Certain statements in this document
constitute “forward looking statements”
within the meaning of Section 27A of the
US Securities Act of 1933 and Section
21E of the US Securities Exchange Act
Such forward looking statements involve
known and unknown risks, uncertainties
and other important factors that could
cause the actual results, performance or
achievements of the company to be
materially different from the future
results, performance or achievements
expressed or implied by such forward
looking statements. Such risks,
uncertainties and other important factors
include among others: ...read more
|Sibanye Gold (KDC and Beatrix) listed separately
JOHANNESBURG. 14 February 2013, Gold Fields Limited (NYSE & JSE: GFI) today announced net earnings for the December
quarter of R546 million compared with R1,424 million in the September quarter and R2,605 million in the December 2011
quarter. Net earnings from continuing operations for the December quarter amounted to R382 million compared with R1,000
million in the September quarter and R1,467 million in the December 2011 quarter. Net earnings from discontinued operations
for the December quarter amounted to R164 million compared with R425 million in the September quarter and R1,138 million in
the December 2011 quarter.
In US dollar terms net earnings for the December quarter were US$54 million, compared with US$171 million in the September
quarter and US$336 million in the December 2011 quarter. Net earnings from continuing operations for the December quarter
were US$41 million, compared with US$122 million in the September quarter and US$186 million in the December 2011
quarter. Net earnings from discontinued operations for the December quarter were US$13 million, compared with US$48
million in the September quarter and US$150 million in the December 2011 quarter.
- Illegal strike action at KDC and Beatrix resulted in 110,000 ounces of lost production;
- Gold Fields unbundles and lists Sibanye Gold, formerly GFIMSA (KDC, Beatrix and Service companies);
- Gold production for total Gold Fields down 7 per cent at 754,000 equivalent attributable ounces due to illegal strikes;
- Total cash cost for total Gold Fields of US$946 per ounce and NCE of US$1,476 per ounce; and
- Operating margin for total Gold Fields of 44 per cent and NCE margin of 13 per cent.
A final dividend of 75 SA cents per share (gross) is payable on 11 March 2013, giving a total dividend for the year ended
December 2012 of 235 SA cent per share (gross).
Statement by Nick Holland, Chief Executive Officer of Gold Fields:
The way forward for the new Gold Fields
Key issues of the December 2012 quarter
The December quarter of 2012 was a quarter of great challenges on the one hand and significant milestones on the other.
While the international operations had an outstanding quarter, KDC and Beatrix in South Africa were impacted by the industrywide
illegal strikes in the South African mining industry.
Group attributable gold production of 754,000 ounces for the December quarter was 7 per cent lower than the 811,000 ounces
achieved in the September quarter. This decline was due to the impact of the illegal strikes, compounded by a slower than
anticipated resumption of normal production following the cessation of the strikes. In the South Africa region, production at KDC
and Beatrix in aggregate decreased by 30 per cent from 316,000 ounces in the September quarter to 220,000 ounces in the
December quarter. The strike action during the December quarter resulted in the loss of 23 production days at KDC East, 27
production days at KDC West, 29 production days at Beatrix as well as 110, 000 ounces of gold production during the quarter.
The protracted strikes across the industry had a significant impact beyond the production impact. Mining companies not only
suffered significant earnings losses but also a breakdown of trust and common purpose between employees and employers,
which will require a significant effort to restore. Specifically, a new engagement model needs to be established whereby mining
companies no longer rely solely on trade unions to communicate with employees. Instead direct contact needs to be established
and regularly maintained with the workforce for us to gain a first-hand understanding of the concerns and aspirations of our
employees. In this way companies will be more in tune with the challenges faced by our employees and can determine relevant
action plans to create closer alignment.
South Africa’s economy was the biggest loser of the strike, suffering not only from the loss of tax revenue but, more significantly,
from a loss of investor confidence and support at a time when investment is critical in achieving our national development
objectives, the most important of which is the need to create and protect jobs.
