Shared value as a percentage of total revenue
New, skilled employment positions created at South Deep
Proportion of total procurement spend from suppliers in host countries
Our Vision of global leadership in
sustainable gold mining requires us to:
- Create the greatest enduring value
from gold, which means not only
generating optimal financial value for
our investors, but also sustainable
socio-economic value for our
employees and communities
- Understand and support
stakeholder needs, by ensuring we
effectively address the concerns of
those stakeholders who have the
ability to influence the long-term
success of our business
- Leave a legacy of shared value,
through the delivery of meaningful
and lasting benefits to our
employees, communities and
It is these requirements that sit behind
our strategic objective of 'securing
We are determined to ensure that
Gold Fields is the place to work in all of
our countries of operation. This means
ensuring that employees:
- Enjoy optimal working conditions
and development opportunities in
return for their motivation and loyalty
- Can be confident of their safety –
and the safety of their colleagues –
when they enter their workplace
- Are acknowledged and rewarded
for their essential contribution to
- Know that they have made the right
decision – for themselves and their
families – by joining forces with the
world’s most sustainable gold miner
Group human resources performance (pre-unbundling)
||Total employees (excluding off-payroll contractors)
||HDSA employees in South Africa (%)1
||HDSA employees in South Africa (% Management)1
||National employees in Ghana (%) (Excluding contractors)
||Minimum wage ratio2
||Female employees (%)
||Ratio of basic salary of men to women
||Employee wages and benefits (Rm)
||Average training (hours per employee)
||Employee turnover (%)
||Excluding foreign nationals, but including white females; HDSA – Historically Disadvantaged South Africans
||Entry-level wage compared to local minimum wage
||Restated from 9,448 to 7,951 as the number previously included head offices and shared services staff in addition to mine personnel
||This number includes employees from Growth and International Projects for the first time
Relevant stakeholder promises:
- A winning, safe and productive team: If we cannot mine safely, we will not mine. We seek to eliminate all harm to
our people. Motivated and loyal employees act as our ambassadors. They enable safe production and exceptional
value creation. Our ability to attract and retain top talent creates a key competitive advantage
- The most trusted and valued mining partner: We build strong relationships with key stakeholders in the
communities and societies in which we operate. We measure the contributions we make as we create and share
value to leave an enduring, positive legacy
Recruitment and retention
The ‘war for talent’
Skills shortage and retention continues to represent a key challenge. This is not specific to Gold Fields, but is a global, sector-wide issue. Indeed, skills shortages comes second only to resource nationalism in Ernst & Young’s ‘Business risks facing mining and metals 2012 – 2013’, whilst it has also been identified as a key issue in Deloitte’s ‘Tracking the trends 2012: The top 10 trends mining companies may face in the coming year’. If we are to achieve our long- term business objectives, we need a well-trained, motivated and stable workforce – including technical experts, managers and operational personnel.
|Employee training at KDC, South Africa
Turnover challenges in Australia and Ghana
During 2012, we continued to experience high levels of turnover at our Australian operations due to the nature of the highly dynamic ‘fly-in, fly-out’ extractive labour market in Western Australia, as well as intense competition from other major mining and energy projects and operations in the region.
The turnover rate remains high at 27.5% (2011: 28%). We expect the scarcity of some core and critical skills to continue.
To address this issue, we are:
- Implementing a new, centralised
recruitment and retention strategy
- Ensuring remuneration remains
fully competitive with peers in
- Identifying core and critical skills so
that we apply well-targeted
- Making adjustments to our benefits
packages to ensure they remain
competitive in light of a
benchmarking exercise carried
out against our competitors in the
- Implementing a formal Talent
Management programme linked to
- Carrying out workplace ‘climate
surveys’ to inform related human
resource action plans
In Ghana, local regulations mean
expatriates can fill a maximum of
6% of management, supervisory
and technical positions at mining
companies – resulting in intense
competition for the relatively limited
number of local specialists and
managers. Furthermore, in many cases
these individuals pursue opportunities
to take up highly paid expatriate roles
outside of Ghana.
Although turnover in Ghana is not
particularly high at 7.06% (2011: 7.4%)
– its disproportionate prevalence
amongst national managers and
specialists (including mine planners,
geologists and heavy mining
equipment artisans) means it has a
greater impact than would otherwise
be the case.
To address this issue, we are:
- Ensuring remuneration of senior
nationals remains fully competitive
with peers within the West
- Delivering structured and predictable
career progression within the Group
- Carrying out workplace ‘climate
surveys’ to inform related human
resource action plans
- Providing opportunities for senior
nationals to pursue opportunities as
expatriates within the Group – with a
view to returning to Ghana
- Implementing intensive succession
planning, whereby for each of our
non-national, expatriate employees
we also develop a national
successor, using Individual
Employment impact of unbundling
Following the unbundling of the former
Gold Fields South Africa (GFIMSA)
operations into Sibanye Gold,
Gold Fields activities in the country will
focus on the South Deep mine. At
South Deep the conclusion of a new
operating model has
resulted in a decision to recruit
approximately 1,500 mostly skilled
mineworkers to support the ‘24/7’ shift
operations. The recruitment process is
set to continue until mid-2013. Once in
full production South Deep is set to
employ around 5,000 full-time
employees – compared to around
The provision of competitive training and development is instrumental in terms of:
- Ensuring our employees operate safely and generate exceptional value
- Supporting the long-term sustainability of our business
- Attracting and retaining the best talent in a competitive global labour market
In 2012, we invested a total of R408 million (US$50 million) in internal training and skills development. This helped us deliver training to a total of 47,501 employees and contractors.
||The Academy is represented in the South African Chamber of Mines Education Advisory Council, the mining advisory committees of the University of Witwatersrand
and the University of Johannesburg, and the Mine Education Trust Fund
The Gold Fields Business and Leadership Academy in South Africa1 represents a key centre of excellence within the Group, providing high- quality, on-site and external training and development to individuals across the regions.1 The Academy is now part of the Sibanye Gold corporate structure but could continue to provide training and skills development to Gold Fields through a Service Level Agreement.
In addition, each of our regions runs their own leadership development programmes.
Key leadership development courses offered by the Academy include the following:
- Global Leader Programme: This 15-day course is run in partnership with Duke University in North Carolina, and is aimed at the development of ‘global leaders’ – with a focus on strategic thinking, risk management, stakeholder engagement and related issues. Delivery takes place at Group level
- Business Leader Programme: This 15-day course is also run in partnership with Duke University, and is aimed at high-performing senior managers. It is focused on issues such as the cascading of strategy, community engagement, development of regional perspectives and related issues. Delivery takes place at Group level
- Operational Leader Programme: This 10 – 15-day course is run in partnership with both Duke University and the Gordon Institute of Business Science in South Africa. The course is focused on developing potential successors for senior managers, with emphasis on the execution of strategy, process excellence, employee engagement and related issues. Delivery takes place at Group level
- Emergent Leader Programme: This nine-day course is run in partnership with Duke University and is focused on high-performing/high-potential managers. Focus areas include safe production behaviours, team-building, community awareness and related issues. Delivery takes place at regional level
- Preparatory Programme: This two to four-day programme for high performers, including potential supervisors and junior managers, focuses on self-leadership, leading others and driving safe performance. The course is designed at Group level and delivered by our regions
- Foundational Programme: This two to three-day programme for all Gold Fields employees (with particular focus on high-potential talent and those in ‘mission critical’ roles) addresses issues such as linking individuals’ roles to Group strategy, development options, internal governance, sustainable development strategy and a range of other important issues. The course is designed at Group level and delivered by our regions
These programmes are in addition to
the Academy’s wide range of elective
courses, focused on the development
of skills around training, moderation,
finance project management and soft
skills – as well as a dedicated KDC
Shaft Full Potential Leadership
Development Programme to promote
effective, safe production at the mine.
