As filed with the Securities and Exchange Commission on 29 March 2019
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 20-F
(Mark One)
☐ REGISTRATION |
STATEMENT PURSUANT TO SECTION 12(b) OR 12(g) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or
☒ ANNUAL |
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended 31 December 2018
or
☐ TRANSITION |
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
or
☐ SHELL |
COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Date of event requiring this shell company report
For the transition period from to
Commission file number: 1-31318
Gold Fields Limited
(Exact name of registrant as specified in its charter)
Republic of South Africa
(Jurisdiction of incorporation or organisation)
150 Helen Road
Sandown, Sandton, 2196
South Africa
011-27-11-562-9700
(Address of principal executive offices)
with a copy to:
Taryn L. Harmse
Executive Vice-President: Group General Counsel
Tel: 011-27-11-562-9724
Fax: 011-27-86-720-2704
Taryn.Harmse@goldfields.com
150 Helen Road
Sandown, Sandton, 2196
South Africa
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
and
Thomas B. Shropshire, Jr.
Linklaters LLP
Tel: 011-44-20-7456-2000
Fax: 011-44-20-7456-2222
One Silk Street
London EC2Y 8HQ
United Kingdom
Securities registered or to be registered pursuant to Section 12(b) of the Act
Title of Each Class |
Name of Each Exchange on Which Registered | |
Ordinary shares of no par value each American Depositary Shares, each representing one ordinary share |
New York Stock Exchange* New York Stock Exchange |
* | Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission. |
Securities registered or to be registered pursuant to Section 12(g) of the Act
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuers classes of capital or
common stock as of the close of the period covered by the Annual Report
821,532,707 ordinary shares of no par value
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes ☒ No ☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. ☐ Yes No ☒
NoteChecking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or an emerging growth company. See definition of large accelerated filer, accelerated filer, and emerging growth company in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Emerging growth company ☐
If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
The term new or revised financial accounting standard refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP ☐ International Financial Reporting Standards as issued by the International Accounting Standards Board ☒ Other ☐
If Other has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 ☐ Item 18 ☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☐ No ☐
Gold Fields Operations
FORM 20-F CROSS REFERENCE GUIDE
Item |
Form 20-F Caption |
Location in this document |
Page | |||
1 |
Identity of directors, senior management and advisers | NA | | |||
2 |
Offer statistics and expected timetable | NA | | |||
3 |
Key information | |||||
(a) Selected financial data |
Further InformationKey InformationSelected Historical Consolidated Financial Data | 1-3 | ||||
(b) Capitalisation and indebtedness |
NA | | ||||
(c) Reasons for the offer |
NA | | ||||
(d) Risk factors |
Further InformationRisk Factors | 4-38 | ||||
4 |
Information on the Company | |||||
(a) History and development of the Company |
Further InformationAdditional Information on the CompanyOrganisational StructureGroup Structure | 39 | ||||
Annual Financial ReportAccounting policies | AFR 129-149 | |||||
Integrated Annual ReportLeadership | IAR 26-28 | |||||
Further InformationAdditional Information on the CompanyMemorandum of IncorporationGeneral | 112 | |||||
Integrated Annual ReportAdministration and Corporate Information | IAR 131 | |||||
Annual Financial ReportDirectors ReportSignificant Announcements in 2018 | AFR 23-24 | |||||
Annual Financial ReportManagements Discussion and Analysis of Financial StatementsCapital Expenditures | AFR 80-81 | |||||
Further InformationDescription of the Mining BusinessCapital Expenditures | 73-74 | |||||
Further InformationAdditional InformationDocuments on Display | 135 | |||||
(b) Business overview |
Gold Fields Operations | Back of cover | ||||
Further InformationAdditional Information on the CompanyGold Fields Mining Operations | 40-48 | |||||
Integrated Annual ReportOur Business |
IAR 4-7 | |||||
Integrated Annual ReportCEO Report |
IAR 3141 |
i
Item |
Form 20-F Caption |
Location in this document |
Page | |||
Integrated Annual ReportPortfolio Management |
IAR 42-53 | |||||
Integrated Annual ReportSafe Operational Delivery | IAR 54-71 | |||||
Integrated Annual ReportLicence and Reputation | IAR 90-123 | |||||
Annual Financial ReportCorporate Governance ReportApplication of King IV within Gold Fields | AFR 17-20 | |||||
Further InformationDescription of the Mining Business | 72-76 | |||||
Further InformationThe Gold Mining Industry | 76-77 | |||||
Further InformationEnvironmental and Regulatory Matters | 78-98 | |||||
(c) Organisational structure |
Further InformationAdditional Information on the CompanyOrganisational Structure | 39 | ||||
(d) Property, plant and equipment |
Further InformationAdditional Information on the CompanyProperty | 49-50 | ||||
Annual Financial ReportManagements discussion and analysis of the financial statements | AFR 63-126 | |||||
Annual Financial ReportNotes to the consolidated financial statementsNote 13. Property, plant and equipment | AFR 171 | |||||
Further InformationAdditional Information on the CompanyReserves of Gold Fields as at 31 December 2018 | 65-71 | |||||
4A |
Unresolved staff comments | NA | | |||
5 |
Operating and financial review and prospects | |||||
(a) Operating results |
Annual Financial ReportManagements discussion and analysis of the financial statements | AFR 63-126 | ||||
Annual Financial ReportConsolidated income statement | AFR 150 | |||||
Annual Financial ReportConsolidated statement of financial position | AFR 152 | |||||
Annual Financial ReportConsolidated statement of cash flows | AFR 154 |
ii
Item |
Form 20-F Caption |
Location in this document |
Page | |||
Annual Financial ReportNotes to the consolidated financial statementsNote 38. Risk management activitiesForeign currency sensitivity | AFR 197 | |||||
Further InformationEnvironmental and Regulatory Matters | 78-98 | |||||
(b) Liquidity and capital resources |
Annual Financial ReportManagements discussion and analysis of the financial statements | AFR 63-126 | ||||
Annual Financial ReportNotes to the consolidated financial statementNote 24. Borrowings | AFR 182-184 | |||||
Annual Financial ReportNotes to the consolidated financial statementNote 34. Commitments | AFR 188 | |||||
Annual Financial ReportNotes to the consolidated financial statementNote 37. Financial Instruments | AFR 191-193 | |||||
Annual Financial ReportNotes to the consolidated financial statementNote 38. Risk Management Activities | AFR 194-201 | |||||
Annual Financial ReportNotes to the consolidated financial statementNote 39. Capital Management | AFR 202 | |||||
(c) Research and development, patents and licences, etc. |
NA | | ||||
(d) Trend information |
Annual Financial ReportManagements discussion and analysis of the financial statementsTrend and Outlook | AFR 126 | ||||
(e) Off-balance sheet arrangements |
Annual Financial ReportManagements discussion and analysis of the financial statementsOff-balance sheet items | AFR 125 | ||||
(f) Tabular disclosure of contractual obligations |
Annual Financial ReportManagements discussion and analysis of the financial statementsContractual obligations and commitments as at 31 December 2018 | AFR 124-125 | ||||
(g) Safe harbour |
Forward-Looking Statements | xii | ||||
6 |
Directors, senior management and employees | |||||
(a) Directors and senior management |
Annual Financial ReportCorporate Governance ReportDirectors | AFR 14-16 | ||||
Further InformationDirectors, Senior Management and EmployeesDirectors | 99-104 |
iii
Item |
Form 20-F Caption |
Location in this document |
Page | |||
Further InformationDirectors, Senior Management and EmployeesExecutive Committee | 102-104 | |||||
(b) Compensation |
Annual Financial ReportRemuneration Committee Report | AFR 30-62 | ||||
(c) Board practices |
Further InformationDirectors, senior management and employees | 99-104 | ||||
Annual Financial ReportCorporate Governance ReportApplication of King IV within Gold Fields | AFR 17-20 | |||||
Annual Financial ReportCorporate Governance ReportBoard committeesAudit committee | AFR 10-11 | |||||
Annual Financial ReportCorporate Governance ReportBoard committeesRemuneration committee | AFR 11 | |||||
(d) Employees |
Integrated Annual ReportSafe operational deliveryFit-for-purpose workforce | IAR 74-81 | ||||
Further InformationDirectors, senior management and employeesEmployees | 104 | |||||
Integrated Annual ReportSafe operational deliverySafety | IAR 61-64 | |||||
Integrated Annual ReportSafe operational deliveryHealth | IAR 65-67 | |||||
(e) Share ownership |
Annual Financial ReportDirectors ReportShare ownership of directors and executive officers | AFR 22 | ||||
Annual Financial ReportNotes to the consolidated financial statementsNote 5. Share-based payments | AFR 156-161 | |||||
7 |
Major Shareholders and Related Party Transactions | |||||
(a) Major shareholders |
Further InformationMajor Shareholders and Related Party TransactionsMajor Shareholders | 110 | ||||
(b) Related party transactions |
Further InformationRelated Party TransactionsRelated Party Transactions | 110 | ||||
Annual Financial ReportNotes to the consolidated financial statementsNote 40. Related parties | AFR 203-204 | |||||
