Gold Fields Limited — FY2015 Form 20-F
Reporting period: Year ended December 31, 2015; filed April 13, 2016. This is an annual report, not a standalone fourth-quarter filing, so the provided text does not give clear Q4-only financial results. Financial statements are presented in U.S. dollars under U.S. GAAP; some operating and management measures use IFRS and are identified as non-GAAP where applicable. Sibanye Gold’s KDC and Beatrix mines are discontinued operations; FY2015 results below refer to continuing operations unless noted.
Business context and financial performance
Gold Fields operates gold mines in South Africa, Ghana, Australia and Peru, and produces copper at Cerro Corona in Peru. In FY2015, production by region was approximately 9% South Africa, 34% Ghana, 44% Australia and 13% Peru. The company processed 33.0 million tonnes and produced 2.236 million gold-equivalent ounces, of which 2.159 million ounces were attributable to Gold Fields.
| Metric | FY2015 | Prior comparable period |
|---|---|---|
| Revenue | $2,545.4 million | $2,868.8 million in FY2014, down 11.3% |
| Net loss from continuing operations | $347.4 million | $25.2 million loss in FY2014 |
| Net loss attributable to Gold Fields shareholders | $345.0 million; loss per share $0.45 | $27.2 million; loss per share $0.04 |
| Cash provided by continuing operations | $580.0 million | $743.8 million in FY2014 |
| Capital expenditure | $434.5 million under U.S. GAAP; $634.1 million under IFRS | $480.5 million under U.S. GAAP; $608.9 million under IFRS |
| Cash and cash equivalents | $440.0 million | $458.0 million at December 31, 2014 |
| Total loans / net debt | $1,820.3 million / $1,380.3 million | $1,910.9 million / $1,452.9 million |
| Current assets / current liabilities | $904.3 million / $522.1 million | $1,088.8 million / $708.1 million |
Revenue fell mainly because the realized gold price declined 8.7% to $1,140 per ounce, realized copper price fell 29.9% to $4,787 per tonne, and gold-equivalent sales decreased 2.7%. Production costs under U.S. GAAP fell 8.2% to $1,660.3 million; operating costs excluding depreciation and amortization under IFRS fell 15.1% to $1,431.3 million. Depreciation and amortization declined 12.2% to $594.4 million. The reported income and mining tax expense was $155.0 million, with an unusually high effective tax rate of 196%, primarily reflecting deferred-tax valuation allowances and nondeductible items.
Gold production declined 2.5% to 2.236 million equivalent ounces. Group all-in sustaining cost (AISC) was $1,007 per ounce of gold sold and all-in cost (AIC) was $1,026; both are non-GAAP measures. Management reported an 8% free-cash-flow margin and $123 million adjusted net cash flow, also management-defined measures. Net debt decreased by $72.6 million, while net debt to adjusted EBITDA rose to 1.38 from 1.30 because adjusted EBITDA declined.
Material changes and unusual items
- FY2015 net loss widened substantially, reflecting lower commodity prices and significant impairment charges. Asset impairments and write-offs totaled $100.1 million, including a $71.6 million impairment at Cerro Corona and $13.8 million at Darlot. A separate $109.5 million impairment of investments in equity investees included $101.4 million for Far Southeast.
- Gold reserves attributable to Gold Fields fell to approximately 46.1 million ounces from 48.1 million, primarily due to depletion; attributable copper reserves declined to 532 million pounds from 620 million.
- Operating costs and production were mixed by mine: Tarkwa production rose 5%, while Damang fell 6%; Australian production declined 4%. South Deep produced 198,000 ounces, approximately flat year over year, and remained below break-even.
- Cash from operations decreased by $163.8 million. Investing activities used $458.7 million and financing activities used $117.2 million; cash declined by $18.0 million after exchange-rate effects.
- The company declared a final FY2015 dividend of R0.21 per share in February 2016, following an interim R0.04 per share. Management reported a total FY2015 dividend of R0.25 per share, equal to 34% of normalized earnings.
