Gold mining company Gold Fields increased production in the three months to December 31, when it generated $47-million in cash flow.

It pulled down costs to $942/oz, recorded normalised earnings of $15-million, stuck to its dividend commitment, reduced net debt by $47-million and is striving to reach a one times ratio of net debt to earnings before interest, taxes, depreciation and amortisation.

“We’re firmly focused on delivering a sustainable South Deep and we’re encouraged by early signs,” Gold Fields CEO Nick Holland said last week at a presentation of fourth quarter (Q4) and 2015 financial results, attended by Creamer Media’s Mining Weekly.

South Deep’s gold production increased 24% on the back of a 42% increase in the September quarter. A comparison of the second half of 2015 with the first half reveals that the company is roughly up by 70% on output from its sole South African mine.

It is guiding 2.05-million ounces to 2.1-million ounces in 2016 at costs in the $942/oz range.

In the last three years, Gold Fields costs have been falling at a greater rate than the gold price has been declining, resulting in $400/oz being taken out of the company’s cost structure.

Currencies in nondollarised countries assisted the company in 2015, when it found inflation to be benign.

“Inflation in Australia has been pretty flat. In fact, we are able to pay people now less than what you paid three years ago, which is quite amazing, and contractors have pulled back costs,” Holland said.

In strategising to concentrate on cash generation in a declining gold price environment, the company pulled back from projects, greenfield exploration and marginal production.

With its nearest debt maturity in 2017, the company has lots of financial headroom.

The sharp rise of the South Deep gold mine’s Q4 production to 68 000 oz pulled costs down to $1 156/oz and put breakeven in sight with the help of the company’s new high-profile fully mechanised mining method.

“We’re targeting breakeven at South Deep by the end of 2016 and, obviously, the gold price in rand terms is certainly helping us.

“We’ll obviously try to get there quicker but we have to be careful of the impact of the rand on inflation,” Holland told investors, analysts and journalists.

He is guiding 257 000 oz from South Deep in 2016 at an all-in cost (AIC) of R575 000/kg.

Excluding South Deep, Gold Fields’ mines in Ghana, Peru and Australia produced 498 000 oz in Q4 and 1.96-million ounces for the year at an AIC of $912/oz.

The cash generation from these operations outside South Africa was $86-million in Q4 and $334-million for the year.

Gold Fields wants to continue to discover gold in Australia and will this year spend A$86-million on exploration there.

“We’re in a finite industry, so we have to find a million new ounces a year, which is not so easy,” Holland commented.

The company has made two promising discoveries at Australia’s St Ives mine, where it is looking for early generative targets and not only extensions to existing mines.

The Tarkwa mine, in Ghana, which produced 144 800 oz in Q4 at $800/oz, has a 15-year life-of-mine within a seven-million-ounce resource.

The Damang mine, in Ghana, is in flux and a decision will be made by May on whether it is going to be recapitalised or closed.

The Cerro Corona, in Peru, which produced a lower 66 200 oz in Q4, was hit by lower copper and gold head grades but expects AICs to come in at a low $860/oz in 2016.

Half of the metal is copper, which, at $2/lb, hurt Cerro Corona.