Gold Fields pioneers carbon trading in gold industry

LOndon, 26 May 2010

Gold Fields Limited (Gold Fields) is set to become the world’s first gold mining company to sell Certified Emissions Reductions (CERs), the financial securities used to trade carbon emissions.

Gold Fields (JSE, NYSE, NASDAQ Dubai: GFI) will derive the CERs from the capture of methane gas at its Beatrix Gold Mine in South Africa’s Free State province. The company will sell 1,700,000 CERs to European energy trading company Mercuria Energy Trading SA under forward contracts which will run until 2016. The transaction was brokered by TFS Green, the carbon credits broker and environmental business of the worldwide Tradition Group.

CERs are traded globally and frequently bought by industrial companies as part of their efforts to alleviate their own carbon emission obligations. At current CER values and exchange rates, the CER contract is worth about R200 million.

Gold Fields will use the funds to finance a number of projects linked to the methane capture. The first phase, set for completion before the end of this year, comprises the installation of a methane extraction system underground and flares above surface at a cost of about R42 million. For the second phase Gold Fields is looking at ways of using the gas to generate electricity, thereby converting a harmful greenhouse gas into a valuable resource. Construction of a power generation plant, with the potential to generate about 5MW of electricity, is scheduled to start next year.

So far CERs-linked projects in Africa comprise less than 2% of the total number of projects registered by the Clean Development Mechanism (CDM) executive board, the global body tasked with administering CERs trading. Gold Fields’ Beatrix project is one of around 15 South African projects that have to date received Designated National Authority verification from South Africa’s Department of Mineral Resources.

The Gold Fields/Mercuria CER transaction, which is subject to final regulatory approvals, was yesterday recognised by the London-based Energy Risk magazine as the “Deal of the Year” for 2010 in its annual energy risk awards.

Gold Fields’ Chief Executive Officer, Nick Holland, comments: “In addition to the obvious financial and environmental benefits, this project will result in a safer working environment for our people at Beatrix, as it eliminates the hazard of underground mine methane, and it is one of many examples that shows Gold Fields’ commitment to being the global leader in sustainable gold mining.”

Methane emanates from underground geological features such as faults, fissures and dykes and escapes during the normal course of mining operations. If released into the atmosphere it is a potent greenhouse gas. At Beatrix the methane gas will be captured at source underground and then conveyed via a network of pipes to the surface, where the methane will be flared. Installation of the underground pipes is well underway.

“We are delighted to have been involved with this transaction – we firmly believe that projects in Africa and other developing countries linked to carbon emission reduction projects are where the market will be focused in the future,” says Lucy Mortimer, Global Manager of TFS’s CDM & Joint Initiative Business.

Mercuria Energy Trading’s Jean Francois Steels said of the transaction: ”This is our first transaction in Africa and follows shortly on the opening of our newest international office in South Africa. It shows our commitment to improving the geographical distribution of carbon finance to include the African continent.”

The Beatrix development is the first in a number of carbon projects Gold Fields is investigating to bolster its sustainable mining practices. The strategy is underpinned by efforts to become more energy efficient and thus reduce dependence on coal-fired electricity.

Gold Fields was advised by Promethium Carbon, a South African carbon advisory company, throughout the development of the project, by assisting in the tender development, the evaluation and allocation of the tender.

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