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Forward looking statements

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 of 1934.

Such forward-looking statements, including, among others, those relating to the future business prospects, revenues and income of Gold Fields, wherever they may occur in this report and the exhibits to the report, are necessarily estimates reflecting the best judgment of the senior management of Gold Fields and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. As a consequence, these forward-looking statements should be considered in light of various important factors, including those set forth in this report. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without more

Salient features
US$1,023 per ounce All-in-sustaining costs
US$1,047 per ounce All-in-costs
556,000 ounces of attributable gold production
US$54m cash flow from operating activities*
9 per cent free cash flow margin

Strong operational performance generates US$54 million cash flow

JOHANNESBURG. 12 February 2015, Gold Fields Limited (NYSE & JSE: GFI) today announced normalised earnings for the December 2014 quarter of US$17 million compared with US$23 million for the September 2014 quarter and US$14 million for the December 2013 quarter. Net losses for the December 2014 quarter of US$26 million compared with net earnings of US$19 million for the September 2014 quarter and net losses of US$491 million for the December 2013 quarter.

A final dividend of 20 SA cents per share (gross) is payable on 9 March 2015, giving a total dividend for the year ended December 2014 of 40 SA cents per share (gross).

Statement by Nick Holland, Chief Executive Officer of Gold Fields:


Over the past two years, Gold Fields has undergone a significant transformation that has positioned it to operate successfully in the current low gold price environment. This strategy continues to deliver sound results.

For the sixth consecutive quarter, the Group has generated positive cash flow from operating activities* with US$54 million generated in the December 2014 quarter, despite the 7 per cent lower average gold price during the quarter.

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In 2014, the Group generated cash flow from operating activities of US$235 million despite the 10 per cent decrease in the gold price during the year. The robust international portfolio continues to perform well, underpinning the 2014 financial performance. Unfortunately, South Deep remains challenging and the planned build-up for 2015 will not be achieved. However, we believe that 2014 was the low-point for the mine and expect consistent improvement through 2015 and beyond.

Highlights for the December 2014 quarter:

Zero fatalities;
Strong performance from the international operations, with Granny Smith and Cerro Corona being the standout performers;
A further improvement in the balance sheet, with an additional US$45 million net debt reduction. Net debt to EBITDA ratio now stands at 1.30;
A final dividend of 20 SA cents per share declared; and
A slower than expected build-up at South Deep with a renewed focus on reducing cash burn and moving closer to breakeven.

Highlights for fiscal 2014:

10 per cent increase in attributable production to 2.2 million ounces;
Million ounces produced by Australia;
12 per cent reduction in AIC to US$1,087/oz;
16 per cent reduction in net debt to US$1,453 million; and
Non-core asset disposals.

* Cash flow from operating activities less net capital expenditure and environmental payments for continuing operations

South Deep – Focusing on getting the basics right

Gold production for the quarter increased by 16 per cent to 1,508kg (48,500oz), mainly as a result of the resumption of full production after the ground support programme was completed during the September quarter. However, production for the full year was severely impacted by this four-month remediation programme, reducing by 34 per cent to 6,237kg (200,500oz) in 2014.

A number of issues that arose during 2014 highlighted the numerous challenges facing the mine. These included the ground support remediation programme and a skills deficit in mechanised mining practices, as previously indicated. In view of these issues Gold Fields has decided to take a step back to get the basics right and set the foundation to unlock the long-term value inherent in the asset.

Management retains full confidence in the orebody and the world-class infrastructure in place to successfully exploit this orebody. Many of the challenges faced by the mine are related to the shortage of mechanised mining skills in South Africa and our competition with other players for these limited skills. We now have put in place a strong senior management team in South Africa with South African mechanised mining experience, headed by Nico Muller as EVP for the South Africa Region. In addition, we have retained a small part of the Australian team brought in at the beginning of the 2014 to assist with ongoing training and skills transfer.

Key focus areas for South Deep are:

Upgrading skills of operators and associated maintenance crews in the trackless sections;
Improving fleet management;
Improving underground working conditions; and
Optimising the installation of support.

Unfortunately, there are no quick fixes and providing more equipment, capital and people on its own will not solve the challenges at the mine. The right sizing of the mine last year with a reduction in personnel and equipment thus remains an important building block for future sustainability and improvement. The South Deep project, with an estimated life of 70-years plus, is pioneering mechanised gold mining in South Africa on the scale not previously envisaged and hurdles can be expected; setting it up for long-term sustainable delivery will require more time than we had originally anticipated.