In addition, each of our regions runs
their own leadership development
- Our Australasia Region’s Leadership
Development Programme: This is
run in partnership with the Australian
Institute of Management and the
University of Western Australia.
In 2012, 77 employees took part
in the programme
- Our West Africa Region’s
Programme: This is run with the
Da Vinci Institute of Technology
and offers formal tertiary education
programmes leading to qualifications
in management, technology and
innovation. In 2012, 15 managers
were enrolled in the programme
- Our South America Region’s internal
development programme: This
includes coaching and training to
help high-potential employees
progress into middle and senior
management positions. In addition,
the region has a Leadership
Programme, which is run in
partnership with the University of
Piura and DBM Peru.
Our Business and Leadership
Academy also runs a series of
operational training courses for the
South Africa Region, including those
- Mineral Resources management
This includes the delivery of
programmes that are highly tailored
to individuals’ roles, aspirations and
development needs – and follow-up
monitoring to ensure the provision
of appropriate support and
In 2012, the Human Resources
department delivered the following
operational training to employees in the
South Africa Region:
- Induction and refresher training:
55,234 (2011: 43,717)
- New skills training: 16,349
- Adult Basic Education and Training
(ABET) programmes: 1,065
- Engineering learnerships3: 421
- Mining learnerships: 298 (2011: 340)
||Learnerships are ongoing training programmes provided to our workforce in South Africa. They include both theoretical and practical training and lead to the award
of nationally recognised qualifications.
The total cost of this training amounted
to R366 million (US$45 million)
This was in addition to 131 university
bursaries provided by Gold Fields to
employees in South Africa to pursue
mining-related degrees and
qualifications to augment both their
individual knowledge and skills and the
capabilities of the Group as a whole.
Furthermore, we have an ongoing,
three-year sponsorship of the mining
faculties of the University of
Witwatersrand (Wits) and the University
of Johannesburg – worth R26 million
Our training capabilities in the South
Africa Region have been significantly
enhanced by the completion of South
Deep’s Trackless Engineering Skills
Training Centre, which will
support development and production
ramp-up at the mine. This will be
further augmented in early 2013 by
the completion of the mine’s Operator
Training Centre – marking a major
advance in our ability to develop,
nurture and deploy cutting-edge
underground mechanised mining skills
in South Africa and beyond.
Outside South Africa, operational
training is delivered at a mine-site level.
In the West Africa Region, we have
delayed plans to establish a new
engineering centre due to current
Health and wellbeing
We aim to employ and develop local
employees wherever we operate and
at all levels of our business – whether
required to or not. We believe our
approach will help build local capacity,
broaden local skills pools, enhance our
reputation – as well as helping to
underpin the long-term sustainability
of our business.
Gold Fields fully recognises the need to
continue the long-term transformation
of the South African mining sector – as
part of the broader transformation of
society. Furthermore, under the revised
Mining Charter, we are required to fill
40% of all management positions with
Historically Disadvantaged South
Africans (HDSAs) by 2014.
Whilst we are continuing to make
progress towards our 2014 target,
more still needs to be done. Our
longstanding efforts to promote the
education, training and development
of our HDSA employees is part of a
long-term strategy – and its effects will
be increasingly felt as individuals pass
through this ‘empowerment pipeline’.
The employment of nationals not only
supports our social licence to operate
in Ghana and Peru – but is also a
matter of national regulation in both
countries. In 2012, we achieved the
following proportion of nationals in
- Ghana: 98.0% (2011: 98.0%)
- Peru: 99.9% (2011: 99.5%)
In Ghana, we continue to place strong
emphasis on the development and
retention of local senior managers and
specialists to help address intense
competition for local talent – as well
as tight quotas imposed by the
government on the utilisation of
expatriate personnel. In 2012, 67.7%
(2011: 60.5%) of our senior managers
in Ghana were nationals.
|Virtual training for mechanised operators at South Deep
1 White females are included within the definition of HDSAs
|HDSAs within the
workforce in South Africa
We are committed to delivering the kind of workplace and working practices that are conducive to the long-term, holistic wellbeing of our employees and contractors – as well as the maintenance of a fit, motivated and productive workforce. This is the driver behind our established ‘24 Hours in the Life of a Gold Fields Employee’ wellness programme (24-hours programme), which operates across the Group and addresses determinants linked to individual wellbeing:
- Occupational health management
- General health management
- Individual safety behaviour
- Lifestyle (including accommodation, nutrition, sport and recreation)
- General education and development
This programme is of particular importance in our South Africa Region, due to the nature of the specific health risks posed by our deep, underground operations there, the socio-economic context from which many of our employees are drawn and the size of the workforce.
Health performance in South Africa (pre-unbundling)
||Noise Induced Hearing Loss
submissions (NIHL) (Rate per
||Silicosis submissions (Rate
per 1,000 employees)
||Chronic Obstructive Airways
Disease (COAD) (Rate per
Tuberculosis (CRTB) (Rate
per 1,000 employees)
||Employees on Highly Active
||Started HAART (Individuals)2
||Exited HAART (Individuals)3
||Restatement due to improved measurement methodology and reporting correction
||Cumulative since 2002
||i.e. individuals who have stopped participating due to a failure to conform with programme requirements,
death, ill-health retirements or voluntary withdrawal. Exited individuals are – where relevant – referred to
state programmes. In our labour-sending areas, this process is facilitated by TEBA
|Occupational disease in the South African Region
(rate per 1,000 employees – pre-unbundling)
Occupational health management
All employees are subject to initial and annual medical assessments – tailored in line with local legal requirements, as well as operation and role-specific health risks. The assessments are aimed at preventing, identifying and treating occupational diseases.
In 2012, we submitted the following cases to local occupational health authorities for certification across the Group:
- 54 cases of Chronic Obstructive Airways Disease (COAD) (2011: 66)
- 58 cases of Noise Induced Hearing Loss (NIHL) (2011: 139)
- 84 cases of Silicosis (2011: 107)
- 851 cases of Cardio-Respiratory Tuberculosis (CRTB)1 (2011: 913)
Our deep underground and relatively labour-intensive South African operations tend to pose higher risks with respect to all four of these occupational diseases. Employees in South Africa are also subject to quantitative, confidential Health Risk Assessments, which relate to each of these occupational diseases, as well as general health and lifestyle issues such as hypertension, diabetes, cholesterol, diet and mental health. Where necessary, participating employees are referred to practitioners – who can proactively address identified risk factors – as well as to our High Performance Centres and Employee Assistance Programme, which can provide broader lifestyle support.
|Employees in South Africa
Engineering-out health risks
As with safety risks, one of the most important ways we can reduce occupational health risks is through proactive engineering, which aims to reduce noise and dust levels in line with South Africa’s Mine Health and Safety Council milestones for 2013. Key environmental management measures implemented under our Noise and Dust Management System in 2012 include:
- Ongoing installation of tip-filters to minimise dust generation
- Ongoing chemical spraying to suppress dust at foot walls
- Initiation of mist sprays along haulage routes to help trap moving dust concentrations
- Application of chemical dust settling agents along surface haulage roads
- Installation of real-time dust measurement equipment to allow for rapid trouble-shooting and the accumulation of more comprehensive risk-mapping
Personal Protective Equipment
We are also carrying out extensive work through our Respiratory Protection Programme to ensure Personal Protective Equipment (PPE) is suitable and effective given underground conditions and likely employee activities. This includes, for example, examination of ‘open-faced’ helmets that utilise an active ‘air curtain’ to minimise exposure to dust and particulates (see below).