(c) Interests of experts and counsel |
NA | |
iv
Item |
Form 20-F Caption |
Location in this document |
Page | |||
8 |
Financial information | |||||
(a) Consolidated statements and other financial information |
Annual Financial ReportManagements discussion and analysis of the financial statements | AFR 63-126 | ||||
Annual Financial ReportConsolidated income statement | AFR 150 | |||||
Annual Financial ReportConsolidated statement of comprehensive income | AFR 151 | |||||
Annual Financial ReportConsolidated statement of financial position | AFR 152 | |||||
Annual Financial ReportConsolidated statement of changes in equity | AFR 153 | |||||
Annual Financial ReportConsolidated statement of cash flows | AFR 154 | |||||
Annual Financial ReportAccounting policiesBasis of preparationProvision for silicosis settlement costs | AFR 136 | |||||
Annual Financial ReportAccounting policiesProvision for environmental rehabilitation costs | AFR 136 | |||||
Annual Financial ReportNotes to the consolidated financial statementsNote 25. Provisions | AFR 185-186 | |||||
Annual Financial ReportNotes to the consolidated financial statementsNote 35. Contingent liabilities | AFR 189-190 | |||||
Annual Financial ReportManagements discussion and analysisSilicosis settlement costs | AFR 91 | |||||
Annual Financial ReportDirectors reportFinancial affairsDividend policy | AFR 22 | |||||
(b) Significant changes |
Annual Financial ReportNotes to the consolidated financial statementsNote 36. Events after the reporting date | AFR 190 | ||||
9 |
The Offer and listing | |||||
(a) Listing details |
Further InformationThe Listing | 111 | ||||
(b) Plan of distribution |
NA | | ||||
(c) Markets |
Integrated Annual ReportAbout this Report | IAR 2 | ||||
Annual Financial ReportAdministration and Corporate Information | AFR 228 |
v
Item |
Form 20-F Caption |
Location in this document |
Page | |||
(d) Selling shareholders |
NA | | ||||
(e) Dilution |
NA | | ||||
(f) Expenses of the issue |
NA | | ||||
10 |
Additional information |
|||||
(a) Share capital |
NA | | ||||
(b) Memorandum and articles of association |
Further InformationAdditional InformationMemorandum of Incorporation | 112-117 | ||||
(c) Material contracts |
Further InformationAdditional InformationMaterial Contracts | 117-123 | ||||
(d) Exchange controls |
Further InformationAdditional InformationSouth African Exchange Control Limitations Affecting Security Holders | 129-130 | ||||
(e) Taxation |
Further InformationAdditional InformationTaxation | 130-135 | ||||
(f) Dividends and paying agents |
NA | | ||||
(g) Statement by experts |
NA | | ||||
(h) Documents on display |
Further InformationAdditional InformationDocuments On Display | 135 | ||||
(i) Subsidiary information |
NA | | ||||
11 |
Quantitative and qualitative disclosures about market risk | Annual Financial ReportNotes to the consolidated financial statementsNote 38. Risk management activities | AFR 194-201 | |||
12 |
Description of securities other than equity securities | |||||
(a) Debt securities |
NA | | ||||
(b) Warrants and rights |
NA | | ||||
(c) Other securities |
NA | | ||||
(d) American depositary shares |
Further InformationAdditional InformationAmerican Depositary Receipts | 123-129 | ||||
13 |
Defaults, dividend arrearages and delinquencies | NA | | |||
14 |
Material modifications to the rights of security holders and use of proceeds | NA | | |||
15 |
Controls and procedures | Further InformationControls and Procedures | 136 |
vi
Item |
Form 20-F Caption |
Location in this document |
Page | |||
16A |
Audit Committee financial expert | Further InformationAudit Committee Financial Expert | 137 | |||
16B |
Code of ethics | Annual Financial ReportCorporate Governance ReportStandards, principles and systems | AFR 5 | |||
16C |
Principal accountant fees and services | Further InformationPrincipal Accountant Fees and Services | 139 | |||
16D |
Exemptions from the listing standards for audit committees | NA | | |||
16E |
Purchase of equity securities by the issuer and affiliated purchasers | NA | | |||
16F |
Change in registrants certifying accountant | Change in Registrants Certifying Accountant | 138 | |||
16G |
Corporate governance | Further InformationCorporate Governance | 140 | |||
16H |
Mine safety disclosure | NA | | |||
17 |
Financial statements | NA | | |||
18 |
Financial statements | Report of Independent Registered Public Accounting Firm | AFR 127-128 | |||
Annual Financial ReportConsolidated income statement | AFR 150 | |||||
Annual Financial ReportConsolidated statement of comprehensive income | AFR 151 | |||||
Annual Financial ReportConsolidated statement of financial position | AFR 152 | |||||
Annual Financial ReportConsolidated statement of changes in equity | AFR 153 | |||||
Annual Financial ReportConsolidated statement of cash flows | AFR 154 | |||||
Annual Financial ReportAccounting policies | AFR 129-149 | |||||
Annual Financial ReportNotes to the consolidated financial statements | AFR 155-212 | |||||
19 |
Exhibits | Exhibits | 141-144 |
vii
PRESENTATION OF FINANCIAL INFORMATION
Gold Fields Limited (Gold Fields or the Company) is a South African company and, in fiscal 2018, 7 per cent., 36 per cent., 42 per cent. and 15 per cent. of Gold Fields operations, based on managed gold-equivalent production, were located in South Africa, Ghana, Australia and Peru, respectively. Its books of account are maintained in South African Rand. The reporting currency of the Gold Fields consolidated financial statements is the U.S. dollar. The Groups annual and interim financial statements are prepared in accordance with International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board and as prescribed by law (refer to the Basis of preparation section of the accounting policies to the consolidated financial statements).
Except as otherwise noted, the financial information included in this annual report has been prepared in accordance with IFRS and is presented in U.S. dollars, and for descriptions of critical accounting policies, refer to accounting policies under IFRS.
For Gold Fields consolidated financial statements, unless otherwise stated, statement of financial position item amounts are translated from Rand and A$ to U.S. dollars at the exchange rate prevailing on the date that it closed its accounts for fiscal 2018 (Rand 14.63 per U.S.$1.00 and U.S.$0.70 per A$1.00 as of 31 December 2018), except for specific items included within shareholders equity and the statement of cash flows that are translated at the rate prevailing on the date the relevant transaction was entered into, and income statement item amounts are translated from Rand and A$ to U.S. dollars at the weighted average exchange rate for each period (Rand 13.20 per U.S.$1.00 and U.S.$1.00 per A$0.75 for fiscal 2018).
In this annual report, Gold Fields presents the financial items all-in sustaining costs (AISC), all-in sustaining costs per ounce, all-in costs (AIC), and all-in costs per ounce, which have been determined using industry standards promulgated by the World Gold Council (WGC) and are non-IFRS measures.1 The WGC standard was released by the WGC on 27 June 2013. Gold Fields voluntarily adopted and implemented these metrics as from the quarter ended June 2013. An investor should not consider these items in isolation or as alternatives to cost of sales, profit before tax, profit for the year, cash flows from operating activities or any other measure of financial performance presented in accordance with IFRS. While the WGC provided definitions for the calculation of AISC and AIC, the calculation of AISC, AISC per ounce, AIC and AIC per ounce may vary significantly among gold mining companies, and by themselves do not necessarily provide a basis for comparison with other gold mining companies. See Further InformationKey InformationSelected Historical Consolidated Financial Data, Additional Information on the CompanyGlossary of Mining TermsAll-in sustaining costs and Additional Information on the CompanyGlossary of Mining TermsAll-in costs.
Gold Fields also presents net cash flow, free cash flow margin and adjusted EBITDA in this annual report, which are a non-IFRS measures1. An investor should not consider these items in isolation or as alternatives to cash flow from operating activities, cash and cash equivalents or any other measure presented in accordance with IFRS. Net cash flow is defined as net cash flow from operations less the South Deep dividend, net capital expenditure (additions to property, plant and equipment less proceeds on disposal of property, plant and equipment), and environmental trust fund and rehabilitation payments, as per the consolidated statement of cash flows. Free cash flow margin is defined as adjusted all-in costs adjusted for non-cash share-based payments, non-cash long-term employee benefits, exploration, feasibility and evaluation costs outside of existing operations, non-sustaining capital expenditure for growth projects only, realised gains or losses on revenue hedges and taxation paid (excluding royalties) expressed as a percentage. Adjusted EBITDA is defined as profit or loss for the year adjusted for interest, taxation, amortisation and depreciation and certain other costs. The definition for the calculation of net cash flow, free cash flow margin and adjusted EBITDA may vary
1 | These non-IFRS measures have been defined and reconciled to IFRS in the Managements discussion and analysis of the financial statements. |
viii
significantly between companies, and by themselves do not necessarily provide a basis for comparison with other companies. See Additional Information on the CompanyGlossary of Mining Terms.
