fortunate project. That's close to the road. There's grid power not far from there. In fact, a hydroelectric power station. That's not going to be sufficient for our needs; we're going to still have to generate our own power, but it's -- again, it's going to help the whole system. Very, very easy site to put all our infrastructure in place. The capital costs that we're looking at are round $350 million to $400 million, with operating cost of $40 to $50 a ton per ore -- of ore. And that would give a very, very robust NCE if you do the numbers.
So what we really need here is the exploration success over the next couple of months to be able to justify kicking this off. And certainly I think Peet has become very interested in this project in ways that we can actually reduce this capital and do it a lot quicker and a lot easier upfront.
Arctic Platinum, you've heard about this. It's been in Gold Fields for some time, and it's 12 million ounce palladium, platinum, gold, copper, nickel project in Finland on the Arctic Circle. We completed a feasibility study on this in 2005 and 2006, and back then, we looked at producing a concentrate that we could sell to smelters. In getting that concentrate to a marketable grade, we needed to have too low mass pull. We have to clean the concentrate too much and we lost recovery in the post process. So the average recovery that we were looking at was about 50%.
So what's changed since then? Well, since 2005, the metal price deck that we're looking has more than tripled. And what we've been doing is looking at is alternative metallurgical solutions. And we've been working quite hard on the process called Platsol, which is a hydro-metallurgical process where we produce a concentrate, put it through an autoclave and then selectively extract the metals after the autoclave, and will get metals at site that we'll be able to sell. What we're seeing is that we can increase the overall recovery through this process to about 70%. So it's about 20% delta in recoveries that you can add to that 3x multiple in prices, making this quite an interesting project at the moment.
So what we've done, we've completed the scoping study on that Platsol process and basically confirmed that it's a viable route. We've done numerous bench-scale test work. We've done 2 pilot plant tests, and we're quite convinced that it's a process that is well suited to this project. What we did though for the scoping studies, we only assumed 2 of the pits, so only a subset of our total 12 million ounce resource. The reason for that is they were the most advanced from a drilling perspective, and they're also within the existing mining permit. So we thought that if this project was -- if the scoping study showed a very robust result, we'd be able to move to the mining scenario the quickest. And we started at the same time converting that mining permit to the Platsol process, which we've just got approval from the Finnish authorities that we'll be able to do that. But what that did by limiting it to just the 2 projects, Kontijaarvi and Ahmavaara, those 2 resources. It took away flexibility. And what I mean by that is to run an autoclave, you need a certain amount of sulfur to drive the autoclave process. And you need to keep that sulfur fairly constant. So only having the 2 resources to be able to blend to keep the sulfur content constant caused us some difficulty, and it wasn't the most optimal route. So what we're doing now is we're looking at some of the other potential in the nearby area that we know has different sulfur contents and different grade components that will be very synergistic with the 2 that we're looking at. And we're looking at specifically at Suhanko North area, which I'll show you a bit later, where we've identified about 100 million tons of material that would be very suitable and would add that flexibility for us.
So that's what we're doing right now. This is what the scoping study told us. And again, I stress we used only 2 of the resources, for Ahmavaara and Kontijaarvi. So that's the resource that we used which is only a subset of our total 12 million ounces. We assumed that all of the -- for the mining case, we assumed that we were going to mine the inferred and that we would go and drill that out if we were to go forward. So we looked at measured indicators and inferred, and that's what we used there, 140 million tons 1.6 2 PGE plus gold and there's nickel, so for just about 7.2 million ounces.
The strip ratio is about 3.3:1. Again, simple mining. Same with in -- on the Artic Circle. It's got a micro climate that's controlled by a bay in the area, and we don't even get perma frost in this area. So it's quite a benign environment. We looked at a nominal 10 million ton per annum throughput, and we kept at constant, the sulfur grade, at 10%. There's a lot of work that we need to do on that, and I think we can drop that and optimize that. But we look at overall recoveries there for the basket. And as I said, the basket was around 70%. And that would give us around 300,000 to 400,000 ounces of 2 PGE plus gold production per annum. Power is good in the area; access is good. So from all of that perspective, it's very good. The environment -- the regulatory environment is fantastic in Finland. And as I said already, they've agreed to us moving towards the -- to permitting the Platsol process for our current permit.
The initial capital is rather high though. It's $1.3 billion to $1.8 billion, that we looked at in the scoping study. And -- but good thing is the operating costs are low, $25 to $30 a ton. So the operating margin once this project is up and running is good. But the capital is reasonably high, and I think -- so it's not just the flexibility that we're looking at. We're also looking at the extra tonnage to think about do we have the right capital efficiencies? Is 10 million tons per annum the right scale? And how should we be looking at this? So that's the work that we're going to be doing this year.
But just to give you a bit of a graphical understanding of what I've been talking about. Kontijaarvi and Ahmavaara are the 2 pits that we've used in the scoping study, that made up that 7.2 million ounces. This is the permitted mining lease that we're now converting to the Platsol process. And this is now some of the extensions that we want to -- they're all on our exploration permits that we're looking at drilling, that will add very well from a flexibility perspective, as well from a tonnage perspective to this initial project. We specifically like this Suhanko North area up here, and there was some existing drilling there you can see by Outokumpu, those black dots, and that's given us the sort of belief that there's nearly 100 million tons of potential out there. And during the summer months, we drilled a couple of holes on that Section A, A prime. And what we saw down the depth of the existing Outokumpu hole were these 2 holes that we drilled, and we're seeing grades and widths very similar to what we're seeing in Kontijaarvi. So that's our higher grade pit. So we're quite encouraged by this, and we've now kicked off a winter program that we're doing right now with 6 rigs drilling, and hopefully we're going to drill out that $100 million ton potential and bring it into at least inferred resource by the end of this program.
So very quickly, just to give you a smattering of the future. So those are our more advanced projects and projects that hopefully are going to be in the development and construction over the next 2 to 3 years. These are the next generation projects.
Woodjam, which is in Southern British Colombia in Canada. There we've done a number of joint ventures and land consolidation where we've now picked up a fairly significant land position of over 50,000 -- 60,000 hectares -- sorry -- 60,000 hectares.
In the Quesnella domain in southern B.C. It's a very well-endowed part of the crust. It's -- there's a lot of copper-gold and copper-only porphyries in that area. Fact is the operating mine just to the north of our property called Mount Polley. As you can see, 20 kilometers, it's a very significant area.
We've done a lot of drilling over the last year there. We've drilled about 52,000 meters, largely on those prospects over there, Deerhorn, Megabucks. Those are high-grade, gold-copper porphyry, sort of pencil-like porphyries, as well as a lot of drilling on the southeast zone in Tisdall, which are a large bulk copper-dominant porphyry system.
So we're hopefully going to get a resource statement out on this by quarter 1 next year, in the R&R statement that Tim puts up, and that's our objective. So I think there's going to be a significant resource addition through this project then.
Moving now to Chile. This is up in the Maricunga district in northern Chile. What we got there -- this is the same program -- the same exploration program that actually discovered the Chucapaca property. We did the same, we looked at -- lancet anomalies and we picked up ground. So this is the same program. We did this many years ago and we've been systematically going through the targets that we identified. And this is one of them, this has been -- no previous work done in this area. It's called Salares Norte, we'll own this 100%. We've got an option to acquire 100% from the landowner. And what we've done is some early geophysics and what I'm showing here is some IP, which is induced polarization, which shows you the metal content in the ground, as well as some of our soil samples. And we did 3 holes just before the winter close out. First 3 holes in this area across the coincident IP anomaly and soil anomaly and we intersected nearly 100 meters at 1.5 grams gold and 63 grams silver. Now this -- the importance of this intersection from our perspective it's in an oxidized vuggy silica. So the metallurgy on this is going to be easy, it's going to be simple, and it's similar to other very large systems in this area, like this. So we're quite excited by this prospect. It certainly has the scale to be a fairly big system, and we've got the rigs moving on to this property now to the winter break and we'll be drilling 6,000 meters as a first program to confirm the extent during this season.
Kangare, this is in Mali now. So this is north of the Yanfolila project that I was talking about earlier, a similar style of mineralization. What we've done there is we've actually now consolidated a land position, that's nearly 180 kilometers in strike from the Yanfolila project down south up nearly to Bamako up north, by about 80 kilometers in width. And we've got a number of different tenements, either just granted tenements that we applied for or deals that we've done with local vendors. And we're consolidating this whole Belt that -- in southern Mali.
So we started our first work on this area, and this is the first work, and specifically this Tinguela area, we identified a very, very large alteration system, bigger than anything we see down at Yanfolila. So it's a significant alteration system that we've gone in and now done some drilling, air core drilling, and we defined a sort of more discrete gold zone of nearly 2 kilometers by up to 100 meters wide, which is a lot different in nature than what we see at Yanfolila. And the first bedrock drilling we did there, we intersected a modest intersection, 10 meters at nearly 4 grams. But for the first hole in this part of the world, that's been a very exciting start from our perspective. And again, we had to stop work then due to the rainy season. And we're now mobilizing again after the rainy season, and we've got rigs moving on there. And we're planning to drill a significant program, 14,000 of bedrock and 40,000 more air core to define this zone. This I think is a very promising project for us in West Africa.
And then lastly, Argentina, we've just recently done a deal with a private company called Minera S.A. who own the Taguas property in Argentina. It's just north of the Pascua-Lama and Veladero projects, which you probably heard of. It's an area that's being held by this private company for about 20 years. They've done small, modest programs every year. In total, they've drilled about 160 holes for just about 34,000 meters. But very modest over 20 years. But with those holes they've identified some significant mineralization, some high-grade targets, 10 meters at 16 grams. But the stuff that we like a lot of, and we think we've got a lot of potential to grow, is the breccia-style targets, where you're looking at about 30 meters at 3 gram gold and 1.5% copper that they've identified, and we see potential to extend that significantly. And that's very similar to what they're mining at Veladero.
So we've just signed the deal. We'll be -- we've rolled the first rig onto the property. We'll have 2 drills drilling there, at least for the early part, and depending on success we'll mobilize further. But this is our first entry into Argentina, and I think it's a very significant project for us that already has a lot of significant mineralization identified.
So with that rather quick run-through all about projects, I'll hand over to Tim for the Technology and Innovation.
Right, good morning, everyone. Thanks, Tommy, for taking us through the projects. I'm going take you on a small change of tact now just for a short while. Now although my section is comparatively short compared to everyone else, I think it's notable in that it's probably the first time at an Investor Day where we've actually allocated some time dedicated to talking about technology and innovation. And I just want to take you through that over a few slides. Importantly, I'm going to spend 80% of my time actually highlighting a few case studies of technology that we've actually implemented or are rapidly advancing. And I think in future presentations, we'll bring you up to speed with what's moving through on our radar screen. But today, I particularly want to highlight what we put in place to impact the business.
Now, this graphic we put together to highlight that -- the Gold Fields' reaction to the mining landscape is by necessity a strategic response. And what we've highlighted on the left-hand side of this graphic are really the key pervasive challenges running through the mining arena at the moment. And you can see that running from requirements for safe production, which Nick highlighted earlier, right through a number of things through to cash flow margins being under pressure. Now strategically, Gold Fields needs to position itself to respond to these in the right manner. And what we've identified are the key enabling factors that are going to impact our business over the coming years. And these range from engineering out the risk, automation and mechanization, research into mining innovation and robotics, power conservation initiatives and clean energy projects. And they really cover the span of optimizing the operations, growing Gold Fields and securing the future. So as we've said, at the bottom of the slide, the response is strategic and there's no doubt that technology, particularly when it's the introduction of smart, fit for purpose solutions that's very much a key enabler to the business going forward.
This next slide is really just a summary of the modus operandi on how we're approaching technology and innovation in Gold Fields. The model is based on essentially managed process, managed through a central steering committee. And why we have that central steering committee in place is to ensure that the various regions in the group and their inherent mining operations, together with the capital growth projects and the exploration portfolio that Tommy has just taken us through, that all of these are effectively networked and wired into the technology and innovation strategy. And that everyone is on the same page when it comes to the delivery principles and the roadmap we're following.
The centralized management process always -- it also will ensure that it's the high-impact areas that actually benefit from the investment funding and the development and implementation focus. This slide just highlights that there's really 3 key legs to this. There's the push-out technology which inherently means we're doing an internal -- continuous internal scan within the organization to pick up what are the key leading practices and opportunities, and we'll target certain projects for piloting and rapid deployment across the operations. So that's very much an internal view. But to have a balanced T&I program, you need to also watch what's happening external to your organization, and put a lot of effort into that as well.
So the pull-in component is about benchmarking and scanning the external technology environment of Gold Fields and particularly having acute -- an acute awareness of the key technology providers and the evolving concepts across the globe at any point in time. What this would enable Gold Fields to do, and we've also -- we've already initiated this, is to have a well-defined technology suite which not only informs how we optimize the current operations, but when we bring in the new era mines into Gold Fields, that Tom has alluded to, they benefit from the instant implementation of leading practices at that point in time. That comes from the defined technology suite.