In addition, we are testing ‘in-ear’ dosimeters to allow for the more accurate measurement of ‘net’ employee exposure to noise (i.e. in addition to the measurement of ambient exposure) – and to tailor more effective management interventions around this.
Managing diesel particulates
In 2012, we accelerated our work on the management of diesel particulate exposure. This has been partly prompted by the July 2012 classification of such particulates as carcinogenic by the World Health Organisation and International Agency for Research on Cancer – and builds on our existing work on this issue.
We are currently carrying out test work to establish the best control measures for diesel particulates, including the testing of diesel oxidisation catalysts, lower sulphur engines, diesel particulate filters, increased ventilation throughput – as well as PPE.
The Occupational Diseases in Mines and Works Act, No 78 of 1973 (ODMWA), governs the compensation paid to mining employees who contract certain illnesses, such as silicosis. Recently, the South African Constitutional Court ruled that a claim for compensation under ODMWA does not prevent an employee from seeking compensation from their employer in a civil action under common law (either as individuals or as a class).
On 21 August 2012, a court application was served on a group of respondents that included Gold Fields (the ‘August Respondents’). On 21 December 2012, a further court application was issued and was formally served on a number of respondents, including Gold Fields, (the ‘December Respondents’ and, together with the August Respondents, the ‘Respondents’) on 10 January 2013, on behalf of classes of mineworkers, former mineworkers and their dependents who were previously employed by, or who are currently employed by, among others, Gold Fields and who allegedly contracted silicosis and/or other occupational lung diseases (the ‘Classes’). The court application of 21 August 2012 and the court application of 21 December 2012 are together referred to below as the ‘Applications’.
These Applications request that the court certify a class action to be instituted by the applicants on behalf of the Classes. The Applications are the first and preliminary steps in a process where, if the court were to certify the class action, the applicants may, in a second stage, bring an action wherein they will attempt to hold the Respondents liable for silicosis and other occupational lung diseases and resultant consequences. In the second stage, the Applications contemplate addressing what the applicants describe as common legal and factual issues regarding the claim arising from the allegations of the entire Classes. If the applicants are successful in the second stage, they envisage that individual members of the Classes could later submit individual claims for damages against the respective Respondents. The Applications do not identify the number of claims that may be instituted against the Respondents or the quantum of damages the applicants may seek.
With respect to the Applications, Gold Fields has filed notices of its intention to oppose both the Applications and has instructed its attorneys to defend the claims. Gold Fields and its attorneys are engaging with the applicants’ attorneys in both Applications to try to establish a court-sanctioned process to agree the timelines, (including the date by which Gold Fields must file its papers opposing the Applications) and the possible consolidation of the separate applications. At this stage, Gold Fields cannot quantify its potential liability from these actions.
HIV/AIDS and Tuberculosis
Our 52,100-strong workforce2 in South Africa faces a significant risk of exposure to HIV/AIDS, by virtue of living and working in a country which has an adult prevalence rate of 17.3%3 – as well as other factors such as employee demographics, migratory status and lifestyles. As a result, HIV/ AIDS and Tuberculosis (TB, which is exacerbated as a result of co-infection with HIV/AIDS) remain the main drivers behind employee morbidity rates, mortality rates and medically induced retirement. In 2012 our medically related death rate was 6.52 per 1,000 employees.
Our integrated HIV/AIDS, Sexually Transmitted Infections (STIs) and TB strategy (developed in cooperation with the South African HIV Clinicians Society) directly addresses the interrelationships between HIV/AIDS, other STIs and TB.
The strategy is based on:
- Promotion: Including workplace HIV/ AIDS education and awareness raising through regular publicity campaigns and condom distribution in all workplaces
- Prevention: Including the provision of free and confidential Voluntary Counselling and Testing (VCT) to all employees in South Africa – with a participation rate of 15% (2011: 11%)
- Treatment: Including the provision of free Highly Active Anti-Retroviral Treatment (HAART) to HIV infected employees through our on-site, doctor-staffed clinics. In 2012, 1,027 employees in South Africa joined our HAART programme (2011: 1,010), taking the total number of active participants to 4,365 (2011: 3,7171). Employees’ dependants can receive HAART via our medical aid schemes
- Support: Including through our 24 Hours in the Life of a Gold Fields Employee programme – with services such as doctor-based primary healthcare, psychological counselling and social services. We extend such support to medically retired employees through our home-based care programmes in labour-sending areas
||Restatement due to improved measurement methodology and reporting correction
We also carry out extensive work to address stigmatisation and discrimination to remove any barriers that would otherwise stop employees from participating in VCT and HAART. This includes the integration of HIV/AIDS management into our mainstream health services – with VCT taking place during our general Health Risk Assessments, for example. This has the added benefit of enhancing our response to potential interactions with related issues such as TB and other STIs.
In 2012, we initiated the first phase of a new HIV/AIDS and TB initiative, which will see ‘high risk’ employees tested for TB using newly installed GeneXpert technology – as well as an optional HIV/AIDS test at the same time. Around 481 employees were tested using the new technology (all employees receive annual testing for TB using standard sputum-based methods). Subsequent planned phases include:
- Potential partnership by both Gold Fields and Sibanye Gold with AngloGold Ashanti, Harmony Gold, the Department of Health, the Aurum Institute, UNAIDS and relevant NGOs on the extension of GeneXpert screening to local communities
- Future roll-out of the strategy to the gold sector’s labour-sending areas within South Africa – and then to the Southern African Development Community (SADC) region
This will complement our existing work on HIV/AIDS in our local communities, which is done in recognition of the interrelationship with the prevalence of the disease within our workforce.
We fully recognise the important role decent accommodation plays in terms of employee wellbeing and morale. This is particularly so in our South Africa Region, where about 85% of our workforce comes from domestic and Southern African Development Community labour-sending areas. It has also been a historically contentious issue in South Africa, due to traditional reliance by the industry on high-density accommodation (or hostels) to house workers living away from home.
In 2006 Gold Fields launched its five-year R750 million housing programme at its South African operations. Until the end of December 2012 R582 million of this had been spent on building new houses and hostel upgrades and to date we have provided 594 new homes to employees and improved the room density at our hostels from around eight people per room in 2006 to 1.4 per room in 2012.
There are three key aspects to our approach to accommodation – which is also regulated by our current 2012 Social and Labour Plans:
- Construction of family accommodation: Although the original Mining Charter requires us to upgrade hostels into family accommodation – we prefer to go further and construct new family units in viable, stable communities. In 2012, Gold Fields initiated construction of 200 new family units at East Village and Glenharvie near KDC
- Upgrading of single-person hostels: During 2012, we upgraded 329 rooms at hostels in South Deep. We are currently looking at longer term plans to fundamentally review our housing and hostel policy at South Deep
A total of 15,359 of our employees in South Africa decide not to live in high-density or family accommodation – and receive a Living Out Allowance (LOA) of R1,640 (US$200) a month. Many employees who take up the LOA choose to live in informal settlements. We do not encourage these informal settlements, but to the extent that they appear inevitable, we try and mitigate their negative impacts and ensure the wellbeing of our employees by helping improve living conditions there. As poor living conditions were identified as one of the underlying reasons for the illegal strike actions that affected South African gold mines during 2012, the LOA and its attached conditions need to be re-evaluated.
