GFI

Business Context and Reporting Period

Company: Gold Fields Limited
Filing Type: Form 6-K (Operational Update)
Reporting Period: Quarter ended 30 September 2021 (Q3 2021)
Date of Filing: 11 November 2021

Gold Fields Limited is a global gold producer with operations in South Africa, West Africa (Ghana), South America (Peru, Chile), and Australia. This report details operational performance, cost metrics, and strategic updates for the third quarter of 2021, including significant progress on the Salares Norte development project and ongoing COVID-19 management.

Key Financial and Operational Metrics

Note: Gold produced includes Gold Fields' 45% share of Asanko. Figures are in US Dollars unless otherwise stated.

Material Changes vs. Prior Period

• Production Growth: Attributable gold production increased 8% quarter-over-quarter (QoQ) to 606,000 oz and 9% year-over-year (YoY). This was driven by improved volumes and grades at South Deep (South Africa) and Cerro Corona (Peru).
• Cost Efficiency: AISC improved by 8% QoQ to $1,016/oz, primarily due to higher gold sold volumes offsetting increased operational and capital expenditures. However, AIC increased 18% YoY to $1,263/oz, largely attributed to currency appreciation (South African Rand and Australian Dollar) and higher capital spend.
• Debt Reduction: Net debt decreased by $60 million QoQ to $1,037 million, improving the Net Debt to EBITDA ratio to 0.44x.
• Regional Performance:
  • South Deep (SA): Production surged 30% QoQ to 88,200 oz due to improved stoping volumes and grades.
  • Cerro Corona (Peru): Gold equivalent production rose 31% QoQ to 69,400 oz due to higher grades and recoveries.
  • St Ives (Australia): Production remained flat QoQ (94,000 oz) despite a 103% increase in surface ore mined, as lower-grade material from the Delta island pit offset underground gains.
  • Agnew (Australia): Production fell 12% QoQ due to lower mined grades and sequencing constraints.

Guidance, Outlook, and Risks

Guidance and Outlook

Management confirmed that FY 2021 guidance remains intact:

• Production: 2.30Moz – 2.35Moz (Attributable gold equivalent).
• AISC: $1,020/oz – $1,060/oz.
• AIC: $1,310/oz – $1,350/oz (excluding significant project capex at Salares Norte, AIC is expected to be $1,090/oz – $1,130/oz).
• Salares Norte Project: The project is unlikely to meet the previously guided 65% completion milestone by year-end 2021, now estimated at approximately 62%. First gold is still targeted for Q1 2023. Construction progress was impacted by COVID-19 workforce availability and snow events, though critical path items remain on track.

Management Commentary and ESG

• COVID-19: As of 8 November 2021, 14 deaths were recorded in 2021 (total of 20 since pandemic start). Vaccination rates surpassed 72% for the first dose and 50% fully vaccinated. Mandatory vaccination policies are being considered where legally permissible (e.g., Australia).
• Safety: No fatalities in Q3 2021. Total Recordable Injury Frequency Rate (TRIFR) returned to a downward trend. MSCI upgraded ESG rating from BBB to A.
• Capital Expenditure: Total capex for Q3 was $194.3 million. Sustaining capex increased significantly at South Deep ($17.9m) due to solar plant delivery and Doornpoort expansion.

Risks and Contingencies

• Operational Disruptions: South Deep faces scheduled critical maintenance in Q4 2021 (shaft infrastructure) and a 10-day Christmas shutdown, expected to decrease production in the December quarter.
• Geopolitical and Regulatory: Risks include labor relations in South Africa, water use licenses, and potential new legislation affecting mining rights.
• Market Volatility: Exposure to fluctuations in gold prices and exchange rates (ZAR, AUD).
• Project Delays: Salares Norte faces potential delays due to supply chain constraints and weather, though shipping constraints are not currently expected to delay the project.

Investor Verification Checklist

• Salares Norte Timeline: Verify the impact of the revised 62% completion estimate on the Q1 2023 first gold target and associated capital burn rate.
• Currency Sensitivity: Assess the impact of ZAR and AUD appreciation on reported AIC and future profitability, as noted in the variance analysis.
• South Deep Q4 Outlook: Confirm the magnitude of production decline expected in Q4 due to scheduled maintenance and the Christmas shutdown.
• Cost Inflation: Monitor trends in consumables and energy costs (Eskom tariffs) which contributed to cost increases in Q3.
• Debt Profile: Review the trajectory of net debt reduction and the company's ability to service debt while funding the Salares Norte expansion.