And then where we can't find a solution off-the-shelf, because the last thing we want to become is an R&D company, but where we don't get solutions off-the-shelf to what are strategic challenges, we will do our own research and we will build our own solutions. And the way we're doing this is engaging with key partners. These partners range at the moment from the original equipment manufacturers, the OEMs of the heavy mining equipment, various technology providers, a number of universities, some of which we're putting strategic funding in place to assist them with our R&D. But it's all really about building those long-term relationships with the research technology partners that do share the same vision and strategy as Gold Fields. And through that, I believe that we'll be able to bring in the innovative processes and the solutions that we need to move the company forward in the coming couple of years.
That's as much as what I want to say about the modus operandi at this point in time. What I want to take you through now is a couple of case studies that I think highlight what we're doing very well and how we implement it very well.
The first one is the Python plant. Now Peter Turner is going to expand on this a little bit later, when he explains how it's given us a new opportunity to bring surface gold ounces forward in a new configuration. But what we've done with an Australian OEM partner is develop the Python plant and actually have it in place, where it's up and running at Kloof at this point in time. The Python plant epitomizes some of the key principles in Gold Fields: safety; innovation; and delivery. And as you all know, if you pre-concentrate ore in a modular plant, as shown in the photograph there in the bottom right-hand side, which is a low-energy processing system, you can count on substantial reductions in costs and a much improved environmental impact. And this is what the Python plant brings to it. It's a modular, skid-mounted, fully-integrated processing plant. I won't go through the whole metallurgical process. But I think importantly, at the back end, it enjoys an ILR or intensive leach reactor, which significantly improves security on site as well, because the product is a concentrated gold pregnant liquid, from which the final recovery is achieved through electro-winnowing at the current CIL plants on the West Wits operations.
So all the items in the Python plant can be moved from site to site in a relatively short period of time and at relatively low cost. So significant additional flexibility has allowed us to reconfigure our business plan at KDC. The flexibility that the Python plant gives us, together with those improved energy efficiencies in the slide, the fact that there's no gold-in-process issues with this, and there's a limited 24-hour gold pipeline in place means that this really has taken us into a new paradigm on surface processing.
Talking about changing paradigms, one of the key focus areas for Gold Fields is actually tackling the paradigms that have been in place in the gold mining industry over the last 100 years or so. Now the compressed airless shaft is a particularly important project in the South African region at this point in time. Existing pneumatic systems that have been in place for many, many decades in South Africa are inherently inefficient due to the massive reticulation systems underground which cause a high level of leakage. And when you couple this to the fact that 20% of total electricity goes into compressed air production, you're looking at a situationally operation that is begging a paradigm change in the way we approach this.
Now although the solutions in those small graphics at the bottom of the slide, such as hydraulically-powered shovels for cleaning, hydropower powerpack drills for drilling, and things on the right-hand side like the turbulator for agitating backfill dams and mud dams underground. All those are technologies that are in place. The trick is that no one has ever brought them all together in an integrated, coordinated fashion to have a holistic solution for removing compressed air from a deep level shaft. And that's exactly what the Gold Fields focus is with this project.
So we're going to see incremental improvements in drawing down on the compressed air usage, and therefore the electrical power cost that, suffice to say, the real challenge is in the ventilation of the refuge bays underground, which by very nature need compressed air at this stage for ventilation and cooling because of the high virgin rock temperatures. So that's probably the most challenging component of the project, but there's no doubt that we can get at the end of the day, we're targeting a fully compressed airless shaft in the South African region.
Another one I won't go into too much detail on, and I don't want to get too technical on this. But bringing in drop-in impellers, which is an improvement in the way we ventilate through our main fans. It's something that is cutting-edge, and Gold Fields is definitely leading in the implementation of drop-in impellers across South Africa, and you can see the kind of impact it has. An average 8-megawatt saving at KDC. And for each megawatt saving, you can equate a cost of about -- sorry, for each single-megawatt saving, you can equate a cost saving of about ZAR 5 million per annum. So that's why the ZAR 40 million saving in 2012 for KDC is on the radar screen. And we've also put in a new impeller at South Deep, which has allowed us to not switch on the second one until the back end of next year, and that also equates to a ZAR 5 million saving at South Deep.
Again at the bottom -- on the cutaway section on the bottom right-hand side is a carbon fiber composite impeller, and you can see the kind of numbers we're looking at by replacing the old auxilliary inline fans, 600 of them in fact at KDC, should again bring down cost by another ZAR 35 million. So it's small bites at the elephant, but if you keep pushing hard on it, you can really offset the annual increases that we know are coming through from the national utility, Escom.
Another one which we're proud of, this was presented at the Second World [ph] Conference in Ontario a couple of months ago. We're the first company to implement this on large geared grinding mills, it's the mill safe start system. Very simply, it's a protective system that allows the safe starting of big grinding mills. In essence, when you actually do plant maintenance and you stop these mills turning, the charge, the lop-charge in place, which is made up of all the steel balls and water, can have a propensity to freeze. And when you start up the mill after a period of downtime, that lop-charge can actually move up on the side of the mill and then actually fall under gravity. The impact there is that it would do damage to the mill shell and also the drive mechanisms. So we put that in place at Tarkwa for really a nominal cost of USD $240,000, into the sag and the bore mill. And surprise or not surprisingly, a few weeks later after putting it in place, we actually avoided a potential loss from a lop-charge in the sag mill where -- which would've been a total cost of business of in the order of $9 million. So we got that in place in Ghana, and we're going to roll that out to all relevant large geared mills in the future and all the new era mills we buy -- we build on the new mines.
The gold, the PGM concentrate, the copper cathode and our nickel cobalt hydroxide products are all produced on-site now, which gives much more flexibility to where we -- to how we'll deal with the off-take agreements from the project. And the overall recoveries, as Tommy said, have improved by a nominal 20% from when we first looked at the pre-feasibility a number of years ago.
I think what's exciting at Platsol is it's also -- because it's well-suited to polymetallic ores which are high-refractory in nature, it's definitely got application to other such ores across the globe, and I think it's going to allow us to look at a number of pipeline projects differently as well going forward, as we get more and more comfortable with this metallurgical process.
Just looking at the methane extraction at Beatrix. This is a key project that underpins securing the future of Gold Fields. It's at the heart and center of the carbon and energy management program that we have in place. And importantly, it's managing carbon emissions down and the footprint down significantly by half [ph]. As you can see in the slide, 1.7 million tons of carbon dioxide for the first 7 years. And we're flaring methane not only from underground sources but also from historically drilled surface bore holes. Importantly, this will reduce the footprint at Beatrix by an excess of -- the carbon footprint by an excess of 25%, which is very material. And the captured methane will be used to generate between 4 and 5 megawatts of electricity once the cogeneration plant has been built. So overall, this will save about 12,000 tons of methane, which is equivalent to over 250,000 tons of environmental CO2. The contract to the sell of the CERs or certified emission reduction certificates from this particular project was recognized by a London-based Risk magazine in 2010 as the Deal of the Year in its Annual Energy Awards, and we're looking forward to hopefully expanding this project into Phase 2 on the west side of Beatrix in the near future.
And then my final slide, to exemplify how we're applying smart fit for purpose technologies is just looking at water treatment in South Africa. Now we operate in a number of water-starved areas. And in fact, mining often gravitates to water-starved areas. And South Africa is really no different looking forward. Now what we want to do is proactively unlock sustainable solutions in water treatment, and that secure water supplies for the future. Now we're fortunate for the time being in KDC in that we're operating in a water catchment area that has not been materially affected by acid mine drainage, as we're still dewatering it with current mining activities. But nevertheless, proactively we're driving hard on the project we know is liquid gold.
Now the objective of liquid gold is actually very simple. It's about preventing future acid mine drainage. It's about being smart, about creating a sustainable solution that will continue beyond the operating life of the mining assets. And number three, importantly, it makes sure it enables us to eventually close the mines one day in a responsible liability-free manner. Now, without going into the details of the technology, we're not looking at reverse osmosis. We're looking at ion-exchange with selected anion and cation resins. This has been comprehensively piloted across the South African West Wits operations already, and we've been very pleased with the results to date. And I think notably it avoids the production of brine, which is associated typically with reverse osmosis.
The generation of potable water from mine and dirty fisher water is now a very realistic prospect for us through the auspices of liquid gold. And we've identified all the key stakeholders and have initiated the processes of developing a necessary commercial partnerships that are important for this to work in the South African context.
So in summary, technology and innovation will leverage Gold Fields' ability to turn available ore bodies and new resources to account and we're going to do this more safely, more efficiently and more cost-effectively, while reducing the environmental footprint, all those issues that go to the heart of the Gold Fields value system and the Gold Fields strategy.
Importantly to me, however, technology and implementation in Gold Fields, I think is going to be significant in assisting us in retaining the caliber of people that we'll need to take us forward over the coming years. So a healthy, dynamic technology and innovation strategy will also help skills retention and attraction for Gold Fields going forward. Thanks very much.
Nicholas John Holland
If I can ask Peter Turner to come up to the podium? And if we can all get seated again. We'll go through South African region first, and then we'll go through the other regions after that. Paul will enter the financial overview and I'll wrap up again at the overall strategy. And we'll move through these sections as quickly as we can. We're cognizant of people's time, both from the webcast and here today, so we'll move through these sections as quickly as we can. So without any further ado, let me welcome Peter to the podium. Peter Turner? Thank you.
Peter L. Turner
Thank you, Nick. Good morning, ladies and gentlemen. The South African industry's production has been in decline for a number of years now, and the Gold Fields has been no exception. In this presentation today, I would like to show you how we in Gold Fields are tackling this challenge and how we plan to generate value for our shareholders from our operations in S.A. In this presentation, I will share with you the how we are looking to transform the quality of our assets in our portfolio toward the position of lower cost ounces going forward. We will achieve this largely through the following: firstly, the optimization of our NCE margin from our KDC and Beatrix mines, whilst delivering South Deep, the jewel in S.A. crown, which will have a substantially lower all-in NCE cost than the current deep level legacy asset mines in our portfolio at present; secondly, the response to the safety challenge, something we'll be talking about in a lot of detail. And then some of our BPR initiatives which are delivering value at KDC at this point. The project progress at South Deep, and finally how we see the future of the S.A. region as a significant contributor to Gold Fields in the future.
Our first slide shows the significance of the region, contributing around 49% of gold production and 37% of group EBITDA. Generally, gold mining companies the world over are grappling with the replacement of reserves. And like the South African region of Gold Fields, we are well endowed with 60 million ounces of reserves, 20 million at KDC, 5 million at Beatrix and 35 million ounces at South Deep.
At current prices, we are seeing a positive uptick in the NCE margin. And importantly, our new growth, low-cost, high-margin ounces account for more than 50% of the reserve in S.A. region, thanks largely to South Deep.
Now our 3 multi-shaft complexes are characterized by our new KDC complexed, complex rather, whilst deep, the complex still has the potential to deliver significant shareholder value.
Beatrix continues to impress with leading industry productivity, a good cash generator and well capitalized.
South Deep, as I have said, is the jewel in the crown, with all the fundamentals for outstanding shareholder returns with low cash costs. The delivery given the technology deployed will be absent of the vagaries which have plagued the legacy assets in S.A. in the past. The ability to deliver -- to mine by mechanized mean is proving to be a substantial advantage for this operation at this point in time.
Moving on into safety. We've spoken about safety and I think Nick has covered this in a lot of detail. But I'd also like to share with you the trends in our region thus far. And as you all know and has been said, safety is our #1 value. And although we have shown significant trends since 2008 in terms of improvement. And our safety, fatality and serious injury frequency rates over the last year has plateaued. And obviously, there's a lot of work to be done in this regard. We have had 18 fatals in our region this year, and it's a huge concern to us.
In the next phase going forward, we're looking for a stiff change in safety, and I'm going to share with you the key fundamentals that are going to produce that stiff change going forward.
Our safety strategy has 5 core thrusts. Namely: the first one is compliance; the engineering out of risk; health and wellness; the alignment of our stakeholder; and at the heart of safety in the end it is the culture which is the main driver towards a safe working environment. And I'll share some of these details with you.
But just to reflect on safety, the core agencies for accidents in our region are really in 2 areas, it's fall of ground, act-related or rock-related accidents, and the other one is transport-related or locomotives underground.
I'm going to share with you now the detail of how we're going to fix this. I will walk you through these in a little bit more detail. Safety in essence is about walking the talk, and I would like to share some of the detail of our strategy with you.
In terms of culture, visible felt leadership is the key to creating a safe work culture, underpinned by proactive attitudes, mutual respect and good teamwork in the working place which are all cardinal. Delivery on safety requires the collective efforts of our Free State stakeholders. And to this end, Gold Fields is actively engaged and continues to nurture the relationships with the national, regional and local level stakeholders.
