Gold Fields Limited — FY2013 Form 20-F
Reporting period: Fiscal year ended December 31, 2013; filed April 25, 2014. Although the request refers to 2013 Q4, this is an annual report, not a standalone quarterly filing. Financial statements are presented under U.S. GAAP in U.S. dollars unless stated otherwise. Results are for continuing operations unless noted; Sibanye Gold’s KDC and Beatrix mines were spun off in February 2013, and comparative results were recast as discontinued operations.
Business context
Gold Fields mined gold in South Africa, Ghana and Australia, and gold and copper in Peru. Fiscal 2013 production was 2.104 million gold-equivalent ounces (2.022 million attributable). Operations by production were approximately 15% South Africa, 37% Ghana, 33% Australia and 15% Peru. The company acquired the Granny Smith, Darlot and Lawlers mines in Western Australia on October 1, 2013, for net consideration of $262 million, paid through $135 million cash and 28.7 million shares.
Financial and operating performance
| Metric | FY2013 | FY2012 |
|---|---|---|
| Revenue | $2,906.3 million | $3,530.6 million |
| Net income (loss) from continuing operations | ($286.6 million) | $290.2 million |
| Net income (loss) attributable to Gold Fields shareholders, continuing operations | ($268.4 million) | $292.1 million |
| Net income (loss), including discontinued operations | ($266.1 million) | $652.5 million |
| Cash provided by continuing operations | $316.0 million | $737.4 million |
| Capital expenditure, continuing operations | $543.7 million | $943.4 million |
| Cash and cash equivalents at year-end | $325.0 million | $655.6 million |
| Total cash costs per equivalent ounce | $902 | $887 |
| Total production costs per equivalent ounce | $1,186 | $1,105 |
| AISC per ounce of gold sold, net of by-product revenue | $1,197 | $1,318 |
| AIC per ounce of gold sold, net of by-product revenue | $1,313 | $1,542 |
Debt was approximately $2.06 billion at year-end, versus $2.36 billion in 2012; the filing reports $763.2 million of unused committed facilities. Total assets were $7.26 billion, total liabilities $3.16 billion and total equity $4.10 billion. Current assets were $1.08 billion and current liabilities $629.5 million. No material off-balance-sheet items were reported.
Material changes versus FY2012
- Revenue declined 17.7%, primarily as the average realized gold price fell 16.3%, from $1,656 to $1,386 per ounce; equivalent ounces sold also declined 1.7%. The realized copper price fell 10.2%.
- Continuing-operations production was broadly stable at 2.104 million ounces versus 2.124 million. Reduced output at Tarkwa, Damang, St. Ives and Cerro Corona was partly offset by the acquired Australian assets and higher South Deep production.
- Continuing-operations cash generation fell to $316 million from $737 million, while capital expenditure decreased by $399.7 million as the company cut and reprioritized spending.
- Asset impairments and write-offs rose to $215.3 million from $41.6 million. Items included $53.0 million at Damang, $63.0 million related to Tarkwa heap-leach closure, and a $29.7 million write-down at Yanfolila.
- Depreciation and amortization rose 33.5% to $568.5 million. The company recorded a $29.5 million prior-year deferred-tax adjustment relating to Cerro Corona as an out-of-period adjustment, which it assessed as not material to prior-year statements.
Outlook and management commentary
- FY2014 guidance was approximately 2.2 million attributable gold-equivalent ounces, AISC of $1,125 per ounce and AIC of $1,150 per ounce. Estimates use IFRS management accounts, assumed exchange rates of R9.50/$1 and $1.056/A$1, and had not been reviewed by the auditors.
- Management’s strategic objective was a Group free-cash-flow margin of about 15% at a planning gold price of $1,300 per ounce. The company said it removed about $450 million from its cost and capital base during 2013 and reduced its global workforce by about 10%.
- South Deep’s production build-up target was revised from 700,000 ounces annually by end-2016 to 650,000–700,000 by end-2017, at a target AIC of $900 per ounce. Management expected cash-neutral status in FY2014 or early FY2015, subject to execution and gold-price conditions.
- Management reported FY2013 attributable production of about 2.0 million ounces, above the upper end of its February 2013 guidance of 1.9 million equivalent ounces. From 2014, Gold Fields planned to report costs using World Gold Council AISC and AIC definitions, replacing cash-cost and NCE reporting.
- The company paid $61.2 million in dividends during FY2013. It skipped the interim dividend; a final dividend of R0.22 per share was announced in February 2014 and paid in March.
Risks, contingencies and unusual items
- Commodity and currency exposure: Gold prices fell about 29% during 2013, and the company generally does not hedge gold production. Rand and Australian-dollar movements materially affect costs reported in U.S. dollars. Gold Fields had no outstanding gold hedges at year-end.
- Debt and funding: Management cited significant debt and refinancing needs; about $0.9 billion of debt securities were expected to mature within 36 months of the report date. South African exchange controls can constrain the movement of capital.
- Operational execution: South Deep remained behind plan amid ore-handling constraints, equipment availability and shortages of mechanized-mining skills. Damang faced pit-wall instability and plant constraints; Tarkwa and St. Ives curtailed heap-leach activity.
- Labor, safety and power: Strikes at Tarkwa and Damang halted production for six days in April 2013, with reported combined production losses of about 21,700 ounces. Two fatalities occurred in continuing operations in 2013. Power-price increases, outages and supply constraints were identified as risks.
- Legal and regulatory matters: The SEC was investigating the South Deep BEE transaction, and South Africa’s Hawks had begun a preliminary investigation. Gold Fields also faced consolidated silicosis-related class-action certification proceedings, an individual silicosis claim seeking approximately R25 million, a historic Randgold & Exploration claim with stated alternative calculations ranging from about R519 million to R11–12 billion, and an Australian native-title claim affecting St. Ives tenements. Outcomes and potential financial effects were not determinable; no related amounts were accrued.
- Environmental and permitting exposure: Potential acid mine drainage, water-use license requirements and rehabilitation obligations could lead to added costs, delays or operating restrictions. The filing said it could not reliably estimate the potential effect of acid mine drainage.
- Other unusual items: The Sibanye Gold spin-off reduced the company’s asset base and changed comparability. The Yilgarn South acquisition contributed $127.3 million of shares and $135 million cash; related transaction costs of $27.4 million were expensed. The audit opinion was unqualified. Management and the auditor reported effective internal control over financial reporting, but the assessment excluded the acquired Darlot and Granny Smith mines.
Most important facts for investors to verify
- Reconcile the annual results on a continuing-operations basis and account for the Sibanye Gold spin-off when comparing periods.
- Check progress against FY2014 production and cost guidance, and whether South Deep meets its revised ramp-up and cash-neutral milestones.
- Verify debt maturities, facility availability, refinancing execution and cash generation against capital needs and dividends.
- Track gold and copper prices, exchange rates, and the company’s AISC/AIC calculations; these are non-GAAP measures and may not be comparable across miners.
- Monitor the BEE investigations, silicosis proceedings, R&E claim, St. Ives native-title case, and water/acid-drainage obligations for developments or changes in estimated exposure.