Market Information
This annual report includes industry data about Gold Fields markets obtained from industry surveys, industry publications, market research and other publicly available third-party information. Industry surveys and industry publications generally state that the information they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed. Gold Fields and its advisers have not independently verified this data.
In addition, in many cases, statements in this annual report regarding the gold mining industry and Gold Fields position in that industry have been made based on internal surveys, industry forecasts and market research, as well as Gold Fields own experiences. While these statements are believed by Gold Fields to be reliable, they have not been independently verified.
ix
In this annual report, all references to the Group are to Gold Fields and its subsidiaries. On 18 February 2013 (the Spin-off date), Gold Fields completed the separation of its wholly-owned subsidiary, Sibanye Gold Limited, trading as Sibanye-Stillwater (Sibanye-Stillwater), formerly known as GFI Mining South Africa Proprietary Limited (GFIMSA), which includes the KDC and Beatrix mining operations (the Spin-off).
In this annual report, all references to fiscal 2014 are to the 12-month period ended 31 December 2014, all references to fiscal 2015 are to the 12-month period ended 31 December 2015, all references to fiscal 2016 are to the 12-month period ended 31 December 2016, all references to fiscal 2017 are to the 12-month period ended 31 December 2017, all references to fiscal 2018 are to the 12-month period ending 31 December 2018, and all references to fiscal 2019 are to the 12-month period ending 31 December 2019. In this annual report, all references to South Africa are to the Republic of South Africa, all references to Ghana are to the Republic of Ghana, all references to Australia are to the Commonwealth of Australia, all references to Chile are to the Republic of Chile, all references to Peru are to the Republic of Peru, all references to the Philippines are to the Republic of the Philippines and all references to the United States and U.S. mean the United States of America, its territories and possessions and any state of the United States and the District of Columbia.
In this annual report, all references to the DMR are references to the South African Department of Mineral Resources, the government body responsible for regulating the mining industry in South Africa.
This annual report contains descriptions of gold mining and the gold mining industry, including descriptions of geological formations and mining processes. In order to facilitate a better understanding of these descriptions, this annual report contains a glossary defining a number of technical and geological terms. See Additional Information on the CompanyGlossary of Mining Terms.
In this annual report, gold production figures are provided in troy ounces, which are referred to as ounces or oz, or in kilograms, which are referred as kg. Ore grades are provided in grams per metric tonne, which are referred to as grams per tonne or g/t. All references to tonnes or t in this annual report are to metric tonnes. All references to gold include gold and gold equivalent ounces, unless otherwise specified or where the context suggests otherwise. See Additional Information on the CompanyGlossary of Mining Terms for further information regarding units of measurement used in this annual report and a table providing rates of conversion between different units of measurement. AIC, net of by-product revenue, and AISC, net of by-product revenue, are calculated per ounce of gold sold, excluding gold equivalent ounces. See Annual Financial ReportManagements Discussion and Analysis of the Financial StatementsAll-in Sustaining and All-in Costs.
This annual report contains references to the total recordable injury frequency rate (TRIFR) at each Gold Fields operationwhich was introduced in 2013. The TRIFR at each operation includes the total number of fatalities, lost time injuries, medically treated injuries (MTI) and restricted work injuries (RWI) per million man hours. A lost time injury (LTI) is a work-related injury resulting in the employee or contractor being unable to attend work for a period of one or more days after the day of the injury (i.e. the employee or contractor is unable to perform any of his/her duties). An MTI is a work-related injury sustained by an employee or contractor which does not incapacitate that employee and who, after having received medical treatment, is deemed fit to immediately resume his/her normal duties on the next calendar day, immediately following the treatment or re-treatment. An RWI is a work-related injury sustained by an employee or contractor which results in the employee or contractor being unable to perform one or more of their routine functions for a full working day from the day after the injury occurred, but the employee or contractor can still perform some of his/her duties.
In this annual report, R and Rand refer to the South African Rand and SA cents refers to subunits of the South African Rand, $, U.S.$ and U.S. dollars refer to United States dollars, U.S. cents refers to
x
subunits of the U.S. dollar, A$ and Australian dollars refer to Australian dollars, GH refers to Ghana Cedi, S/. refers to the Peruvian Nuevo Sol and CAD refers to Canadian dollars.
In this annual report, except where otherwise noted, all production and operating statistics are based on attribution of 100 per cent. of Gold Fields total operations, which include production from the Tarkwa and Damang mines in Ghana and from the Cerro Corona mine in Peru, a portion of which is attributable to the non-controlling shareholders in those mines. In addition, production and operating statistics for Asanko are included on an attributable basis. This annual report contains references to gold equivalent ounces, which are quantities of metals (such as copper) expressed as amounts of gold using the prevailing prices of gold and the other metals. To calculate this, the accepted total value of the metal based on its weight and value is divided by the accepted value of one troy ounce of gold.
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This annual report contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended (the Securities Act) and Section 21E of the U.S. Securities Exchange Act of 1934, as amended (the Exchange Act) with respect to Gold Fields financial condition, results of operations, business strategies, operating efficiencies, competitive position, growth opportunities for existing services, plans and objectives of management, markets for stock and other matters.
These forward-looking statements, including, among others, those relating to the future business prospects, revenues, income and 2019 production and operational guidance of Gold Fields, wherever they may occur in this annual report and the exhibits to the annual report, are necessarily estimates reflecting the best judgement of the senior management of Gold Fields and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. As a consequence, these forward-looking statements should be considered in light of various important factors, including those set forth in this annual report. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation:
| the difficulties, delays and costs in relation to the restructuring plan at the South Deep operation; |
| decreases in the market price of gold or copper; |
| fluctuations in exchange rates, currency devaluations and other macroeconomic monetary policies; |
| changes in relevant government regulations, particularly labour, environmental, tax, royalty, health and safety, water, regulations and potential new legislation affecting mining and mineral rights; |
| court decisions affecting the South African mining industry, including, without limitation, regarding the interpretation of mineral rights legislation and the treatment of health and safety claims; |
| the success of the Groups business strategy, development activities and other initiatives, particularly at Damang and Gruyere; |
| the ability to achieve anticipated efficiencies and other cost savings in connection with past and future acquisitions or joint ventures; |
| changes in assumptions underlying Gold Fields mineral reserve estimates; |
| the ability to achieve anticipated cost savings at existing operations; |
| the occurrence of hazards associated with underground and surface gold mining or contagious diseases (and associated legal claims) at Gold Fields operations; |
| loss of senior management or inability to hire or retain sufficiently skilled employees; |
| power cost increases as well as power stoppages, fluctuations and usage constraints; |
| the ability of the Group to protect its information technology and communication systems and the personal data it retains; |
| the ability of the Group to comply with requirements that it operate in a sustainable manner and provide benefits to affected communities; |
| regulation of greenhouse gas emissions and climate change; |
| geotechnical challenges due to the older age of certain mines and a trend toward mining deeper pits and more complex deposits; |
| the occurrence of work stoppages related to health and safety incidents; |
| the ability to manage and maintain access to current and future sources of liquidity, capital and credit, including the terms and conditions of Gold Fields facilities and Gold Fields overall cost of funding; |
xii
| downgrades in the credit rating of Gold Fields or South Africa; |
| political instability in South Africa, Ghana, Peru or regionally in Africa or South America; |
| overall economic and business conditions in South Africa, Ghana, Australia, Peru and elsewhere; |
| fraud, bribery or corruption at Gold Fields operations that leads to censure, penalties or negative reputational impacts; |
| the inability to modernise operations and remain competitive within the mining industry; |
| the effects of a failure of a dam at a tailings facility and the closure of adjacent mines; |
| the occurrence of labour disruptions and industrial actions; |
| the adequacy of the Groups insurance coverage; |
| supply chain shortages and increases in the prices of production imports; |
| the manner, amount and timing of capital expenditures made by Gold Fields on both existing and new mines, mining projects, exploration projects or other initiatives; and |
| the appointment of a new registered independent accounting firm which may interpret accounting rules differently than its former firm. |
Gold Fields undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events.
