GFI

Business Context and Reporting Period

Company: Gold Fields Limited (South African incorporated)

Filing Type: Form 20-F (Annual Report)

Reporting Period: Fiscal year ended June 30, 2010

Business Overview: Gold Fields is a major global producer of gold and copper, with operations primarily in South Africa, Ghana, Australia, and Peru. The company is in the process of changing its fiscal year-end from June 30 to December 31 to align with industry peers, effective beginning in 2011.

Accounting Basis: Financial statements are prepared in accordance with U.S. GAAP and presented in U.S. dollars. The company also reports non-GAAP measures including Total Cash Costs and Notional Cash Expenditure (NCE).

Key Financial Metrics (Fiscal 2010)

Production Statistics: Produced 3.84 million ounces of gold (3.50 million attributable ounces). Attributable gold reserves as of June 30, 2010, were approximately 75.9 million ounces (excluding copper).

Material Changes vs. Prior Period

• Revenue Growth: Revenues increased 29% to $4,164.3 million from $3,228.3 million in fiscal 2009, driven primarily by a higher average realized gold price ($1,085/oz vs. $875/oz) and increased production at international operations.
• Profitability: Net income attributable to shareholders more than doubled to $391.0 million from $160.9 million in fiscal 2009.
• Cost Increases: Total cash costs per ounce rose to $670 from $538 in fiscal 2009. This increase was driven by higher input costs (labor, power, fuel) and lower production volumes at South African operations due to safety-related stoppages.
• Production Variance: South African production decreased 5.2% due to safety stoppages and a slow start post-holidays. Conversely, international production increased 15.5%, led by a 79.5% increase at Cerro Corona (Peru) due to a full year of operations.
• Debt Reduction: Long-term loans decreased significantly to $430.0 million from $785.9 million in fiscal 2009, reflecting debt repayments and the issuance of new $1 billion bonds in October 2010 (post-period).

Guidance, Outlook, and Risks

Management Commentary and Outlook

• Strategic Goals: The company aims to grow production to approximately 5 million attributable gold equivalent ounces by 2015. The immediate target for the 12 months ending June 30, 2011, is 3.5 to 3.8 million attributable ounces.
• Cost Targets: Management targets an NCE margin of 20% for the 12 months ending June 30, 2011, through business process re-engineering and cost optimization.
• Capital Allocation: Significant capital is being directed toward the build-up of the South Deep mine (targeting 750,000–800,000 ounces/year by 2014) and exploration projects in Mali (Yanfolila) and Peru (Chucapaca).
• Year-End Change: The company will file a transition report for the period July 1, 2010, to December 31, 2010, as it shifts its fiscal year-end.

Risks and Contingencies

• Commodity Price Volatility: The company does not hedge its gold production, exposing it to significant downside risk if gold prices fall below production costs.
• South African Regulatory Environment: Compliance with the Revised Mining Charter (requiring 26% Historically Disadvantaged South African ownership by 2014) and the new Royalty Act (effective March 2010) poses financial and operational risks. Failure to comply could result in the suspension of mining rights.
• Power Supply: Operations in South Africa and Ghana face risks from power shortages and significant tariff increases (e.g., Eskom in South Africa, VRA in Ghana).
• Safety and Seismicity: Deep-level mining in South Africa carries high risks of seismic events and rock bursts, leading to production stoppages and fatalities.
• Acquisition Integration: The company has not independently confirmed the reliability of pre-acquisition reserve data for the South Deep mine, creating uncertainty regarding long-term resource estimates.

Key Facts for Investor Verification

• Reserve Reliability: Verify the accuracy of South Deep reserves, as a significant portion relies on pre-acquisition data from 2005 that has not been fully independently confirmed by Gold Fields.
• Regulatory Compliance Costs: Assess the financial impact of the South African Revised Mining Charter and the new Royalty Act on future margins and capital requirements.
• Power Cost Exposure: Monitor the trajectory of electricity tariffs in South Africa and Ghana, which constitute a major portion of operating costs and are subject to regulatory increases.
• South Deep Build-up: Track the progress of the South Deep mine's production ramp-up, which is critical to meeting the company's 2015 production targets.
• Year-End Transition: Confirm the comparability of future financial reports as the company transitions from a June 30 to a December 31 fiscal year-end.