Everyone has to be in this going, too, ladies and gentlemen. And that's key. The health and wellness of our employees is guided by the holistic 24-hour in the life of the miner well-being program which brings together all the elements which ensure a fit-for-work employee. These include typically fatigue management, nutrition, living conditions, lifestyle, health and safety and medical care.
Nick spoke to the engineering out of risks early on, and that's the first issue we deal with whenever we have an issue around safety is the attempt to engineer out risk with any possible technology deployed. To this end, we'll also be making use of our technology department under Tim for various ideas which can contribute to improving safety in the S.A. region.
To this end, I'd like to share a few examples with you in this regard. Our operations are committed to in-stope roof bolting and netting support. This has been rolled out 100% in the Free State and we'll be finished with this by March of next year. The new-era locos with a -- with guard comm systems on all our shafts is in progress and being implemented. Industrial alleviation measures, we have set a target for ourselves of 0.05 milligrams per cubic meter, with the regulated number for legislation is 0.1 milligram per cubic meters.
The new Gold Fields standard certainly will go a long way to reducing the incidence of silicosis going forward.
And then lastly, our statutory compliance inspections, which we all know on regular intervals of 45 days, which is a statute, we've now reduced those to 20 days, we've bolstered our order teams, and we've bolstered the general skills in these teams so that these inspections are a lot more rigorous, a lot more regular to ensure that we actually ensure full compliance with our own safety standards and safety directors.
Moving on to production, the second key element. From this slide, we can clearly see the decline in the production which is in KDC, that's the area in green on your slide. And the major drivers in this decline have been the focus on safer layouts and mining practices, as being critical at times to actually abandon areas which we believe have been not safe enough to mine.
Secondly, the reduced mining flexibility and more challenging logistics impacting on our mining volumes. The third one is key shaft at times mining through lower-grade areas.
Beatrix is the area in blue. And you can see that during this phase, this has been stable. And the yellow bar there is South Deep in build-up at this phase, at this point.
The decline in growth at KDC in essence has accounted for 11% decline in the -- sorry, pardon me. The decline in our gold production of 11% has all been at KDC. And here, if you see this slide, this analysis clearly shows the drivers for decline, which are associated with grade, predominantly at our KDC West operation. And the reduction in minable working place as a consequence of extraction rates from pillars, in the interest of safety.
As you can observe from the slide, the area in green shows that our mine call factor improvement indicates a good quality mining has been taking place on these operations.
Further plans to stabilize KDC, at -- a response to stabilize KDC further would be -- we have a bankable strategy to stabilize between 250,000 and 275,000 ounces per quarter. And these 4 core thrusts shown on this slide will be the enablers of our strategy going forward.
And then firstly as I've said before, pardon me -- firstly as I've said before, safety is key to this -- to avoid unnecessary mine stoppages. And in addition to being the morally correct thing to do, certainly this will go a long way towards stabilizing production going forward. Disruptions caused by stoppages certainly do upset the production machine. And as far as possible, safety really is #1 in this regard.
Our BPR programs are focused in the area of productivity and cost delivery. These are well entrenched and delivering results, and I'll share that with you in a slide shortly.
Nick also spoke about the impact of our BPR programs in Gold Fields. Certainly these have taken traction and are working well for us.
Thirdly, the banker to de-risk our production profile by the deployment of our new Python plant technology for the treatment of our surface rock dumps.
And then finally, a strong drive to improving skills within our operating structures through our Gold Fields Academy and production coaches, is top of the Gold Fields people focused agenda.
Moving on into our Shaft Full Potential program, and this addresses the area of productivity. And that's split up into 2 areas. And our Shaft Full Potential at KDC has taken traction. I'd like to share with you some of the basic successes that we've enjoyed in this regard.
Firstly, the continuous blasting program targets. The avoidance of the monthly slowdown syndrome we're measuring period causes a dip in our production. This process involves continuous blasting through this process through various changes in our procedures. It's also supported by changes in our mining cycles and improved logistics to these working places.
Face advance. Increased face time and labor optimization are all key drivers towards improving our crew productivity. A back to basics approach in all these areas is underway through our front line coaches and teamwork training. In parts of KDC, primarily our older operations, a cycle mining concept with no night shift, in other words we've changed this process, has been implemented. And we've seen improved safety here, but also we've seen improved productivity and outputs in terms of production.
Our workplace availability initiatives are primarily focused on face creation, equipping, with all flat ends on these operations fully mechanized at KDC and Beatrix in the Free State.
I'd like now to share with you some of the stats with respect to our Business Process Re-engineering program. And this element touches on the cost which is our project blueprint. And I'd like to point out the green bar. The green bar shows the savings for this year of ZAR 838 million in our cost reduction. And essentially, these have been key to offsetting the cost escalation with respect to our wage rate of 9% increase this year -- or absorbing that rather and also absorbing the 27% electricity price increase.
Our further cost savings initiatives for this year have been identified to the tune of ZAR 535 million. So it's not just a once-off. What we're doing here is we're targeting savings on an annualized basis going forward.
Comparing rents paid in 2011 quarter to September 2010 quarter, we managed to contain cost to under 2%, to be exact, it was 1.8% for the time. And I think Nick covered that in some detail as well.
Moving on to forecast for KDC's production. We believe that will be holding steady at above 90,000 ounces of production, per monthly production that is. And this trend is expected to continue on the back of all the productivity, safety and cost initiative, and project full potential which is underway at present.
The further opportunity I wanted to share with you -- Tim alluded to the Python technology. But importantly here what I'd like to show you is that the surface sources on the KDC leases, predominantly here, show that we have 4.1 million ounces in reserve. Furthermore, rock dumps, those are the yellow pictures on the slide that you will see. If you looked at that same slide, you will see a whole lot of green triangles on that slide. And those green slides -- triangles are the surface rock dumps, and those have 600,000 in reserve -- 600,000 ounces, that is.
The exploitation of the surface reserve is further -- is a further opportunity to de-risk this process. And in essence what we're going to do, our strategy going forward is to accelerate the treatment of the surface rock dumps by installing these Python plants to treat the surface rock dump material, while freeing up the potential in our old conventional milling circuits to bring forward the reprocessing of tailings material. And if you see that slide on the right-hand side, you'll see a big bubble there where we've actually been able to pull tailings material forward with the injection, or let's call it the offsetting of surface rock dump material by using the Pythons.
There are 3 of our conventional plants, 2 at KDC West and 1 at KDC East will then be turned into -- transformed into the treatment of tailings -- for the treatment of tailings. This combined process has the potential to bring forth 50,000 ounces per annum, and we have a project program in place to install 2 Pythons the following year. One is installed already, next one is coming up. And certainly, dependent on the success of these Pythons, we're going to continue installing them.
They have a treatment rate of 170,000 tons per month and we typically upgrade our material anything from 0.4 to 0.7 and 0.8, sometimes even higher than that.
So this is really one of the technologies that we're going to deploy to de-risk the production profile -- further de-risk the production profile at KDC.
I need to share with you some further options. We're busy with option studies at KDC. And looking at both complexes, KDC and KDC West, key options here on the table and in essence what we need to do here or want to do here is to bring margin ahead of reserve. We have a big mining reserve. And key to this process to ensure that we can pull or bring forward higher-margin ounces for recovery. And if you just look at this, we have -- we intend to upgrade K4 and bring forward, typically, ounces at K3, K7 and K8 without sacrificing -- dropping production there. This would also involve changing pumping arrangements at K8 and K10. And furthermore, looking at the rationalization of outputs from shaft at D7 and D8. In other words, reducing footprint and wherever possible, increasing volumes through a common barrel, and closing other barrels down where we can. These option studies are underway, in a bid to improve margin on our older legacy assets.
Moving on to the Free State then. Beatrix is a stable performer with excellent cash generation potential and industry-leading through productivity. Given that the mine is relatively shallow, eliminates seismic risk and rock-related accidents. During the quarter, rock bolting in stopes, together with netting to improve our safety conditions has significantly reduced fall of ground-related accidents and almost eliminated them at this point.
This mine is the first mine to gain carbon credits from methane flaring with future power generation potential to the tune of 4 to 5 megawatts available. This mine remains a solid, consistent performer, with production levels expected to continue around the 330,000 to 350,000 mark.
Moving on to South Deep. South Deep is the flagship project in our region. And I would like to lift out a few fundamentals that are underpinning the future delivery of this 50-year-plus mine. The size of the ore body, the mechanized technology deployed, the high quality of the infrastructure and the mine design are all key elements to unlocking the full potential. The slide to the right shows the forecast production build-up to above 700,000 ounces, and the section below shows the progress on our capital project program against key milestones. The infrastructural project is ahead of schedule and on budget, and I must just share with this audience that Gold Fields is very proud of the work that is being done here. We're setting this mine up for 50 years, and the quality of the work and the infrastructure that's going in here certainly is going to serve us very, very well. So it's good money invested.
I'd also like to show you a few pictures of the project progress in the forthcoming slides. And what we see here, the slide shows our vent shaft, 80% complete, on budget, on time, due for commissioning next year, the 20th of -- rather, July 2012.
The next slide here shows the ventilation shaft, the equipping and the headgear. The left-hand top corner, we see the headgear. And the other slides here show a huge winder, 15-megawatt winder which is under construction on the mine. So a lot of infrastructure going in as you can see.
The next slide shows the tailings storage facility. The return water dam lift top. And top-right, we see the early stage deposition of tailings to the undertow drainage of the tailings dam. So world-class tailings dam, well permitted, and certainly one of most modern in South Africa today.
Backfill infrastructure, this is a picture showing the backfill structure under construction. This is an older picture. Happy to report that this plant is now fully functioning in terms of its cold commissioning.
And then finally, our plant expansion from the current level to 330,000 tons per month. These are sketches of work in progress on this capital program.
Now moving forward the key to unlocking the deep level bulk mining code is the de-stressed mining philosophy deployed at South Deep. The image on the top-left depicts a de-stress methodology, which creates a mining horizon equivalent to that of roughly 1,200 meters below surface. And mining stresses of 30 to 40 MPa, which is manageable essentially for bulk extraction. Just remember, in this environment, we'd be mining typically around 2,300, 2,400 meters. So by putting this de-stress methodology in place allows us certainly to tackle this in a shallow mining regime.
The image on the right-hand side shows the long-haul stopes backfilled. The future of South Deep is highly dependent on bulk backfilling, which has been adequately provided for in all these future designs.
This slide shows a section through the ore body, indicating a holistic approach of de-stress and long-haul stoping mining methodology used. The thin blue/red lines and the thin blue lines show the de-stressed stoping advancing ahead of the long-haul stopes in the bulk, in the green blocks. The key to setting up South Deep successfully is the ability to deliver the de-stress well ahead of the long-haul stopes.
Deliver the de-stress targets. This slide shows the de-stress trends. Good improvements are evident, as with the consistent improvement as the number of de-stress attacking points become available. Mining sequence at South Deep remains a key fundamental in a safe production build-up to open the ore body. The ramp up at this mine is on track.
Looking at the South Africa region the way forward. On the production side, we're targeting production, stable production, of 250,000 to 275,000 ounces per quarter from KDC. And the 3 key elements there are ensuring that we continue to optimize these operations and take advantage of any possible optimization and cost-cutting measuring we can create. Secondly, surface mining opportunities to de-risk KDC going forward as a banker. And there are further, as I've described, options under review at both operations to see how we can optimize KDC in the future.
Secondly, is the steady, consistent performance from Beatrix and the ramp up of South Deep to offset any production decline anywhere else, and to further grow it. I'll show you those slides now.
Critical enablers to underpin this performance going forward are the safety performance. We have to get the safety right, and the continuous focus on the BPR to manage cost in NCE. Then finally people skills key to this delivery, ensure we have the correct people to do the job.
In terms of -- in conclusion, the South African region is well-poised to get to the 2 million ounce mark by 2015, the impact of stabilizing KDC together with de-risking that profile via surface sources, continued stable production from Beatrix, around 350k ounces per year and the growth at South Deep banks this plant, with significant potential for NCE growth in the future.
Ladies and gents, if you see that trajectory, certainly I believe that it's doable, possible and achievable. I'd like now to thank you, and I'd like now to hand over to Peet, who will then tell us something about West Africa. Thanks very much.
Peet van Schalkwyk
Good morning, ladies and gentlemen. I think we're unfortunately late from afternoon, but I will kick off. Actually, I'll be here this morning to update you on the Western -- West African region, and specifically more our performance and also our growth profile.
Our West African operations is mainly focused in Ghana. You can see it in this slide here. And we have 2 operational mines set in Ghana, and the first is Damang, the 220 kilo ounce per annum producer, and a mine in transition at this stage. And then secondly, our biggest operation in Ghana, Tarkwa, the 750 (sic) Ø kilo ounce mine with a stable platform for growth. Tarkwa is currently our cash generator with a potential to deliver much more.