To prevent a recurrence of the labour turmoil of 2012, it is vital that government, organised labour and the mining industry work
together to determine a sustainable future for the mining industry. This conversation will need to focus first and foremost on the
economic realities faced by the industry, namely increasing depth, declining grades, wage increases beyond inflation along with
productivity declines, as well as unaffordable increases in electricity tariffs and other input costs, to name just a few. Fiscal
measures already implemented and those mooted are a further concern. Should the industry have to continue to bear the brunt
of the collective impact of these factors, further declines in mining output and job losses are inevitable.
Sound leadership is needed from government, industry and organised labour, all of whom need to take a sober look at the
events of last year. We, as the mining industry cannot achieve this on our own. Labour and government need to urgently
collaborate with the industry to return South Africa to a competitive investment destination. First and foremost it will require
government to moderate its views on taxes, electricity costs and other imposts that the industry simply cannot afford. Our
workforce and their trade unions need to modify their demands for wage increases well beyond inflation that accompany flat or
declining productivity. The mining industry in turn must honour its commitment to all stakeholders in terms of transformation as
well as social and labour plans. Only by working together can we determine a sensible and sustainable way forward for the
The international operations increased their combined managed production by 11 per cent from 446,000 gold equivalent ounces
in the September quarter to 496,000 gold equivalent ounces in the December quarter. Cerro Corona in the South America
region and Agnew in the Australasia region were the best performers. Cerro Corona increased production by 18 per cent from
83,000 gold equivalent ounces to 98,000 gold equivalent ounces while Agnew increased production by 15 per cent from 48,000
ounces to 55,000 ounces. More importantly, however, the NCE margin at Agnew improved from 32 per cent to 46 per cent. At
Cerro Corona the NCE margin remained very high at 49 per cent, a slight decrease from the 52 per cent in the September
quarter. The West Africa region also increased production by 11 per cent from 209,000 ounces to 232,000 ounces while the
Australasia region increased production by 8 per cent from 154,000 ounces to 167,000 ounces.
The lower Group production during the quarter resulted in cash costs increasing by 3 per cent from US$916 per ounce to
US$946 per ounce and Notional Cash Expenditure (NCE) increased by 2 per cent from US$1,448 per ounce to US$1,476 per
ounce. The Gold Fields continuing operations, excluding the operations of the newly listed Sibanye Gold achieved cash costs
of US$793 per ounce and an NCE of US$1,365 per ounce.
At South Deep, three significant milestones in support of the build-up to an annual production run-rate of 700,000 ounces by the
end of 2015 were reached during the quarter. The first was the completion, within budget and on time, of South Deep’s new
ventilation shaft. The commissioning process at the shaft has already started. The additional rock hoisting capacity provided by
this shaft is planned to ramp up to a nameplate capacity of 195,000 tonnes per month by December 2013, which, combined with
the 175,000 tonnes capacity of the existing Main shaft, will be sufficient to sustain a full-production mill-feed of 330,000 tonnes
per month. The second major milestone was the completion and commissioning of the gold plant expansion, which increased
South Deep’s plant capacity from 220,000 tonnes per month to 330,000 tonnes per month. The third major milestone was the
conclusion of a landmark agreement with the National Union of Mineworkers (NUM), introducing a new operating model for the
mine. The implementation process has commenced and is well underway. The essence of the agreement is the introduction of
a new 24/7/365 operational schedule which is in line with best practice mechanised underground operations world-wide. This is
expected to provide an additional 30 per cent face time and help achieve further productivity improvements. The new operating
model which includes, inter alia, more competitive grading, remuneration and targeted incentives, is expected to underpin the
production ramp-up to the full production run-rate of 700,000 ounces of gold per annum planned for the end of 2015. It also
seeks closer employee alignment with the mine’s business objectives. During the December quarter South Deep produced
62,700 ounces of gold, increasing the total for the full 2012 year to 270,000 ounces. Production is expected to improve by
between 10 to15 per cent during 2013, though it will still take some months for the full benefits of the new operating model to be
It is with regret that the Gold Fields Board of Directors received, and reluctantly accepted, the resignation of Dr. Mamphela
Ramphele as Chair of the Company’s Board, with immediate effect, to dedicate herself to her socio-economic and political
interests. On behalf of the Board, the management, and all of the people of Gold Fields, I thank Dr. Ramphele for her enormous
contribution to and inspirational leadership of the Company over the past two-and-a-half years.