Efforts to improve living conditions in informal settlements include the ongoing supply of safe drinking water and assistance with waste management. In addition, we are exploring potential opportunities to work with other stakeholders (including our peer companies and local officials) on a joint Community Waste Management Project on the West Rand, and to potentially integrate relevant informal settlements into our own waste management programmes.
Delivering shared value
Our operations in each of the following countries have the following levels of union participation within their workforces:
- Australasia Region: 0%
- South Africa Region: 85%
- South America Region: 15%
- West Africa Region: 95%
Illegal strikes at Beatrix and KDC
In 2012, the South African mining industry experienced a wave of wide-ranging, mostly illegal strikes – that impacted not only Gold Fields but the mining sector as a whole. This significantly affected our production at both KDC and Beatrix, with 29,000 workers participating in the illegal industrial action between September and November. As a result, we lost 145,000 ounces of production – equivalent to R2.1 billion (US$256 million) in lost revenue.
Although the strikers issued demands relating to administrative issues and wages, the root cause of the strikes appears to relate to tensions between the leadership of the National Union of Mineworkers (NUM) and certain sections of their membership.
The strikes violated the existing two-year Collective Wage Agreement (CWA) signed in 2011 between the gold mining industry and the relevant unions (including the NUM, Solidarity and UASA). We adopted a joint position with other gold producers during the strikes and insisted that the CWA continued to apply. Any wage negotiations can only take place when the CWA comes to an end in June 2013. As an act of goodwill, however, we brought forward certain elements of the 2011 CWA relating to changes to job grades and entry level wages, which cumulatively raised our wage bill by around 2.5%.
South Africa’s gold mining companies, trade unions and government have since established a working group to examine labour issues within the industry. This group will have input into the next round of labour negotiations scheduled for mid-2013.
The strikes raised concerns about the long-term sustainability of our deep underground, mature mines in South Africa under current corporate structures and labour-relations models. A key focus for Sibanye Gold, as owner of the Beatrix and KDC mines, is to examine the structure of labour relations at these two mines, as well as the potential for profit participation, through direct interaction with the workforce – as well as negotiations with registered trade unions.
Maintenance of responsible security
Given the context in which the cross-sector strikes were taking place in South Africa – including strike- related incidents at Lonmin’s Marikana platinum mine in August 2012 that resulted in the death of 44 people – Gold Fields took particular care to avoid similar incidents at its own mines. The Marikana incident (along with the cross-sector nature of the strikes) was seen as indicative of many of the tensions within the mining sector – as well as wider society. It was also seen to demonstrate the potential for violence that could result from such tensions.
|Employees at South Deep, South Africa
Despite a number of isolated, non-fatal incidents and acts of intimidation by illegal strikers against employees at Beatrix and KDC, we are pleased that all parties were able to reach a generally peaceful resolution to the situation without serious injury or damage to property. We believe this reflects the professional and sensitive response of Gold Fields Protection Services (GFPS) and those assisting them, particularly the South African Police Service, constructive engagement between our management and the relevant unions (and the NUM in particular), and the attitude of the majority of our employees.
New operating model at South Deep
Despite the strikes at Beatrix and KDC, in 2012 we marked a major step forwards in terms of our labour relations at South Deep. This related to the proposal by Gold Fields of a new operating model at the mine, which is aimed at improving productivity, performance and rewards in line with international best practice. Following months of negotiations with the relevant unions and the early agreement by UASA, in August we entered into a formal consultation process with the NUM and other unaffiliated employees under a Section 189 (3)1 notice. After further negotiations, the NUM and Gold Fields reached a landmark agreement implementing the new operating model in October, which allowed us to suspend the Section 189 notice.
The new operating model will transform South Deep into a 24-hour, seven-day a week operation – in line with advanced mechanised underground operations across the world. Under the agreement, an uncapped-bonus system will more appropriately reward employees who achieve production targets and will improve alignment to Gold Fields business objectives. At the same time, bonuses will be aligned to safety targets to ensure that safety performance is in no way compromised by the new system . This will have a lasting impact on productivity at South Deep for the rest of its life of mine – currently estimated to be 2060 – and position it to become one of the leading underground mechanised mines in the world.
The long-term impact of this ground-breaking agreement on the future of Gold Fields (and indeed the South African mining industry) cannot be overstated. The agreement also serves as a valuable reminder of what can be achieved when management and labour work together for the common good.
Shared value: Local employment
Our aim is to be the most trusted and valued mining partner for key stakeholders wherever we operate – or where we plan to operate. This means establishing, maintaining and monitoring strong relationships with our employees, communities, governments and other groups. It also means ensuring that these relationships are sustainable, by building them upon the ongoing creation of mutually beneficial shared value.
Our most important means of generating shared value for the societies in which we operate is through:
- The payment of wages, benefits and dividends to our employees
- The payment of taxes, royalties and dividends to government
- Where possible, the sourcing of goods and services from local suppliers (i.e. suppliers within our countries of operation and preferably in and around our mines) and help build their capabilities
- The Socio-Economic Development contributions we make to those living around our mines
Shared value in the context of the Responsible Mineral Development Initiative
The Responsible Mineral Development Initiative (RMDI) – which was developed by the World Economic Forum –
- Identify the key challenges around responsible mineral development
- Develop practical responses to these challenges
- Develop shared understanding of the benefits and costs of mineral development
- Establish collaborative processes for stakeholder engagement
During 2012, the RMDI focused on the last two of these aims, developing a Mineral Value Management Tool. This
aims to improve understanding of how value is created, to highlight those areas that have the greatest value
potential and to identify where stakeholder expectations align and diverge.
The Tool focuses on the direct and indirect positive impacts of mining on seven dimensions of value that “drive
value creation for governments, local communities and mining companies”. The seven dimensions are fiscal value,
employment and skills, the environment, social cohesion and socio-economic development, procurement,
beneficiation and infrastructure.
The work by the RMDI further demonstrates the growing consciousness amongst stakeholders that the actual and
potential benefits of mining can be better measured, managed, promoted and leveraged – by looking beyond
narrow measures of socio-economic impact. It is this same consciousness that has driven the application of our
shared value approach.
In 2012, our shared-value contributions to our local communities and host countries amounted to US$5.30 billion. This represents 95% of our total revenue.
Shared value is a broader measure than Total Economic Contribution, in that it captures local capital expenditure in addition to local operating costs – and is thus significantly higher. Shared value does not include, however, payments to capital providers other than dividend payments made to government and employees.
Like any mining company, our ability to sustain these contributions is entirely dependent on our ongoing profitability. As such – and fluctuations in gold price notwithstanding – our shared-value contributions are highly sensitive to increases in input costs, higher government imposts and more stringent regulation. This is a key message in our interactions with governments seeking to increase their short-term fiscal take.
|Member of near-mine exploration team at
Shared value: Government
In 2012, our contribution in terms of salaries, benefits (including housing, training, healthcare, etc.) and the payment of dividends to employees amounted to US$1.08 billion. Given that most of our total workforce are either nationals or Historically Disadvantaged South Africans (HDSAs), the country-level impact of this contribution is obvious.