At the Yanfolila project in southern Mali, I think Tommy has touched on that. You can see that little dot there. This -- we've completed a scoping study with a promising result, exploration, drilling, we'll expand the results was -- is in progress.
From the gold production graph, it's clear that we have consolidated the solid position in Ghana, with approximately 950 kilo ounce per annum, with a strong NCE margin of 40%, up from the 28% in 2010.
Our reserve has increased from 8% to 10% while the resources have increased from 12% to nearly 16%. And the West African operations EBITDA have produced a contribution -- contributed 30% percent to the group, based it over the past 9 months.
The well-run elections in 2008 in Ghana and the subsequent smooth political transition further boosted Ghana's already positive international reputation. Ghana's independence and foreign investment and financial assistance from the Damang community for sustainable economical growth are key factors which will contribute to shape the government policies. With the next elections only 11 months away in December 2012, the current government places persistent expectations to address the rising cost of living and the demand for energy infrastructure. The emerging oil sector will provide much needed revenue to tackle these challenges. However, the government will need to carefully manage the sector to balance the expectations of Ghanaians and the oil companies. Infrastructure improvement was kick-started with a $3 million -- sorry, $3 billion loan from the Ghana Development Bank in 2011. The Bank of Ghana, which is the central bank, has kept the interest rates unchanged at 12.5% while GDP growth is at 12.2%. Oil production is at 120,000 barrels per day and accounted for 6% of Ghana domestic revenue. This is to double in 2012 to about USD $2 billion. The oil industry equates to about 32% of total GDP, whilst the gold industry equates to about 9% of total GDP. Just an update on the proposed new fiscal regime announced on the December 2011 budget, the Ghana Minister of Finance has announced the following changes to the new tax regime: increase corporate tax from 25% to 35%, the national stabilization levy of 5% on pre-profit was discontinued. It is good news for us. However, introduced the windfall profit tax of 10%, and currently there's no mechanism in place to calculate this, the capital allowance was reduced to 20% per annum. Originally, it was been 80% per annum and the royalties were left unchanged at 5%.
But I can say at this stage is that we are engaged with government and we have reasonable expectation that we will achieve some relief in these conditions. I've said earlier, without -- if you don't get the lease on the Damang project, most certainly, it won't continue. If you look at our achievement since 2008, major CIL extension was completed in 2008, which increased the blank capacity from 5 million tons per annum to 12 million tons per annum. Expiration success increased the life of mine of Damang from 2012 to 2019 and beyond. HPGR, which stands for high pressure grinding rolls, charged of Tarkwa project was undertaken in 2009. And its main function was to execute on only for 4 months to gather enough information to actually implement this in another project. And we have very impressive results from this casework. We actually saw an increase between 7% and 10% in the heap leach recoveries. And we actually kept that plant running up to now and we mainly use it to actually clear all low-grade stockpiles on the mine.
The other mining -- sorry, the maintenance was actually introduced in Tarkwa and all the haul trucks and ancillary equipment and we achieved about a $3.4 million year of savings since December 2010. And obviously, as we continue, we'll see -- we got some more savings.
Following the success at Tarkwa, owner mining and maintenance were also introduced at Damang, and it led to a savings around $18 million since commencement. The BRP, or Business Process of Re-engineering, was introduced at Tarkwa and cost price and unit savings of about $14 million was achieved from January to December 2011, whereas throughput initiatives were also realized. Following almost 12 months of dedicated and attentive activity on the Damang Super-pit, we can report that the conceptual study identified 4 million ounce potential resource at Damang.
Our strategic objectives -- strategic objectives for West African -- sorry, pardon me -- West Africa supported our draft to optimize our assets, go and go-through on securing the future on the mines. In optimizing our assets, we are maintaining a 35-plus percent plus NCE margin, by creating a stable and a secure production base at both Tarkwa and Damang. This was achieved by consistently delivering and optimum processing options and de-risking, as well as introduction of the BRP process, to optimize and to control our cost.
To grow our West African region, we have targeted 1.25 million ounces of attributable production by the end of 2015. We are currently just below 1 million ounces. By delivering the 4 million-ounce Damang Super-Pit and doubling production from the current 220-kilo ounce per annum to about 450-kilo ounce per annum and also bringing online the Mali approximately 200 kilo ounce per annum Yanfolila's Project online, we are confident that we will succeed in our goal. To secure our future, we are endeavoring to maintain our health and safety standards on all operations. We will continuously focus on our people development and to ensure that we have a well-developed pipeline to compete with our new projects online. We're also committed to expand our stakeholder engagement to continue meeting the social contracts to serve in-house, a good relationships within the country that we are operating.
Looking at Tarkwa, Tarkwa is a steady contributor. And you can clearly see that expansion project in 2008, the production output has steadily increased to a plus 720 kilo ounce per annum, and has reached steady state at this stage. From the outlook in 2011, it's around 750 kilo ounce per annum, which creates a stable platform for growth. Tarkwa is a cash generator and, as I said earlier, potential to deliver even more.
We have given another extension project at Tarkwa in the pipeline. And if you look at this project, you'll see some more indication information. The Tarkwa ore body at greater depth becomes more competent and harder. Tarkwa is a low grade operation, meaning high volume throughput is vital. And processing circuit of a low grade recovery is increasingly necessary.
Unlike the more traditional expansions which usually increase mine tons and the capacity throughput, the Tarkwa expansion project is aimed at significantly increase the current heap leach recoveries from the current 55% to 70% level to about 95%. And the way we anticipate doing this is basically replacing the existing 8 million tonne per annum heap leech process, circuit, moved to CIL, carbon in leach, and gold recovery section beyond that. And this will enable us to push other recoveries up to 95%.
And in doing so, this will also obviously, gives us some additional ounces at around 1 million ounces over life of mine to improve recoveries. This throughput capacity holds a number of synergies -- the existing mining rates, fleets and existing crushing circuit. Therefore, this is a low-risk project supported by our reserve with low-risk initial capital of between $400 million and $600 million. If board approval is granted for this project, our intention is to commission the plant before 2015.
Looking at Damang. It is early on, a mine in transition. This mine has produced more than 200 kilo ounce per annum since 2008 and has basically reached a sort of steady-state. And with the increase in the metal prices and in -- possibly in the reserves, we can actually develop the Super-Pit, which will enable us to double our production.
Speaking of the Damang Super-Pit, the Super-Pit, as I've said earlier, we're targeting 4 million ounce the source at this stage, at the Damang Super-Pit extension project in Ghana -- Damang Super-Pit, we're targeting the around 4.8 million ounce open pit reserve to support a potential doubling of the current production. Work on this project is continuing rapidly and in-fill drilling done in 2011 will support a pre-feasibility study decision to enlarge the currency of this mining operation. Project works extends from more than 20 kilometer along the analyzed strike length in the existing reserves.
Probably I showed you this graph earlier, we're actually very excited about this. As you can see, we can really get into a massive operation here. In short, the conceptual study of the Super-Pit identified 4 million ounce possible resource and looking at the figures, both in tonnage of between 80 -- well, 50 million and 80 million tons at grades of between 1.6g and 1.8g per ton. During demonstrated continuation of the depth of 350 meters below the current pit floor and consistently in style with the current mined ores of strike length of 3 kilometers.
Evaluation of the conceptual models, based on the extrapolation of grade control data, demonstrates potential economic viability to depths of up to 500 meters below surface, capable of supporting significant expansion and extension to the life of mine of Damang.
An updated resource model has been completed and the engineering geotechnical and metallurgical test work is running in parallel with the engineering and the design activities at this stage. We're completing applications has also commenced.
The expansion of Damang with pending board approval and also building up success with negotiating a better tax deal, this life of mine will increase from 2019 to 2024. Our intention is to double our current production at Damang if the approval is granted.
Looking at this slide, the rate roughly indicates the position of the Super-Pit and close to that existing plant and the proposed new plant. And we are so confident, in terms of the exploration, that we actually approved 42,500 meter drilling exploration program over the 20 kilometer strike length working at Damang area to commence next year.
Drilling is the target of potential extension of the deposit integrator in the Rwanda area. Detailed geological studies completed earlier highlighted the significant extension opportunity exist at both rigs and mine deposits. On the eastern flank of Damang anticline, the drill program of 4,500 diamond pool is planned at the Bonsa Hydrothermal prospect targeting structural hydrothermal mineralization and potential conglomerate reef positions.
In order to achieve our 1.2 million ounces of attributable production in 2015, we obviously have a very strong project pipeline behind us. As discussed -- we're going to work slightly backwards in this slide from this way.
In the pre-feasibility stage, we are having the Damang Super-Pit and the CIL expansion at Tarkwa, and are in the process of completing the pre-feasibility studies to enable us to obtain board approval for construction to start in 2012 and '13. We have an advanced stage exploration category with Damang regional exploration and the Mali Yanfolila project. Early-stage exploration projects focus mainly in Mali, specifically on Kangare, Sankarani and Solana areas, also remain active in Ghana on various projects close to the Damang and Tarkwa. Mines. For example, the Bonsa north, Rex south, Chida and Epieso and the Shiva areas. And gold Fields are also focused on exploration areas in the northern region of Ghana.
We're really excited about the Yanfolila Project, although at this stage, it's a [indiscernible] project and this will give us a second strong foothold in a highly prospective area. It is a starter project, with approximately 200,000-kilo ounce per annum with significant growth prospects beyond this amount. It also gives us a good leverage due to our existing infrastructure and human resources in West Africa. The project will reduce cost in West Africa and improve the quality of our portfolio.
In December 2010, the results stands at 740 kilo ounce and scoping studies completed in August 2011 demonstrates that an optimal resource requires an initial reserve of a minimum of 1.5 million ounces to develop this project into a new mine. However, we are in process to divide this capital to see if we can reduce this threshold to develop this project much earlier.
In summary, if you look at the 5 year target to achieve the 1.25 million ounces. I think we're well on our way to get to that. And to just summarize by being -- we have the Tarkwa expansion project, by replacing the north heap leach process with a milling and CIL plant. Secondly, by doubling the Damang slippage by start mining the Damang Super-Pit. And thirdly, introducing the Mali Yanfolila project which will give us, as I said earlier, on approximately 300,000 kilo ounce per annum by 2015.
By doing all these mentioned projects, I think we're well on our way to increase our current production target between 20% and 30%, and this will enable us to grow with Africa quite significantly. Thank you.
Richard Michael Weston
Thanks, Peet. And good afternoon, ladies and gentlemen. I'm going to discuss the Australasia region. For those that might not know, we have 2 projects. First one is Agnew, the other one is St. Ives. Agnew is about 1,000 kilometers northwest of Perth. And St. Ives is actually south of Kalgoorlie. There's been a misprint there, apologize for that. And it's about 600 kilometers from Perth. And I'll put Perth in this perspective with New York. It's basically the geographic opposite on the surface of the earth, and that's why we're 12 hours time difference.
In terms of the region, we're looking at Australia to produce 650,000 ounces per annum. And if you look at where we've been since 2008, our production has been in a range of around 600,000 to 620,000 for the last 3 years and we expect that to be slightly higher at the end of this year. In terms of reserves, our current reserve level at December 2010 was 4.1 million ounces, and our resource base was 9.6 million ounces. Those reserves equate to in excess of 6 years of operations of both our mines.
The Australian region, currently at 18% to 19% of our group contribution, and that's going to increase to 20% by 2015. And as you can see from 2008 to 2011, there has been improvement in NCE. The one thing that's happening in Western Australia at present is an unprecedented mineral investment in oil and gas and other minerals.
The Australian Bureau of Agricultural and Resources Economics, in their April 2011 report, stated that there are over 94 projects valued at over $173 billion under construction, or committed, or in the planning phase, of which about 80% are in oil and gas -- no, sorry, 80% are in WA and 80% of that is in oil and gas. So there's a massive investment focused in oil and gas in Western Australia at present.
If you look at Australia in terms of fiscal and economic review, the region is affected by a strong Australian dollar, and also high labor costs. If you look at the current government, the current government is a minority labor government and until recently had 1 seat majority in the House of Representatives, but now has 2 seats, and it will probably last the full term, which will take it to 2013.
And the government's introduced 2 pieces of contentious legislation. The first one was the mineral resource rent tax, which started life as the Resource Super Profits Tax. That resulted in the end of then Prime Minister, Mr. Kevin Rudd, and the new Prime Minister, Julia Gillard, negotiated with the Big 3, BHP Billiton, Rio and Xstrata, to get a deal, which for gardens he was quite good course under the resource of profit tax gold, uranium and other base metals were included, but under the mineral resource rent tax, gold, base metals and uranium were excluded.
The tax has been approved by both House of Parliament and will commence in July of 2012 and only applicable to iron ore and coal.
The other contentious bit of legislation was carbon tax, that's also been introduced in both House of Parliament and approved, and that will commence at 1st of July 2012 at an equivalent rate of AUD $25 per ton of carbon. The impact of that on Gold Fields Australia is around $8 million.
