GFI

Business Context and Reporting Period

Company: Gold Fields Limited
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Quarter ended September 30, 2013 (Announced November 20, 2013)
Context: Gold Fields reported a return to net earnings from continuing operations, driven by a strategic shift to reduce costs and improve margins. The company completed the acquisition of the Yilgarn South assets (Granny Smith, Lawlers, and Darlot mines) from Barrick Gold on October 1, 2013, effective post-quarter end.

Key Financial Metrics

Material Changes vs. Prior Periods

• Profitability Turnaround: The company returned to profitability with net earnings of $9.4 million, a significant improvement from a net loss of $128.5 million in the June 2013 quarter. This was primarily due to a reduction in non-recurring expenses (from $142.8 million in June to $2.2 million in September) and improved operational efficiency.
• Cost Reduction: All-in sustaining costs (AISC) dropped 23% quarter-over-quarter to $1,089/oz. Total cash costs decreased 10% to $772/oz. These reductions were achieved through the closure of marginal mining operations (e.g., heap leach at Tarkwa) and restructuring.
• Production Growth: Gold production increased 10% to 496,000 ounces compared to the June quarter, driven by higher output at South Deep, West Africa, and Cerro Corona, partially offset by lower production at Agnew.
• Revenue Decline YoY: While up sequentially, revenue was down 21% compared to September 2012 ($683.3m vs $861.9m), reflecting a 21% decrease in the average gold price received ($1,315/oz vs $1,663/oz).

Guidance, Outlook, and Risks

Guidance and Outlook

• 2013 Production: Revised full-year guidance is 1.92 million to 2.00 million ounces (including Yilgarn South assets). Excluding Yilgarn, guidance remains 1.83 million to 1.90 million ounces.
• Cost Guidance: Total cash cost guidance remains at approximately $830/oz; NCE guidance remains at approximately $1,240/oz.
• Yilgarn South: Expected to contribute 90,000 to 100,000 ounces in the December quarter with an NCE of ~$1,165/oz.
• Strategic Shift: Management is prioritizing free cash flow and margin improvement over ounce production. The Growth and International Projects (GIP) division is being broken up to reduce expenditure from $220 million (2012) to an estimated $165 million (2013).

Risks and Contingencies

• SEC Investigation: The company is subject to a regulatory investigation by the US SEC regarding the Black Economic Empowerment transaction associated with the South Deep mining license. The outcome and potential impact are currently indeterminable.
• Operational Challenges: South Deep is still in a production build-up phase with high costs. Damang and Darlot are under review for economic viability; if sustainable plans cannot be developed, care and maintenance may be considered.
• Legal Actions: Class action lawsuits regarding Silicosis and Tuberculosis claims by former and current employees are ongoing, though the quantum of damages is not yet identified.
• Market Risks: Exposure to gold price volatility, currency fluctuations (ZAR, AUD, USD), and potential labor disruptions.

Investor Verification Checklist

• SEC Investigation Status: Monitor updates on the South Deep BEE transaction investigation for potential fines or operational restrictions.
• Yilgarn Integration: Verify the realization of synergies between Agnew and Lawlers and the cost performance of the newly acquired assets in the December quarter.
• South Deep Build-up: Track the progress of the production ramp-up and cost right-sizing at South Deep, which remains a high-cost operation.
• Asset Dispositions: Confirm the sale or disposal status of non-core greenfield projects (e.g., Arctic Platinum, Woodjam, Talas) to validate cost reduction targets.
• Cost Curve Position: Assess whether the reported AISC of $1,089/oz is sustainable given the closure of marginal operations and the inclusion of high-cost build-up mines.