Ghana, Peru and South Africa share a key challenge in the form of unemployment and underemployment. This is a key driver behind our cross- Group emphasis on employing – where operationally and commercially viable – nationals, HDSAs and local community members. In addition, this approach:
- Has an important longer-term impact in terms of enhancing local skills pools, building local capacity and fostering international employment standards wherever we operate
- Contributes to broader development in the communities in which we operate, due to the indirect economic impact generated through the purchase of goods and services by employees and their dependants
However, local labour pools are not always of sufficient breadth or depth to offer the specialised skills required for our increasingly sophisticated operations. To address this, we also place significant focus on supporting the training and education of local people outside the workplace . We also carry out a range of activities to promote alternative income-generating opportunities through our Socio- Economic Development (SED) initiatives, as well as preferential procurement.
Examples of our local employment strategy in practice include the following:
Ghana: As well as adhering to national quotas around the employment of nationals, both our Damang and Tarkwa mines cross-check new vacancies against a skills and qualification database of local community members, who are selected by each mine’s Employment Committee (chaired by local chiefs). In addition, both mines (and their contractors) proactively fill unskilled positions from local communities, who are identified by local chiefs in co-operation with our Community Affairs teams.
Peru: Our Cerro Corona mine employs 519 local community members (the majority of whom have been subject to ongoing, targeted training and development) compared to an original commitment to employ 150 local people. We estimate that approximately 20% of the local economically active population are either Cerro Corona employees or contractors.
South Africa: We are subject to the Mining Charter and relevant legislation around Black Economic Empowerment (BEE).
Shared value: Local suppliers
Our second most important economic contribution to our host countries is through our payment of taxes, royalties and dividends to governments. 1 In 2012, this amounted to US$626 million.
Our contribution in this respect is an important factor in the conversion of each country’s gold resources into broad-based development – including through the provision of public services, infrastructure development and other forms of government expenditure. This is particularly the case given that those governments hosting our operations are generally perceived to have relatively low levels of public corruption, moderate to strong public governance frameworks, high levels of democratic accountability and moderate to strong rule of law.
Of our host countries, three of them experienced growth of more than 3% in 2011 (latest figures) – suggesting sound government economic policies.
Likewise, both Ghana and Peru are compliant with the Extractive Industries Transparency Initiative (EITI), ensuring full transparency around natural resource revenues received by host governments – and allowing strong public scrutiny of revenue management and distribution.2 Gold Fields supports the principles and processes of the EITI through its membership of the International Council on Mining and Metals (ICMM) – and fully participates in the EITI process in Ghana and Peru.
As a result, the impacts of our economic contributions to our host governments are likely to outlive our operations in terms of public education, health, infrastructure and other development enablers – often amongst communities that are in acute need of such support.
|Contributions to government
(US$m – pre-unbundling)
Host country governance and growth indicators
Rule of Law
||7th out of
||Not a signatory
||64th out of
||83rd out of
||69th out of
||Not a signatory
1 In addition, the government of Ghana has a 10% shareholding in both our Tarkwa and Damang mines – receiving dividend payments of US$8 million in 2012
2 Australia and South Africa are not participants in the EITI
Shared value: SED
|Dump truck at Agnew, Australia
In 2012, we spent a total of US$3.45 billion on suppliers from our host countries – or 92.3% of our total procurement spend.
It is our policy to use national and/or local suppliers, where possible. This not only helps strengthen our own local supply chains at a strategic and operational level, but also enhances our social licence to operate. In certain cases, national and/or local supply pools do not necessarily have the depth or breadth to support our needs. As a result, we actively work with current and potential suppliers within our host countries and communities to improve their business, management and production standards.
Examples of our local supplier strategy in practice include the following:
Ghana: We use local companies for stripping and hauling, employee transportation, on-site catering, fuel and grinding. We continue to play a leading role in the efforts of the Chamber of Mines to increase the proportion of procurement spend going to Ghanaian suppliers – and promote local value-adding activities.
Peru: We use local companies for the provision of heavy equipment, light transport and general services – in line with local legal requirements. We have supported the development of local suppliers since the construction of Cerro Corona – including their compliance with ISO 14001 and OHSAS 18001-equivalent standards. This has helped establish a commercially sustainable local supply pool of companies that now service a range of nearby mining operators.
South Africa: During 2012 a total of 50.5% of our procurement budget amounting to R4.1 billion (US$500 million) was spent with Broad-Based Black Economic Empowerment (BBBEE) South African suppliers (2011: 46%). We enhanced our ability to drive the transformation of our supply chain through the launch of a new Supplier Portal (which provides enhanced transparency around supplier shareholdings and BBBEE credentials) as well as a Community Capability Database (which will help us drive more localised procurement).
contributions by region (US$m –
|| Local supplier spend as a
proportion of total procurement spend
by region 2012 (pre-unbundling)
We run substantial Socio-Economic Development (SED) programmes to ensure we deliver targeted, tangible and lasting benefits to those communities in the immediate vicinity of our operations – and in our labour- sending areas. This is in recognition that some of our largest Local Economic Contributions (e.g. payments to employees, government and suppliers) do not necessarily directly benefit our local communities or contribute to our social licence to operate at a local level – and in satisfaction of our Social and Labour Plans (SLP) in South Africa. Our approach is also driven by the need to make sure that our finite mineral deposits help generate enduring, mutually supporting social and economic development that continues delivering value to communities long after mine closure.
In 2012, we spent a total of US$136 million on a range of SED projects (2011: US$54 million).1 We place particular focus on project impact to ensure we maximise community benefits.
|Figure 7.15: SED spend by region
(US$m – pre-unbundling)
||Figure 7.16: SED contributions
by type (US$m – pre-unbundling)
Local environmental impacts
As well as complying with applicable national environmental regulations and international standards around our own operational performance – we also contribute to the protection and conservation of the broader environments in which we operate. This is particularly the case where local communities rely on the land for their livelihoods or where there is a severe risk of degradation. Key examples include the following:
Ghana: We continue to support Leadership Conservation Africa (LCA) Ghana Chapter. This included funding for three ‘green’ accommodation tents at the LCA’s Shai Hills Reserve to help ‘kick-start’ and attract further sponsors for a sustainable tourism programme. The programme is aimed at securing a sustainable source of funding for conservation efforts at the Reserve.
Peru: We have a programme at Cerro Corona to reforest 1,000 acres of local land with native species and fast growing trees by 2016 – assisting with land stability, ground water retention, the provision of sustainable wood-fuel and the creation of economic opportunities around feed-stock for paper production. To date, over half the area planned has been reforested and the programme has benefited local community members significantly.
South Africa: Our Alien Vegetation Project at KDC aims to clear non- native, water-extracting species from our landholdings using local small- and medium-sized enterprises (SMEs), which employ local people who have been given formal training by Gold Fields. Cleared vegetation is then sold to a nearby company for its conversion into charcoal and the extraction of silicon. The programme employs 45 local people.
|How is SED spending defined?
SED is defined as spend relating to projects that are:
- Influential in benefiting employees and contractors beyond the core business
- Influential in uplifting the communities and societies in our host countries
- Guided by a strong development approach
- Linked to infrastructure investment that benefits communities during operation and closure phases
Some of the areas in which we operate are sorely lacking in terms of high-quality infrastructure. As a result, a proportion of our community contributions are aimed at transportation, utility, construction and other infrastructural projects, which we believe offer long-term community benefits and impact multipliers. Key examples include the following:
Ghana: We have (in partnership with the Ministry of Roads and Highways and the District Assembly) initiated a major US$2.3 million project to install an all-weather road between Samahu and Pepesa near Tarkwa. The road, which will be maintained by the public authorities, will benefit five communities along the route – or around 5,500 people.