In terms of the Australian dollar exchange rate, as you can see from the graph, it was a little over 0.65 following the GFC. And it's been climbing ever since, much to the disappointment of most exporters. Recently, there has been some fluctuation, and the Reserve Bank of Australia controls the inflation rate, and they're targeting at 2% to 3% range for 2012.
In terms of achievements in Australia since 2008, exploration has added 3.3 million ounces of reserves in the region at a cost of around AUD $35 per ounce. In terms of the exploration success, St. Ives added 2.2 million ounces before depletion. The June 2008 figure is 1.9 million ounces for reserves and December 2010, 2.8 million ounces, and in Agnew, we've added 1.1 million ounces.
At St. Ives, we've developed 2 new underground mines, and they're called Athena and Hamlet. They were recently discovered and very quickly put into development, and Athena is now into production and that was done on time and budget. Hamlet is currently being -- is under construction, and I've got some slides coming up on that.
And first off, we managed to mine our first ore in November 2001. Development is in progress, on target and we expect that to be in operation as proclaimed. And both Athena and Hamlet will provide the lower cost base to underpin our future at St. Ives.
Other things that have been done in terms of costs, we eliminated the royalty in 2008 or in 2009. We've also commenced conversion to other mining, we begun in Agnew last year. We also -- we started off with a maintenance contract, but we eliminated that and took that over at Agnew as well. And this year, we had a very successful takeover of the underground mining contractor. And we're planning to continue with that process in 2012 with the open pit contractor.
We are targeting all other contracts where we see an advantage with our operation and that process will continue in 2012. We've also targeted the heap leach operation, we have 2 processing facilities at St. Ives and a heap leech operation. And we have been optimizing the heap leech and that has resulted in increased throughput and lower costs.
At both Agnew and St. Ives, we undertook our Business Process Re-engineering programs last year and they're providing both cost and productivity improvements in both the open pit and the underground. If we look at our strategic outlook, to optimize our assets, ongoing BPR to achieve the minimum of 25% NCE margin, complete the undermining and maintenance conversions, in particular at St. Ives, and maintain our regional production capability at 650,000 ounces per annum.
In terms of growing Gold Fields, complete construction of the Hamlet underground mine at St. Ives and bring that into production as quick as we can, and importantly, continue with their reserve growth and life extension of both St. Ives and Agnew and drive down our costs wherever possible. And in the longer term, as Tommy explained, to bring far Southeast to account.
In terms of securing our future, focus on people. We need to have pipeline of people to ensure we have sufficient capability to maintain our operations to the highest level, with efficiency and productivity. We've also had a very significant permit approved recently at St. Ives called the "Beyond 2010" EIS, and that was for a 10-year extension to allow mining to continue on Lefroy Lake, and I'll show you that on the next slide. And then, also strengthen community and regulatory relationships. And in terms of the community, especially strengthening the indigenous relationships, we currently have -- providing additional employment and training opportunities.
In terms of production, St. Ives, 2008, 2009 fairly standard, bit of an increase or big increase in 2010 and we're looking at around for 2011 estimating about 450,000 ounces by the end of 2011. And we actually consider this to be an optimal level of production at St. Ives under the current circumstances.
In terms of this slide, we consider St. Ives to be one of Australia's premier gold camps. The scale from top to bottom is about 40 kilometers, about 35 kilometers across. The green areas is basically the St. Ives tenements. So we've got a very large tenement holding. We have a current underground mine at Cave Rocks. On a larger scale, we've got Kalgoorlie up here and Kambalda, that's about 100 kilometers, 60 miles apart in St. Ives project is in this area, and it's conveyed on the larger scale and as I said, this is a very prospective mineralized ground. The Cave Rocks has been an underground mine, Santa Ana, Revenge open pits, Lefroy Mill and in this area. We currently have an underground mine at Argo, Athena/Hamlet complex, Junction was an earlier underground mine and we've got a number of series of open pits in this area as well.
So we acquired the project from Western Mining at the end of -- actually it was 1st of December 2001, so we've had our 10-year anniversary and we have mined -- there has been an excess of 11 million ounces mined by Western Mining and ourselves in that time. And we have produced 4.8 million ounces since acquisition in 2001. And we consider that there's exploration potential for at least another 5 million ounces in that area.
The Athena-Hamlet deposit, if you can find something and bring it into development in a very quick period of time. The Athena-Hamlet is very important to supporting St. Ives' longer-term future. If you look at a closeup of the Athena-Hamlet underground complex, you can find something and bring it into development in a very quick period of time. The Athena-Hamlet is very important to supporting St. Ives' longer-term future.
If you look at the close up of the Athena-Hamlet underground complex, we've got Athena on the left, the Athena complex, and Hamlet on the right. Athena has got about 400 meter strike, and Hamlet is about 700 meter strike. Athena's body is slightly thinner and longer, but she had the same portal and infrastructure, so that was very important for reducing our cost. Surface facilities are shared as well as combined price plant and do have independent ventilation.
So in terms of the combined reserves, 6.7 million tons, 12.2 grams, 1.13 million ounces, Athena has got 2.2 million tons at 6.3 grams, and Hamlet slightly lower grade 4.5 million tons at 4.7 grams or 6.89.
As I mentioned earlier, discovery to production within 4 years, so we're quite proud of that. The Athena project was AUD $100 million project, we did do it on time and on budget, and we brought that into commercial production in quarter 3 of this year. And the Hamlet development is well advanced and that's tracking to be in operation as per plan, and has also further exploration potential along strike and down due.
If we look at St. Ives' regional exploration potential, as I said earlier, there's a further potential for at least 5 to 5.5 million ounces. And we've got a number of our Brownfields and Greenfields projects that we are looking at.
If you look at the map, you've got Cave Rocks in the north, greater Santa Anna area, which we're looking at potentially a large open pit Revenge-Neptune, and Victory area, all potentially large open pits.
And then Athena-Hamlet, further down here. So in terms of our Brownfield projects, we're looking at extensive underground -- or extensions of our Cave Rocks underground mine and consolidation opportunity for large pits. And we're quite excited about some of the prospects that we're looking at in these areas, and they could be significant -- could have a significant impact on St. Ives. And then additional focus on our underground Greenfields projects in terms of Foster, which is here and also the Greater Junction area, where most likely to be underground potential in very similar geology to what the Athena-Hamlet complex is. We're very excited about our future growth at St. Ives.
Moving on to Agnew. Production in 2008 was around 200,000 ounces. We feel that 200,000 ounces are a very comfortable production rate for Agnew. In 2010, production was low for a number of reasons. We implemented undermining and importantly, at Agnew, there was lack of flexibility with processing. Their only source of oils from the underground and we've since bought on a small open pit called, Songvang, which allows us to keep mill full reducing our processing costs and bringing our production levels up to the level that we think it should be at.
So in terms of Agnew, we've got our main processing area at our Waroonga pit. This is an old open pit and the dateline is around that area, and this is our processing plant in this area. And way down the bottom, we've got a small open pit, which we call Songvang. It delivers around 30,000, 35,000 ounces. It's only small, but it has had a big impact on project economics in ensuring that we've been able to fill the mill and Songvang mining was completed -- will be completed early in 2012, and it gives us the opportunity to complete -- to process all that ore and fill the mill for next year.
Another promising open pit is Cinderella. At this stage we're doing, have completed the drilling and we're looking at completing a feasibility study on that in early 2012, and making a decision on that in 2012. The bigger tenements at Agnew, we've got over 50 kilometers of very prospective ground, that's a large area, and it takes time to find things. But we're very confident that we will find a traditional surface deposits or underground deposits, and on the underground, we'll just look at Waroonga.
If you look at Waroonga ore body, the area in green, was our mining pre-2008, and at the reserve level was at around this level. And the reserves in 2008 were about 620,000 ounces. But the kilo body showed promise in 2008. And since then, we've done a lot of drilling below the bottom of Kim and also below the mine load to load, the Kim load the left, main load to the right, ore body in the center, fairly small called Roger, but with a fairly extensive growth in this growth in this area, which you can see on the next slide. We're very excited about this.
So we've extended the reserves now from the 2008 level to reserve level at December 2010 of about 1,500 meters below surface. That's the lighter blue, and was also extended, since 2008, the mine ore body fairly substantially. And in the last 12 months, we've been doing a lot of drilling. This pen doesn't want to work. We've been doing a lot of drilling in this area, in the area we call Fitzroy, Bengal and Hastings. And to identify the highly encouraging intersections, which were very -- for both grade and continuity, we're very confident that's going to bring that into our resource and reserves when we complete our drilling.
Other things were done at Waroonga. We've upgraded the ventilation. We now have installed ventilation for the life of the mine, that will keep that -- will cover ventilation requirements well in excess of the 1,500 meters, and also for all the lives that we're currently planned or have planned.
Now we've got a -- if you look at our project pipeline, we've got a number of very exciting projects in our graph pipeline. We've got -- early stage exploration, we've got Beta Porphyry, which is possibly a large open pit at St. Ives, Urik, Incredible, Foster, Junction, possible underground at Agnew. We've got the Porphyry link, Kim South Deep and Fitzroy, Bengal and Hastings, depth extensions, which we're still drilling -- and Cinderella and then further afield the East Lachlan Belt in New South Wales and Delamarian Province in South Australia and not all these will go to advanced stages but we're quite confident that a number of them will be.
And at St. Ives, we're very excited about the large open pit opportunities with consolidation of a number of shallow deposit, especially with the current gold prices. And once identified, we have the proven capability to deliver any new projects on time and on budget.
So moving across, we've got a number of projects at pre-feasibility and feasibility stage. And we've got a number of projects in construction. Now if you look at for Australia, 5-year outlook, this doesn't look as exciting as the other regions, but we are looking at maintaining a reliable level of production at 650,000 ounces. We think that's quite important. Optimize our margin by bringing down our costs, focusing on our costs, and improving our reserve position and grow the life of mine.
Now we've got that at 650,000 ounces, now we will be looking for other opportunities for growth and there's constantly being evaluated, and if feasible, will be added to the current production profile. And in the longer term, the Australasian production will be supplemented by the much larger production levels that will come out of Far Southeast.
So thank you for listening, and I'll pass it over to my colleague, Juan Louis Kruger.
Juan Luis Kruger
Thank you very much, Richard. Well, I hope you're awake because I'm really excited today to be here to share with you guys a little bit of South America, our performance, achievements and more importantly, where we're going on our growth prospects.
By region, this is actually the youngest in the group, but I think -- and no wonder why I say that it's the most promising one. Are you awake, guys? All right. Five years ago, Gold Fields started in South America, investing in a Greenfields project, Cerro Corona, which started production in 2008, after 2 years of construction. And so far has delivered 1.2 million gold equivalent ounces for the group, contributing now to around 11% of the group's production, increasing significantly our international diversification. But I think that the strategic importance of South America as a region in this case goes beyond the contribution to our production base because the region contributes now with an operation that delivers at 61% NCE margin, becoming the most profitable region for the group, and therefore, contributing with 15% of the group's EBITDA year-to-date 2011.
So it was not only adding more ounces to our portfolio, it was adding better and higher quality ounces to our portfolio, and that's what we're willing to do. Therefore, Cerro Corona has certainly been a great addition to our company. And being on the success of Cerro Corona, and as Tommy alluded before, we're very busy now developing the Chucapaca project. We taken to account the recent acquisition of a minority sub-Cerro Corona we have been able to increase reserves to $5.3 million gold equivalent ounces and if we further include the Chucapaca project into our resources, resources have grown to $9 million gross equivalent ounces in the region.
Here is the importance that Peru has within the South America region and for the company, I thought it was good to share with you a little bit of a perspective of the recent changes in the political regime and the fiscal context. Despite the initial uncertainty that was created by our new elected President, Ollanta Humala, we believe that the initial signaling has been positive, both the Cabinet, the Economic Minister and the Prime Minister, sorry -- and the Central Bank President have been -- they come from the previous governments, so that shows continuity. And more importantly, the President has really moderated his campaign speech, moving towards a center type of government, where he will certainly promote social inclusion programs, but he's very aware that he needs economic growth and continuous investment to fuel and fund the social inclusion programs. So what we believe is that we're talking about a President that will be very much similar to Lula, the former President of Brazil, with a government that has been considered one of the most -- one of the best governments that Brazil has ever had. So we're really positive on those lines.
One of the things that I think shows or proves the moderation on how the new government wants to manage the relationship with mining and with investment was the way that the new tax has been defined or agreed, between the government and the industry. And at the tax, it's not voluntarily, but rather it hasn't been imposed as well. Why? Because the new tax was the result of the discussions that we, as an industry, had with our new government, which allowed us to shape something that as Nick alluded before was a win-win proposal. And why was it a win-win proposal? Because it still keeps the country and the mining industry within Peru, as a competitive industry amongst the other countries in the world. And I'm talking about the big mining countries. And secondly, because it allowed the government to achieve the objective of increasing the fiscal revenues.
