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, 2010 (Q3 Financial Year 2010)
Announcement Date: May 7, 2010
Overview: Gold Fields reported a significant decline in production and earnings for the quarter, primarily driven by the customary Christmas break in South Africa, accelerated maintenance at the Kloof mine, and safety-related stoppages. Despite lower production, the company achieved a net cash inflow of R1 billion.

Key Financial Metrics

Material Changes vs. Prior Period

• Production Decline: Attributable gold production fell 12% quarter-on-quarter (from 900,000 oz to 793,000 oz) and 8% year-on-year. South African production dropped significantly due to the Christmas break and maintenance at Kloof Main shaft.
• Cost Inflation: Total cash cost per ounce increased 15% to US$703, and Notional Cash Expenditure (NCE) rose 12% to US$1,003, largely due to lower production volumes spreading fixed costs.
• Earnings Drop: Net earnings decreased 78% compared to the December 2009 quarter and 76% compared to the March 2009 quarter.
• Regional Performance:
  • South Africa: Production down due to seasonal breaks and safety stoppages. Operating margin fell from 35% to 17%.
  • West Africa: Production increased 6% (to 398,000 oz combined for international regions). Damang production rose 20% following SAG mill rebuild.
  • South America: Cerro Corona saw a 13% increase in gold equivalent ounces due to higher grades.
  • Australasia: St Ives production increased 12% due to improved grades, while Agnew declined 13% due to ground conditions.

Guidance, Outlook, and Risks

Guidance for June 2010 Quarter

• Production: Estimated between 875,000 and 900,000 attributable equivalent ounces.
• Total Cash Cost: Estimated between US$675 and US$690 per ounce.
• Notional Cash Expenditure: Estimated between US$980 and US$1,000 per ounce.
• Capital Expenditure: Expected to be approximately R1,210 million (US$165 million) for South Africa.

Management Commentary

CEO Nick Holland expressed deep regret regarding three fatal accidents in the South African region (Kloof, Driefontein, and Beatrix), all related to gravity falls of ground. The company remains focused on safety initiatives, including seismic risk reduction. Production at South African mines has improved post-holiday and is expected to be sustained in Q4. International operations continue to show positive momentum, particularly in West Africa and South America.

Risks and Contingencies

• Safety: Three fatal accidents occurred in Q3; ongoing risks related to seismicity and ground stability.
• Operational: Maintenance delays (Kloof water pump column) and ground conditions (Agnew) impacting output.
• Market: Exposure to gold and copper price fluctuations; currency exchange rate volatility (ZAR/USD).
• Political/Social: Risks in operating jurisdictions including South Africa, Ghana, Peru, and Australia (e.g., labor disruptions, regulatory changes).

Investor Verification Checklist

• Safety Metrics: Verify the implementation and effectiveness of new safety protocols following the three fatal accidents in South Africa.
• Cost Trajectory: Monitor if Total Cash Costs and NCE stabilize as production volumes recover in Q4, or if inflationary pressures persist.
• South Deep Progress: Confirm the timeline for the ventilation shaft deepening and the ramp-up to the target of 750,000–800,000 oz by end-2014.
• International Growth: Validate production increases at Damang (Ghana) and Cerro Corona (Peru) against guidance.
• Capital Allocation: Review the balance between sustaining capital and project capital (e.g., Athena underground mine at St Ives) to ensure long-term growth targets are met.