Outlook, management commentary and key risks
For FY2016, management estimated attributable production of 2.05–2.10 million gold-equivalent ounces, AISC of $1,000–$1,010 per ounce, AIC of $1,035–$1,045 per ounce and capital expenditure of $602 million. Estimates assume exchange rates of R14.14 per U.S. dollar and A$0.73 per U.S. dollar. The filing says these estimates are forward-looking and had not been reviewed or reported on by the auditors.
- Strategy and South Deep: The long-term objective remains a 15% free-cash-flow margin at a $1,300 gold price. Management targeted South Deep cash break-even by the end of FY2016, but planned to publish an updated production ramp-up schedule in early FY2017. The mine’s strategic review could change expected production, reserves, costs and mine life.
- Debt and liquidity: Approximately $827.7 million of debt was exposed to floating interest rates at year-end. About $0.83 billion of debt securities was due within 36 months of the filing date. The company reported $1,009.5 million of undrawn committed facilities and no default under its credit facilities. La Cima did not meet certain facility covenants, but lenders waived their rights arising from the breach.
- South Africa regulatory uncertainty: Disputes over Black Economic Empowerment ownership rules and the Mining Charter could result in dilution, remedial obligations or jeopardy to mining rights. Relevant court proceedings were delayed, extending uncertainty.
- Power, labor and operations: Power constraints and tariff increases in South Africa and Ghana could disrupt production or raise costs. The filing also describes mine safety, labor, equipment, supply-chain and community-relations risks. Four fatalities occurred in FY2015, and South Deep production was halted for a total of 18 days following safety incidents and regulatory stoppages.
- Environmental and health contingencies: Potential long-term acid drainage impacts at South Deep and Cerro Corona could not be reliably estimated and, beyond normal rehabilitation provisions, were not quantified in the financial statements. Silicosis and tuberculosis class-action certification proceedings remained pending; the potential number and value of claims were not clear.
- Other legal matters: Gold Fields disputed a South African tax authority position denying a $1,014.2 million additional capital allowance, with a stated tax effect of $304.3 million; the company appealed and made no adjustment. A separate historic Randgold & Exploration claim has a stated range from approximately $34 million to $700–800 million, depending on the basis of calculation; the company said it had defenses and made no provision.
- Commodity and currency exposure: Gold Fields generally does not hedge gold production. Gold-price, copper-price and exchange-rate movements can materially affect revenue, costs, reserves and impairment estimates. FY2015 included a $1.5 million negative fair value on outstanding Australian diesel hedges.
Subsequent developments: In February 2016, a subsidiary purchased $147.6 million principal amount of the 2020 notes at $880 per $1,000. In March 2016, Gold Fields raised $150 million through an equity placement, with proceeds intended to repay facilities used for the note purchase. Ghana’s Parliament ratified development agreements for Tarkwa and Damang, including a 32.5% fixed tax rate from March 17, 2016 and sliding-scale royalties from 2017, alongside changes to prior withholding-tax exemptions.
Most important facts for investors to verify
- Confirm the distinction between U.S. GAAP results and IFRS-based capital expenditure and non-GAAP measures such as AISC, AIC, net debt and adjusted net cash flow.
- Review the $100.1 million operating-asset impairment and $109.5 million investment impairment, including the valuation assumptions for Cerro Corona, Darlot and Far Southeast.
- Assess debt maturities, floating-rate exposure, available facilities, the La Cima covenant waiver and how the 2016 note repurchase and equity placement affect leverage.
- Track South Deep’s cash break-even progress, revised production plan, safety performance and the outcome of its strategic review.
- Monitor the South Deep tax dispute, silicosis proceedings, Mining Charter litigation and the unquantified acid-drainage exposure.
- Compare FY2016 production, cost and capital-spending guidance with reported outcomes, noting its exchange-rate assumptions and unaudited status.
KPMG issued an unqualified opinion on the U.S. GAAP financial statements and concluded that internal control over financial reporting was effective as of December 31, 2015.