So I think that it's very important to realize that we work together with the government, we shaped the proposal, and we got a final proposal that improved our current royalty base, given that the previous royalties were regretted based on revenues and the new royalties are basically based on a progressive scale on operating profit margins and operating profits. The same applies for the EIM tax, which was the new tax that was implemented.
The only impact of the tax changes is of an additional 400 basis points on average for the industry in terms of effective tax burden, taking the average industry tax rate close to 43%. Having said that, it's very important to realize as well and to recognize, that social conflicts remain a main issue for the industry and for the new projects to develop as evidenced by the latest developments on the Congo project.
The biggest challenge that the government faces is to really manage the social unrest, and we believe that there are some good things that are happening on that respect. The first one is that President Humala has clearly stated his support -- his public support as a national policy to the mining industry and to continue developing the mining industry. He supports the development of the Congo project, and this temporary suspension will hopefully be over in the near future after getting some more community support for that project.
The other thing is that the previous consultation law, which is the prior and informed consent law, was approved recently by the government, but it was approved on a nonbinding basis. And that means that there is -- the communities don't have veto power from a legal perspective, which was something that could have happened, another signal or another positive signal of the government for the mining industry.
Finally, the territorial zoning is something that is a process that has to be conducted technically and if so, we believe that it could be an enabler for future projects and for the industry to grow as opposed to a threat. Overall, we believe that Peru remains as a competitive mining environment, and together with Chile, very recently Argentina and eventually Columbia, are the countries of South America where we have decided to focus today and in the future.
Our strategic target is obviously to build a million ounce region and this remains the key driver of all our efforts and focus. Our strategy together relies mainly in 3 pillars. The first one is to optimize our operations at Cerro Corona, with the goal of achieving 0.5 million ounces in production by the end of 2015, and increase our life of mine average production base to 400,000 gold equivalent ounces. The second pillar is to deliver to Chucapaca, our flagship project, with first production also expected by 2015. And the third pillar is to build on our regional diversification opportunities through all our Greenfields exploration projects and portfolio in Peru, Chile and Argentina, and hopefully expanding in the future, as I mentioned before, to Columbia.
These 3 building blocks will certainly drive us to achieve our targets. However, if we find good M&A opportunities at the right price to create shareholder value, we will definitely look up to them as well.
Last but not least, I would like to highlight how important is our footprint in the region, basically to enable our strategy. Based on our experience and track record, we are convinced that we're very well-positioned to deliver all of our projects both in Peru and to start diversifying within South America. And when we talk about the track record, it's interesting to look at our achievements since 2008 when we started operations. And the first achievement was basically to complete the construction and to ramp up, in record time, Cerro Corona. And when I say record time, from the time we acquired the project, and there was nothing on the ground until the time we started operations in Cerro Corona, it was less than 4 years. And that today, is a record time. I haven't seen any other projects that have been built from scratch to production and ramped up in 4 years, especially if we take into account the fact that we were getting into one of the most conflicted areas of Peru.
Then we transition the project to become a world-class operation. And basically, delivering a 61% NCE margin operation, becoming the most profitable operation in the group in a very short timeframe after we ramp up. Following that, we not only focused on getting the whole thing up and running and delivering results, but we also focus in increasing our reserves at Cerro Corona, and we have been able to increase by 1.3 million ounces before depletion from 2008 to our December 2010 reserve declaration our reserves, through mainly improving the design of our tailings dam and acquiring the Selvita concession.
But achievements are not limited to Cerro Corona. As you know, the Chucapaca discovery has been a really important discovery for us in South America and for the mining industry in that part of the world, I would say. We have basically taken from the discovery whole to what would be our feasibility study, again in less than 4 years, the Chucapaca project.
And the Chucapaca discovery has been a really important discovery for us in South America and for the mining industry in that part of the world, I would say. We have basically taken from the discovery hall to what will be our feasibility study, again in less than 4 years, the Chucapaca project. And the Chucapaca project -- I call it mine because I think it's already going to be a mine, but if it wasn't in production, Chucapaca would be the fourth largest gold producing mine in South America today. So it's significant. And there are not that many discoveries of this size and quality, as Tommy mentioned in his presentation. The feasibility study's in progress and we have been able to basically deliver and we keep -- remain on track to deliver that. In terms of sustainable development, which is another key pillar of our strategy, if I would have to summarize in the last 3 or 4 years, we have been able to really position very strong Gold Fields in the region and particularly in Peru. The Gold Fields franchise is very, very strong. We're well-recognized for the way we manage our social relationships and for our capacity to deliver.
We have had a sustained safety performance. Cerro Corona has been awarded for 2 years in a row as the safest open pit mine operation in Peru, competing against the likes of Yanacocha, Cerro Verde and many other well-established operations. We have consolidated our social license to operate and that will allow us to leapfrog -- and is allowing us to leapfrog the development of Chucapaca. And we have been recognized at the Lima Stock Exchange, for 3 years in a row, as one of the top companies in terms of corporate governance. Gold Fields is clearly well-established and well-positioned to continue growing.
Going back to Cerro Corona. Two years ago in our last Investors Day presentation, we were talking about how we have stabilized the operation and how we were delivering up to our design parameters. And then we said, now the focus is going to be on how we optimize this asset. And that's what we have been doing. Through several projects and optimization initiatives, we have been able to achieve record throughput of 812 tons per hour in the last quarter, and that's 5% above designed parameters. And we have been able to increase our recoveries above 65% for gold and above 85% for copper which is a reflection of the focus that we have had on all of our optimization initiatives.
So there are continuous improvement and optimization projects remain under implementation as we speak. And we expect them to continue to be an important lever for value creation, contributing to offset the declining head grades of our ore body in the future. As a result of these projects, production has really been above the original project parameters both for gold and copper. Gold production has steadily increased and copper production has also been above plan. However, it still shows a declining trend as a consequence of the decreasing head grades. However, we are partially offsetting the decreasing head grades into the future.
In what -- how does this result from a financial perspective? Cerro Corona is the lowest cost producing mine for the Gold Fields group in the world. We have a 72% operating margin. It's one of the top 4 mines in Peru and South America in terms of profitability. And we just realized this when we were negotiating with the government the new tax. Has a 61% NCE margin with a cash cost below $430 per equivalent ounce and an NCE below $560 per equivalent ounce. Since we started the operation, our focus on cash management and working capital management has been critical. And that has allowed us to pay back to Gold Fields Limited $400 million in cash since we started the operation. Cash will remain -- cash flow generation will remain and remains as our key priority to create value through this asset.
Moving into the future. What are our strategic objectives? Well, at Cerro Corona, as I mentioned, first of all continue optimizing our operation. And basically really focused on improving recoveries and increasing throughput. We want to continue growing our reserves by converting resources. And for this to happen, optimizing our tailings and waste storage management and facilities are critical. We also are focused on monetizing the value of the oxides and we want to talk a little bit about how we're going to create value in that line. In addition to that, we're starting a pre-feasibility study to evaluate the expansion or a potential expansion of our current sulphides plant with the aim of achieving our 2015 objective.
Outside of Cerro Corona, 2 drivers or 2 strategic goals. The first one, deliver our Chucapaca project feasibility study by the second half of next year. And the second one is to consolidate our regional diversification within South America, mainly through the greenfield opportunities that Tommy presented, and I'm going to also allude too later on. Obviously, it is very important for us to secure the social license to develop our Chucapaca project and to develop all our new initiatives in the region. So securing these licenses or this social agreement is a critical strategic imperative for us.
We are also fully committed to safety and the hard target is 0 LTIs in the region. And we need to make sure that we have the right people. Not only that we attract, but we retain the best people, so we want to become an employer of choice for the mining industry in South America. And we believe that we are on the right track. Environmental compliance is also another key pillar of our strategy and we're fully committed to that.
Talking a little bit about Cerro Corona and the potential for growth. The upside potential for resource conversion to reserves at Cerro Corona is really significant. Provided that we can find alternatives to increase our tailings, storage and our waste storage capacity with an unconstrained scenario, we could add up another 40 million tons of resources or 1.8 million gold equivalent ounces. We're working on several initiatives to achieve this objective which range from the in-fill drilling program and the new geological model that we have completed to a full team of top people in the world dedicated to evaluate alternatives to increase our tailings and waste storage capacity. An alternative to increase the height of our tailings dam wall to level 38-15, which is 15 meters above our original design, is currently being analyzed and engineered. And we expect to complete the engineering by the first quarter next year.
Obviously, the feasibility of this is also linked to environmental and social permitting. Other alternatives to optimize the deposition of tailings are also -- and constantly being analyzed such as dry stacking paste. And 2 potential additional waste storage facilities have been identified and are also under evaluation as we speak. So we remain very optimistic.
In the oxides, there's 7.2 million tons of oxides that's stockpiled at our operation right now. We started working 1.5 years ago on this project. And so far, we believe that the best alternative to treat these oxides is through building a heap leach operation with the potential to recover between 250,000 to 300,000 ounces at Cerro Corona. A pre-feasibility is underway and it should be delivered by the second quarter of 2012. The EIA approval should run in parallel, and shall it be granted by the end of 2012, we could start construction in 2013 and production in 2014. We remain very optimistic that we will be able to deliver this project in this time frame.
Moving into our growth projects outside Cerro Corona -- and Tommy has talked a lot about Chucapaca, but I would really like to share with you today why we believe that Chucapaca is a great addition to our portfolio and it's certainly our flagship advanced exploration project in the group. For a new project to ultimately create value for shareholders, it has to have in my view, 2 conditions: The first one, it has to be the right project. And we mean by that, it has to be a project that has a good quality resource, it has to be a robust project, and it has to have exploration upside. And those 3 conditions are certainly met by Chucapaca. Further, it provides us with geographic diversification within Peru because Cerro Corona is in the north and Chucapaca is in the south. But that's not good enough. Nowadays, you need to deliver the project. Project execution is as important as having the right fundamentals. And we believe that we have the winning combination. Why? Because we have a track record of delivery in the region. We know how to operate in Peru and in South America. We have developed the skills and the capabilities to do so. The support that we're getting from the communities to develop Chucapaca and the fact that the studies are on track without any surprises are a testimony of those capabilities. All the lessons that we have learned at Cerro Corona will clearly enhance our capacity to deliver the project and we will clearly leverage on building them. And that's what we're doing. So we believe that Chucapaca is a great addition to our portfolio, both because we're going to be able to deliver it, and we're going to be able to deliver a world-class project into production.
But the growth prospects are not only limited to Chucapaca, we believe that there's significant growth in our regional diversification, significant growth potential in our regional diversification. We have now exploration offices and interests in drilling targets both in Peru and Chile and have recently opened a new office in Mendoza, Argentina, to support the drilling at our recently acquired Taguas Project. By February 2012, we will have in total 6 drill rigs turning in the region to complete a drilling campaign of up to 30,000 meters with a budget of around $20 million to $30 million that could be increased if Tommy's group proves to be successful. Without a doubt, a very strong commitment to fuel our future growth on our exploration portfolio or through our exploration portfolio in the South American region. Still early days, but certainly all of these exploration targets looks very encouraging.
Last but not least, we believe that Columbia has a very interesting exploration potential and we remain with an open eye actively looking for projects and targets in this country. Despite South America being the youngest region for the group -- I know Victorville is not in the book, sorry for the omission. Despite being the youngest region for the group, our growth pipeline represents or presents significant upside potential with projects and initiatives currently in progress at all the different stages of the development chain.
Our early stage exploration projects in Peru and Chile look very promising. In Peru, we're working in Tacna, which is further southwest of Chucapaca, and where we have our own properties and also we have a joint venture with Vena Resources, a Canadian junior, which is called Amantina, where we have the right to go all way up to 70% and we're drilling the Chapi Chiara target there. In Chile, we're working on the Maricunga belt. And our aim is to take this Salares Norte project to the advanced development or advanced phase exploration stage by the end of 2012. And that's very important because it will allow us to keep on pushing towards the higher ranks or the higher levels of development in the value chain of projects. Same is the case of our Taguas Project in Argentina, that we want to really confirm the potential so that it can become our next project into the pre-feasibility and feasibility stage to replace Chucapaca that will be hopefully moving into construction. In terms of what is now -- right now a pre-feasibility and feasibility, we're talking about the oxide heap leach pre-feasibility study and the sulphides expansion pre-feasibility study as well in Cerro Corona.
Construction, we have several optimization initiatives and projects under construction right now at Cerro Corona, basically aiming to increase recoveries and keep the throughput up.
In my final slide, I would like to leave you with a few key messages from our region. First of all is we have a clear and focused strategy to deliver high margin growth from this region with the specific building blocks that we have identified to achieve the 1 million-ounce target in production or development by 2015. At Cerro Corona, we aim to achieve 0.5 million ounces by the continuous process optimization, monetizing our oxide stockpiles and the potential expansion of sulphides treatment plant. At Chucapaca, we will deliver around 200,000 to 300,000 ounces per year of incremental production attributable.