Gold Fields will give the newly appointed team the time to get the basics right and determine the way forward for the mine. The knock-on effects of the stoppage last year will have a material impact on 2015 but we nonetheless forecast a 15 per cent increase in production to approximately 230,000oz this year. We expect the efforts of the new team to start to come through in 2016, when we forecast South Deep to move to a breakeven position, assuming current Rand gold prices.

Australia – Full benefits of the Yilgarn South deal shine through

The Australian region had another strong quarter, achieving a free cash flow margin of 20 per cent. Production for the quarter was 260,000oz (down 3 per cent), with AIC of A$1,089/oz (US$930/oz) (up 2 per cent). At St Ives, production increased by 5 per cent to 93,000oz mainly due to higher grade open pit material mined and processed. Production at Agnew/Lawlers was largely unchanged at 73,200oz. Darlot was negatively impacted by lower tonnes processed and lower grades mined, resulting in a 30 per cent reduction in gold produced to 15,500oz. At Granny Smith, gold production decreased by 8 per cent to 78,500oz due to lower volumes mined and processed as well as lower grades.

Calendar 2014 was the first full year of the inclusion of the Yilgarn South assets (acquired from Barrick Gold in October 2013), with the region achieving 1,031,000oz, at an AIC of A$1,124/oz (US$1,015/oz). Granny Smith was the star performer in the region, producing 315,200oz at an AIC of A$896/oz (US$809/oz). On the other hand, St Ives was negatively impacted by the closure of the Argo mine and a lower underground head-grade, which resulted in production decreasing by 10 per cent to 361,700oz. Darlot remains in a challenging position, but achieved its targets for the year. Agnew/Lawlers performed well for the year with 270,700oz at an AIC of A$1,096/oz (US$990/oz).

During 2015, there will be a further increase in exploration spending at the Australian operations, with particular focus at St Ives. In addition to exploration activities aimed at extending the mine’s Mineral Reserves and Resources with a focus on the Invincible, Invincible South and Incredible areas, greenfields exploration outside these possible extensions will also be increased. The main target areas include the Eastern Corridor, SW Dome, Speedway Corridor and Kambalda West. We expect to spend approximately A$80 million on brownfields exploration across the region in 2015, compared with A$62 million in 2014.

On 12 December 2014, we advised the market that, together with another major resources company, we had filed an appeal in respect of aspects of the decision of the Federal Court handed down in the Ngadju native title matter. It is anticipated that the appeal will take place later in the year.

South America – Consistent performance

Cerro Corona continues to be the jewel in the crown, with equivalent gold production stable at 84,600oz for the quarter, in line with the previous quarter. AIC per ounce of gold increased from US$245 per ounce to US$468 per ounce mainly due to higher net operating cost. AIC per equivalent ounce decreased from US$718/oz to US$682/oz, due to the increase in equivalent ounces sold. The mine achieved a free cash flow margin of 32 per cent in the quarter and 37 per cent for the full year. For the full year, gold equivalent production increased by 3 per cent to 326,600oz, at an AIC of US$316/oz or US$702/oz when expressed on an equivalent ounce basis.

Favourable results from early exploration work at Salares Norte in Chile during 2014 have warranted additional drilling in 2015. The approved exploration budget for 2015 is US$24 million.

West Africa – Turnaround at Damang sustained through 2014

Production and AIC from the West African region were similar to the September 2014 quarter at 180,900oz and US$1,126/oz, respectively. The success of the turnaround at Damang is evidenced by the December quarter results, with production increasing 12 per cent to 47,800oz, mainly due to higher tonnes processed. Consequently, AIC decreased by 13 per cent to US$1,082/oz. At Tarkwa, gold production decreased by 4 per cent to 133,100oz, due to lower ounces from the heap leach operations and a lower yield. AIC increased by 4 per cent to US$1,142/oz as a result of the lower output and higher capital expenditure, partially offset by the lower operating costs.

For the year, total managed production from the region decreased by 6 per cent to 736,000oz. Production from Damang improved by 16 per cent to 177,800oz in 2014 mainly due to the implementation of the recovery plan and a higher head grade mined, in line with improved mining discipline. At Tarkwa, production decreased by 12 per cent to 558,300oz primarily as a result of the closure of the heap leach facilities.

Further improvement in the balance sheet

Net debt decreased from US$1,498 million at the end of September 2014 to US$1,453 million at the end of December 2014, which resulted in a lower net debt to EBITDA ratio of 1.30. The further US$45 million reduction in the quarter, takes total net debt reduction over the year to US$282 million. An additional encouraging indicator is that the net debt as a percentage of enterprise value** decreased to 29 per cent at the end of December 2014, compared with 41 per cent at the end of December 2013.

