GFI

Business Context and Reporting Period

Company: Gold Fields Limited (NYSE & JSE: GFI)
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Quarter ended September 30, 2015 (Q3 2015)
Announcement Date: November 19, 2015

Gold Fields reported a quarter of higher production and improved cash flow despite a lower US dollar gold price. The Group achieved a fatality-free quarter, though a security incident involving an armed robbery at South Deep resulted in one fatality (a contractor) which was excluded from the official safety rate calculation.

Key Financial Metrics

Material Changes vs. Prior Periods

• Production: Group attributable equivalent gold production increased 4% quarter-on-quarter (QoQ) to 557koz, driven by a 42% surge at South Deep. Production was marginally down 0.4% year-on-year (YoY).
• Costs: AISC decreased 8% QoQ to US$948/oz and 12% YoY. Total AIC decreased 9% QoQ to US$961/oz. Cost reductions were aided by weaker currencies (Rand and Australian Dollar) and lower oil prices.
• Cash Flow: Net cash flow from operations rose to US$221 million (up from US$191 million in Q2). Free cash flow improved significantly to US$75 million (up from US$30 million in Q2), enabling a US$50 million reduction in net debt.
• Revenue: Revenue declined 4% QoQ and 9% YoY due to a lower average gold price (US$1,103/oz vs US$1,174/oz in Q2 and US$1,265/oz in Q3 2014), partially offset by higher gold sold.

Guidance, Outlook, and Management Commentary

Operational Highlights

• South Deep (South Africa): Delivered a much-improved quarter with production up 42% to 54.9koz. A strategic shift from low-profile to high-profile destress mining is underway to simplify operations, expected to continue until early 2017. Full-year 2015 production is expected between 5,900kg and 6,000kg.
• Damang (Ghana): Production increased 7%, but the mine is challenged by the current low gold price environment. Management is considering options including recapitalisation to expose higher-grade ore or preserving value until prices recover. A decision is expected in early 2016.
• Australia: Production increased 6% to 249koz. Costs in US dollar terms were 15% lower QoQ. Darlot production surged 46% due to higher grades.
• Peru (Cerro Corona): Equivalent production decreased 5% due to lower head grades. AIC per equivalent ounce increased 10% to US$731/oz.

Guidance

• Full Year 2015 Production: Expected to be within 1% to 2% of previous guidance.
• Full Year 2015 Costs: Expected to be better than previously guided, with AISC around US$1,035/oz and AIC around US$1,055/oz.
• 2016 Outlook: Management expects 2016 production to be significantly better than 2015.

Risks and Contingencies

• Safety Incident: A security contractor was killed during an armed robbery at South Deep on August 7, 2015. Six perpetrators were arrested. The incident was excluded from the official fatality rate, which remained at 0.00 for the quarter.
• Legal: A consolidated Silicosis Class Action application is pending judgment. A Mining Charter ownership element declaration application is scheduled for hearing in March 2016.
• Market Risks: Exposure to declines in gold and copper prices, currency fluctuations (particularly the Ghanaian Cedi and South African Rand), and political instability in operating regions.

Investor Verification Checklist

• South Deep Transition: Verify the progress and cost implications of the transition to high-profile destress mining and its impact on H2 2015 and 2016 production targets.
• Damang Strategy: Monitor the decision-making process regarding the Damang mine (recapitalisation vs. preservation) expected in early 2016.
• Cost Realization: Confirm if the full-year AISC guidance of US$1,035/oz is achievable given the volatility in input costs and exchange rates.
• Legal Exposure: Track the outcome of the Silicosis Class Action certification and the Mining Charter court application.
• Debt Reduction: Assess the sustainability of the debt reduction trajectory (US$50m reduction in Q3) given the current gold price environment.