During 2012, we also continued to implement the Small Town Water Supply (STWS) programme, focused on the construction of deep boreholes and overhead tanks in local communities. In 2012, we completed STWS projects worth a total of US$672,700 to supply clean, potable water to the communities of Tebe, New Atuabo, Brahabebom and Pepesa – benefiting around 10,400 people.
In addition, we constructed two sets of school buildings in the Subri and Bompieso communities near Damang. The schools, which are run by the Department of Education, benefits around 270 pupils.
|Hilltop communities near Far Southeast, Philippines
During 2012, we commissioned a report by experts from the Kwame Nkrumah University of Science and Technology to assess our longstanding infrastructure contributions to communities around our Damang and Tarkwa mines. Amongst other things, this found general consensus among stakeholders (both within the local communities and local government) that Gold Fields had significantly improved access to quality infrastructure. The report notes “improved enrolment, standard of education among pupils, a reduction in morbidity, enhanced image of communities, increased productivity, among others”.
Peru: At the Chucapaca project, we are examining an innovative public/ private initiative to provide clean water to local communities in this high- altitude agricultural area. We plan to do so via a new 30 million cubic meter reservoir, that will also provide water to any future mining operation.
South Africa: We constructed the R3.5 million (US$427,000) Simunye Health Centre near our KDC and South Deep mines. The clinic was transferred to the public authorities, which will remain responsible for its continued operation. The project is located in an area that is home to many Gold Fields and Sibanye Gold employees and contractors.
Education and training
Over time, our education and training initiatives not only help those individuals who have not found employment at our mines to pursue viable alternative options, but also enhance the skills pools available to us at both local (i.e. community) and national level. As such, they are expected to deliver long-term benefits not only to our local stakeholders – but to Gold Fields itself. Key examples include the following:
Ghana: Collectively, we sponsored
50 community members through the
Takoradi Technical Institute to train as
engineers and geologists (2011: 23),
provided 54 four-year community
scholarships (2011: 32) and 145 new
bursaries for local communities
(2011: 110), enrolled 48 people onto
our Community Apprenticeship
Programme, and granted bursaries to
dependants of 30 employees.
Peru: Our Cerro Corona mine has an ongoing, in-house operator and electro-mechanical training programme for community members. In 2012, 250 community members took part, helping them gain employment either at the mine itself or in the broader Peruvian industry (2011: 60). We also continue to sponsor the enhancement of local teaching through our ‘Successful Schools’ and ‘Teaching for the Future of the Hualgayoc District’ programmes.
South Africa: We provide a range of education and training programmes through our SLPs. This includes, for example: 131 bursaries to universities and technical colleges (2011: 96); 719 engineering and mining learnerships (2011: 605); sponsorship of the mining faculties of the University of the Witwatersrand (Wits) and the University of Johannesburg.
In addition, the KDC mine also delivers ‘hands-on’ portable skills training in construction, plumbing, electrics, agriculture and other related skills to local community members via its on-site training facilities.
As part of the Gold Fields 2010 Black Economic Empowerment (BEE) transaction, the Company formed the South Deep Education Trust to receive a regular dividend flow from Gold Fields with the objective of carrying out educational activities in a non-profit manner and with an altruistic purpose. By the end of 2012 the Education Trust, which is managed by a Board of Trustees, had received R35 million (US$4.3 million) in dividends, of which R15 million (US$1.8 million) had been allocated. The remaining R20 million (US$2.4 million) will be allocated in due course.
Some of the key beneficiaries of the funds to date include:
- Previously disadvantaged students, who have received scholarships to some of South Africa’s private sector schools – R5.7 million (US$0.7 million)
- The Lapdesk charity, chaired by former Archbishop Desmond Tutu – R2.3 million (US$0.3 million)
- The Letsema Circle organisation, which works in labour sending areas – R1.5 million (US$0.2 million)
- The South African Legal Resources Centre – R1.5 million (US$0.2 million)
- The University of the Western Cape – R1.6 million (US$0.2 million)
Health and wellbeing
It is in recognition of the prevalence of relatively weak health indicators in the vicinity of some of our mines – as well as the interaction between local communities and our workforce – that a proportion of our community contributions are focused on improving local healthcare and behaviours. Key examples include the following:
Ghana: We carry out a range of community health initiatives at Damang and Tarkwa, including regular radio broadcasting on health issues, support for Community Health Facilitators and the establishment and support of community Water and Sanitation Committees.
In addition, the Tarkwa Mine Hospital provides general medical care to our employees at both Damang and Tarkwa – as well as up to six dependants per employee – giving more than 25,000 people access to high-quality medical care.
South Africa: We provide ongoing co-support (with Johns Hopkins University and the Bill & Melinda Gates Foundation) to three community HIV/ AIDS programmes, including the Westonaria Randfontein AIDS project, the Mothusimpilo project near KDC and the Lesedi Lechabile project near Beatrix. These provide peer education, presumptive periodic treatment and the treatment of Sexually Transmitted Infections – and in 2012 benefited around 180,000 people.
GGiven the finite life of our mineral
deposits – as well as the fact we are
unlikely to meet all local employment
demands – we place strong emphasis
on working with communities and
government to leverage the revenues
generated by our operations to help
foster a broader, sustainable and
non-mining related economic base.
Where possible, such efforts are
supported by our community skills
and training contributions.
Key examples include the following:
Ghana: We continued to support our longstanding Agribusiness Projects, which include the efficient cultivation and marketing of palm oil by local farmers. In 2012, the programme – carried out in partnership with the Ministry of Food and Agriculture – benefited 320 people.
Peru: We continued to build upon our long-term Milk Production Chain Programme. The programme aims to increase both the value and productivity of the local community’s livestock holdings through improved pasture, enhanced husbandry and more efficient milking processes. In 2012, around 250 people benefited from this programme.
South Africa: We have initiated (under KDC’s SLP) the vertically integrated ‘Agri-Hub’ programme to promote the production, processing and marketing of vegetables, poultry and pigs on Sibanye Gold-owned land by local people. In 2012, this (early stage) programme employed around 240 people directly and indirectly – a number that is expected to rise significantly over the medium term.
During 2012, Gold Fields had five agricultural and livestock programmes in the labour-sending areas of Eastern Cape and KwaZulu-Natal. The programmes provide agricultural and marketing support to local farmers, as well as animal husbandry services, products and training. In 2012, the programmes benefited around 9,800 people.
Practising strong business ethics
The operational continuity of our mines, as well as our ability to successfully establish new operations in potentially challenging locations, relies on a strong social licence to operate from our local communities – and, by extension, our host governments. This makes it essential that we establish and maintain durable relationships based on the sustainable generation of shared value.
Engaging local stakeholders
We place particular focus on establishing and maintaining constructive, consultative and cooperative stakeholder relations. This includes regular and formalised engagement with the following groups to address relevant and material issues:
- Central and local government
- Traditional community leaders
- Informal community groups
- Organised labour
- Local businesses
Our activities in this regard are guided by relevant legislation, our Communities and Indigenous People Policy, our Social and Labour Plans (SLPs) in South Africa and the AA 1000 Stakeholder Engagement Standard. In addition, in 2012 we developed a new Community Handbook that will apply across the Group and across all project lifecycle stages. This will establish a coherent approach to community engagement across all regions based on our ‘shared value’ concept – as well as best practice from the International Finance Corporation, World Bank, the International Council on Mining and Metals and the wider industry. Guidance included in the Community Handbook is designed so that it can be tailored to local circumstances.