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IAR-3
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IAR-5
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6 | The Gold Fields Integrated Annual Report 2018 | |
Value creation and distribution
The ultimate aim of our strategy and business model is to create value for our stakeholders
Total and national value distribution
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National value distribution by region and type 2018 (US$m) |
Government | Business | Employees | Socio- economic spend |
Capital providers |
National value distribution |
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Americas |
55 | 156 | 37 | 6 | 4 | 258 | ||||||||||||||||||||||
Australia |
121 | 812 | 128 | 1 | 0 | 1,062 | ||||||||||||||||||||||
South Africa |
3¹ | 176 | 144 | 3 | 2 | 9 | 336 | |||||||||||||||||||||
West Africa |
90 | 654 | 83 | 15 | 13 | 855 | ||||||||||||||||||||||
Corporate |
14 | 15 | 49 | 0 | 121 | 200 | ||||||||||||||||||||||
Total Gold Fields |
283 | 1,813 | 442 | 26 | 147 | 2,711 | ||||||||||||||||||||||
1 South Deep does not yet pay income tax as it is in a loss-making position 2 This includes spending from the South Deep trusts and SLP commitments
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Governments
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Workforce
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Payments include |
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Payments include Mining royalties and land-use payments, taxes, duties and levies.
Why these stakeholders matter Governments provide us with access to ore bodies by granting mining and other licences. They also deliver the infrastructure necessary to build and maintain our mines, including roads, electricity and water supply.
2018 Contributions: ∎ We paid governments US$283m (2017: US$310m) in taxes and royalties, 10% of total value distribution (2017: 11%) ∎ In addition, the Ghanaian government benefited from US$15m in declared dividends relating to its 10% shareholding in Gold Fields Ghana |
Salaries and wages, benefits and bonus payments (including shares and payroll taxes).
Why these stakeholders matter The technical skills, experience and activity of our people drive the day-to-day operations of our business.
2018 Contributions: ∎ We paid US$442m (2017: US$506m) to employees in terms of salaries, dividends and benefits, representing 16% of total value distribution (2017: 18%) ∎ We also provide employees (where legislated) with additional benefits such as retirement savings, healthcare assistance, life and disability insurance, housing assistance and personal accident cover ∎ We prioritise the employment of members from our host communities. At end 2018 host community employment comprised 56% of our workforce |
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Business
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Payments include Operational and capital procurements.
Why these stakeholders matter Supply chain businesses provide the equipment and services needed to develop and maintain our operations. They comprise business partners, contractors and suppliers.
2018 Contributions: ∎ We paid US$1,813m to suppliers and contractors, representing 67% of total value creation (2017: US$1,857m/65%) ∎ Of the total 2018 procurement expenditure of US$1,813m, US$1,542m, or 85%, was spent on businesses based in operating countries by our mines (2017: US$1,620m/88%) ∎ US$441m, or 29%¹, of total procurement by our mines was spent on suppliers and contractors from host communities (2017: US$774m/45%)
¹ The % decline is due to a change in the definition of host communities by our Australian operations to only include communities in their area of influence (previously Perth was included in the definition due to the FIFO nature of our mines) |
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Capital providers
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Payments include Interest and dividend payments to capital providers.
Why these stakeholders matter Financial institutions, shareholders and bond holders invest with us, thus enabling us to fund the development, maintenance and growth of our operations and our overall business.
2018 Contributions: ∎ We paid US$147m (2017: US$160m) to the providers of debt and equity capital, mainly in the form of interest and dividends ∎ Net debt increased by US$309m to US$1,612m ∎ We paid a total dividend of R0.40/share for the 2018 financial year |
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The Gold Fields Integrated Annual Report 2018 | 7 | |
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Communities
How we create value for communities |
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Why the focus on communities
We believe that our host communities are one of our most critical stakeholders as they grant us our licence to operate. Over the past few years, we devoted considerable resources to sharing the value created through our mines with the communities surrounding them. This goes beyond the direct financial investment to creating sustainable surrounding economies through community employment and procurement.
During 2018, we enhanced our understanding of the value created through these programmes by quantifying the impact.
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Trade-offs
We continue to balance the legitimate, and at times conflicting, needs of our stakeholders in order to create value over the short, medium and long-term. These were some of the significant trade-offs we had to make during 2018. |
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1. | Balancing financial viability with employment | |||||||||
∎ | To improve financial viability, we unfortunately had to retrench 1,082 employees and 420 contractors at South Deep to right-size the business (p46) | |||||||||
∎ | At Tarkwa mine, we retrenched 2,211 employees, of which 1,714 were re-engaged by contractors or on a contractor basis (p33) | |||||||||
2. | Improving long-term sustainability | |||||||||
∎ | By channelling funds into growth capital we aim to secure future growth by temporarily cutting back on other stakeholder spending | |||||||||
3. | Managing our environmental impacts | |||||||||
∎ | Mining is resource intensive, but we seek to minimise our environmental impacts. During 2018, we had two Level 3 water-related environmental incidents. We responded speedily to address the causes and communicated the incidents (p95) | |||||||||
4. | Balancing the immediate needs of communities with long-term value creation | |||||||||
∎ | Our focus shifted from short-term projects to long-term value creation by creating sustainable value for host communities through employment and procurement programmes (p113) | |||||||||
5. | Providing long-term contributions to host governments | |||||||||
∎ | At the Cerro Corona mine, we reduced our taxable income in the short term to fund future growth. The investment is set to provide longer-term tax and royalty revenues to the host government | |||||||||
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8 | The Gold Fields Integrated Annual Report 2018 | |
Gold Fields is subject to external strategic dynamics that inform decision-making and influence our business performance. An analysis of the three key strategic themes - and how Gold Fields is responding to them - is set out below.
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The Gold Fields Integrated Annual Report 2018 | 9 | |
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10 | The Gold Fields Integrated Annual Report 2018 | |
Top 20 Group risks and opportunities in 2018
How Gold Fields manages risk
The approach to assessing risk in Gold Fields is a collective effort by Group, regional and mine management of the risks facing the business. The assessments of the risks and their mitigating actions are a critical internal management tool, which reduce the identified risks significantly. Risk mitigations are included in the annual Group Performance Scorecard and cascaded down to the performance scorecard of management employees at regional and operational levels. The formal risk review process starts during managements annual strategic planning sessions where strategic risks and macro-trends are analysed in developing the Companys risk register and mitigating actions. These are updated quarterly, and presented to the Boards Risk Committee twice a year for verification.
Risk tables and heat maps have been published in the IAR on this basis for the last nine years.
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The Gold Fields Integrated Annual Report 2018 | 11 | |
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12 | The Gold Fields Integrated Annual Report 2018 | |
Risks and materiality continued
Top five risks and opportunities per region in 2018
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The Gold Fields Integrated Annual Report 2018 | 13 | |
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14 | The Gold Fields Integrated Annual Report 2018 | |
Performance against strategic targets
Group 2018 performance against BSC objectives
Our strategy is embodied through our Board-approved balanced scorecard (BSC), which is cascaded throughout our organisation. Below we reflect on our performance against these targets in 2018. On the pages that follow, we show our CEOs performance against his 2018 targets, as well as the Groups 2019 BSC.
