Gold Fields Limited — FY2019 Form 20-F
Reporting period: Fiscal year ended 31 December 2019; filed 6 April 2020. This is an annual report, not a standalone fourth-quarter filing. Financial statements are prepared under IFRS and presented in U.S. dollars. Gold Fields is a diversified gold producer operating in South Africa, Ghana, Australia and Peru, with the Salares Norte project in Chile.
Key financial and operating metrics
| Metric | FY2019 | FY2018 |
|---|---|---|
| Revenue | US$2.967bn | US$2.578bn |
| Profit/(loss) attributable to owners | US$161.6m | (US$348.2m) |
| Basic EPS | US$0.20 | (US$0.42) |
| Cash flows from operating activities | US$845m | US$569m |
| Capital expenditure | US$613m | US$814m |
| Attributable gold-equivalent production | 2.195Moz | 2.036Moz |
| AISC per gold ounce, original WGC interpretation | US$970 | US$981 |
| AIC per gold ounce | US$1,064 | US$1,173 |
| Net cash flow, company-defined measure | US$249m | (US$122m) |
| Adjusted free-cash-flow margin, company-defined measure | 21% | 16% |
| Net debt, pre-IFRS 16 | US$1.331bn | US$1.687bn |
| Net debt, post-IFRS 16 | US$1.664bn | Not provided on a comparable basis |
Cash and cash equivalents were US$515m at year-end, versus US$220m a year earlier. Total borrowings were US$1.846bn. The net-debt-to-adjusted-EBITDA ratio was 1.08x before IFRS 16 and 1.29x after IFRS 16. The company declared dividends totaling R1.60 per share for 2019; the final R1.00 dividend was declared and paid in February and March 2020.
Changes versus the prior year
- Revenue rose 15%, reflecting an 11% increase in average realised gold price to US$1,388/oz and higher gold sales.
- Attributable production grew 8%, supported by South Deep’s recovery, a full-year Asanko contribution, higher Damang output and Gruyere’s first production.
- Profit attributable to owners swung to US$161.6m from a US$348.2m loss. The 2018 loss included US$520.3m of net impairment charges and US$113.9m of restructuring costs; 2019 included a US$238m loss on financial instruments, largely from gold hedges as prices rose.
- AIC declined 9%, and net cash flow improved by US$371m to a positive US$249m. Net debt (pre-IFRS 16) fell US$356m.
- Operating cash flow increased, while capital expenditure fell as the Damang and Gruyere investment programmes tapered. IFRS 16 adoption added lease liabilities and changed reported net debt.
Outlook, commentary and risks
- 2020 guidance: attributable production of 2.275–2.315Moz; AISC of US$920–940/oz; AIC of US$1,035–1,055/oz, or US$975–995/oz excluding Salares Norte expenditure; and capital expenditure of US$630m. Guidance assumes exchange rates of R14.50/US$ and A$0.69/US$.
- Growth and debt: The Board approved construction of Salares Norte in February 2020. Estimated capital cost is about US$860m, with first production expected in Q1 2023. Management targeted US$300–400m of debt reduction in 2020 while maintaining a dividend policy of 25–35% of normalised earnings.
- COVID-19: South Deep was placed on care and maintenance during South Africa’s 21-day lockdown in March 2020. Management assessed a hypothetical three-month group closure, with no production and approximately 50% savings on costs and capital; duration and actual impact were uncertain. At filing, the company reported about US$600m cash and more than US$1.5bn of committed undrawn facilities, and considered liquidity adequate for a considerable interruption.
- Operational and market risks: Gold and currency volatility, rising input costs, energy reliability and tariffs, reserve replacement, South Deep execution, labour relations, permitting and resource nationalism, water availability, geotechnical events, tailings facilities, climate change and contractor performance. One fatality and 12 serious injuries were reported; TRIFR increased to 2.19 from 1.83. Gold Fields reported no Level 3–5 environmental incidents in 2019.
- Contingencies and unusual items: Gold Fields recorded a US$21.2m provision for its share of the silicosis and tuberculosis settlement (nominal value US$29.2m). Potential acid mine drainage liabilities could not be reliably estimated beyond existing rehabilitation provisions. The filing also describes significant litigation claims for which a reliable liability estimate was unavailable. Gross mine-closure liability was US$436m, up from US$400m.
- Controls and audit: A material weakness in year-end cut-off controls led to restatements of prior-period balance-sheet and cash-flow captions, with no impact on prior-period earnings or EPS. Management reported remediation by 31 December 2019; PwC opined that internal control over financial reporting was effective at year-end and issued an unqualified opinion on the financial statements.
Important facts for investors to verify
- Confirm the drivers and sustainability of the earnings recovery, including the contribution of higher gold prices, operations and hedge losses.
- Track South Deep’s production, costs, safety and execution against its 2020 plan and longer-term reserve assumptions.
- Assess Salares Norte’s funding, construction schedule, permitting and cost estimates, and the impact of project spending on debt reduction and dividends.
- Review liquidity and debt maturities, including the 2020 notes and the availability and terms of committed facilities.
- Evaluate COVID-19 disruption scenarios and whether subsequent operating results differ materially from management’s assumptions.
- Review the year-end cut-off control remediation, restated comparative figures, and the assumptions behind rehabilitation, silicosis and other contingent liabilities.
AISC, AIC, net cash flow, adjusted free-cash-flow margin and adjusted EBITDA are non-IFRS measures; the filing cautions that definitions may differ across companies.