In addition, we conduct public engagement as part of our Environmental Impact Assessments, to help explain project impacts (and related mitigation measures) and to identify and address stakeholders' issues of concern. In 2012, this process was used (in addition to other project-related engagement activities) at the Arctic Platinum Project, for example.
Communicating transformation and development in South Africa
During 2012, we initiated a dedicated awareness-raising campaign in South Africa to highlight our community initiatives – as well as our ongoing contribution to transformation within the mining industry and wider society. This included particular focus on our upgrading of accommodation, our provision of portable skills training to local people, new development opportunities being driven by South Deep, local agricultural projects and our contributions to education.
Although the illegal strike action that affected the Beatrix and KDC operations took place as we launched the campaign, these events – and the wider political, social and economic tensions behind them – highlighted the importance of this initiative. The awareness-raising initiative sought to:
- Maximise the development and transformation impact of our new and existing SLP programmes
- Ensure that these impacts are understood at a grassroots level – and are clearly associated with Gold Fields and Sibanye Gold
This is one of the reasons that Gold Fields is piloting new Sustainable Development Forums in communities around South Deep, to enhance our ability to communicate directly with local people – without the assistance of intermediaries.
Maintenance of community relations in Cajamarca
The Cajamarca Region of Peru – in which the Cerro Corona mine sits – has seen a high degree of social tension between certain local communities and mining operations. This has been exemplified by events around Newmont’s Congas and Yanacocha joint ventures, which have faced extensive activism and opposition from certain elements within the community – as well as NGOs and political actors from beyond the region.
Cerro Corona has so far been unaffected by related activism or tensions – something we believe is due to the particularly strong community relations we have nurtured since before the construction of the mine, as well as our longstanding focus on sound water management. Nonetheless, we are monitoring the situation closely to help ensure this remains the case.
|What are Social Labour Plans (SLPs)?
South Africa’s Mineral and Petroleum Resources Development Act 2002 requires mines to submit a five-year, renewable SLP before they are granted mining rights. Each SLP, which is agreed with the Department of Mineral Resources (DMR), commits companies to spending a defined budget on Local Economic Development (LED) or Skills Development (SD) initiatives. This is with the aim of:
- Promoting employment and socio-economic welfare
- Assisting in the transformation of the mining industry
- Contributing to development of their areas of operation – as well as in their labour-sending areas
In 2012, we submitted new, second-round SLPs for the Beatrix and KDC mines following the end of their initial, five-year SLPs as well as a new SLP for South Deep. The new SLPs integrate earlier lessons-learnt, including increased focus on:
- Narrower, more vertically integrated LED and SD programmes
- Optimisation of impact
The SLP for South Deep is currently being negotiated with government and the relevant trade unions.
|Community engagement details by region
Australasia: Engagement with local indigenous groups at both mines under the Native Title Act 1993 on issues around native title, land access and cultural heritage
South Africa: Engagement – under the Local Economic Development (LED) of our statutory Social and Labour Plan (SLP) requirements – on issues including local enterprise development and infrastructure support. This includes:
- Regular engagement on issues around water quality in the West Wits area through the Far West Rand Dolomitic Water Association and the Mining Interest Group
- The 2012 piloting of new Sustainable Development forums in communities around South Deep, which include directly elected local representatives. One of these forums is the South Deep Community Trust, which was established as part of Gold Fields 2010 Black Economic Empowerment transaction, and which to date has received R11 million (US$1.4 million) in dividends from the deal. These will be allocated to projects identified jointly with community stakeholders. This is with the aim of enhancing grassroots communication with communities
- In-depth stakeholder mapping and analysis at the Beatrix and KDC mine to improve clarity around our engagement activities
South America: Engagement through a formal framework to address community priorities around our Cerro Corona mine – including water quality, agricultural development and local employment. In addition, we participate in the ‘Mesa de Dialogo y Concertacion de Hualgayoc’ (a community-based, multistakeholder forum focused on regional development projects), as well as joint water monitoring with local communities
West Africa: Engagement in a number of well-established community forums in Ghana on:
- Broad-based Mine Consultative Committees
- Formalised, regular engagement with local chiefs
- Regular Community Committee meetings
- Direct Community Forums
- Continuous informal engagement, including an ‘open-door’ policy
Relevant issues in 2012 included local employment, resettlement, crop compensation, illegal mining and access to Gold Fields Socio-Economic Development programmes.
Our Values require us to act responsibly, honestly and with respect for others in everything that we do. We aim to maintain the complete confidence of our stakeholders – including our shareholders, business partners and host governments – by adopting an approach that goes beyond legal compliance and applies the highest ethical standards.
We will not engage in any activities that undermine the legitimate business environment in any form – including bribery and corruption.
All of our directors and employees are bound to adhere to our updated Code of Ethics. The Group-wide rollout of the Code – including formal training sessions – was completed in 2012, to ensure common ethical standards across all of our regions. The Code articulates Gold Fields policy with respect to an array of issues – ranging from facilitation payments through to political contributions. It is binding on every employee, officer and director of any entity that is owned or controlled by Gold Fields.
|Stamping gold at the Rand Refinery, South Africa
The Code is supported by an implementation framework, with defined responsibilities and reporting processes – as well as an anonymous whistle-blowing hotline managed by Deloitte. Any breach of the Code will result in disciplinary action, which may lead to dismissal. Should the breach be criminal, we will pursue prosecution of the employee concerned.
Since the Code was launched, we have experienced a marked increase in proactive queries from employees to ensure that their proposed course of action is compliant with its terms – reflecting heightened awareness of the need to apply strong ethical standards. Training on the Code will take place on an annual basis, with plans for additional, targeted training for those in high-risk roles.
Security and human rights
The nature of our business means that our host governments are among our most important stakeholders. General engagement takes place through national Chambers of Mines due to the efficiency and legitimate influence offered by collective engagement. In certain circumstances, we also engage our host governments on a bilateral basis.
As a general rule, Gold Fields does not make financial contributions to political parties – and no such contribution was made in 2012. Likewise, Gold Fields does not receive financial assistance from any of its host governments.
Black Economic Empowerment
The primary focus of our engagement with government in South Africa is focused on Black Economic Empowerment (BEE). In the mining sector, this is regulated by the Mineral and Petroleum Resources Development Act of 2002 and the associated 2010 revised Mining Charter.
During 2010, the South African Department of Mineral Resources (DMR) unveiled the revised Mining Charter 2010, which updates empowerment targets that mining companies have to comply with by March 2015. Our South Deep mine is currently working with the DMR and other stakeholders in addressing these targets with a special focus on meeting the Social Labour Plan (SLP) requirements.
Gold Fields is an active participant in the Mining Industry Growth, Development and Employment Task Team (MIGDETT) – through its membership of the South African Chamber of Mines. The MIGDETT is a vehicle used by the DMR, companies and trade unions to promote sustainable growth and meaningful transformation of the mining sector.
Royalties and revenues
Resource nationalism remains a key risk for Gold Fields, with government efforts to increase imposts on the mining sector generally showing little sign of abating. This dynamic continued to be driven by a mixture of populist pressure, income inequality in resource-rich countries, shortfalls in government budgets and relatively high commodity prices. In addition, the misguided perception persists that mining companies (and gold mining companies in particular) are enjoying profit windfalls – despite the fact that the sector faces rapidly escalating all-in costs (as represented by Notional Cash Expenditure (NCE).
