GFI

Business Context and Reporting Period

Company: Gold Fields Limited
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Quarter ended December 31, 2013 (Q4 2013) and Full Year 2013
Date of Filing: February 13, 2014

Gold Fields reported results for the December 2013 quarter, marking the first full quarter of integration for the newly acquired Yilgarn South assets (Darlot, Lawlers, and Granny Smith) in Western Australia. The company continues a strategic shift from volume-focused production to margin and cash flow optimization, having previously unbundled its legacy South African assets into Sibanye Gold in early 2013.

Key Financial Metrics

Material Changes vs. Prior Period

• Production Increase: Attributable gold production rose 21% quarter-on-quarter to 598,000 ounces, driven by the integration of Yilgarn South assets (114,000 oz maiden contribution) and a 39% production increase at the Damang mine in Ghana.
• Cost Reductions: All-in sustaining costs (AISC) improved by 3% to US$1,054/oz. Total all-in costs dropped 7% to US$1,095/oz. South Deep's all-in cost decreased 41% year-over-year to US$1,436/oz following cost right-sizing.
• Impairments: The quarter included significant non-recurring impairments totaling US$672 million, primarily due to lower gold prices and higher discount rates. Key impairments occurred at St Ives (A$297 million), Damang (US$173 million), and Tarkwa (US$51 million).
• Revenue Growth: Revenue increased 14% to US$781 million, offsetting a 4% decline in the average gold price (US$1,265/oz) with higher production volumes.

Guidance, Outlook, and Risks

2014 Guidance

• Production: Forecast at approximately 2.2 million gold equivalent ounces (2.1 million gold-only ounces).
• Costs: AISC forecast at US$1,125/oz; Total all-in cost forecast at US$1,150/oz.
• South Deep: Expected to reach a run-rate of 650,000–700,000 ounces per annum by end-2017 at an all-in cost of ~US$900/oz.

Management Commentary

Management highlighted the successful integration of the Yilgarn South assets, which are expected to contribute ~400,000 ounces in 2014 at costs below US$1,000/oz. The company eliminated approximately US$450 million from its cost base in 2013 through the closure of marginal mining operations (e.g., heap leach at Tarkwa) and restructuring.

Risks and Contingencies

• SEC Investigation: Gold Fields is subject to a US SEC investigation regarding the Black Economic Empowerment transaction associated with the South Deep mining license. No financial adjustment has been made due to the early stage of the investigation.
• Legal Proceedings: The company is defending class action lawsuits regarding silicosis and tuberculosis claims by former employees in South Africa, as well as a native title claim at the St Ives mine in Australia.
• Safety: One fatality was recorded at the Cerro Corona mine in Peru during the quarter, regressing the fatal injury frequency rate from 0.00 to 0.10.

Investor Verification Checklist

• Impairment Impact: Verify the sustainability of earnings given the US$672 million impairment charge in Q4 2013, which drove the reported net loss despite positive normalised earnings.
• South Deep Build-up: Monitor the revised production schedule and cost targets for South Deep, which remains in project mode and is the primary driver of future volume growth.
• Debt Profile: Review the net debt to EBITDA ratio of 1.53x and the maturity profile, noting US$720 million of debt maturing in November 2015.
• Regulatory Status: Track developments in the SEC investigation regarding South Deep and the outcome of the silicosis class action certification.
• Cost Metrics: Confirm the transition to World Gold Council reporting standards (AISC and Total All-in Cost) effective Q1 2014, noting the cessation of Total Cash Cost and NCE reporting.