Gold Fields non-executive director, Cheryl Carolus, will succeed Dr Ramphele as Chair of the Company with immediate effect.
Ms Carolus was appointed a director of Gold Fields on 10 March 2009.
KDC and Beatrix in the South African region, which now form part of the unbundled Sibanye Gold, are classified as discontinued
operations for accounting purposes and as such all prior periods have been restated to exclude results from these operations.
For comparative purposes only, the Group results, which include continuing and discontinued operations, are provided together
with the separate results for continuing and discontinued operations. Commentary relating to Gold Fields operations before the
unbundling combined continuing and discontinued operations. Commentary on only continuing operations new Gold Fields after the unbundling of Sibanye Gold. Commentary on only discontinued operations
During the second half of 2012 the Group engaged in a comprehensive analysis of Gold Fields’ operating model and the assets
in the portfolio - both producing mines and growth projects. This was in response to the ongoing underperformance of gold
industry share prices, including Gold Fields’, when measured against the higher gold price, and the inability of the sector to
reflect the decade-long gold bull market in its valuations. The outcome of this analysis and review was a recognition and
adoption of five key guiding principles which will underpin the Gold Fields strategy going forward.
The first of these is that our focus will not be on ounce targets at any cost, but on the generation of cash returns. Flowing from
this, the Group embarked on a review and repositioning of all of its assets and structures to optimise cash generation in a more
sustainable manner. Central to this is a concerted focus on understanding and managing the all-in costs of our business,
expressed as Notional Cash Expenditure (NCE).
The most significant outcome of the review process was the decision to separate the Gold Fields portfolio into two entities
reflecting the diverse nature of the ore bodies, mining methods, management and operational skills, and technologies required
to optimally and sustainably extract these diverse ore bodies.
This decision led to the November 2012 announcement of the creation and unbundling to shareholders of the new Sibanye Gold
as a totally independent company with its own dedicated executive management and board of directors, led by well-known and
respected South African mining and business entrepreneurs, Neal Froneman (Chief Executive Officer) and Sello Moloko
(Chairman). The new Sibanye Gold, which comprises the KDC and Beatrix mines as well as the various South African service
entities, was successfully listed on the JSE Limited and New York Stock Exchange on 11 February 2013. The transaction,
which has been widely welcomed by local and foreign investors, has created a fit-for-purpose new vehicle which allows Sibanye
Gold management to determine the optimal future exploitation strategy for its assets and to have control over its cash flows,
including rewarding shareholders through dividend payments.
The review process also resolved to reposition all of the producing mines in the Gold Fields portfolio to focus on the production
of profitable ounces only and to curtail marginal production which does not contribute to meaningful cash generation, even if this
results in a decline in ounces of production. Some of the key decisions that followed were:
- At Agnew, it was decided to withdraw from the low-grade and marginal Main and Rajah Lodes and to focus only on the
high grade Kim Lode at the Waroonga underground mine and to right-size the mine accordingly. This is expected to
reduce unit costs and improve profitability. A more appropriate level of production for this mine is expected to be
around 160,000 ounces per annum relative to 176,600 ounces produced in 2012.
- At St Ives, the marginal heap leach operation was mothballed. While this will result in production declining by between
30,000 and 40,000 ounces per year, it should also lead to a lowering of costs and more profitable production overall.