Effect of oil prices on All-in Costs (AIC)

For Gold Fields, the impact of the lower oil price is not as meaningful as would be expected (especially in the short-term). This is because in Ghana and Peru fuel price stability strategies are followed by Government and short term variations in prices are not always passed onto consumers and industry. The Australian operations entered into a hedge at a base price of US$99.10 per barrel of Brent crude on 10 September 2014. On 26 November 2014, an additional hedge at a base price of US$78.45 per barrel of Brent crude was entered into. This resulted in 100 per cent of diesel requirements for the March 2015 quarter and 75 per cent of diesel requirements for the remaining 9 months (April to December) 2015 for Australia being hedged. All other things being equal – i.e. assuming no fuel price stabilisation strategy and no hedges – the impact of a decrease of US$10 per barrel of Brent crude on AIC is a reduction of US$18/oz for Ghana, A$6/oz (US$5/oz) for Australia and US$7/oz for Peru.


In South Africa, South Deep has elected to be on a load curtailment schedule, and will not be subjected to load shedding. Under Eskom Stage 1 and 2 emergencies, the mine is required to reduce its load by 10 per cent for the duration of the emergency. Thus far, South Deep has only been subject to Stage 1 and 2 emergencies. We expect minimal impact on production due to the excess hoisting and plant capacity at the mine. In the event of moving to a Stage 3 emergency, the mine would have to reduce its load by 20 per cent for the duration of the emergency.

The Ghanaian mines have been affected by load shedding of up to 25 per cent. These disruptions have been accommodated through the use of standby Gensets.

2015 guidance

Attributable equivalent gold production for the Group for 2015 is forecast at around 2.2 million ounces. All-in sustaining costs are forecast at US$1,055/oz and total all-in cost at US$1,075/oz. Capital expenditure for the year has been set at US$660 million. It is weighted to the first half of the year, which will have a resultant impact on AIC. Notwithstanding continuous inflation in labour and power costs, which make up approximately 60 per cent of the Group’s costs, the 2015 guidance for AISC at US$1,055/oz and AIC at US$1,075/oz is forecast to be lower than that achieved in 2014. The exchange rate assumptions for guidance were US$1=R11.50 and A$1=US$0.80.

** Enterprise value is defined as market capitalisation plus net debt

At 496,000 ounces, production for the September quarter was 10 per cent higher than the 451,000 ounces reported in the June quarter. This brings production for the year to date to 1,424,000 ounces, which is supportive of our existing guidance for the full year of between 1,825,000 and 1,900,000 ounces, excluding the Yilgarn South assets.

Group all-in sustaining cost (AISC) for the September quarter was US$1,089 per ounce, 23 per cent lower than the US$1,416 per ounce reported for the June quarter;
Group all-in cost (AIC) for the September quarter was US$1,176 per ounce, 25 per cent lower than the US$1,572 per ounce reported for the June quarter;
Total cash cost for the September quarter was US$772 per ounce, 10 per cent lower than the US$857 per ounce reported for the June quarter; and
Group NCE of US$1,064 per ounce for the September quarter was 14 per cent lower than the US$1,239 per ounce reported for the June quarter.

Despite the fact that South Deep is a developing project and is still operating significantly below full production, it is accounted for as a fully operational mine. If South Deep is excluded then the Group NCE is US$962 per ounce and AIC is US$1,088 per ounce for the September quarter. This gives a good indication of the robustness of the rest of the portfolio.

The newly acquired Yilgarn South assets are expected to produce between 90,000 and 100,000 ounces for the December quarter. As a consequence Group production guidance for the full year is revised up to between 1,915,000 and 2,000,000 ounces, while cost guidance remains unchanged with total cash costs of approximately US$830 per ounce and Notional Cash Expenditure (NCE) of approximately US$1,240 per ounce.

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During the September quarter Gold Fields made progress with its strategy to make a sustainable structural shift in the Group’s cost base with four of our six existing mines reporting much improved all-in costs: Cerro Corona achieved an AIC of negative US$21 per ounce; Agnew US$842 per ounce; St Ives US$1,116 per ounce and Tarkwa US$1,124 per ounce. The only exceptions were Damang in Ghana which reported AIC of US$1,727 per ounce and South Deep in South Africa, which is a build-up mine and reported AIC of US$1,599 per ounce.

