Business Context and Reporting Period
Company: Gold Fields Limited
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Year ended December 31, 2018
Announcement Date: February 15, 2019
Gold Fields reported its 2018 full-year results, marking the second year of a reinvestment program initiated in late 2016. The strategy focuses on lowering group all-in costs and extending mine life through significant capital projects, primarily at Damang (Ghana) and Gruyere (Australia). The company also completed a major restructuring at its South Deep mine in South Africa and acquired a 45% interest in the Asanko Gold Mine in Ghana.
Key Financial Metrics
| Metric | 2018 (US$) | 2017 (US$) |
|---|---|---|
| Revenue | $2,578 million | $2,762 million |
| Net Loss | ($348 million) | ($19 million) |
| Headline Earnings | $61 million | $210 million |
| Normalised Profit | $27 million | $154 million |
| Attributable Gold Production | 2.04 million ounces | 2.16 million ounces |
| All-in Sustaining Costs (AISC) | $981/oz | $955/oz |
| All-in Costs (AIC) | $1,173/oz | $1,088/oz |
| Capital Expenditure | $814 million | $834 million |
| Net Debt | $1,612 million | $1,303 million |
| Net Debt / Adjusted EBITDA | 1.45x | 1.03x |
| Dividend (Total for Year) | 40 SA cents/share | 90 SA cents/share |
Material Changes vs. Prior Period
- Production Decline: Attributable gold production decreased 6% to 2.04 million ounces, driven almost exclusively by a 44% production drop at South Deep due to industrial action, restructuring, and geotechnical challenges.
- Cost Performance: Despite the production decline, Group AISC ($981/oz) and AIC ($1,173/oz) remained below the lower end of the 2018 guidance range. International operations (excluding South Deep) outperformed guidance on both production and costs.
- Profitability Impact: Normalised profit fell significantly to $27 million from $154 million in 2017. The reported net loss of $348 million was heavily influenced by non-recurring items, including a $482 million impairment charge at South Deep and restructuring costs.
- Debt Increase: Net debt rose to $1.612 billion, primarily due to the $165 million acquisition of the Asanko JV and peak capital spending on growth projects. The debt-to-EBITDA ratio remains within the 2.5x covenant.
- Regional Highlights:
- West Africa: Production increased 6% (excluding Asanko) due to strong performance at Damang, which exceeded guidance by 13%.
- Australia: Production was 5% lower than 2017, partly due to the exclusion of the discontinued Darlot operation, but all active mines outperformed cost guidance.
- South America: Cerro Corona saw a 2% increase in gold-equivalent production, driven by higher copper grades and prices.
Guidance, Outlook, and Risks
2019 Guidance
- Production: Expected to increase 4% to 7% to a range of 2.13–2.18 million ounces, driven by the completion of the Damang project, the start of Gruyere production, and a full year of Asanko contribution.
- Costs: AISC guidance is $980–$995/oz; AIC guidance is $1,075–$1,095/oz.
- Capital Expenditure: Planned at $633 million, a significant decrease from 2018 as growth projects near completion.
Management Commentary
CEO Nick Holland highlighted that the reinvestment program is on track to deliver over 2 million ounces annually for the next decade. The restructuring at South Deep, which removed over R800 million from the cost base, is expected to allow for a gradual production build-up in 2019. The Gruyere project is 89% complete, with first ore through the crusher expected in Q1 2019 and first gold in Q2 2019.
Risks and Contingencies
- South Deep Restructuring: The mine faced a six-week strike and a fatality in October 2018. While the restructuring is complete, production recovery is expected to be gradual.
- Project Delays/Costs: The Gruyere project experienced a slight delay (first gold moved to Q2 2019) and a 17% increase in final forecast capital costs.
- Regulatory Environment: Ongoing engagement with the Ghanaian government regarding the 2018 Mining Charter and potential pre-emption rights on minerals.
- Safety: The company recorded one fatality in 2018. The Total Recordable Injury Frequency Rate (TRIFR) improved 24% year-over-year to 1.83.
Investor Verification Checklist
- South Deep Recovery: Verify the timeline and success of the production ramp-up at South Deep following the restructuring and strike.
- Gruyere Commissioning: Monitor the Q2 2019 start date for first gold and the management of the increased capital cost estimate (A$621m).
- Asanko Integration: Assess the performance of the Asanko JV in its first full year of contribution in 2019.
- Debt Management: Track the reduction in the net debt-to-EBITDA ratio as capital expenditure declines in 2019.
- Cost Discipline: Confirm that AISC remains within the $980–$995/oz guidance range despite the inclusion of new, ramping operations.