GFI

Business Context and Reporting Period

Company: Gold Fields Limited
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Quarter ended September 30, 2012 (Announced November 26, 2012)
Overview: The quarter was characterized by severe operational disruptions in South Africa due to unlawful strikes and an underground fire, significantly impacting production and financial results. International operations remained relatively stable, with improvements noted in Australia.

Key Financial Metrics

Material Changes vs. Prior Periods

• Production Decline: Group attributable equivalent gold production fell 6% quarter-on-quarter to 811,000 ounces (from 862,000 ounces) and 10% year-on-year. South African production dropped 11% due to strikes and fire.
• Cost Inflation: Total cash cost per ounce increased 8% to $916/oz, and NCE rose 11% to $1,448/oz, driven by lower production volumes and higher operating costs (wages, electricity tariffs).
• Earnings Compression: Net earnings decreased 14% quarter-on-quarter and 42% year-on-year. Operating profit declined 5% quarter-on-quarter.
• Cash Flow: Operating cash inflow dropped significantly to $172 million (from $514 million in June) due to working capital movements and higher costs. Net cash outflow for the quarter was $327 million.
• Debt Increase: Net debt increased by approximately $325 million quarter-on-quarter to $1.69 billion.

Guidance, Outlook, and Risks

Management Commentary & Outlook

• 2012 Production Guidance: Revised downward to no more than 3.3 million equivalent ounces for the full year, reflecting prolonged strike impacts at KDC and Beatrix.
• 2012 Cost Guidance: Total cash cost estimated at $895/oz (4% higher than previous guidance); NCE estimated at $1,370/oz (5% higher).
• South Deep Agreement: A landmark "24/7" operating model agreement was reached with the NUM, resolving long-standing tensions. This involves upfront costs of ~R170 million but aims to improve productivity and safety.
• Strategic Review: The company concluded a strategic portfolio review focusing on cash returns over production volume, prioritizing dividends (25-35% of normalised earnings) and rigorous capital allocation.

Risks and Contingencies

• Labour Disruptions: Unlawful strikes at KDC and Beatrix caused significant production losses (estimated 145,000 ounces over two quarters) and revenue loss of R2.1 billion. Violence and intimidation were reported.
• Operational Hazards: An underground fire at KDC West (Ya Rona shaft) caused 30,000 ounces of lost production and five fatalities in the prior quarter. Investigation is ongoing.
• Legal Action: A class action application regarding silicosis and occupational lung diseases was served on the company; Gold Fields intends to oppose the application.
• Project Viability: The Chucapaca project in Peru did not deliver acceptable returns in its initial feasibility study; further value engineering is required.

Investor Verification Checklist

• Strike Resolution Status: Verify the timeline for full production restoration at KDC and Beatrix following the November resolution of strikes.
• South Deep Implementation: Monitor the execution of the new 24/7 operating model and associated upfront costs vs. productivity gains.
• Cost Trajectory: Track the impact of rising electricity tariffs and wage increases on the ability to meet the revised $895/oz cash cost guidance.
• Chucapaca Project: Review the outcome of the value engineering study to determine if the project remains viable.
• Legal Exposure: Assess the potential financial impact of the silicosis class action lawsuit.
• Liquidity Position: Monitor the cash balance trend given the significant net cash outflow and increased net debt.