Gold Fields Limited — FY2018 Form 20-F
Reporting period: Fiscal year ended 31 December 2018; filed 29 March 2019. This is an annual report, not a stand-alone Q4 filing. Financial statements are prepared under IFRS as issued by the IASB and reported in U.S. dollars. Gold Fields is a diversified gold producer operating across South Africa, Ghana, Australia and Peru, with the Asanko joint venture in Ghana and the Salares Norte project in Chile.
Financial and operating performance
| Metric | FY2018 | Prior comparable period |
|---|---|---|
| Revenue | US$2.578bn | US$2.762bn, down 7% |
| Loss attributable to parent shareholders | US$348.2m; loss per share 42 cents | US$18.7m loss; 4-cent loss per share |
| Headline earnings | US$60.6m; 7 cents per share | US$212.3m; 26 cents per share |
| Attributable gold-equivalent production | 2.036Moz | 2.160Moz, down about 6% |
| AISC / AIC per ounce | US$981 / US$1,173 | US$955 / US$1,088 |
| Capital expenditure | US$814m | US$834m |
| Cash generated by operations / net cash from operations | US$998m / US$615m | US$1.287bn / US$826m |
| Cash and cash equivalents | US$400m | US$479m |
| Total borrowings / net debt | US$2.012bn / US$1.612bn | US$1.782bn / US$1.303bn net debt |
| Net debt / adjusted EBITDA | 1.45x | 1.03x; covenant ceiling 2.50x |
| Dividend declared | R0.40 per share | R0.90 per share |
Management’s non-IFRS net cash-flow measure was a US$132m outflow, compared with a US$2m outflow in 2017; it incorporates capital expenditure and environmental payments and is not the same as IFRS net cash from operations. The average realised gold price was US$1,252/oz, versus US$1,255/oz. AISC and AIC are non-IFRS measures and may not be directly comparable with other miners.
Material changes and unusual items
- Gold-equivalent production declined as South Deep underperformed; international operations generally met or exceeded production and cost guidance.
- South Deep produced 157,100oz, about half its original 321,000oz guidance. A 45-day strike in November–December halted production. Restructuring removed 1,092 employees and 420 contractors and reduced the mine’s cost base by more than R800m, according to management.
- South Deep recorded a US$481.5m impairment. Total impairment and write-downs were US$520.3m, compared with US$200.2m in 2017. Restructuring costs rose to US$113.9m from US$9.2m, principally relating to the Tarkwa contractor transition and South Deep and Damang restructurings.
- Gold Fields acquired a 45% interest in the Asanko Gold Mine for US$165m; a further US$20m is payable upon an agreed development milestone, no later than 31 December 2019. The transaction generated a US$51.8m accounting gain. Asanko is equity-accounted in the IFRS statements.
- Gruyere’s first gold was delayed to Q2 2019 and its forecast project cost increased 17% to A$621m (about US$480m). Damang’s reinvestment was reported ahead of plan.
- IFRS 15 was adopted from 1 January 2018 without restating 2017. The transition reduced opening retained earnings by US$3.5m; the filing reports FY2018 revenue US$15m lower than under the previous policy, offset partly by US$11.5m lower cost of sales.
- Management’s estimate for the South African silicosis and tuberculosis settlement was a US$25.1m provision. Court approval of the broader settlement remained pending. The gross mine-closure liability was US$400m, up from US$381m.
Outlook, management commentary and risks
For 2019, Gold Fields guided to attributable equivalent production of 2.13–2.18Moz, AISC of US$980–995/oz and AIC of US$1,075–1,095/oz. Planning assumptions include a US$1,200/oz gold price, R13.80/US$ and A$0.75/US$. Planned capital expenditure is US$633m: US$490m sustaining and US$143m growth capital. Management expected production and cash flow to be weighted toward the second half of 2019, as Gruyere starts production and Damang and Asanko contribute more.
- South Deep: Management targeted 193,000oz production in 2019 at AIC of US$1,394/oz and an initial return to break-even. It stated that alternatives for the asset could not be ruled out if performance fails to improve.
- Growth projects: Salares Norte’s feasibility study indicated a potential 11.5-year mine life, US$834m construction capital and a 25% IRR at US$1,300/oz gold. A final investment decision depends on environmental approval; the EIA review was expected to take 18–24 months.
- Debt and funding: Management planned to refinance or extend syndicated bank facilities and the bond during 2019 and prioritise debt reduction after the capital-intensive phase. A US$380m term-loan maturity was extended to June 2020. The filing reports US$986.7m of undrawn committed facilities at year-end.
- Market and operating risks: Gold and copper prices, exchange rates, inflation and energy costs can materially affect margins. Eskom supply reliability and tariffs are risks for South Deep; power outages and cost increases are also possible elsewhere.
- Safety, environmental and social risks: One fatality occurred in 2018; the Group TRIFR improved to 1.83 from 2.42. Two Level 3 water-related environmental incidents occurred, at Damang and Cerro Corona. Tailings-facility failure, water scarcity, acid drainage, geotechnical events, labour disputes and community opposition remain material risks.
- Legal and regulatory matters: The silicosis settlement required court approval. The filing also describes acid-drainage exposures for which a reliable total estimate was unavailable and a Randgold and Exploration lawsuit with claims stated up to R43.7bn (alternative claims approximately R26.9bn); no reliable liability estimate was provided. South African Mining Charter interpretation and Ghanaian regulatory and pre-emption measures may affect operations.
KPMG issued unqualified audit opinions on the financial statements and internal control over financial reporting, which management and the auditor assessed as effective. PwC was selected as auditor for 2019, subject to shareholder approval.
Most important facts for investors to verify
- Whether South Deep delivers its 2019 production, productivity and cash-flow targets, and whether further asset decisions become necessary.
- Gruyere’s commissioning, final cost and ramp-up; Damang’s production and cost improvements; and the timing and approval status of Salares Norte’s EIA and funding plan.
- Debt refinancing, liquidity headroom and the path from the 1.45x net-debt-to-adjusted-EBITDA ratio toward management’s target.
- The court outcome and final cost of the silicosis settlement, and developments in the acid-drainage, tailings and Randgold and Exploration matters.
- Reported financial and cash-flow trends, including the effects of IFRS 15 and the definitions and reconciliations of non-IFRS AISC, AIC, net cash flow and adjusted EBITDA.