Our ability – and the ability of any mining company – to continue generating shared value for communities and governments is entirely dependent on our continued profitability. Similarly, there is no guarantee that tightening fiscal and regulatory regimes will – in the long term – result in government receiving greater income from the sector, as this dynamic acts as a direct disincentive to investment.
In this context, we believe it is important that we (and other mining companies) better communicate the broad social and economic benefits we already generate for our host societies and governments and – assuming our continued profitability – hope to continue generating in the future.
Gold Fields is not currently affected by the Mineral Resource Rent Tax, which was passed by the Australian Government in March 2012. The tax only applies to large iron ore and coal mining companies – but is evidence of an ongoing shift in political attitude towards the Australian mining sector.
In July 2012, the Clean Energy Act 2011 came into force, directly impacting our operations. Although we are not required to directly participate in the cap and trade scheme established by the Act (which applies a carbon price of A$23/tonne) (US$25/tonne), it applies an equivalent carbon price to our diesel through the adjustment of our applicable fuel tax credits and excise duties. It is estimated that this increased our fuel costs by A$6 million (US$6 million) in 2012. We believe the Act is again indicative of a broader trend towards the imposition of a heavier fiscal burden on the mining sector.
In 2012, we joined the Minerals Council of Australia, which will help ensure we are able to engage with the federal government at the highest level on these and related issues.
We are the largest individual contributor to national revenues in Ghana. In 2012, we paid a total of US$255 million (2011: US$247 million) in corporate taxes, royalties, dividends, income taxes and contributions to the National Stabilisation Levy.
In early 2012, the government introduced a set of additional fiscal imposts on the mining sector. This occurred in a context in which the government identified a shortfall in its budget of more than US$410 million.
These new imposts comprise:
- A rise in the Corporate Income Tax from 25% to 35%
- A reduction in the capital allowance to 20% for five years (previously 80% in the first year) and the removal of a special 5% allowance for the mining sector
- Provisions to ‘ringfence’ income and expenses on a localised basis (e.g. potentially on a mine-by-mine, or even pit-by-pit basis) – reducing our ability to internally off-set capital expenditure
- Introduction of 5% customs duties on Mining List items, which were previously subject to a rate of 0%
- A sharp increase in the Stool Tax (which is calculated on the basis of all exploration and mining licence areas) from GH¢0.5 (US$0.25) per km2 to GH¢9,019 (US$4,600) per km2. Whilst this can be sustained by our mining operations, its application to large exploration areas is one of the reasons behind our divestment of exploration licences in Ghana
The Ghanaian tax regime now appears globally uncompetitive, particularly as there may well be further tax increases in future.
We therefore believe the latest increase in the fiscal burden – which follows the 2011 increase in mining royalties from 3% to 5% of revenues – could discourage investment in Ghana’s mining sector. Furthermore, while government delayed the implementation of the planned Windfall Profit Tax, it has been given to the Mining Review Committee as part of their full review of the mining industry. This committee is due to revert to Parliament by June 2013. It is also looking at the tax stability agreements that have been selectivity granted to other mining companies.
We believe it is important that all mining companies in Ghana enjoy a level fiscal playing field. The government has established a Renegotiating Stability Agreement Committee to review these agreements and investigate a common and fair approach to taxation within the Ghanaian mining sector. We have also submitted our own draft stability agreement directly to Ghana’s Ministry of Finance and Economic Planning and are continuing to engage with the government in this regard.
Despite initial concerns around the 2011 decision of President Ollanta Humala’s government to raise taxes and royalties on the mining sector – the government showed no sign of seeking a further increase in the fiscal burden in 2012. This reflected a more ‘centrist’ policy approach, based on a commitment by the government to attract further investment in the mining sector and to promote the development of new mining projects in the country. This appears to be at least partly driven by growing recognition that the industrial mining sector is a major contributor to Peru’s public revenues (32%), GDP (6%) and exports (62%).M1 As such, we are pleased to be able to recognise Peru’s continued status as an attractive fiscal destination for mining investment.
While the tax situation in South Africa
has remained stable, the government
has announced a review of corporate
taxation (including mining royalties)
– and has committed to introducing a
carbon tax in 2015. We expect to be
subject to the terms of this tax.
Nonetheless, the ruling ANC party ruled out the potential nationalisation of South Africa’s mines at its 5-yearly National Elective Conference – despite previous pressure from a number of quarters to apply such a policy.
During 2012, Gold Fields Protection Services (GFPS), was responsible for the effective and responsible protection of our people and assets. GFPS now falls under Sibanye Gold. Gold Fields is examining appropriate service delivery models to achieve the following objectives:
- Ensure the safety and security of employees and contractors on site as well as protect our physical assets
- Address illegal internal activity, including gold theft, fraud and other illicit activities
- Address illegal external activity, including illegal gold mining, cable theft and other illicit activities
- Ensure the safety and security of our bullion despatches and cash escorts (including armed escorts in South Africa)
During 2012, GFPS personnel helped enforce good safety practices on our sites and participate in emergency response activities where needed.
We believe it is down to the high levels of professionalism within GFPS that – despite high levels of tension, strong inter-union rivalries and a number of non-fatal violent incidents between employees – the illegal mine strikes that affected our KDC and Beatrix operations between September and November were ultimately resolved without any fatalities. Given the extreme sectoral and national context in which the strikes took place – and the large numbers of employees involved – we believe this is a singular achievement.
All GFPS personnel receive human rights training during induction. This is based on local legal requirements and both national and international human rights best practice. Where relevant, GFPS personnel are supported by public security organisations as well as private security contractors. GFPS ensures that the organisations they partner with are committed to upholding human rights and the rule of humanitarian law, including through training.
GFPS is also a signatory to the International Code of Conduct for Private Security Service Providers. As a result, it is committed to respecting human rights and humanitarian law in its operations.
In addition, Gold Fields is implementing measures to prepare for the application of the Voluntary Principles on Security and Human Rights.
In 2012, we established a Group-wide crisis management programme, which provides a senior management support framework for action planning and decision-making around the anticipation, prevention and response to crisis events, as well as post-crisis recovery. This includes the establishment of a Corporate Crisis Management Support Team, Regional Incident Response Teams and Emergency Response Teams.
|Gold bullion from the Rand Refinery, South Africa
The programme is based on:
- Isolation of crisis events from mainstream business and operational processes – including their management by a dedicated crisis team
- Management of crises at a regional level – with support from on-the-ground incident management teams
- Escalation of crisis situations – or potential crisis situations – according to predefined criteria
- Clear allocation of roles and responsibilities
The programme has been supported by comprehensive training for all key personnel – as well as semi-live simulated crisis exercises in Australia and South Africa, which demonstrated the readiness of our crisis management team. The initiative proved its worth almost immediately, playing a key role in our response to:
- The serious underground fire at a worked-out area of KDC’s Ya Rona shaft in June 2012, which resulted in five fatalities
- The illegal strikes at Beatrix and KDC between September and November 2012 – and the associated risk of serious violence
World Gold Council
Conflict-Free Gold Standard
The nature of gold – including the relative ease of extraction of shallow deposits, its high intrinsic value and its portability – means it is a potential source of finance for armed groups involved in civil conflict. The proportion of newly mined gold believed to be linked to the financing of conflict is believed to be very low, at less than 1% of annual gold production. Nonetheless, Gold Fields and its fellow World Gold Council members believe strong efforts are required to reduce this proportion even further and to ensure responsible gold production continues to generate socio-economic development in as wide a range of locations as possible.