Gold Fields’ Damang mine in Ghana has been “losing money”, the miner’s CEO Nick Holland has said in an interview with Miningweb’s Warren Dick.

“Damang and Darlot, we also did about $50m to $60m of write down between the two of them. Damang has been losing money, it’s under review as to what we are going to do there and Darlot just has a very, very short life at this stage. So until we get more exploration success we decided to bite the bullet and just write that down,” Holland said.

According to Gold Fields’ website, Damang’s Mineral Resources stand at 5.3 million ounces with Mineral Reserves of1.2 million ounces. It said turnaround at Damang was sustained through 2014.

The full mining lease underwent a prospectivity assessment in 2014 to identify and rank brownfield opportunities. A strike of 8km contiguous to the Damang pit provides upside potential with a further 15km of strike trending south-west toward Tarkwa reflecting a prospective corridor for ongoing near-mine exploration. Following this assessment, a three-year phased exploration programme was profiled and meant to commence in 2015.

Below is the full interview that Miningweb’s Warren Dick had with Nick Holland:

WARREN DICK: Today Gold Fields announced results for the fourth quarter and full year to the end of December that saw gold production decline marginally to 2.16m ounces. Revenue per ounce for the year was US$1140/ounce versus the $1249 seen in 2014 but quarter on quarter production in December was higher than the September quarter and the prior corresponding period. Joining me on the interview today is Gold Fields’ CEO, Nick Holland. Good to have you with us, Nick.

NICK HOLLAND: Thank you.

WARREN DICK: You had a very strong operational end to the year, as I mentioned, that production increased in December over both September and the prior year, so just tell us what were the reasons for that?

NICK HOLLAND: Well, I think it was in line with the guidance as well, we said that we would achieve basically the number for the year, we came within 0.6% of it, so it was all planned to be achieved.

I think it’s a focus on quality volumes through our plant and making sure that the mining is properly executed but it’s all planned for, so basically we just delivered our commitment and we came in lower than the cost as well, if you look at the guidance we gave in February of last year, we came in about 8% lower. So all-in, despite the fact that the gold price went down a bit, we achieved things that we can control, which is our production, and we achieved our costs. In Fact, we overachieved on costs.

WARREN DICK: You’ve made quite a step change in adjusting those costs, in your presentation today you announced that over the last few years you’ve removed $400/ounce roughly in costs, are improvements in the future still expected?

NICK HOLLAND: I think we can get improvements because of South Deep’s volume going up on the back of the fact that a large proportion of the costs are fixed. So South Deep certainly can come down some more but on the international operations we’ve achieved around $940/ounce for the international operations over the last year, which is in the lowest quartile of costs if you look at the peer group around the world.

So I think we’ve pretty much got those operations to really optimal performance. There’s always something more you can take out but oil prices might give us another $20, who knows. There might be some incremental productivity and efficiency improvements but we’re into diminishing returns, it has to be said.

WARREN DICK: You posted a headline earnings per share loss of US4c/share and that was largely due to non-recurring items that you wrote down in the fourth quarter, and there primarily I see that $101m was attributed to the Far Southeast in the Philippines, so just take us through those numbers.

NICK HOLLAND: So what we’ve done on the Philippines project is we are still going through a process of permitting issues and the prices, of course, have come down quite a lot, it’s a copper-gold deposit.

So what we’ve done is we’ve brought it in line with the listed share price valuation of our partner in the Philippines, Lepanto, so we’ve done a look through to their share price, they are own 60% of it, we own 40%, so we’ve essentially just adjusted the carrying value to have a market value, their piece of Far Southeast, which is obviously the only material asset they have, so it’s a good proxy to value the asset.

So that’s meant $100m. In Finland we have a platinum-palladium project called Arctic Platinum and we’ve decided to write that down to $1m, in the current market environment with PGM prices where they are we felt that was the most prudent thing to do, is just write it down virtually to zero and if we’re able to secure anything in time over and above that, that will be a win from where we are, if you take those two that’s about 75% of the write down.

Damang and Darlot, we also did about $50m to $60m of write down between the two of them. Damang has been losing money, it’s under review as to what we are going to do there and Darlot just has a very, very short life at this stage. So until we get more exploration success we decided to bite the bullet and just write that down.

WARREN DICK: Even with the lower dollar/ounce price that you realised in 2015 cash flow was strong enough to pay down debt and you’ve declared a final dividend of SA21c/share, so cash flow still strong.

NICK HOLLAND: Cash flow is still strong and it’s been our focus, Warren. We’ve moved away from trying to keep growing production because part of the problem with growing production is that you have to keep on replacing it and that results in more cost over time.

We focused more on let’s optimise the cash flow of the operations and that’s the big focus, we’ve set ourselves a target of generating at least a 15% cash flow margin after all costs at a $1300 gold price, clearly we’re not at $1300 now, so that scales back slightly. But at least it makes sure that we target the business to make money after all costs and that’s the name of the game, we’re not here just to make ounces, we’re here to make money. So, all of the managers in the business have that clear in their minds as to an objective.

WARREN DICK: The emerging story, and I’m sure you’re happy to discuss it, has been South Deep and the 24% quarter on quarter increase in production there, the presentation really gave a lot of colour as to some of the big changes you’ve made there, so for the benefit of our audience tell us what drove that increase in production and I guess the changes to how that mine is being developed.

NICK HOLLAND: Well, first of all we’ve had a major overhaul of our senior, middle and supervisory management, we’ve brought in about 150 skills vertically across the operation. That doesn’t sound like a lot but in terms of the management ranks that’s probably around about 20% to 25%, that’s a big change. We’ve brought in the right skills, we’ve embedded a culture of safety first and foremost, and if you get safety right on mines generally you’ll find it’s a leading indicator to improved production.

You get the safety right and the production follows. We’ve seen the number of accidents at South Deep drop from 168 in 2014 to 67 in 2015, so it’s a material change in our safety performance. In addition we’ve brought in a lot of new fleet, we’ve bought 24 items of fleet, which is a third of the existing complement and you always get better abilities and utilisations on fleet. We’ve changed the mining method, we’ve simplified the mining method at the mine, which is going to speed up things and make more of the mining processes mechanised and more safer and more efficient. We’re starting to see the early fruits of that change, which took place in the middle of last year. So a lot of work still to do but what’s encouraging is that we went up 64% in the second half of 2015, production wise, compared to the first half of 2015 that’s a material step change. We’re looking to increase production again by 30% in 2016 versus 2015.

WARREN DICK: That will get you to that guidance that you announced today of 275 ounces for South Deep.

NICK HOLLAND: That’s right and also, more importantly, because we said it’s not just about ounces, we should be targeting a break even by the end of 2016, certainly at the planning price of R500 000/kg and, of course, the current price, who knows, maybe we might even surprise ourselves by getting there a little early.

WARREN DICK: We’ll hope for that, Nick. That’s all that we’ve got time for, so thanks very much for your time this evening.

NICK HOLLAND: Thank you very much, Warren, have a good evening yourself.