With these 2 operations, Cerro Corona and Chucapaca, we will achieve the 1 million-ounce mark on a managed basis. However, on an attributable basis, we still will have a 200,000 gap to make our objective. And where are we going to get -- or how are we going to fill that gap? Well, it's going to come from our greenfields exploration pipeline or alternatively any opportunistic value accretive acquisition. In a very short timeframe, South America has become an important cash generator for the group, and Cerro Corona has been a success story for Gold Fields in the region. It has provided us with experience, skills and capabilities that will allow us to deliver on our future growth projects.
We're now very excited and committed to deliver Chucapaca and to diversify our exploration portfolio into other countries to further fill the gap and achieve our goal. Muchas gracias.
Paul A. Schmidt
Good afternoon, everybody. I think the one thing Gold Fields has always pride itself is it's very conservative financial management and financial strategy that it's had. A couple of things to highlight. I mean we do not hedge gold, we will not hedge gold despite the whole gold price. And it's a philosophy for us. In terms of our leverage target, our net debt to EBITDA, we always stated that our target is not more than 1x net debt to EBITDA. Our funding strategy, to date, we've done most of our acquisitions or growth through internal cash flow generated as well as debt financing. However, we also said that if the project is good enough, we're prepared to go to the equity markets to raise finance -- to fund it. If you look at our credit rating, we've always pride ourselves in our investment grade status that we have. And also in the last quarter, Moody's has upgraded our status to positive. Our dividend policy, I think it's one of the highest paying dividend policies in the industry and it is 50% of net earnings net growth capital.
What have we done since 2008? Obviously, we have remained unhedged. We've improved our net debt-to-EBITDA ratio from 0.67 to .42x. Our free cash flow has increased to $346 million. Our NCE margin, we've grown it from a negative 4% to a positive 29%. We've got our investment grade status for our bonds. In terms of our funding sources, previously we only had bank debt. What have we done since then? We've accessed the commercial paper market in South Africa and last year, we also issued our debut Yankee bond, which at that stage, was the lowest 10-year bond done by a gold mining company at 4.875%. Also we've managed to extend our maturities. We had very short dated debt. Our debt now is between 1 and 10 years. The bulk of it is sitting in 10 years. That is where our bond is setting.
In terms of NCE, that's a philosophy of Gold Fields. And just to refresh everybody what NCE is, it's notional cash expenditure and it's all operating costs plus all capital. And including in capital is brownfield exploration, growth capital as well as sustaining capital. And what does this give us? If you deduct our NCE from our revenue, it leaves us with 4 bills to pay: our interest bill, our tax bill, our exploration, as well as to pay dividend. And what have we managed to do over the last year? If you look since the December quarter in 2010, we had an NCE margin in dollar per ounce of $274 per ounce. We've managed to grow this to $490 an ounce, almost doubling it. And in terms of the increase in the gold price, more than 50% of the increase in the gold price we've managed to translate into an increase in NCE margin giving it through to our shareholders.
If we look at this slide, Nick mentioned it earlier, it just shows how we managed to grow our NCE margin since 2008 from almost 0% to 29% which we got in the last September quarter.
If you look at this slide, and I want to spend some time on this slide. This reflects the NCE for the peer group for the September quarter. And it's showing that the average for the peer group is about $1,371 an ounce. This is up from $1,200 in the June quarter. And the one thing that it's showing us, the whole industry is facing turbulent times in terms of cost as well as increased capital expenditure. And the capital expenditure I think is there for 2 reasons, it's to not only sustain the gold production of the peer group in which we're in, but as well as to try and grow it. The other thing that's important on this slide, is looking at the relationship of cash costs to NCE. We've always said, we don't believe that cash costs are the be all and the end all because it's subject to a lot of manipulation. If you call something X or Y, you can exclude it from cash costs and go into capital and your cash costs look great. However, your capital -- your NCE is still there. And it shows in our relationship. We've got a very small gap between our NCE and our cash costs.
To the next slide. Nick mentioned this earlier. But what we've done since 2005, we've plotted the inflation increases of our full regions. And surprisingly, South Africa has not inflated by the most. The worst has been Ghana. South Africa is similar to Australia and Peru has been a bit. And I think that's because it's a quasi-U.S. economy and it's kept inflation. But what's driving? In South Africa, it's basically been 2 things. Above inflation wage increases and obviously the high increase by Escon of around 28%, 29% higher than Ghana. Last year, we had an electricity increase of in excess of 50%. And you're seeing electricity prices going up throughout the world. Also, what is driving inflation at the international operations? The big uses of fleet which use diesel. In the last 3 years, nevermind the last 5 years, the oil prices more than doubled. And we're picking up the cost of that as well. Steel has also escalated substantially above inflation and all our regions are exposed to it.
Business process re-engineering. One of the reasons why South Africa is looking so good than the previous year is the successes that we've had with the business process engineering. Total savings from June 2010 to September 2011 were ZAR 353 million, that is just the quarter-on-quarter increase. If you annualize the annuity [indiscernible] it's the ZAR 838 million that Peter and Nick spoke of earlier. And that's mainly due to labor reduction and right-sizing the South African ops as well as electricity consumption savings. In West Africa, we've saved around $32 million. A lot of that has come out of the conversion to owner maintenance, as well as owner mining, as well as improved fleet availability and utilization. In Australia, I think it's in its infancy stage. The big savings is still to come. And that's from the conversion to owner mining at the surface, the open pit operation, as well as looking at our tracking efficiencies. Because of the size of that piece real estate, we do a huge amount of tracking.
If we look at our balance sheet, just showing that our net debt is at the 0.42x to EBITDA and our net debt in total is about $1.4 billion as we spend at the end of September quarter.
If you look at the next slide, just looking at our available committed facilities. We have in terms of dollar facilities about $800 million of unutilized committed facilities. In terms of rand facility, we have about ZAR 3 billion in undrawn committed facility. And also the little graph on the bar chart on the right hand side shows our debt maturity profile. I think, it is a well spread out debt maturity profile that we have now.
And I mentioned to you earlier, I think we've got one of the highest dividend policies. And this is just to set on what does the 50% of earnings less growth capital translate to? And if we look at it for the last 5 years, it start straight to effective payment of 42% of our earnings. I think it's a very high payout.
If we look at dividend yield over the last year -- and this was reported by Bloomberg on the 28th of November 2011, it shows that Gold Fields is by far -- has got by far the highest yield out of all the peers.
I think in conclusion, what does that leave you with? We've got low gearing, as our net debt to EBITDA of about 0.42x. What this means, if I want to keep to my policy, I said of not going above 1x net debt to EBITDA, I can still add another $1.4 billion of debt to my balance sheet before I even get to the 1x. And that's using a lot of peace of mind in terms of having to fund all the great projects that my colleagues and management side has talked about. We've got strongly liquidity position, robust cash flow generation, annualized for the last quarter of about $1.4 billion in terms of free cash flow from operations. And I think the last thing, we are committed to retaining cash this year and our dividend policy speaks mounds about this. That is to how well we've rewarded our shareholders.
With that, I'll hand over to Nick to give the conclusion.
Nicholas John Holland
Thank you very much, Paul. We're coming to the end and I don't want to take too much time. I really want to sum up what Gold Fields offers shareholders today. One of the largest reserve bases in the industry. 77 million ounces of reserves. Third largest. Production, fourth largest, 3.5 million ounces. And as you've seen, we have significant potential to not only maintain that, but also to increase it.
Geographical diversification. Today, you are seeing a global gold company that is being created and it will be sustained over time. And in fact, we'll become more diversified through the addition of the additional projects we've spoken about.
Robust free cash flow. Paul just indicated, if you annualized these numbers, you're talking about close to $1.5 billion a year of free cash flow. A growth pipeline that shows that 2, 3 years ago when we talked to you about our strategy, we have this desire to get a 5 million-ounce growth pipeline. Today, we have it. A balance sheet that can fund it. And you've heard again about the untapped debt capacity that we could add on in addition to the free cash flow that we currently generate.
Safety will always be the #1 priority. And we will have no qualms about stopping production that is not safe. And actually stopping, fixing and then getting back. That is now engrained into 45,000 people in this company and that's the way that we can operate. That's the way that we do things in Gold Fields.
Unhedged. I don't see us changing our philosophy and that is a philosophy. It's not about what is the right level to hedge, it's a philosophy. We intend to give a full exposure to the gold price to our shareholders. If the gold price goes down, then we will adjust our strategy to cope with the lower gold price, but we still intend to give our shareholders the exposure to that gold price.
Commitment to our investment grade rating. As Paul has indicated to you, we now have 2 ratings, and it was particularly nice to get Moody's to upgrade us to positive and maintaining those ratings is very important for us.
Returning cash to shareholders. We've spoken about our dividend policy. And certainly if you look at our track record, I believe it speaks for itself.
And with that, we're going to allow some time for questions. We probably have around about 10 or 15 minutes. So another I know that there are people also listening to the webcast. So it may be possible to try and accommodate some of those questions. But let's first of all hear from the audience here and either myself or my colleagues will answer the questions. And please feel free to direct questions at any of the executive here today. We're very lucky that we've got 10 out of the 13 executives together. That doesn't happen very often, particularly that they're all over the world.
So with that, we'll hand over to questions and thank you very much for your attendance.
My question's for -- first question is for Peter. Could you just spend a little bit more time talking about the rationalization at KDC? First of all, is the asset performing now as expected relative to what you anticipated at the time that the 2 were joined? And could you spend maybe a couple of minutes talking -- you put the slide up showing all the various shafts. And I want to get an understanding what you really meant. It sounds like you're pulling back tonnage from some shafts to focus on the ones that are going to give you the best margins.
Peter L. Turner
What we're saying in a nutshell is we're going to look at all opportunities. If you look at some of the older assets, we're looking at fairly low volumes in terms of let's say, KDC 7 and 8 for example. They're typically mines that are doing 5,000, 6,000 square meters. Now what we would do in an environment like that is to really look at the mining location, the mining horizons, where they are, and look at how we can optimize tramming routes. Let's just use a basic example. And this really cuts to the core of our mine at K3 as well, and combining a few of those assets. And it's exploiting the productivity of those assets and saying, well, let's combine a 6 and a 5 and make it 11 from 1, rather than 5 and 5 from 2, in terms of mining volume. In that way, we can then look at closing down a shaft barrel for example. Let's call it shutting a shaft barrel. Producing the same gold but essentially out of 1 barrel rather than 2. Secondly, looking at the pumping arrangements between a shaft like that, energy in South Africa is at a premium. And when you're lifting water, 2,000 meters or at least 1.5 to 2,000 meters, there's a lot of energy that goes into that kind of process. So we're optimizing pumping systems, looking at how we can combine pumping systems between those units. And this is work in progress at this stage. We'll probably be finished around about March next year and be reviewing this with a view to optimizing it. And it's around the old operations and combining them into one single barrel. That's largely the principle of what we're talking about here.
And as far as how the asset is performing relative to expectations?
Peter L. Turner
Well, what we have done is we've obviously combined the West and the East. We have a common management structure now, which is one Senior Vice President controlling both, with Senior Operations Managers on each of these mines. And giving dedicated resources to these operations rather than sharing resources over a very wide footprint. What we believe this has done certainly and it has done is created dedicated focus per operation, per site. And it has created a lot more ownership. We've seen the traction with respect to ownership of management and the leadership of these various operations. And look, it's been a fairly short while now, but I can say without any doubt at all that we have the desired effect. There's nothing like the captain of the ship running his own ship rather than somebody else. And we've seen those effects around good management, good leadership coming through. And we've seen some improved safety results in a lot of these areas. So structurally, it's working well, no question.
I just have a couple of questions. My first one is with regards to Ghana. If the tax situation doesn't improve and you choose not to continue to expand there, what other opportunities do you see in the general region? Or in general, in order to achieve your production targets for 2015?
Nicholas John Holland
Okay, we shouldn't forget that's in the region, we all also got the Mali projects. I call them Mali projects because in essence, we've got the project to the South, that we call Yanfolila, which is the one that Tommy and Peet spoke about. That has the potential for 200,000 ounces a year production. But also north of the Sankarani River, in what we now call Kangari because the whole area is so large. We have that area that Tommy spoke about as well. And we are aggressively pushing exploration in that area. So certainly, we could focus a lot more of our efforts on Mali. And at that point in time, our strategy on Ghana would be to maintain things as we are. And I still remain hopeful that we will achieve a similar result as to what we've achieved in Peru through engagement. And we are engaging and we hope that we can get a win-win solution with the government that would allow us to develop the projects that we've spoken about. But if not, there's more than enough opportunities within the group, both in terms of the projects that you've seen. But also remember, there are projects bubbling under. And we're hopeful that one or a number of those could come through. I think you've seen an extensive list both from a greenfields exploration perspective, as well as a detailed inventory list at different levels of resolution from each of the regions. So at the end of the day, if we don't do the expansion, I think it would be a pity because I think they have the potential to be very good projects. But at the end of the day, it's all about allocation of our resources to achieve the best returns for shareholders. And those are critical parameters that we bear in mind. So we'll keep engaging. We hope that we'll find solutions at the end of the day. If we don't, I still think there's enough gas in the portfolio for us to achieve our goals.
