Business Context and Reporting Period
This Form 6-K filing by Gold Fields Limited, dated May 22, 2019, reports the results of the Annual General Meeting (AGM) held on May 21, 2019. The filing details shareholder voting outcomes on director re-elections, remuneration policies, and special resolutions regarding equity issuance and share buybacks. It also includes management commentary on operational performance, safety, restructuring efforts, and strategic growth initiatives for the 2018 fiscal year and outlook for 2019.
Key Financial Metrics and Operational Data
- Revenue: Approximately US$2.6 billion for the 2018 fiscal year.
- Value Distribution (2018): Total value distributed to stakeholders was US$2.7 billion, including US$442 million to the workforce, US$283 million to governments (taxes/royalties), US$147 million to capital providers/shareholders, and US$1.82 billion to business partners.
- Community Investment: Approximately US$690 million (25% of total value creation) remained in host communities through job creation, procurement, and shared value projects.
- Debt and Liquidity: The company raised US$1 billion in new bonds in May 2019 to strengthen its debt profile. Debt was increased to fund the acquisition of Asanko Gold, though the balance sheet is described as being in "good health."
- Production Outlook: Expected production from the portfolio in Australia, Ghana, and Peru to approach 2 million ounces (Moz) during 2019.
- Workforce: Total workforce decreased 5% to 17,611 in 2018 (from 18,594 in 2017). Direct employees declined 37% to 5,601, while contractors increased 23% to 12,010.
Material Changes and Operational Developments
- South Deep Restructuring: A fundamental restructuring was initiated in Q3 2018 to address losses of approximately R100 million per month. This involved closing loss-making areas, reducing the cost base, and retrenching over 1,500 employees and contractors. The mine experienced a 45-day strike due to union opposition but is currently meeting targets.
- Geographic Diversification: The proportion of attributable Mineral Reserves held outside South Africa increased significantly. At the end of 2018, over 40% of reserves were outside South Africa, compared to just over 70% held by South Deep two years prior.
- Acquisitions and Projects:
- Acquired a 45% stake in the Asanko gold mine in Ghana.
- Completed a US$500m+ investment in the Damang mine (Ghana) and Gruyere project (Australia), with production benefits expected in 2019.
- Completed a feasibility study for the Salares Norte project in Chile, declaring a maiden Mineral Reserve.
- Extended the life of the Cerro Corona mine in Peru to 2030, with scoping studies underway to extend to 2040.
- Safety Performance: The Total Recordable Injury Frequency Rate (TRIFR) improved by 55% since 2014, reaching 1.83 incidents per million hours worked in 2018. However, one fatality occurred in 2018.
- Legal Settlement: Reached a historic settlement regarding Occupational Lung Disease (silicosis and TB) with ex-mineworkers. The total settlement is R5bn (US$380m), with Gold Fields contributing almost R400m.
Guidance, Outlook, and Risks
- Outlook: Management expects the global portfolio outside of South Africa to maintain production levels of approximately 2Moz over the medium to longer term at current gold prices. The restructuring at South Deep is expected to significantly reduce cash losses in 2019.
- Management Commentary: Chair Cheryl Carolus emphasized the critical nature of safety and the necessity of the South Deep restructuring to ensure long-term sustainability. The company is focusing on strengthening relations with host communities and diversifying its asset base away from South Africa.
- Risks and Contingencies:
- Operational Risk: Ongoing challenges at South Deep, including labor relations and the execution of restructuring plans.
- Regulatory/Environmental: The Salares Norte project in Chile is awaiting an Environmental Impact Assessment outcome, expected in early 2020.
- Legal/Financial: Contingency regarding the R400m contribution to the occupational lung disease settlement pending court approval.
Key Facts for Investor Verification
- Verify the execution of the US$1 billion bond issuance and its impact on the company's leverage ratios.
- Monitor the progress of the South Deep restructuring and its ability to achieve the projected reduction in cash losses for 2019.
- Confirm the timeline and regulatory approval status for the Salares Norte project in Chile.
- Track the production ramp-up at the Damang mine (Ghana) and Gruyere project (Australia) to ensure they meet the 2Moz production target for the non-South African portfolio.
- Review the final court approval and payment schedule for the R400m occupational lung disease settlement.