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ADu ReVIeW

Misreporting a set-up for

nationalistic grab: Holland

ick Holland used the Af- in the coming five years,”
Nrica Down Under stage to Holland said. “Grades are
launch a scathing attack on gold declining and orebodies are
industry reporting standards but becoming more complicat-
the real target for his message ed, which will increase costs
was sat in the audience. of mining. And, all this on the
Gold Fields Ltd chief execu- back of assets that probably
tive Holland told delegates that haven’t had enough spent on
inconsistent reporting of all-in them already.”
sustaining cash costs was giv- Exploration, Holland said,
ing stakeholders a false impres- was vital to reversing the
sion of how well the industry trend. With global reserves
was performing, internal analy- falling at an alarming rate in
sis from Gold Fields suggested. the last decade – average
“By our analysis more and reserve life of the industry
more costs are pushed into has dropped from more than
growth and non-sustaining 25 years to less than 15
costs, we believe $US1 billion years – the gold sector has
in the top 25 gold companies a job on its hands just finding
is misreported,” Holland said. replacement gold.
“When we compare reported Nick Holland with WA Minister for Mines Bill Johnston and Paydirt “It is no mean feat to keep
all-in sustaining costs with free chairman Bill Repard at the Africa Down Under Ministerial Dinner at the 100 mozpa production
cash flow, it shows there is a rate,” Holland said. “To do
$US200/oz difference between that, you need to target 200-
what is reported and what is real.” troduced the all-in sustaining cost (AISC) 300 mozpa in exploration because a lot of
Holland said the misleading reporting reporting standard in 2013. Under the new what you find won’t be mined.”
was “shrouding problems with an industry standard, companies completed a turna- However, the cost-cutting mantra of the
that has been undercapitalised down the round, slashing costs between 2013 and last five years has meant little exploration
years” and he doesn’t believe it is even to 2017 but Holland believes it has come at has been undertaken. Gold Fields cur-
the benefit of the companies themselves. a price. rently spends $US50 million on explora-
“The smart money will figure it out, but “Any capital expenditure that could ma- tion, a rarity among its peers according to
the industry is probably giving the wrong terially increase production could be clas- Holland.
impression to other stakeholders,” he said. sified as non-sustaining capital. As a con- “Gold Fields has invested when oth-
“It is suggesting we are making more mon- sequence, we saw costs begin to decline ers haven’t,” he said. “We have built one
ey than we actually are and therefore we over the next 4-5 years. Only in the course mine here in Western Australia [Gruyere]
begin to fuel resource nationalism.” of ‘17 and ‘18 did we see costs begin to rise and have another in development in Chile
Holland’s point was clearly directed again. Was the cost-cutting real? Or, was [Salares Norte]. We believe our capital re-
to the dozen African delegations watch- there a whole bunch of costs that were quirements are now about to come down
ing his presentation as well as others deferred on development, stripping, etc. when others will have to catch up.
of gold-producing nations not in attend- that are going to come back to haunt the “We spend 25-35% of our exploration
ance. Gold’s recent record run has led a industry?” budget in WA. We have been able to main-
number of jurisdictions (both in Africa and Analysis bears out Holland’s point with a tain production and increase reserves,
elsewhere) to revisit their royalty and tax sample group of 25 companies showing a from three years at the start to six years
regimes but Holland believes misreport- combined $US920 million was incorrectly at a discovery cost of less than $US100/
ing costs could lead governments to target excluded from AISC numbers. oz at a time when companies are buying
what are actually artificially inflated profit “It appears the industry is quite keen to ounces at three or four times that amount.”
margins in the sector. show good AISC so keeps deferring capi- Holland pointed to the discovery of the
Instead, he said, current cost reporting tal into [total] all-in costs, but only six of 2 moz gold Invincible orebody at St Ives
was hiding the gold industry’s wider prob- those 25 companies report all-in costs,” as evidence of the value exploration can
lems with growth, calling the misreporting he said. “It means a lot more money is be- generate.
“a symptom of a growing risk to the sus- ing pushed into growth and non-sustaining “This is real value creation and is what
tainability of the industry”. costs but is not being reported.” the industry should be doing,” he said. “Al-
After gold’s price plunge and investor The result is an industry set up for short- though it might be slower in its evolution,
sell-off in 2012, the industry’s majors were term success but lacking longer term sus- exploration will create more value and it
left with a restructuring job to win back tainability. will be sustainable.”
market support. To provide more clarity “Metals Focus is projecting a big in- – Dominic Piper
for investors, the World Gold Council in- crease in volumes mined at lower grades

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