Business Context and Reporting Period
Company: Gold Fields Limited
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Year ended 31 December 2021
Release Date: 17 February 2022
Gold Fields reported a solid operational performance for 2021, achieving both production and cost guidance despite ongoing challenges from the COVID-19 pandemic. The company achieved a production profile of 2.340 million ounces of attributable gold equivalent production. The CEO highlighted a strategic review resulting in three pillars: maximizing potential from current assets, building on ESG commitments, and growing the value and quality of the asset portfolio. The Salares Norte project in Chile remains largely on track, with first gold production expected by the end of Q1 2023.
Key Financial Metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | US$4,195 million | US$3,892 million |
| Profit Attributable to Owners | US$789 million (US$0.89/share) | US$723 million (US$0.82/share) |
| Normalised Earnings | US$929 million (US$1.05/share) | US$879 million (US$1.00/share) |
| Headline Earnings | US$890 million (US$1.00/share) | US$729 million (US$0.83/share) |
| Adjusted Free Cash Flow | US$463 million | US$631 million |
| Adjusted Free Cash Flow from Operations | US$913 million | US$868 million |
| Net Debt | US$969 million | US$1,069 million |
| Net Debt / Adjusted EBITDA | 0.40x | 0.56x |
| All-in Sustaining Costs (AISC) | US$1,063/oz | US$977/oz |
| Total All-in Cost (AIC) | US$1,297/oz | US$1,079/oz |
| Attributable Production | 2.340 million oz | 2.236 million oz |
Material Changes vs. Prior Period
- Production: Attributable gold equivalent production increased 5% year-over-year (YoY) to 2.340 million ounces, driven by strong performance at South Deep (up 29%) and Peru (up 20%).
- Profitability: Basic earnings increased 9% YoY. Normalised earnings rose 6% YoY.
- Costs: AISC increased 9% YoY to US$1,063/oz, primarily due to higher sustaining capital expenditure and inflation. Total AIC increased 20% YoY to US$1,297/oz, heavily influenced by project capital expenditure at Salares Norte.
- Cash Flow: Adjusted free cash flow decreased 27% to US$463 million due to significantly higher capital expenditure (up 86% YoY to US$1.089 billion), particularly for the Salares Norte project. However, adjusted free cash flow from operations (excluding project capex) increased to US$913 million.
- Debt: Net debt decreased by US$100 million to US$969 million, improving the net debt to adjusted EBITDA ratio to 0.40x.
- Exchange Rates: The strengthening of the South African Rand (10%) and Australian Dollar (9%) against the US Dollar impacted reported costs in USD terms.
Guidance, Outlook, and Risks
2022 Guidance (Excluding Asanko)
- Production: 2.25 million to 2.29 million ounces.
- AISC: US$1,140/oz to US$1,180/oz.
- AIC: US$1,370/oz to US$1,410/oz (US$1,230/oz to US$1,270/oz excluding Salares Norte project capex).
- Capital Expenditure: US$1.050 billion to US$1.150 billion total (Sustaining: US$625m–US$675m; Non-sustaining: US$425m–US$475m).
Longer-Term Outlook
- Production is expected to grow to 2.7 million ounces by 2024 before declining as some mines reach the end of their lives.
- South Deep is forecast to grow production by 20-30% over the next 3-4 years.
- Salares Norte is expected to produce ~200koz in 2023 and ~550koz in 2024 (first full year).
Risks and Contingencies
- Salares Norte Sanctions: Chilean regulators initiated sanction proceedings regarding the relocation of short-tailed chinchillas. Management states this will not impact the Q1 2023 commissioning schedule.
- Asanko Joint Venture: No 2022 production guidance provided for Asanko due to ongoing geological re-evaluation by the operator, Galiano. An impairment of US$53 million was recorded in 2021.
- Safety: One fatality and nine serious injuries were reported in 2021. Additionally, 17 COVID-19 related deaths occurred among employees and contractors.
- Operational Risks: Guidance does not factor in potential stoppages due to COVID-19. Risks include labor relations, power costs, and regulatory changes in operating jurisdictions.
Investor Verification Checklist
- Salares Norte Timeline: Verify the impact of the chinchilla relocation sanctions on the Q1 2023 first gold production target.
- Asanko Status: Monitor updates from Galiano regarding the Asanko mine reserve re-evaluation and future production guidance.
- Cost Inflation: Assess the sustainability of the 2022 AIC guidance given the 20% increase in 2021 and ongoing inflationary pressures in South Africa and Australia.
- Capital Allocation: Review the execution of the US$1.1 billion+ capex budget, specifically the split between sustaining and non-sustaining (Salares Norte) spend.
- Safety Performance: Track progress against the 2030 safety targets (zero fatalities/serious injuries) following the 2021 setbacks.