GFI

Business Context and Reporting Period

Company: Gold Fields Limited (GFI)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Quarter ended December 31, 2010 (and six months ended December 31, 2010)
Announcement Date: February 18, 2011
Key Context: The company changed its financial year-end from June to December to align with industry peers. This filing covers the first six months of the new financial year. The quarter was characterized by steady production, improved margins, and the completion of significant Black Economic Empowerment (BEE) transactions.

Key Financial Metrics

*Adjusted for gains/losses on foreign exchange, non-recurring items, and share of gain/loss of associates.

Material Changes vs. Prior Period

• Earnings Volatility: While adjusted earnings increased 43% year-over-year and 45% quarter-over-quarter, the reported net result swung to a loss of R777 million (US$106 million) due to R2.3 billion (US$327 million) in non-recurring costs related to empowerment transactions.
• Production Stability: Attributable gold production remained relatively flat at 898,000 ounces, down 1% from the previous quarter but in line with annual guidance. Regional variances included a 10% increase in Australasia and a 13% decrease in South America.
• Cost Management: Total cash costs decreased in Rand terms (R161,894/kg vs R164,898/kg) but increased in USD terms (US$728/oz vs US$697/oz) due to currency fluctuations. Operating costs decreased by 2% in Rand terms.
• Liquidity Improvement: Net debt decreased by 22% to R3,974 million (US$589 million) following a bond issue and strong operating cash flow generation of R3,889 million (US$557 million).
• Dividend: A final dividend of 70 SA cents per share was declared for the six months ended December 31, 2010.

Outlook, Guidance, and Risks

Guidance and Outlook

• 2011 Production Forecast: 3.5 million to 3.7 million attributable equivalent ounces.
• 2011 Cost Estimates: Total cash cost estimated at US$760/oz; NCE estimated at US$1,050/oz.
• Growth Pipeline: The company aims to have 5 million ounces either in production or development by 2015. Key projects include Far South East (Philippines), Chucapaca (Peru), Yanfolila (Mali), and Arctic Platinum (Finland).
• Strategic Goals: Management aims to consolidate NCE margins at 20% in the short-to-medium term and 25% in the longer term.

Risks and Contingencies

• Safety Incidents: Five fatalities occurred in the South Africa region during the quarter (gravity fall of ground and tramming accidents). The company emphasized a commitment to "Zero Harm."
• Operational Disruptions: A week-long strike at South Deep in November impacted production, though the mine achieved record mechanized mining volumes in December.
• Market Risks: Exposure to gold and copper price fluctuations, currency devaluations (specifically Rand and Australian Dollar strength), and inflation.
• Regulatory and Political: Risks include changes in government regulations, environmental laws, and political conditions in operating jurisdictions (South Africa, Ghana, Peru, Australia).

Investor Verification Checklist

• Non-Recurring Items: Verify the impact of the R2.3 billion empowerment transaction costs on reported net income versus adjusted earnings.
• Cost Inflation vs. Currency: Analyze the divergence between Rand-denominated cost reductions and USD-denominated cost increases to understand currency exposure.
• Safety Metrics: Monitor the trend in fatalities and serious injuries, particularly in the South Africa region, given the recent incidents.
• Project Execution: Track progress on the Far South East, Chucapaca, and Yanfolila projects to ensure they meet the 18-24 month construction decision timeline.
• Debt Maturity: Review the debt maturity ladder, noting the significant bond issuance and repayment schedule.