The strategy to make a sustainable structural shift in the Group’s cost base includes the following interventions:

Reduction of marginal mining by closing down unprofitable production. As previously reported, marginal mining projects had already been stopped at St Ives (heap leach operations), Agnew (low grade Main and Rajah lodes) and Tarkwa (South heap leach operations). The benefits of these interventions are largely reflected in the September quarter results. At Tarkwa the North heap leach operation has also been earmarked to be stopped by the end of 2013, given that the Heap leach operation is loss-making at current gold price levels;
Restructuring and right-sizing of the Corporate office, as well as restructuring of all regional and operational structures to be fit-for-purpose with operational responsibility and accountability devolved to capable and appropriately resourced regions, which resulted in a 5 per cent reduction in head count across the portfolio;
Rationalisation and prioritisation of all capital expenditure and, where appropriate, the deferral of non-essential capital expenditure without compromising the future integrity of ore bodies and operations. Capital expenditure for 2013 has been reduced by approximately US$180 million from US$970 million to US$790 million;
Cancellation of brownfields growth projects that did not provide an adequate return. These include the Tarkwa Expansion Phase 6 project (TEP 6) and both of the Cerro Corona Oxides and Sulphides projects;
General cost savings and improved efficiencies brought about by site specific Business process re-engineering interventions and through the interrogation and, where appropriate, revision of operating budgets, procurement and supply contracts, and general expenditure at mine, regional and corporate level;
Damang and Darlot are implementing a range of operational improvements to reduce their cash burn, while the longer term future of both of these mines is being assessed;
South Deep’s cost base is being right-sized to match its slower than anticipated production build-up, without impeding the momentum of the build-up, that is mechanised mining (trackless and engineering) at South Deep has not been affected; and
The break-up of the Growth and International projects division (GIP) and the significant reduction of all associated expenditure, which is discussed below.
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Following the announcement on 22 August 2013 of the review of the Group’s GIP division, which included all international growth as well as greenfields exploration projects, it was decided during the September 2013 quarter to break-up the GIP Division and significantly downscale all associated growth activities, and to relocate the remaining activities to the existing relevant regional structures.

Greenfields exploration is being reduced from 16 projects around the world to a smaller nucleus of the most promising projects. All other greenfields exploration projects will either be relinquished or disposed of;
In the Australasia region, the key focus will be on brownfields exploration in the Yilgarn South region where Gold Fields has an extensive and highly prospective tenement position associated with its newly acquired and existing assets;
The Arctic Platinum project in Finland, the Woodjam project in British Columbia, the Talas project in Kyrgyzstan and the Yanfolila project in Mali have all been earmarked for disposal. Pending the sale of these projects, the burn-rate on these projects has been reduced. Where disposal proves impractical in the current market environment, some of the projects may be retained for optionality, but with a significantly reduced holding cost. No final decisions have been made on the sale of any of these projects;
Activities at the Far Southeast project in the Philippines have been limited to those associated with securing the FTAA and expenditure has been significantly reduced; and
At the Chucapaca project in Peru, expenditure has been limited to the completion of a scoping study focussed on exploring the viability of a smaller, higher grade underground option for this project. This work will continue into 2014.

As a consequence of these interventions the combined expenditure on all GIP related activities is expected to reduce from approximately US$220 million in 2012 to an estimated US$165 million in 2013 including once off costs of US$10 million relating to restructuring and retrenchment costs. Further cost reductions should be realised in 2014.

Break-up of the GIP division is well underway and is expected to be completed by year-end. While some of the anticipated savings are reflected in the results for the September 2013 quarter, the bulk of the savings will be realised over the remainder of 2013 and into the first half of 2014.

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Of the Group’s eight mines (including the recently acquired Yilgarn South assets) five are performing well and consistent with production and cost expectations (Tarkwa, St Ives, Agnew/Lawlers, Granny Smith and Cerro Corona), while three are in need of and receiving focussed attention (South Deep, Damang and Darlot) with a view to improving operational performances and reducing cost.

At Tarkwa in Ghana the South heap leach operation has now been decommissioned. The focus for the remainder of 2013 is on the closure of the North heap leach operation which has a cost structure higher than the prevailing gold price, and to transition the mine from a combined heap leach and CIL operation, to a CIL operation only. This will see the mining rate reduce in 2014 from approximately 130 million tonnes per annum to approximately 90 million tonnes per annum. Following the closure of the North heap leach operation Tarkwa’s production is expected to decline to between 525,000 ounces and 550,000 ounces in 2014, and to approximately 500,000 ounces per annum thereafter.

At Damang, also in Ghana, the focus remains on improving operational performance through improved quality mining and more consistent plant availability. The work to determine if it is economically viable to extract all or part of the four million ounce reserve continues, with a decision on the future of the mine expected in the first half of 2014. If a viable sustainable operational plan cannot be developed for this mine, care and maintenance will be considered.