1 At 2019 levels
2 FCF does not take project capital into account
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The Gold Fields Integrated Annual Report 2018 | 15 | |
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PERFORMANCE AGAINST 2018 BALANCED SCORECARD TARGETS
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∎ |
Production and AIC/oz better than yearly guidance with spatial compliance to plan |
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pg 56 | |||||||||||
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∎ | No fatalities and a reduction in TRIFR by 10% in the long term (due to a regression in 2017, the stretch target was 12% for 2018) |
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pg 63 | |||||||||||||
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∎ | Reduce energy usage by 5% to 10% against a future baseline through energy saving initiatives and implement renewable energy initiative at South Deep |
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pg 70 | |||||||||||||
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∎ | Implement ICMM critical control guidelines on safety, health and environmental stewardship and stakeholder management |
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pg 64 | |||||||||||||
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∎ | Project delivery: deliver in accordance with key metrics for 2018 | |||||||||||||||
| Damang |
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pg 48 | |||||||||||||
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| South Deep |
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pg 46 | |||||||||||||
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| Gruyere |
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pg 44 | |||||||||||||
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∎ | Manage talent pipeline and succession cover for critical roles |
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pg 76 | |||||||||||||
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∎ | Reinvigorate vision and values to a winning culture that rewards teamwork and delivery of Group strategy |
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∎ | Pay dividends in line with policy |
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pg 87 | |||||||||||||
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∎ | Debt: | |||||||||||||||
| Maintain net debt: adjusted EBITDA ratio of under 1.25x- |
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pg 87 | |||||||||||||
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| Extend debt maturity |
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pg 87 | |||||||||||||
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∎ | All new capital spend to have appropriate returns taking into account risks and cost of capital ranked and prioritised in accordance with an agreed matrix and in line with internal capital control standards and study guidelines. Accordingly all growth capital expenditure on existing mines, new projects or acquisitions to have hurdle rates of 15% at a US$1,300/oz gold price |
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∎ | Deliver life extension, cost reduction, revenue enhancement and improved health and safety through innovation and technology (I&T) and business improvement initiatives |
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pg 74 | |||||||||||||
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∎ | Reduce Group life-of-mine AIC/oz and increase reserve life per region through brownfields exploration, M&A and optimisation of existing mines |
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pg 50 | |||||||||||||
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∎ | Deliver positive Salares Norte feasibility project that exceeds metrics set for the project |
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pg 47 | |||||||||||||
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∎ | Mine closure costs, along with concurrent rehabilitation plans, incorporated into strategic plans |
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pg 105 | |||||||||||||
∎ | Improve total shareholder return by positioning share price between median and upper quartile of peer group |
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pg 106 | |||||||||||||
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∎ | Increase the proportion of sustainable host community procurement and employment to drive Shared Value |
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pg 111 | |||||||||||||
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∎ | No Level 3 or above environmental incidents and a 10% reduction in Level 2 incidents |
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pg 95 | |||||||||||||
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∎ | Align management practices with ICMM tailings and water position statements |
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pg 100 | |||||||||||||
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∎ | Deliver and manage a robust and transparent group governance and compliance programme |
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pg 23 | |||||||||||||
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∎ | Maintain position in top five of the Dow Jones Sustainability Index (DJSI) |
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Performance
key:
Achieved
Ongoing
Not achieved
IAR-17
16 | The Gold Fields Integrated Annual Report 2018 | |
Performance against strategic targets continued
CEOs 2018 performance against BSC objectives
Gold Fields recognises that remuneration is a critical part of value creation. We are committed to aligning our employees remuneration to our strategic objectives, as embodied in our Group BSC. The Group BSC is then cascaded into individual scorecards, to ensure individual effort drives Group performance. Below is a summary of our CEO, Nick Hollands, BSC for 2018 and his performance against it. His average score for 2018 was 2.9 out of 5, as evaluated by the Remuneration Committee. The Board believes that by reflecting on the CEOs scorecard and how it drives value creation, we demonstrate to our stakeholders our commitment to fair and transparent reporting. For the detailed breakdown of the CEOs BSC, refer to our comprehensive Remuneration Report in the AFR p44 46.
PERFORMANCE RATING SCALE: | CATEGORY KEY: | |||||||
1 | / Target not achieved | 3.5 | / Great performance |
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(less than 60% of goals achieved) | (106% - 110% of goals achieved) |
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2 | / Underperformance | 4 | / High performance |
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(60% - 90% of goals achieved) | (111% - 120% of goals achieved) |
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2.5 | / Development required | 4.5 | / Top performance | |||||
(91% - 99% of goals achieved) | (121% -125% of goals achieved) | |||||||
3 | / Good performance | 5 | / Exceptional performance | |||||
(100% - 105% of goals achieved) | (126% or more of goals achieved) |
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The Gold Fields Integrated Annual Report 2018 | 17 | |
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Group 2019 performance targets
Each year, management and the Board assess the Groups key objectives for the year ahead to ensure the Group achieves its medium-term target. The 2019 goals are captured in the BSC below.
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The Gold Fields Integrated Annual Report 2018 19 | ||||||
Leadership | ||||||
Our vision of being the global leader in sustainable gold mining requires the highest levels of corporate governance to ensure we create value for our stakeholders over the short, medium and long term. In order to ensure our ultimate operational and strategic success, as well as our sustainability, we remain committed to sound and robust corporate governance and responsible corporate citizenship. |
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Vision of the Chairperson | p20 | |||||
Summarised governance and compliance report | p23 | |||||
Our Board of Directors | p24 | |||||
CEO Report | p29 | |||||
∎ Introduction and overview | p30 | |||||
∎ Group performance scorecard | p31 | |||||
∎ Strategy overview | p38 | |||||
∎ Note of thanks | p39 |
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20 | The Gold Fields Integrated Annual Report 2018 | |
Many of our stakeholders, particularly investors, still see Gold Fields as a South African mining company, with much of its fortunes inextricably linked to the countrys current and future mining landscape, as well as the short-term performance and outlook for South Deep, our sole remaining mine in the country. We are a proudly South African company with a history going back to 1887 and remain deeply committed to the country despite the political and economic uncertainties currently besetting it. While South Deep is a key component of our portfolio, I continue to stress that Gold Fields is a global gold mining company with a portfolio of assets spread across three continents.
Not only are our production and cash-flow already heavily weighted towards our mines in Australia, Peru and Ghana, we have increased our investment in these countries to enhance sustainability of our business: ∎ Our combined US$502m investment over the past two years in the Damang mine in Ghana and the Gruyere project in Australia is set to bear fruit in 2019, with the potential to further boost our production and profitability in these regions ∎ During 2018, we acquired a 45% stake in the highly prospective Asanko gold mine (AGM) in Ghana, further raising our profile in a jurisdiction in which we have operated for 25 years ∎ We expect the production of our portfolio in Australia, Ghana and Peru to approach 2Moz during 2019. Based upon our attributable gold-equivalent Mineral Reserves of over 20Moz in these regions, our track record of resource conversion and exploration activity, we believe that our global portfolio outside of South Africa will be able to maintain a similar production level over the medium to longer term (at the current gold price) |
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∎ We have successfully completed a feasibility study for the Salares Norte project in Chile and declared a maiden Mineral Reserve. While we await the outcome of the Environmental Impact Assessment (EIA), expected in early 2020, we have also asked management to develop a funding plan for the project ∎ We have extended the life of our Cerro Corona mine in Peru to 2030 and are working on a scoping study with the aim of extending it further to 2040 ∎ Our substantial investments in near-mine exploration at our Australian mines continued to yield good results, with the mines not only making up annual depletion but adding net Mineral Reserves over the past four years ∎ Until two years ago, just over 70% of our Reserves were held by South Deep. That profile has changed: at end 2018, 59% of the Groups attributable Mineral Reserves were at the mine
I believe that these developments clearly underscore Gold Fields strong and sustainable global profile.
Turning to South Deep, I fully appreciate the frustration experienced by our shareholders over the past few years. We failed to deliver the rebase plan in 2018, as it became evident that South Deep would not achieve the targets set out in the plan and continued to experience cash losses that averaged R100m (US$8m) a month.
With the full backing of the Board, the mine embarked on a fundamental restructuring in Q3 2018, which saw management close loss-making areas, reduce the cost base and embark on a section 189 retrenchment process. Unfortunately, this meant that we had to retrench just over 1,500 employees and contractors, despite the strong opposition by the unions, which led |
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to a 45-day strike. We could not yield to the demands of the unions to reverse the retrenchments, as this would have put the sustainability of South Deep, and the remaining 3,500 jobs, at risk.
I believe that the restructuring, the most comprehensive in South Deeps history, will achieve a significant reduction in the cash losses this year and set the mine up for long-term and sustainable growth. However, the Board has also mandated management to investigate alternative options should it fail to deliver its key targets over the next year.
Gold Fields mines performed well against a background of a volatile gold price and heavy investment in growth projects during 2018. All mines, except South Deep, met, or improved on, their production and cost guidance and generated sufficient cash to fund the bulk of the investment spend and pay a modest dividend to shareholders. We had to increase our debt to pay for the acquisition of Asanko Gold but, notwithstanding this, our balance sheet remained in good health.
Not only has the cash generated by our mines enabled us to invest in future growth, but also to create significant value for our key stakeholders. During 2018, Gold Fields total value distribution to our stakeholders was US$2.7bn in the form of payments to governments, capital providers, business suppliers and our workforce.
A particular focus in 2018 was strengthening our relations with host communities, whose partnership is critical in sustaining our mines. We have asked management to focus on host community employment and procurement, to improve the economic wellbeing of these communities. During 2018, almost a quarter of our total value creation, | ||||
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The Gold Fields Integrated Annual Report 2018 | 21 | |
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22 | The Gold Fields Integrated Annual Report 2018 | |
Vision of the Chairperson continued
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The Gold Fields Integrated Annual Report 2018 | 23 | |
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Summarised corporate governance
Corporate governance overview
Strong leadership and good governance support the achievement of our vision to be the global leader in sustainable gold mining. By protecting and enhancing our reputation and licence to operate, and ensuring compliance with legislation and industry standards, good governance ensures we continue to enjoy the support of stakeholders and allows us to deliver sustained value. The long-term, capital-intensive nature of our mining operations, as well as the often challenging social and political contexts in which we operate, make it even more important that we leverage good governance to ensure the long-term sustainability of our business.
