GFI

Business Context and Reporting Period

Company: Gold Fields Limited (NYSE & JSE: GFI)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Quarter ended March 31, 2015 (Q1 2015)
Date of Filing: May 7, 2015

Gold Fields reported a seasonally weaker first quarter, consistent with management guidance. The period was characterized by scheduled production reductions due to the Christmas break in South Africa and mine sequencing at other operations. A fatal accident occurred at the South Deep mine in South Africa on March 8, 2015.

Key Financial Metrics

Material Changes vs. Prior Period

• Production Decline: Attributable gold equivalent production decreased 10% quarter-on-quarter (QoQ) to 501,000 ounces. South Deep production dropped 25% QoQ due to the Christmas break and safety-related closures in late 2014. Cerro Corona (Peru) production fell 21% due to lower head grades.
• Cost Increases: AISC increased 12% QoQ to US$1,143/oz and AIC increased 11% QoQ to US$1,164/oz. Drivers included lower gold sold, gold inventory charges, lower by-product credits, and higher sustaining capital expenditure.
• Profitability: Operating profit decreased 20% QoQ to US$244 million. The company reported a normalised loss of US$13 million compared to normalised earnings of US$17 million in Q4 2014.
• Cash Flow: Cash outflow from operating activities less net capital expenditure and environmental payments was US$29 million, a reversal from a US$54 million inflow in Q4 2014. This was driven by lower gold sales and higher seasonal tax payments in Ghana and Australia.
• Debt: Net debt increased by US$46 million to US$1,499 million due to reduced operating cash inflows.

Guidance, Outlook, and Risks

Outlook and Guidance

Management reaffirmed its full-year 2015 guidance despite the weaker Q1 results:

• Production: Attributable gold equivalent production forecast at approximately 2.2 million ounces.
• Costs: AISC forecast at US$1,055/oz; Total AIC forecast at US$1,075/oz.
• Capital Expenditure: Forecast at US$660 million, weighted toward the first half of the year.

Management Commentary

CEO Nick Holland stated the weaker quarter was "as planned" and incorporated into guidance. He highlighted a ground-breaking three-year wage deal signed at South Deep post-quarter-end, expected to stabilize operations and improve performance in the second half of the year. The company is focusing on "getting the basics right" regarding safety and productivity at South Deep.

Risks and Contingencies

• Safety Incident: A fatal engineering-related accident occurred at South Deep on March 8, 2015.
• Regulatory/Legal: The Minister of Mineral Resources and the Chamber of Mines in South Africa are jointly approaching courts to clarify ownership principles under the mining charter.
• Operational: Production delays at Cerro Corona due to shipping schedule delays at the Salaverry port in Peru caused by adverse weather.
• Financial: A non-cash deferred tax charge of US$21 million arose from the weakening of the Peruvian Nuevo Sol against the US dollar.

Investor Verification Checklist

• South Deep Recovery: Verify the timeline for production recovery at South Deep following the safety closure and the impact of the new wage agreement on unit costs.
• Cost Trajectory: Monitor if AISC and AIC can return to the guided levels (US$1,055/oz and US$1,075/oz) given the Q1 spike and the weighted capital expenditure in H1 2015.
• Peru Logistics: Confirm the resolution of shipping delays at the Salaverry port and their impact on Cerro Corona's revenue recognition.
• Debt Reduction: Track progress toward the target of reducing the Net Debt/EBITDA ratio to 1.0x by the end of 2016, currently at 1.41x.
• Deferred Tax Impact: Assess the sensitivity of future earnings to exchange rate fluctuations between the Peruvian Nuevo Sol and the US dollar regarding deferred tax adjustments.