And my second question is more general. Given your cash flow projections and your CapEx needs, can you provide any guidance as to when you may expect to need to access the debt markets again?
Paul A. Schmidt
We're always looking at accessing the debt markets. I suppose it depends on what the rate is. I mean, we did an investor update about 3 months ago, and it was just when the world went into total turmoil and the rates became highly uncompetitive. At the moment, we've got a facility that's expiring in May next year. We're looking at renewing it. And bank debt at the moment is very cheap relative to 10-year and longer financing. So at the moment, we're probably going to stick with traditional bank debt. But if the markets open up, we'll look at accessing it when the rates are competitive again.
And around what rate is bank debt in comparison?
Paul A. Schmidt
At the moment, bank debt is probably LIBOR plus about 1% to 1.5%. So total all-in cost of about 2%. Where at the moment the 10-year bond is in the region of 7%. There's a big differential at the moment. That's why I'm saying it's not very competitive for us.
Maybe just to follow-on, on that point, I think the operational story that you've told and the financial positioning story you've told is pretty solid as is the current ratings you have. But you're not trading anywhere near to rating. And obviously, you have the ability to access the debt markets to raise capital. Do you look to do anything with regard to your secondary levels more aggressively? Are you conscious of it? And if there's any plans to improve them?
Paul A. Schmidt
I think the one thing that we're going to do in the new year, we are going to register our existing bond with the SEC. It's been one of the criticisms from some of our investors, that it was not the previous one, it was not registered and that we are missing quite a significant portion of the American market, that will only access SEC registered. And I think we'll also be looking at most probably more investor updates in terms of our existing bond to try and see if we can bring the spread down. But a lot of that existing spread evolves around the South African story that we have. As I said on our investor update about 2 months ago and that was the biggest concern that most of the big fund investors that we saw, was the South African story. And I think a lot of things have started to clear up in South Africa at the moment. The nationalization story I think has quieted down. I think that will hopefully alleviate some of the pressure we've been experiencing in terms of our bond compared to some of our peers.
David's got a question here in front.
I was going to follow on, on that debt question. I mean, is this one-time debt-to-equity ratio? Is that set in stone because I think there's a lot of concern around this bond issue and that the rules may change given the capital aspirations of the group.
Paul A. Schmidt
Well, as I said, I can still issue another $1.4 billion of debt before I even get to the 1x. Nick and I have said, for a short period, we're prepared to go over the 1x net debt to EBITDA. But for a long-term period, no. We must really then issue equity to bring it down again. 1x for a sustained period is our comfort level.
But I mean, at 7% with the bond blowing out the way it has, I mean, is that a realistic target for the group to guide debt and equity holders to?
Paul A. Schmidt
I think, we still got the capacity to use bank debt. We've got substantial ability to access the bank debt. And I just said at the moment, 5 of the bankers -- 5-year bank debt is really cheap, 2% all-in cost. It's far more attractive to me at the moment to access that market compared to the debt market. We have no need at the moment to actually get in extra debt. As well, with the gold prices optimum, especially the South African gold prices. We are we amassing quite a large amount of cash in the group as well.
One last question on the Ghana and project Damang. What sort of hurdle rate would you be looking for to come out of with the discussions before you proceed? Can you give us some idea of the geared and ungeared sort of returns that you'll be looking for?
Nicholas John Holland
Yes, look, we have indicated previously that greenfield projects need to get a hurdle rate of 10% real. We look at all of our projects in real terms. Obviously, the tax purpose is you've got to do them in nominal and then deescalate that to real terms. But greenfield projects is 10%. Of course, Damang is not a greenfield project. There's a mine that's been running there for 15 years, we've owned it for 10 years. As Tommy indicated to you, the drilling that we've done and we've done over 60,000 meters of drilling, indicates that the style and extent of the mineralization below the current pit floor is virtually identical to what we've been mining for the last 15 years. So we have a high level of confidence in the ore body and that will be proved up I'm sure as we get our resource statement out that's updated sometime in the new year. So there's a much lower risk attached to that. And that's more of a brownfield expansion project. So I think there, we'd be looking at 5%, 6% or certainly not less than the incremental cost of debt. And if we finance this with incremental debt, clearly you want to make sure that we have a hurdle rate that constantly gets over that. And then we'll look at any specific adjustments that we may want to mass potentially further up to that there might be. And all of those things are really factored into our overall issue. I never believed it's one number in IRR or payback period. It's a range of issues, and of course, robust gold prices. Currently, we're using around $1,500 as a long-term gold price. And that's one parameter we'd also look at. But clearly we do sensitivities as well and see what the potential is for a higher pit potential underground. There's no doubt that we haven't ended the mineralized zone yet and the drilling has gone way beyond the floor, as Tommy indicated. So there is potential for underground operation. Now that would give us further upside because by getting into a deeper pit, we can actually create a better platform for us to access the underground. So there's a range of issues we'd look at there. But typically as a brownfields project, a lower return, a lower hurdle rate than a greenfields project.
As a couple of a bondholders have mentioned here, the company's made some very impressive gains in terms of operating performance, exploration and project development, and there were some great slides to reflect all of these. What was missing was the share price chart that showed the last 5 years. What things do you think are weighing on the share price performance that has negatively impacted on it's performance and what can the industry do to change the focus away from investing in gold bullion to investing back in the mining shares on the part of the retail investor?
Nicholas John Holland
I think, David, that's an excellent question. And one that exercises all of our minds on a regular basis. And certainly, if you look at the season of results that were put out in the September quarter, I think it gives you an indication that finally, the gold companies are starting to deliver the gold prices to bottom line, and us in particular. And in the quarter ended September, we generated $300 million of earnings in one quarter. We generated substantial cash flow. I believe that, that creates the potential for us to pay higher dividends. And as Paul indicated, if we continue along the lines of what we've done over the last 4 or 5 years, paying at around about 42% of our earnings with dividends and that shareholders should be rewarded if we're able to achieve that. That's the first thing. It's translating the gold price into higher earnings, translating that into higher dividends. I think that will help to bring back the disconnect that exists between the gold price and the gold shares. But I think the other thing is our strategy that we've outlined today, we believe that if we can execute that strategy, that, that will create a platform for significant additional fundamental value delivery. And if we can get these projects away, which as you've heard, are going to be better than what we've got now. That will continue to diversify the portfolio. I think the other thing that's weighed on us in particular is the decline in the SA production that we've seen year after year. And it's something that is very clear, it's there, and it's something that we have to turn. And based on the questions that were asked to Peter earlier, I believe that we are seeing a stability coming into the operations, KDC and Beatrix that we haven't seen before. And if we can continue to build on that momentum, then I think we can get more support and get more confidence from investors. The other thing that's weighing on us, is where the South Deep is going to deliver. I think a lot of people want to believe that South Deep will deliver. But they don't have enough confidence yet to believe that. When we take people underground and we show them the progress on South Deep, that in fact, it is truly a mechanized mine already and there isn't just a few drill rigs there and the rest of the guys are standing with hand-held drill rigs, it's not that. When they truly see that it's a mechanized mining we're building up, I think they start to believe. So I think the next year or 2 is going to be absolutely critical on the delivery of South Deep. What's amazing is that the fixed infrastructure at South Deep to support full production is going to be finished by this time next year. By this time next year, we're going to have the full hoisting and processing capacity to support full production. We're going to have the tails dam, we're going to have the back flow plant to support full production. Now that's amazing and also the refrigeration capacity. So the work and the effort the guys have done and achieved over the last 2 or 3 years is really, really good. And that's going to give us a wonderful springboard to then build production. So I think in a nutshell, for us, if we can continue delivering on the growth strategy, if we can stabilize production and take advantage of the rand gold price. Remember the rand gold price today is something around ZAR 460,000 a kilogram. Now that's about ZAR 100,000 a kilogram higher than what it was 4 or 5 months ago. Now if we could capitalize on that and keep the production where it is -- the cost control has been superb, now we just got to maintain production stability, we will see the results. And I think the combination of all of those, for Gold Fields in particular, I believe will give us recognition. But it's going to take a number of quarters of sustained delivery. We know one swallow doesn't make a summer, we know that we're going to continue doing it quarter after quarter for people to believe it. And we're on our way. I think September was a good quarter. And I'm hopeful that as we get to the end of the year, that we're going to replicate the performance that we put in place in September with possibly higher prices. I think that will get people to start believing, "Yes, this is real and we can see the cash flow, we can see the benefits to shareholders." And we'll get people excited again about getting back into gold equity. status that's all black. Victor?
Another question for Peter. Just going back to South Deep. Can you tell us how the in ore de-stress is progressing? Is that going as expected? And how many square meters of de-stress will you have to be doing every month or every quarter once we're at full capacity?
Peter L. Turner
If you look at the slide, I think it's Slide 120, that's the de-stress buildup slide. Now your question is how is the de-stress going. If we look at where we are and we look at the trends over time, I'm certain by this quarter, this quarter estimate will be 8,000-plus which is virtually our target for next year as well. So what we're saying is at this point in time, we're in position -- on position to meet next year's first ramp-up target. We'll be at 9,000 square meters roughly per quarter for the first half of next year. And then from there on, it goes to 11. We've provided sufficient equipment. We've got the skills in place. And what we're doing, if you look at that slide, which is the one just before this buildup slide, Victor, the one where you see the -- all the pretty pictures and the colors, you'll see that the de-stress starts at the blue and the red slides. In fact, what we've done is there's 3 phases of this de-stress, there's 3 levels, if you can call it that: The top level, the middle one and the bottom one. Now what we're doing at this point in time to get us production ready for next year as well, we've gone and we're ramping down to level 2 and to level 3. And so consequently we're going to have more attacking points for this ore body, and it's the primary focus for us at this point in time. I'm quite comfortable that we're going to meet the de-stress ramp-up plan. We're on target as I said now for the target for next year. And we've got new machines in place, we've put a lot of energy and effort into getting the de-stress sequence right. The key to this is making sure you have a mine plan and you stick to it. Rigidly. And it's a fundamental focus for us now at this point, that we actually keep -- we absolutely monitor this on a daily basis to make sure that every single face that's blasted is in the right place at the right time and so on. So a lot of effort going in there. I think too maybe a sense of comfort is we've just appointed Ken Matthysen who is accountable for the design of this process. He is the manager-in-charge, Ken. And we've now given him the helm of this ship to actually manage. So the feasibility that's in place here, the delivery of the feasibility, the feasibility that he actually did. So he's on top of this all the time and it's core focus for us.
Just finally on South Deep. Have you sort of changed the long-term outlook for the asset down to 700,000 ounces per year? Or is there still some wiggle room to get higher than that?
Paul A. Schmidt
No, look at this stage. I think it's fair to say, we were looking at -- it's really a round up in my opinion. So we're still where we plan to be all the time.
Nicholas John Holland
What we're saying is that the run rates may be close to 700,000 by the end of 2015. But there's nothing to stress that the assets can't get to 750 in the long-term when we get there. Okay. We've got to wrap up guys. Unfortunately, we're out of time. So we can take one more question. Is there anything else? One more. Going, going, going. One more. Victor, the last question to you.
Maybe if I can ask Juancho about the timeline or the potential expansion of Cerro Corona and what size -- to what size would you expand the plant and what size heap leach would you put in?
Juan Luis Kruger
Okay. The timeline, we're just starting -- we're just kicked off the pre-feasibility study, Victor. So that should be worked through 2012. This is an important project for us, but it basically entails a full complete study not only on the plant expansion but also the impact on the tailings and the waste storage capacity. How fast we need to grow them in order to be able to increase our production through the expansion of the plant. So what -- so far, we're focused is on delivering the pre-feasibility study, hopefully in 2012. And in parallel, we need to analyze as well when is the best time to start filing for the EIA application because we might want to do it also during the year. But that's still something that we are analyzing. In terms of size and the impact, it's very early days. If you ask me what I would like to do, is probably get something in the lines of 8,000 to 9,000 tons per day of additional production capacity. But again, it's all linked to a bigger puzzle and the plant is just one of the puzzles, one of the pieces on the puzzle.
And the size of the heap leach, is that too soon to say?
Juan Luis Kruger
We're going to be producing probably 80,000 to 100,000 ounces per year when we start that production.
Nicholas John Holland
All right. Thanks very much everybody. I’m afraid we’re going to have to bring it to an end. We appreciate your attendance, and we wish you a happy Christmas. If you’re traveling, travel safe. And we look forward to seeing you all in 2012. Thanks once again. Bye-bye.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: firstname.lastname@example.org. Thank you!