In addition to the international standards and guidelines to which we voluntarily subscribe (outlined on p3 of the Annual Financial Report (AFR)), we are committed to entrenching the principles of the King IV Report on Corporate Governance (King IV) in our operations. The application of King IV within the Company can be found in the full corporate governance report on p15 16 of the AFR.
KEY DELIBERATIONS AND DECISIONS TAKEN BY THE BOARD
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The Gold Fields Integrated Annual Report 2018 | 25 | |
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1. Cheryl Carolus (60) Chairperson BA Law; Bachelor of Education, University of the Western Cape; Honorary Doctorate in Law, University of Cape Town Appointed to the Board: Director 2009, Chairperson 2013
2. Richard Menell (63) Deputy Chairperson MA (Natural Sciences Geology), Cambridge; MSc (Mineral Exploration and Management), Stanford University, California Appointed to the Board: 2008, Deputy Chairperson 2015, Lead Independent Director 2017
3. Terence Goodlace (59) Independent non-executive director MBA (Business Administration), University of Wales; BCom, University of South Africa; NHDip (Metalliferous Mining), Witwatersrand Technikon; MDP, University of Cape Town Appointed to the Board: 2016
4. Phuti Mahanyele-Dabengwa (48) Independent non-executive director Executive Development Programme, Kennedy School of Government, Harvard University, US; MA Business Administration, De Montford University, Leicester, UK; BA Economics, The State University of New Jersey, US Appointed to the Board: 2018
5. Paul Schmidt (51) Chief Finance Officer BCom; University of the Witwatersrand; BCompt (Hons), University of South Africa; CA(SA) Appointed to the Board: 2009 |
6. Carmen Letton (53) Independent non-executive director PhD (Mineral Economics, University of Queensland; Bachelor Mining Engineering, WASM Appointed to the Board: 2017
7. Steven Reid (63) Independent non-executive director BSc (Mineral Engineering), South Australian Institute of Technology; MBA, Trium Global Executive, ICD.D, Institute of Corporate Directors Appointed to the Board: 2016
8. Alhassan Andani (57) Independent non-executive director BSc (Agriculture), University of Ghana; MA (Banking and Finance), Finafrica Institute in Italy Appointed to the Board: 2016
9. Peter Bacchus (50) Independent non-executive director MA (Economics), Cambridge University Appointed to the Board: 2016
10. Nick Holland (60) Chief Executive Officer BCom; BAcc, University of the Witwatersrand; CA(SA) Appointed to the Board: Executive director, 1998 CEO, 2008
11. Yunus Suleman (61) Independent non-executive director BCom, University of KwaZulu-Natal; BCompt (Hons), University of South Africa; CA(SA) Appointed to the Board: 2016 | ||||||||
Board diversity |
Board independence |
Board tenure | ||||||
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Experience |
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26 | The Gold Fields Integrated Annual Report 2018 | |
Governance
THE BOARD AND ITS SUB-COMMITTEES (as at March 2019)
Our Group Executive Committee (Exco)
The Group Exco is primarily responsible for the implementation of Gold Fields strategy, as well as carrying out the Boards mandate and directives.
Exco meets on a regular basis to review Company performance against set objectives and develops strategy and policy proposals for consideration by the Board. It also assists the Board in the execution of the Companys disclosure obligations.
Exco consists of the principal officers and executive directors of Gold Fields 12 members in total.
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The Gold Fields Integrated Annual Report 2018 | 27 | |
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BOARD OVERSIGHT OF KEY ISSUES PERTAINING TO OUR BUSINESS
Building an ethical culture
As the highest governing authority of the Group, the Board is responsible for upholding an ethos of good governance and sustainability. It sets the tone for a culture of ethics that permeates throughout the Company. This underpins Gold Fields commitment to going beyond compliance requirements, and voluntarily embracing best practice standards and principles.
The Board also seeks to ensure that business decisions are made with reasonable care, skill and diligence. This protects and enhances the Companys reputation and helps to maintain its licence to operate a fundamental foundation of sustainability.
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Setting fair remuneration
In determining remuneration principles, the Board is guided by the principles of King IV. The remuneration policy (outlined on p79) includes detailed and specific disclosures on implementation. Gold Fields provides stakeholders with transparent reporting of the remuneration of the CEO and CFO. The Board seeks to ensure that remuneration of executives is fair, equitable and responsible, and informed by the value added by the Exco through the achievement of strategic objectives.
Through the Remuneration Committee, the Board ensures that remuneration practices align with shareholder interests and support the achievement of a sustainable business by: ∎ Helping to attract, motivate, retain and reward employees ∎ Driving the achievement of strategic objectives through appropriate incentives and rewards ∎ Promoting a culture of ethics and responsible corporate citizenship |
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Creating a safe working environment
Our Boards commitment to safety and health as our key 4 priority reflects the imperative of minimising any potential negative impact on our employees and contractors, maintaining operational continuity and protecting our reputation. The Board, together with management, drives a stringent safety culture. In upholding our primary value, If we cannot mine safely, we will not mine, the Board also backs management in stopping mining in areas or situations that are deemed unsafe.
In discharging its oversight responsibilities with regard to safety, the Board is assisted by the SHSD Committee, which receives detailed quarterly reporting on all safety issues and incidents. The Board also oversees Gold Fields adherence to safety, health and environmental standards and compliance requirements, and has approved the Companys adoption of various voluntary best practice safety principles. |
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Stakeholder relationships and engagement
Gold Fields understands that stakeholders are an integral part of our business, representing a wide range of interests that both influence and are impacted by our operations. The Board, through the adoption of the Stakeholder Relationship and Engagement Policy, seeks to ensure that the Company follows a stakeholder engagement approach that allows for participative and informed decision making. By overseeing transparent reporting, it allows stakeholder groups to make an informed assessment of Gold Fields ability to deliver sustainable value.
As stakeholder concerns have become increasingly important to Gold Fields sustainability, the Board has driven an evolution from simple stakeholder management to inclusive stakeholder engagement and relationship building. This approach balances the interests, needs and expectations of our stakeholder with the best interests of Gold Fields. |
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Environmental and stewardship impact on communities
The Board seeks to ensure that Gold Fields conducts business in a way that aligns with good corporate citizenship, and that we continually assess and respond to any negative impacts our operations may have on communities and the environment. The importance of these issues informed the Boards establishment of a dedicated SET Committee in 2015. The committee focuses on, among others, our impact on communities, while the SHSD Committee deals with, inter alia, issues of environmental stewardship. For more information on our environmental stewardship and how we interact with communities, refer to p95 124. |
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Strategy to deliver long-term value and sustainability
The Board is independent and delegates responsibility for the development and implementation of the strategy to the Group Exco. However, the Board nevertheless has a deep understanding of and approves the strategic goals and direction of the Company. When reviewing the strategy, it considers the business risks and opportunities and how these might impact the achievement of objectives. In so doing it aims to ensure that the strategy drives a sustainable business agenda and considers the interests of stakeholders.
Exco presents the Company strategy, business plans and risk register to the Board on an annual basis for input and approval. The Board also agrees performance targets with management. The CEO provides the Board with monthly reports on, among others, performance against strategic and operational targets. This input allows the Board to effectively monitor the implementation of strategy.
Board members perform onsite visits to our operations and projects, and on occasion interact with individual executives on strategic and operational performance. |
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Regulatory environment
We seek to comply with all relevant laws and regulations, as well as the highest levels of corporate governance, and often our governance practices exceed the legal minimum. As such, corporate governance systems and frameworks at Gold Fields are reviewed constantly to align with the ever-changing and increasingly stringent standards that are being rolled out by regulators. |
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Innovation and Technology (I&T)
Gold Fields recognises the importance of implementing I&T to secure the sustainability of our operations. Doing so is expected to deliver higher production, greater efficiencies, improved safety and a decrease in the potential negative impact on the environment and communities. In line with the requirements of King IV, the Board has approved an I&T strategy that is set to further the achievement of Gold Fields Group strategy.
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28 | The Gold Fields Integrated Annual Report 2018 | |
Summarised corporate governance
Ensuring we do business ethically
THE STRUCTURES AND MECHANISMS USED TO DRIVE ETHICAL BUSINESS PRACTICE
Our business is built on the foundation of ethics, which informs a culture of integrity and transparent reporting to our stakeholders. This foundation assists us in ensuring that we build trust, strengthen our reputation and create value for all our stakeholders. The Board and its committees set the ethical tone for the business. We use various mechanisms to confirm ethical behaviour, compliance and good governance in the business:
Assesses the legal risks facing the Company and mitigates these by enacting effective policies, procedures and controls.
