GFI

Business Context and Reporting Period

Company: Gold Fields Limited
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Financial year ended 30 June 2005
Submission Date: 19 October 2005 (Filing date); 13 September 2005 (Report approval date)

Gold Fields Limited is a leading, globally diversified precious metals producer with operations in South Africa, Ghana, and Australia. The 2005 financial year was characterized by significant operational success despite major external distractions, including a hostile takeover bid by Harmony Gold Mining Company Limited and the subsequent failure of a proposed reverse takeover of IAMGold Corporation. The company successfully defended against the Harmony bid, which was ruled to have lapsed by the High Court of South Africa.

Key Financial Metrics

Note: All figures in South African Rand (R) unless otherwise stated. "Moz" denotes million ounces.

Material Changes vs. Prior Period

• Net Earnings Decline: Net earnings dropped 77% to R180 million. This was primarily driven by non-operating exceptional items, including R316 million in costs related to defending the Harmony hostile bid and R58 million in costs associated with the failed IAMGold transaction. Additionally, higher amortization charges and asset impairments (R261 million) impacted results.
• Production Growth: Attributable gold production increased by 1.4% to 4.22 million ounces. South African production rose 1% to 2.82 million ounces, while international production increased 4% to 1.66 million ounces.
• Cost Management: Despite inflationary pressures and wage increases, total cash costs decreased by 1.5% to R66,041 per kilogram. South African operations successfully reduced costs by 1% through "Project 100" and "Project Beyond" initiatives.
• Exchange Rate Impact: The strengthening of the South African Rand (from an average of R6.90 to R6.21 against the US dollar) offset the benefit of a 9% increase in the US dollar gold price, resulting in a 2% decrease in the Rand gold price received by South African operations.
• Asset Impairments: Impairment charges totaled R261 million, down from R426 million in F2004. Significant impairments occurred at Beatrix (North and South sections) and Living Gold due to cost profile changes and exchange rate assumptions.

Guidance, Outlook, and Risks

Management Commentary and Outlook

Management expressed confidence in the company's operational resilience and asset quality. The strategic focus remains on achieving a 50:50 split between South African and offshore production by 2009. Key objectives for F2006 include:

• Production: Target of 4.3 million attributable ounces.
• Costs: Group costs targeted at or below R66,000/kg; South African costs at or below R70,000/kg.
• Safety: Raise safety performance by 10% to approach global benchmarks.
• Projects: Completion of the Cerro Corona feasibility study in Peru and initiation of development if positive; continued focus on the Essakane project in Burkina Faso.

The Arctic Platinum Project (APP) in Finland has been placed on hold due to increased capital costs, currency effects, and unfavorable palladium market outlooks.

Risks and Contingencies

• Political and Regulatory: Ongoing challenges in converting old-order mining rights to new-order rights in South Africa under the Mining Charter. The company expects new rights to be issued in F2006.
• Operational: Declining ore grades and rising input costs (steel, diesel, cyanide) in South Africa. Seismic activity at Driefontein caused production delays.
• Financial: Exposure to fluctuations in gold prices and exchange rates. The company maintains a strong balance sheet with net cash reserves of approximately R3.4 billion.
• Legal: Class action lawsuits filed in the US alleging human rights violations; the company intends to vigorously defend these claims.

Key Facts for Investor Verification

• Exceptional Items Impact: Verify the specific breakdown of the R374 million in exceptional costs (Harmony defense and IAMGold failure) and their impact on the reported net earnings versus core operational performance.
• Reserve Reconciliation: Review the significant reduction in attributable gold reserves (down 10.9 million ounces at Kloof due to re-modeling of the Eastern Boundary Area project) and the implications for future production guidance.
• Project Economics: Assess the viability of the Cerro Corona project in Peru given the delays and the decision to place the Arctic Platinum Project on hold.
• Cost Inflation: Monitor the ability to maintain cost targets (R66,000/kg) in F2006 amidst rising global commodity prices and wage agreements finalized in August 2005.
• Dividend Policy: Confirm the payout ratio relative to core earnings, noting the full year dividend of 70 SA cents (11 US cents) represented a 192% payout based on net earnings but a lower percentage of core earnings.