Business Context and Reporting Period
Company: Gold Fields Limited
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Date: October 10, 2008
Reporting Period: Operational guidance update for the first quarter of Fiscal Year 2009 (Q1 F2009), covering the period ending September 30, 2008.
Gold Fields Limited is a major unhedged gold producer with operations in South Africa, Ghana, Australia, and Peru. The filing updates production and cost guidance following the commencement of production at the Cerro Corona mine in Peru.
Key Financial and Operational Metrics
Production Guidance (Q1 F2009):
- Group Attributable Production: Approximately 798,000 ounces.
- South African Operations: Approximately 492,000 ounces.
- International Operations: Approximately 306,000 equivalent ounces.
Cost Guidance (Q1 F2009):
- Group Cash Costs: Approximately R154,000/kg (US$618/oz).
- Group Notional Cash Expenditure (NCE): Approximately R227,000/kg (US$910/oz). NCE includes operating costs, sustaining capital, and project capital.
- South African Cash Costs: Approximately R154,000/kg (US$618/oz).
- South African NCE: Approximately R213,000/kg (US$857/oz).
- International Cash Costs: Approximately US$616/oz.
- International NCE: Approximately US$983/oz.
Financial Data Note: This filing is an operational guidance update. It does not contain audited revenue, net profit, cash flow statements, debt levels, or liquidity ratios for the period. Detailed financial results are scheduled for publication on October 29, 2008.
Material Changes Versus Prior Guidance
Production Variances:
- Group Total: Guidance reduced by 2.7% (from 820,000 to 798,000 ounces) primarily due to slower-than-expected production build-up at Cerro Corona.
- South Africa: Guidance improved by 2% due to better performance at Driefontein and Kloof, offsetting declines at Beatrix and South Deep.
- International: Guidance reduced by approximately 30,000 equivalent ounces due to Cerro Corona delays.
Cost Variances:
- Group NCE: Improved by approximately 6% versus previous guidance.
- South Africa: Cash costs and NCE are slightly better than previous guidance.
- International: Cash costs are higher than previous guidance (US$616/oz vs US$570/oz), while NCE is lower (US$983/oz vs US$1,060/oz).
Mine-Specific Changes:
- Cerro Corona (Peru): Production significantly below guidance (12,000 oz vs 42,000 oz) due to commissioning issues with flotation circuits.
- South Deep (South Africa): Production 13% below guidance due to slower return to stability after workforce restructuring.
- Beatrix (South Africa): Production 13% below guidance due to lower volumes and yields.
- Damang (Ghana): Production 12% below guidance due to premature pebble crusher failure.
- Kloof (South Africa): Production 25% better than guidance.
Outlook, Management Commentary, and Risks
Management Commentary: CEO Nick Holland stated that despite rehabilitation impacts in the September quarter, the company remains on track to achieve a run rate of approximately 1 million attributable equivalent ounces during the March quarter of 2009 (Q3 F2009). The target NCE for that period is approximately US$725/oz (assuming an exchange rate of R/US$8.00).
Project Status and Risks:
- Cerro Corona: Commissioning problems are considered not unusual and are expected to be resolved by the end of December 2008. Full production is targeted for end-December 2008.
- Tarkwa (Ghana): Mill expansion is nearing completion; full throughput expected by end-December 2008.
- St Ives (Australia): Ramp-up at Cave Rocks was delayed by complex geology but is expected to improve in Q2 F2009.
- Rehabilitation: Key rehabilitation projects at Driefontein and South Deep were completed as planned. Kloof Main shaft steelwork replacement is expected by end-Q2 F2009.
Unusual Items: The filing highlights specific operational disruptions including equipment failure (Damang), geological complexities (St Ives), and workforce restructuring impacts (South Deep).
Investor Verification Checklist
- Q1 F2009 Financial Results: Verify actual revenue, profit, and cash flow when detailed results are published on October 29, 2008.
- Cerro Corona Commissioning: Monitor progress reports to confirm resolution of flotation circuit issues and achievement of full production by December 2008.
- South Deep Stability: Track production recovery rates following the workforce reduction and restructuring.
- Cost Realization: Compare actual Q1 cash costs and NCE against the updated guidance of US$618/oz and US$910/oz respectively.
- Exchange Rate Sensitivity: Assess the impact of the ZAR/USD exchange rate on reported costs, as guidance assumes R/US$8.00 for future targets.