Gold Fields Limited — FY2012 Form 20-F
Reporting period: Fiscal year ended December 31, 2012; filed May 14, 2013. This is an annual report, not a standalone Q4 filing, and the supplied filing text does not provide separate Q4 financial results. Financial statements are audited, prepared under U.S. GAAP, and presented in U.S. dollars unless noted. Comparisons below are to FY2011.
Business context and reporting period
Gold Fields mined gold across South Africa, Ghana, Australia and Peru, with copper also produced at Cerro Corona in Peru. FY2012 results include the KDC and Beatrix operations, which were distributed to shareholders in the February 18, 2013 spin-off of Sibanye Gold. Accordingly, FY2012 consolidated results do not represent the post-spin-off business. Gold Fields’ remaining portfolio includes South Deep in South Africa, mines in Ghana and Australia, and Cerro Corona.
Key financial and operating metrics
| Metric | FY2012 | FY2011 |
|---|---|---|
| Revenue | $5,551.8 million | $5,800.1 million |
| Net income | $652.5 million | $953.0 million |
| Net income attributable to Gold Fields shareholders | $654.3 million | $881.5 million |
| Basic earnings per share | $0.90 | $1.22 |
| Cash provided by operations | $1,146.9 million | $1,907.5 million |
| Capital expenditure | $1,322.8 million | $1,153.0 million |
| Cash and cash equivalents at year-end | $655.6 million | $744.0 million |
| Total loans at year-end | $2,361.2 million | $1,907.7 million |
| Total gold production, including gold equivalents | 3.348 million oz | 3.697 million oz |
| Realized gold price | $1,654/oz | $1,569/oz |
| Total cash costs per ounce | $960 | $835 |
| Total production costs per ounce | $1,200 | $1,050 |
| Notional cash expenditure (NCE) per ounce | $1,364 | $1,153 |
Gross loans less reported cash imply approximate net debt of $1.71 billion at year-end. The company reported $831.3 million of committed, undrawn facilities at December 31, 2012. Cash costs, production costs per ounce and NCE are non-U.S. GAAP measures; the filing cautions that they may not be comparable with similarly titled measures at other companies.
FY2012 NCE margin was 18%, down from 25% in FY2011, reflecting lower production and higher capital expenditure. Attributable production was 3.254 million ounces. Gold Fields reported 54.9 million ounces of attributable gold reserves excluding Sibanye Gold; the combined pre-spin-off reserve figure was 68.4 million ounces, including 13.5 million ounces attributable to Sibanye Gold. Attributable copper reserves were 1.024 billion pounds.
Material changes versus FY2011
- Revenue fell 4.3%; total production declined about 9.4%, while the realized gold price rose 5.4%. Lower production more than offset the higher gold price.
- Net income fell to $652.5 million from $953.0 million. Shareholder-attributable income was $654.3 million; the difference reflects a small loss attributable to noncontrolling interests in FY2012.
- Operating cash flow declined $760.6 million to $1,146.9 million. The filing cites weaker sales, higher production costs, increased working-capital investment, royalties and taxes.
- Cash costs per ounce rose 15%, and NCE per ounce rose about 18%. Production costs increased $201.4 million to $3,190.4 million, while capital spending rose $169.8 million.
- Total loans increased by approximately $453.5 million. The current portion fell substantially, while long-term loans rose; the company also had significant committed but undrawn facilities.
Outlook, management commentary and key risks
Management shifted strategy from pursuing production growth to prioritizing cash generation, returns on capital and profitable ounces. It discontinued its former five-million-ounce growth target and said it would not provide long-term project production estimates until feasibility information and development decisions are available. The stated dividend policy is to distribute 25%–35% of normalized earnings, subject to cash availability and applicable solvency and liquidity requirements.
For FY2013, management estimated attributable production of 2.010–2.085 million equivalent ounces for the group including two months of Sibanye Gold production, or 1.825–1.900 million ounces excluding Sibanye Gold. Excluding Sibanye Gold, estimated total cash costs were $860/oz and NCE $1,360/oz. Estimates assumed R9.00 per U.S. dollar and A$1.04 per U.S. dollar; the company noted that estimates were unaudited and subject to change. South Deep was expected to ramp toward 700,000 ounces annually by December 2016, with approximately R5 billion of further investment planned over three years.
- Labor and safety: South African strikes and a fatal fire at the former KDC mine reduced FY2012 production by an estimated 145,000 ounces across KDC and Beatrix; management also cited a 30,000-ounce loss from the fire. Further labor disruption, safety stoppages and wage pressure remained risks. Ghana operations experienced a production stoppage in April 2013.
- Costs and power: Wage, electricity, fuel and other input-cost increases pressured margins. Management anticipated further electricity tariff increases in South Africa and potential power-supply constraints.
- Water, environment and regulation: Tarkwa heap-leach operations faced a Ghanaian environmental directive and required water-treatment facilities. Acid mine drainage, water-license compliance, rehabilitation costs, and changing tax, royalty and mining rules could affect operations and spending.
- Legal and governance matters: Two proposed South African class actions concerning silicosis and other occupational lung diseases were being opposed; potential liability could not be quantified. A separate legacy claim against Western Areas cited claims ranging from approximately R519 million to R11–12 billion. A Board investigation into a BEE transaction related to the South Deep license was ongoing.
- Commodity, currency and project risk: Gold Fields generally did not hedge future gold production, leaving revenue exposed to gold-price declines. Currency movements affect reported costs and earnings. Exploration and development projects may not prove economic; the Chucapaca feasibility study, for example, did not support proceeding without further value engineering.
The company reported effective disclosure controls and internal control over financial reporting as of December 31, 2012; the auditor also opined that internal control over financial reporting was effective.
Investor verification priorities
- Confirm the post-spin-off basis of comparison: FY2012 includes KDC and Beatrix, while FY2013 guidance is presented both including two months of Sibanye Gold and excluding it.
- Reconcile reported cash flow, capital spending, year-end debt, undrawn facilities and the refinancing completed after year-end.
- Track production, unit costs, capital needs and ramp-up milestones at South Deep, and test whether the stated production and cost guidance assumptions remain appropriate.
- Assess the effects of labor actions, safety stoppages, water-treatment requirements and power costs on mine plans and cash generation.
- Monitor the silicosis litigation, the Western Areas claim and the BEE transaction investigation; the filing does not quantify potential exposure for these matters.
- Review reserve assumptions and sensitivity to metal prices, exchange rates, operating costs and capital expenditure; reserve estimates are not guarantees of recoverable production.