At South Deep in South Africa trends remain positive and supportive of the mine’s continued production build-up. In the September 2013 quarter production increased by a further 5 per cent to 81,900 ounces (2,547 kilograms) and AIC decreased by 16 per cent to US$1,599 per ounce (R513,149 per kilogram), despite three days of wage related industrial action during the quarter. The critical destress mining increased by a further 6 per cent to 14,986 meters in the September quarter and is now at a run rate of double of what it was 2 years ago. Particularly noteworthy is that the excessive accumulations of blasted stock underground, due to logistical bottlenecks, have at the time of writing been cleared. A new “clean mine policy” has been implemented whereby smaller but more frequent blasts now take place in open stopes and mining areas are cleared of blasted stock before the next blast can take place. This has had a positive impact on the underground yield which improved from 4.8 grams per tonne in the June quarter to 5.0 grams per tonne in the September quarter. The process of right-sizing the cost-base of the mine in line with its production profile is underway, with a particular focus on reducing senior management structures, replacing contractors with own employees where practical and optimising all support service costs. This process is expected to be completed by the end of 2013. The process of interrogating and recalibrating the production build-up plan of South Deep is progressing as scheduled and the new build-up plan is targeted for disclosure with the announcement of the December 2013 results in February 2014.

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The acquisition of the Yilgarn South assets from Barrick, which is in line with our strategy to improve the Group’s cash generating ability, was concluded on 1 October, after the close of the September quarter, and the integration of the Granny Smith, Lawlers and Darlot mines into the Gold Fields portfolio has commenced. A thorough operational review has been concluded on each of the mines and the most appropriate strategy determined to realise the benefits of the acquisition through the application of Gold Fields’ proven low cost model in Australia, which has been successful in repositioning Gold Fields competitively on the cost curve in Australia. The transition to Gold Fields’ management was seamless at all three mines and our attention will now turn to optimising the value of these operations.

In order to maximise the operating synergies between Lawlers and the adjacent Agnew, the two mines were immediately integrated and the Lawlers processing plant is expected to be closed by the end of November. All newly mined ore from Lawlers is now being treated at the Agnew plant. The consolidation of other services, infrastructure and human resources are progressing well. At the Darlot mine the focus is on improving the operational performance and gaining a greater understanding of the reserve potential of the property.

For the December 2013 quarter, Gold Fields will report on all three of the mines, with Agnew/Lawlers being reported as a single entity. It is expected that the three mines will collectively add between 90,000 and 100,000 ounces to Gold Fields’ production in the December quarter at an NCE of approximately US$1,165 per ounce (A$1,215 per ounce).

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Gold Fields’ approach to environmental management is in accordance with international standards and practices. ISO 14001 accreditation is a Group standard and we were the first mining signatory to the International Cyanide Management Code that obtained certification for all of its eligible operations. Our most material environmental performance indicators, i.e. carbon emissions, energy usage, water withdrawal, re-use/recycling and environmental incidents, are reported annually and externally assured. The alignment of our policies, guidelines and practices to the International Council of Mining and Metals’ (ICMM) 10 Sustainability Principles, which include environmental management, is also assured annually. Gold Fields reports environmental incidents using a grading scale of 1 to 5. Levels 1 and 2 involve minor incidents or non-conformances with negligible or limited impact. A level 3 incident is a limited non-conformance or noncompliance with limited environmental impact, but is often a repeat of the same incident. Level 4 and 5 incidents include major non-conformances or non-compliances that could result in long-term environmental impact with company or operation threatening implications and potential major damage to the company’s reputation.

No level 4 or 5 environmental incidents have been recorded at any of Gold Fields’ operations in the past five years. Six level 3 environmental incidents were recorded during 2012 compared with two during the first half of 2013. No level 3 environmental incidents were recorded during the September 2013 quarter.

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As announced on September 10, 2013, the Company has been informed that it is the subject of a regulatory investigation in the United States by the US Securities and Exchange Commission relating to the Black Economic Empowerment transaction associated with the granting of the mining license for its South Deep operation. Given the early stage of this investigation, it is not possible to estimate reliably what effect, the outcome this investigation, any regulatory findings and any related developments may have on the Company.

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Stock data
Number of shares in issue   Range – Quarter US$3.15 – US$4.55
– at end December 2014 771,416,491   Average Volume – Quarter 5,844,217 shares/day
– average for the quarter 770,519,087   JSE Limited – (GFI)  
Free Float 100 per cent  
ADR Ratio 1:1   Range – Quarter ZAR35.99 – ZAR52.93
Bloomberg/Reuters GFISJ/GFLJ.J   Average Volume – Quarter 2,360,551 shares/day