During 2018, we: ∎ Enhanced the regulatory risk profile process to incorporate the review and assessment of all applicable and adopted, non-binding rules, codes and standards (RCS) per country ∎ Developed an online regulatory and RCS risk dashboard for the Group ∎ Recorded an Annual Compliance Index per region and for the Group ∎ Confirmed alignment with the Internal Audit Plan ∎ Screened 100% of all new and existing suppliers and contractors for a range of pre-defined risk categories, including human rights and related violations |
The Risk Committee reports our key business risks to the Board on a biannual basis. The Board aims for effective controls and corrective measures are in place to manage and mitigate these risks. Furthermore, the Audit Committee seeks to ensure the integrity, accuracy, and adequacy of accounting records.
Internal Audit assesses that the internal controls in place are working to mitigate potential risks. This takes place in all regions on a quarterly basis and operations are given an audit ranking. Corrective measures are put in place where necessary.
External Audit provides the integrity, accuracy and adequacy of accounting records and corporate reporting. During 2018 we contracted PricewaterhouseCoopers as our new auditors from 2019 onwards, following our standard tender process. KPMG had been our auditors since 2010.
For more information on our Risk and Audit committees, refer to the full Governance Report in the Annual Financial Report.
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We support the development of an ethical and impactful industry, one that goes beyond a compliance-based approach. Gold Fields is aligned to both international and local best practices, which underpin our commitment to responsible corporate citizenship. We are committed to and guided by: ∎ The legislation and regulations of the countries in which we operate ∎ The requirements of the stock exchanges on which we are listed ∎ The United Nations (UN) Guiding Principles on Business and Human Rights ∎ The ICMM 10 Principles on Sustainable Development ∎ The 10 Principles of the UN Global Compact ∎ King IV ∎ UN Convention Against Corruption ∎ OECD Convention on Combating Bribery ∎ Extractive Industry Transparency Initiative ∎ World Gold Council Conflict Free Gold Standard ∎ Voluntary Principles on Security and Human Rights
During 2018, we also committed to the Task Force on Climate-related Financial Disclosures (TCFD). |
Code of Conduct | ||
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Our Code of Conduct is informed by the Gold Fields values and underpins the way we conduct ourselves, from our operations to our Board. It also extends to our supply chain business partners. The Code of Conduct was updated in 2017 and distributed to all existing employees, while all new employees receive it during their onboarding. As at end 2018, 66% of our people had undergone training on the Code of Conduct. An anonymous Tip-Offs hotline is permanently in operation, and the Company takes a zero tolerance approach to intimidation and victimisation of those who report incidents. | |
Key principles of our Code of Conduct: ∎ Emphasis on ethical leadership within the organisation in addition to ethical management ∎ Protection of employee and third-party whistle-blowers, promoting an environment for reporting of Code of Conduct transgressions ∎ Safeguarding the business against potential reputational harm and litigation ∎ Transparent and ethical dealings with government and suppliers ∎ Protection of company information ∎ Accurate and transparent reporting ∎ Safeguarding against insider trading
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Dear stakeholders 2018 marked the second year of the reinvestment programme embarked on by Gold Fields at the end of 2016. The key motivation behind the investment focus is to ensure that our portfolio of mines continues to generate cash sustainably into the foreseeable future, while at the same time lowering our costs and extending mine life.
Having spent total project capital of US$502m over the past two years, primarily on Damang and Gruyere, Gold Fields is now well placed to maintain a production profile of near to 2Moz a year at our international operations in Australia, Ghana and the Americas over the medium to long term. This is based on current gold price levels, our attributable gold Mineral Reserves of 20Moz in these regions as well as our track record of Resource conversion and exploration activities.
The 2Moz milestone is expected to be reached for the first time in 2019 as Damang and Gruyere are set to come into production and our Asanko joint venture (JV) in Ghana contributes for the full year. The longer-term future of this portfolio also looks positive as we continue to invest in near-mine exploration at our Australian mines, while the Board has approved a maiden Mineral Reserve and the technical components of the feasibility study for the Salares Norte project in Chile.
The globalisation of our portfolio has also been evident in a gradual shift in our Mineral Reserve exposure. Until two years ago, just over 70% of our Reserves were held by South Deep. That profile has changed: of our total gold-equivalent Mineral Reserves of 50.9Moz in December 2018 (December 2017: 53.1Moz), 41% are now outside South Africa.
One of the key benefits of the reinvestment programme over the past two years is the expected reduction in Group All-in Costs (AIC) to approximately US$900/oz, a level which we feel is required to be competitive on a global scale. As the quality of the portfolio improves and our cost profile starts to decline, we expect an improved free cash-flow (FCF) margin. For 2019, therefore, we have adjusted our target to a FCF |
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margin of 15% at a gold price of US$1,200/oz (previously US$$1,300/oz).
Not only did our international portfolio of mines exceed its production targets in 2018, but it also outperformed cost guidance. However, as South Deep, our only remaining South African operation, was well below target, Group attributable production of 2.04Moz for the year was below our original guidance of 2.08 2.10Moz, as well as 2017 production of 2.16Moz. Group AIC of US$1,173/oz were below the guided US$1,190/oz US$1,210/oz, but slightly higher than the US$1,088/oz reported in 2017, due to the continued investment in our growth projects.
The strong operational performances of our operations in Ghana, Peru and Australia resulted in net cash flows of US$332m, and enabled us to fund our US$290m total project capital expenditure in 2018 (excluding Asanko), without putting undue pressure on our balance sheet. Despite the increased spending, as anticipated, we declared a total dividend for 2018 of R0.40/share. Planned project and sustaining capital for 2019 is scheduled to decline to US$633m, of which US$143m is growth capital.
At South Deep, annual production in 2018 at 157,100oz was half the originally guided 321,000oz. Production in the second half of the year was impacted by the tragic fatal accident as well as a wide ranging restructuring, including the retrenchment of over 1,500 employees and contractors, and a subsequent six-week strike by the majority National Union of Mineworkers (NUM). However, I believe that in the wake of the restructuring, which has seen our employee workforce at the mine fall by about 30% to just under 2,500 and the number of contractors decrease from 2,294 to 1,725, we are in a position to significantly reduce South Deeps pre-restructuring (H1 2018) cash-burn of about R100m (US$8m) a month.
During 2018, we recorded one fatality (three in 2017), which served as a tragic reminder that we have lots more work to do to eliminate all |
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fatalities and serious injuries to realise our goal of zero harm. We did however see a continued improvement in our health and safety performance amid renewed efforts to entrench a committed safety culture and standards. Gold Fields total recordable injury frequency rate (TRIFR) fell below two recordable injuries per million hours worked for the first time, a continuation of our long-term downward trend and our best safety performance ever.
Mining is an industry that has significant impacts on the countries and communities in which it operates. This requires continued proactive stakeholder engagement strategies and sustainable development policies.
Host communities, in particular, are critical stakeholders for our mines. During 2018, we continued investing significant resources in community programmes, including increasing the share of jobs and procurement spend allocated to host communities. We are showing good results with around 25% of our total value creation of US$2.7bn during 2018 channelled into host communities.
The judicious use of water and energy resources by our mines and proactive mine closure programmes are other critical elements of our sustainable development programmes, not only as part of our commitment to operational efficiencies and environmental stewardship, but also as part of strengthening our social licence to operate.
We are also committed, in collaboration with our peers in the ICMM, to a renewed focus on the governance and technical management of our tailings storage facilities (TSFs) following the collapse of a TSF at Vales Feijão iron ore mine in Brumadinho, Brazil, in January 2019, during which there were over 300 deaths.
