GFI

Business Context and Reporting Period

Company: Gold Fields Limited
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Quarter ended March 31, 2013 (Q1 2013)
Date of Filing: May 10, 2013

Gold Fields reported Q1 2013 results following the finalization of the unbundling of Sibanye Gold on February 11, 2013. The quarter marked the first period where Gold Fields and Sibanye Gold were managed as separate entities. The Group executed a strategic refocusing to prioritize cash generation, implementing on-mine interventions such as closing marginal production at Tarkwa, St Ives, and Agnew. Exploration and project activities were curtailed to deploy resources on the most promising targets.

Key Financial Metrics

Material Changes vs. Prior Period

• Production Decline: Attributable gold production decreased 11% quarter-on-quarter (QoQ) to 477,000 ounces, driven by the planned cessation of marginal production at Tarkwa (South heap leach), St Ives (heap leach), and Agnew (Rajah and Main lodes).
• Revenue and Profit: Revenue fell 13% QoQ to $805 million due to lower production and a 4% decline in the average gold price ($1,625/oz). Operating profit decreased 17% QoQ to $404 million.
• Costs: Net operating costs decreased 8% QoQ to $401 million. However, total cash costs per ounce increased 5% to $819/oz due to the production decline. Conversely, NCE decreased 2% to $1,291/oz due to reduced capital expenditure.
• Discontinued Operations: The quarter included a significant one-time gain of $232 million from the distribution of discontinued operations (Sibanye Gold), which does not impact continuing operations results.
• Non-Recurring Items: Expenses totaled $44 million, primarily related to the unbundling of Sibanye ($36 million) and restructuring costs ($5 million), compared to $120 million in the prior quarter.

Guidance, Outlook, and Risks

2013 Full Year Guidance:

• Production: 1,825,000 to 1,900,000 equivalent ounces (excluding discontinued operations).
• Total Cash Cost: Estimated at $860/oz.
• NCE: Estimated at $1,360/oz (including $40/oz for exploration and growth).
• Assumptions: Based on exchange rates of R9.00/USD and USD/AUD 1.04.

Management Commentary: The Group achieved a fatality-free quarter. Safety remains the top priority. The refocusing strategy is proceeding as planned, with exploration expenditure cut significantly (Greenfields from $130m in 2012 to $80m planned for 2013). Growth projects like Yanfolila (Mali) have advanced to resource development, while Chucapaca (Peru) is undergoing a re-scoping study.

Risks and Contingencies:

• Operational: Industrial action occurred subsequent to quarter-end at Tarkwa and Damang, resulting in lost production (approx. 18,500 oz and 3,200 oz respectively), though resolved at the time of filing.
• Project Delays: Permitting for the Far Southeast project in the Philippines is expected to slow due to pending elections.
• Market & Macro: Risks include gold price volatility, currency fluctuations (Rand weakness), and political conditions in operating jurisdictions (South Africa, Ghana, Peru, Mali).

Investor Verification Checklist

• Production vs. Guidance: Verify if the Q1 production decline aligns with the revised full-year guidance of 1.825m–1.900m oz.
• Cost Trajectory: Monitor if Total Cash Costs can be maintained near the $860/oz guidance given the 5% QoQ increase to $819/oz.
• South Deep Progress: Confirm the realization of benefits from the new operational model at South Deep, which is critical for future volume growth.
• Industrial Relations: Track the resolution and potential recurrence of labor disputes in Ghana (Tarkwa/Damang) and South Africa.
• Project Viability: Review the outcomes of the Chucapaca re-scoping study and the permitting status of the Far Southeast project.
• Net Debt: Assess the impact of the increased net debt ($1.41 billion) on liquidity and future financing costs.