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 31 December 2005 (Q2 FY2006)
Announcement Date: 26 January 2006
Business Overview: Gold Fields is a global gold mining company with operations in South Africa, Ghana, and Australia. The quarter was characterized by increased production, higher gold prices, and significant progress in international growth strategies, including the acquisition of Cerro Corona in Peru and shareholder approval for the Bolivar acquisition.

Key Financial Metrics

Material Changes vs. Prior Period

• Earnings Surge: Net earnings increased six-fold to R262 million compared to R39 million in the prior quarter, driven by a 10% increase in the gold price (to US$482/oz) and a 5% increase in production.
• Production Growth: Attributable gold production rose to 1,040,000 ounces. South African operations saw an 8% increase (698,000 oz), while international operations remained flat at 342,000 ounces.
• Cost Management: Total cash costs decreased by 2% to US$341/oz compared to the prior quarter, despite a 3% increase in total operating costs due to higher volumes. South African unit cash costs declined by 4%.
• Profitability: Operating profit jumped 73% to R958 million. The operating margin expanded from 18% to 28%.
• Cash Flow: Operating cash flow nearly doubled to R557 million, though partially offset by a R266 million outflow in working capital due to creditor payment timing.

Guidance, Outlook, and Risks

Outlook and Guidance

• Production: Group gold production for the March 2006 quarter is expected to be similar to the December quarter. South African production is forecast to decrease slightly (mainly at Kloof), offset by increases in international operations.
• Costs: Cash costs are expected to remain similar to the December quarter.
• Dividend: An interim dividend of 40 SA cents per share was declared, payable on 20 February 2006.

Management Commentary

CEO Ian Cockerill highlighted a "strong December quarter" with South African operations delivering an 8% production improvement while maintaining cost control. The company is on track with its international growth strategy following the Cerro Corona acquisition and Bolivar shareholder approval.

Risks and Contingencies

• Safety Incidents: Eight fatalities were reported in the quarter (six due to falls of ground/seismicity). The fatal injury frequency rate was 0.21. Management is reviewing safety initiatives to meet Ontario standards.
• Acquisition Litigation: The Bolivar acquisition faces legal challenges from Scion Capital LLC, which filed an oppression claim and an application alleging contravention of the Ontario Securities Act. Court hearings are scheduled for February 2006.
• Operational Challenges: Tarkwa (Ghana) production was impacted by heap leach pad lock-ups and high rainfall. Agnew (Australia) saw lower grades and higher mining costs due to deeper ore bodies.
• Accounting Changes: Adoption of IFRS 2 (Share-based payments) resulted in a restatement of prior year earnings and a R31.2 million expense in the current period.

Investor Verification Checklist

• Bolivar Acquisition Status: Monitor the outcome of the court hearings regarding Scion Capital's opposition to the Bolivar Gold Corp. acquisition.
• Safety Performance: Track the implementation of new safety initiatives following the eight fatalities reported in the quarter.
• South African Production Trends: Verify if the production decline at Kloof in the March quarter is temporary or indicative of longer-term grade/volume issues.
• Cerro Corona Progress: Confirm the commencement of construction in February 2006 and adherence to the US$277 million capital cost estimate.
• Cost Inflation: Assess the impact of rising diesel, steel, and reagent costs on future margins, particularly at international operations.