- At Tarkwa, production at the marginal and high cost South Heap leach operation ceased, which resulted in a
production decline of 40,000 ounces per year. The objective at both St Ives and Tarkwa is to, as far as possible,
maintain costs through absorbing much of the inflation pressures.
- At South Deep, the focus is to become cash generative by the end of 2013 and for cash costs and NCE to reduce as
the production build-up progresses over the next three years. At full production South Deep is expected to be globally
competitive from a cost perspective.
The second key guiding principle which emerged from the review process is to channel our growth efforts, in the first instance,
on low-risk, high-return brownfields opportunities near our existing mines. With the focus moving from production levels to cash
generation, there are a number of opportunities at existing mines to raise production while simultaneously enhancing the
Group’s ability to generate cash. These opportunities are attractive not only because of their potential for competitive returns,
but also because they are low risk given that they are extensions of existing assets that we know and understand well. One
example is the proposed Tarkwa expansion phase 6 project (TEP6), which entails the replacement of all remaining heap leach
operations with appreciably higher recoveries. We continue to evaluate this opportunity which could result in a new CIL plant or
an extension to the existing plant, which will have a positive impact on production levels. Similarly, at Cerro Corona, an
opportunity exists to expand the existing sulphide plant, thereby bringing production forward. At Cerro Corona there is also the
potential to process more than 300,000 ounces of gold which remains captured in oxide stockpiles through a new heap leach
facility. We continue to evaluate these opportunities.
The third key guiding principle that emerged from the review process is to pursue greenfields opportunities only if they offer
truly attractive returns and will contribute to the cash generation objectives of the organisation. Gold Fields has a number of
greenfields projects at various stages of evolution, including Chucapaca in Peru, APP in Finland, Yanfolila in Mali and FSE in
the Philippines. We intend to enforce prudent stage-gating of these projects and ensure that construction decisions are based
on a robust understanding of technical assumptions and economic parameters. As such, we intend to refrain from giving longterm
estimates of timelines and likely production levels on these projects, or for the Group as a whole, until advanced prefeasibility
or feasibility information is available and approved internally. Our approach of not adding ounces for ounces sake will
be rigorously applied to our greenfields portfolio and projects will have to be motivated on their ability to generate a return on
capital invested. We also recognise that, from a technical and financial perspective, it is unlikely that we can advance all
projects to the same extent simultaneously; prioritisation is therefore important.
With this in mind we can provide a status update on our key greenfields projects. We continue to value-engineer Chucapaca to
take advantage of the significant declared Mineral Resource of 7.6 million ounces. We are investigating various means of
optimising the project including different production levels, underground opportunities as well as additional exploration in the
area of interest. At FSE we have completed most of the underground drilling programmes and are continuing to focus on
licensing and social engagement activities, along with surface geotechnical drilling, as these are critical for the project to
proceed successfully. In due course we intend to commence a prefeasibility study. At Arctic Platinum we are close to
completing the key elements of a pre-feasibility study, which demonstrate a viable project, and we are in the process of
determining the next steps to capture its inherent value. Finally, at Yanfolila we have had significant exploration success over
the last year and the project is scheduled to progress to pre-feasibility status this year.
The fourth principle is that the new Gold Fields will continue to follow its “dividend first” policy as articulated in 2012, which is a
commitment to pay 25 to 35 per cent of normalised earnings as dividends.
The fifth principle is our enduring commitment to the long-term sustainability of our business which entails, inter alia, the health
and safety of our people, respectful stewardship of our natural environment, and the creation and equitable sharing of value for
all of our stakeholders.
|| JSE Limited – (GFI)
|Number of shares in issue
||Range - Quarter
||ZAR97.93 – ZAR112.38
|- at end December 2012
||Average Volume - Quarter
|- average for the quarter
||NYSE – (GFI)
||100 per ce
||Range - Quarter
||US$11.32 – US$13.02
||Average Volume - Quarter
|Bloomberg / Reuters