The Gold Fields share price took a hit when we announced the restructuring of South Deep in August 2018. While it has gradually recovered since then, overall in 2018 our share price decreased by 18% on the New York Stock Exchange and 9% on the JSE. | ||||
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Performance highlights (Group)
2018 | 2017 | 4 | ||||||||||||
Fatalities |
Number | 1 | 3 | |||||||||||
TRIFR |
/million hours worked | 1.83 | 2.42 | |||||||||||
Attributable production |
Moz | 2.04 | 2.16 | |||||||||||
All-in Sustaining Costs (AISC)3 |
US$/oz | 981 | 955 | |||||||||||
AIC3 |
US$/oz | 1,173 | 1,088 | |||||||||||
Net cash-flow1,3 |
US$m | (132 | ) | (2 | ) | |||||||||
Free cash-flow (FCF) margin3 |
% | 16 | 16 | |||||||||||
Net debt3 |
US$bn | 1,612 | 1,303 | |||||||||||
Dividend declared |
R/share | 0.40 | 0.90 | |||||||||||
Total value distribution |
US$bn | 2.711 | 2.849 | |||||||||||
Energy usage2 |
TJ | 11,628 | 12,178 | |||||||||||
Water withdrawal5 |
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21,179 | 32,985 | |||||||||||
CO2 emissions |
million tonnes | 1.85 | 1.96 | |||||||||||
Host community procurement (% of total)6 |
% | 27 | 45 | |||||||||||
Host community employment (% of total)7 |
% | 56 | 40 | |||||||||||
Gross mine closure liabilities |
US$m | 400 | 381 |
1 | Net cash-flow = cash-flow from operating activities less net capital expenditure, environmental payments and finance lease payments |
2 | The sum of direct and indirect energy consumption reflects a conversion factor used by Granny Smith, Tarkwa and Damang power stations to account for generation losses |
3 | These non-IFRS measures have been defined in managements discussion and analysis in the Annual Financial Report and have been reconciled to IFRS |
4 | 2017 numbers include continued and discontinued operations |
5 | Large difference in numbers due to change of definition of water withdrawal to exclude diverted water |
6 | The % decline is due to a change in the definition of host communities by our Australian operations to only include communities in their area of influence (previously Perth was included in the definition due to the FIFO nature of our mines) |
7 | South Deeps host community definition was changed in 2018 to align with the 2016 municipal boundary change which amalgamated the Westonaria and Randfontein municipalities. It now includes all individuals who reside in the Rand West City Local Municipality. This number also excludes the Perth office and Gruyere project |
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Portfolio management |
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Mining is a long-term investment. As a business, we need to balance investing for future growth of our portfolio whilst generating cash today. Through our investment projects and strategic decisions, we aim to sustainably extend the life of Gold Fields overall portfolio at lower costs than today.
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∎ Managing our portfolio | p42 | |||||
∎ Life extension through near-mine exploration | p50 |
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Introduction Gold Fields manages its business with the aim of continually improving the quality of its portfolio and, ultimately, its cash-flow generation. From a strategic standpoint, the overriding goal is to generate a free cash-flow (FCF) margin of at least 15% at a US$1,200/oz gold price, which is an adjustment from the previous 15% FCF margin at US$1,300/oz. To achieve this, there is strict focus on reducing AIC and, as a result, increasing the FCF/oz. However, it is also imperative that the generation of cash-flow is sustainable. Therefore, in addition to lowering Group AIC, strategic decisions aim to extend the life of the Groups asset base and the overall portfolio.
To improve the quality of our portfolio, management employs the following elements in the portfolio management process: ∎ Acquiring or developing lower-cost (than Group average), longer-life assets ∎ Disposing of higher-cost, shorter-life assets that management believes can be better served by a company that has more time and resources to commit to them ∎ Extending the life of current assets through near-mine brownfields exploration ∎ Focusing on in-country opportunities to leverage off our existing footprint, infrastructure and skill set and capitalise on the experience we have gained from operating in these jurisdictions
Recent developments that improved the quality of our portfolio include the sale of Darlot in 2017, the acquisition of a 45% stake in the Asanko gold mine (AGM), and the continued investment into the Damang and Gruyere projects. Once Damang and Gruyere are operating at steady state, expected in 2020, Group AIC is expected to approach US$900/oz. |
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Quality portfolio of growth projects By employing an active portfolio management approach, Gold Fields has built an attractive global portfolio of assets in Australia, Ghana and Peru, which have met or exceeded production and cost guidance over the past few years. At a mine level, this international portfolio of assets, excluding South Deep, generated net cash flow of US$457m (excluding project capital) during 2018 (2017: US$$485m), enabling the Group to report a FCF margin, which takes into account the outflow from South Deep, of 16% (2017: 16%). This is in line with our targeted 15% margin at a US$1,200/oz planning gold price.
South Deep is the only asset within the Company that has failed to meet expectations, with 2018 proving to be an extremely difficult year for the mine. After falling behind plan in the first half of 2018, management announced a material restructuring on 14 August 2018, with the aim of consolidating mining activity to increase focus and to match the cost structure with the level of production. The immediate target is to get the mine to break even at the current level of production (around 190koz per annum) and minimise the cash burn. Once this has been achieved, the focus will be on improving productivity off the restructured cost base and overhead structure, to bring the mine to profitability. For more details on the South Deep restructuring and outlook, refer to p46. |
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All assets in our portfolio are subject to the Groups annual strategic planning process, which assesses how to best maximise cash-flow, life-of-mine, and margin. The results of this analysis are combined with the Groups capital profile and the current economic environment as inputs into our annual business planning. This process supported the continued investment in the Groups three key growth and exploration projects (Damang, Gruyere and Salares Norte) during 2018: ∎ US$125m in project capital was incurred on the Damang Reinvestment project in 2018, after having spent US$115m in 2017 (p48) ∎ Gold Fields spent A$218m (US$163m) on the Gruyere project in 2018, compared with A$182m (US$140m) in 2017. Included in this number is A$153m (US$115m) in project capital, A$39m (US$29m) in capitalised interest, A$18m (US$14m) in operational support costs and A$8m (US$6m) in exploration expenditure. During 2018, the joint venture (JV) partners announced that there had been a delay to the project timeline (first gold now expected in Q2 2019), together with a 17% increase in the final forecast capital cost estimate to A$621m (US$480m) (p44) ∎ US$64m on further feasibility study work was spent on the Salares Norte exploration venture in Chile during 2018. The feasibility study was completed and approved by the Board in February 2019 (p47). | ||||
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Gruyere
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South Deep
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Salares Norte
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Damang Reinvestment
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Asanko
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Safe operational delivery |
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In order to deliver sustainable financial returns, meet our strategic promises and achieve our aim of zero harm, we need the right people in the right roles with the right skills, ongoing investments in technology, and an innovative approach to energy cost management. |
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∎ | Introduction | p54 | ||||||
∎ | Operational performance overview | p54 | ||||||
∎ | Safety | p59 | ||||||
∎ | Health | p63 | ||||||
∎ | Energy cost management | p66 | ||||||
∎ | Innovation and technology | p70 | ||||||
∎ | A fit-for-purpose workforce | p72 |
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During 2018, Gold Fields continued to expand its international footprint with the acquisition of a 45% stake in the Asanko gold mine (AGM) in Ghana. The portfolio is geographically diversified, boasting eight mines in four regions, only one of which is in South Africa. In addition, investment into the Gruyere project in Australia continued as planned during 2018. The project remains on track to start contributing to the production profile during Q2 2019, and is set to reach steady state production towards the end of 2019 or early 2020. At name plate, Gold Fields share of Gruyeres production is expected to be 150koz, bringing production in the Australian region to approximately 1Moz.
In another positive development, the feasibility study on Salares Norte in |
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Chile was completed during the year, showing an internal rate of return of 25% at a US$1,300/oz gold price (for more details refer to p47). While there is more work to be done on the project, Salares Norte offers longer-term optionality to the production base.
The Groups broader strategy is focused on reducing Group All-in costs (AIC) and improving cash generation. Our international operations (excluding South Africa) lived up to this mandate during 2018, with each mine meeting or exceeding production and cost guidance for the year. The solid operational and cost performances of our Australian, Ghanaian and Peruvian assets contributed to strong overall Group results and enabled Gold Fields to contain the net debt increase during |
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a year in which US$295m in project capital was incurred.
Some of the key investments made during 2018 in order to bolster the longevity of our portfolio include: ∎ A$153m (US$115m) (2017: A$182m (US$139m)) spent on the Gruyere project in Western Australia (p44) ∎ US$125m (2017: US$115m) in project capital spent at our Damang mine in Ghana (p48) ∎ Near-mine exploration spending of A$85m (US$63m) (2017: A$95m (US$72m)) in Australia (including Gruyere) and US$14m (2017: US$11m) in Ghana (p50) ∎ US$51m (2017: US$53m) spent on feasibility study work and further exploration drilling at Salares Norte in Chile (p47) | ||||
Group operational performance
2019 Guidance | 2018 Actual | 2018 Guidance | 2017 Actual | |||||||||||||||||||||||||||||||||
Prod (Moz) |
AIC (US$/oz) |
Prod (Moz) |
AIC (US$/oz) |
Prod (Moz) |
AIC (US$/oz) |
Prod (Moz) |
AIC (US$/oz) |
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Group |
2.13 | 1,075 | 2.08 | 1,190 | ||||||||||||||||||||||||||||||||
-2.18 | -1,095 | 2.04 | 1,173 | -2.10 | -1,210 | 2.16 | 1,088 |
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South Africa region
2019 Guidance | 2018 Actual | 2018 Guidance | 2017 Actual | |||||||||||||||||
Prod | AIC | Prod | AIC | Prod | AIC | Prod | AIC | |||||||||||||
6,000kg | R610,000/kg | 4,885kg | R854,049/kg | 10,000kg | R540,000/kg |