Gold Fields Limited — FY2020 Form 20-F
Business context and reporting period. Annual report for the fiscal year ended 31 December 2020, filed 31 March 2021. Gold Fields is a South African-based, globally diversified gold producer with nine operating mines across South Africa, Ghana, Australia and Peru, plus the Salares Norte project under construction in Chile. Financial statements are prepared under IFRS in U.S. dollars. The filing is an annual report, not a standalone Q4 report.
Financial and operating performance
| Metric | FY2020 | Prior comparable period |
|---|---|---|
| Revenue | US$3.892bn | US$2.967bn in 2019; up 31% |
| Profit attributable to parent shareholders | US$723m | US$162m in 2019 |
| Profit before tax | US$1.178bn | US$350m in 2019 |
| Operating cash flow, per cash-flow statement | US$1.111bn | US$845m in 2019 |
| Net cash flow, company-defined non-IFRS measure | US$631m | US$249m in 2019 |
| Adjusted free cash flow / margin, non-IFRS | US$1.037bn / 28% | US$591m / 21% in 2019 |
| Attributable gold-equivalent production | 2.236Moz | 2.195Moz in 2019; up 2% |
| AISC / AIC per ounce, non-IFRS | US$977 / US$1,079 | US$897 / US$1,064 in 2019 |
| Net debt / net debt-to-adjusted-EBITDA | US$1.069bn / 0.56x | US$1.664bn / 1.29x in 2019 |
The average realized gold price rose 27% to US$1,768/oz, supporting the increase in revenue and earnings. Costs rose more modestly: AISC increased 9% and AIC 1%. Total capital expenditure was US$584m, including US$409m sustaining and US$175m growth capital. Cash and cash equivalents were US$887m; total borrowings were US$1.527bn, with US$429m of lease liabilities. Current assets were US$1.730bn and current liabilities US$917m.
The company declared total FY2020 dividends of R4.80 per share, versus R1.60 in 2019. The final R3.20 per share was declared after year-end and paid in March 2021. Net debt fell by about US$595m; net debt excluding lease liabilities was US$640m.
Material changes versus 2019
- Profit attributable to shareholders rose from US$162m to US$723m, while headline earnings increased to US$729m and normalised profit to US$879m.
- Operating cash flow increased to US$1.111bn and company-defined net cash flow to US$631m. The higher gold price and increased production were major contributors.
- Production rose despite estimated COVID-19-related lost production of approximately 78koz at South Deep and Cerro Corona. A one-time calendar alignment added about 45koz.
- Cerro Corona gold-equivalent production fell 29% to 207koz, reflecting lower grades, a lower copper-to-gold price factor and COVID-19 disruption. Australian production rose 11% to 1.017Moz, including Gruyere’s first full year at commercial production; Ghanaian regional production rose 3%.
- Financial-instrument losses remained significant at US$239m. Realised losses on hedges were US$417m, partly offset by unrealised gains. An impairment of Gold Fields’ Asanko investment of US$49.5m was recorded; the partner’s reserve and resource update was unavailable. A US$62.3m reversal of prior impairment at Far Southeast partly offset other impairment items.
Outlook, management commentary and risks
Management guided to FY2021 attributable production of 2.30–2.35Moz, AISC of US$1,020–US$1,060/oz and AIC of US$1,310–US$1,350/oz, or US$1,090–US$1,130/oz excluding Salares Norte project capital. Planned capital expenditure is approximately US$1.18bn, including US$538m sustaining capital and US$639m growth capital; US$508m is allocated to Salares Norte. Management expected the project to be about 70% complete by end-2021, with first production targeted for Q1 2023. The filing states that COVID-19 stoppages were not included in guidance and their effect on production or costs was indeterminable.
Management emphasized cash generation, debt reduction, disciplined investment and organic growth. Salares Norte is expected to add about 450koz of annual gold-equivalent production during its first seven years. The company targets a 15% free-cash-flow margin at a planning gold price of US$1,300/oz and expects its portfolio to support 2.0–2.5Moz annual production over the coming years. These are forward-looking statements, not guarantees.
- Operational and market risks: COVID-19, gold and copper prices, currency movements, cost inflation, supply constraints, power reliability and South Deep’s production ramp-up.
- Project and reserve risks: Salares Norte execution, permitting and cost overruns; reserve replacement; technical and economic assumptions underlying reserve estimates; and the absence of an updated Asanko reserve estimate.
- Environmental and social risks: tailings-facility integrity and implementation of the Global Industry Standard on Tailings Management; water availability, acid mine drainage, mine closure costs, community relations and social licence to operate.
- Contingencies: the silicosis settlement provision was US$18.3m, with claim volumes and ultimate costs uncertain. A large Randgold and Exploration litigation claim remains unresolved and unprovided for because the outcome cannot be determined. Potential acid mine drainage costs at certain sites could not be reliably estimated. A dispute with former Damang contractor BCM remains ongoing.
- Unusual items and controls: COVID-19 measures cost approximately US$30m, with more than US$3m in related community and government support. Gross mine-closure liability was US$467m. The company reported no material off-balance-sheet items other than disclosed guarantees and capital commitments. The auditor issued unqualified opinions on the financial statements and internal controls; management also assessed internal control over financial reporting as effective.
Important facts for investors to verify
- Confirm the 2021 guidance, capital budget and Salares Norte schedule against subsequent company updates; the filing gives total capital guidance as both US$1.175bn and US$1.177bn in different sections.
- Review the definitions and reconciliations of non-IFRS measures, especially AISC, AIC, net cash flow, adjusted free cash flow and adjusted EBITDA; these measures may not be comparable across companies.
- Assess the sustainability of South Deep’s production and cash-flow improvement, and obtain updated information on Asanko’s reserves, resources and impairment assumptions.
- Track realised and unrealised hedge effects, including the 2021 Australian gold puts, copper collars and Chilean peso hedge, and their impact on realized prices and project costs.
- Review developments in the BCM dispute, Randgold and Exploration litigation, silicosis claims, acid mine drainage exposure, closure funding and tailings-standard implementation.
- Check subsequent COVID-19 effects, gold-price and foreign-exchange assumptions, dividend declarations and the leadership transition to CEO Chris Griffith.