Gold Fields Limited — FY2014 Form 20-F
Reporting period: Fiscal year ended December 31, 2014; filed April 14, 2015. This is an annual report, not a standalone fourth-quarter filing. Financial statements are presented in U.S. dollars under U.S. GAAP; operating-cost and AISC/AIC measures also use IFRS data and are non-GAAP. Sibanye Gold’s KDC and Beatrix results are reported as discontinued operations.
Business context and key financial metrics
Gold Fields operated eight producing mines across South Africa, Ghana, Australia and Peru, with copper also produced at Cerro Corona in Peru. The Yilgarn South mines, acquired in October 2013, contributed for a full year in 2014. Gold production was 2.294 million equivalent ounces, of which 2.219 million ounces were attributable to Gold Fields.
| Metric | FY2014 | FY2013 | Change / context |
|---|---|---|---|
| Revenue | $2,868.8 million | $2,906.3 million | Down 1.3%; lower realized gold price partly offset by higher equivalent ounces sold. |
| Net loss attributable to Gold Fields shareholders | $27.2 million | $247.9 million | Continuing-operations loss was $27.2 million, versus $268.4 million. |
| Basic loss per share, continuing operations | $0.04 | $0.36 | Loss narrowed. |
| Cash from continuing operations | $743.8 million | $334.3 million | Higher mainly due to working-capital release and lower cash taxes paid. |
| Capital expenditure | $480.5 million U.S. GAAP; $608.9 million IFRS | $543.7 million U.S. GAAP; $739.2 million IFRS | Lower, reflecting capital prioritization and completion of key South Deep infrastructure. |
| AISC per ounce, net of by-product revenue | $1,053 | $1,202 | Down 12.4%. |
| AIC per ounce, net of by-product revenue | $1,087 | $1,312 | Down 17.2%. |
| Cash and cash equivalents | $458.0 million | $325.0 million | Year-end cash increased. |
| Total debt | $1,910.9 million | $2,060.1 million | Debt less cash was approximately $1.45 billion at year-end. |
The average realized gold price fell 9.9%, from $1,386 to $1,249 per ounce. Production costs were $1,808.1 million, down 0.6%; depreciation and amortization rose 19.1% to $677.3 million. The effective tax rate was unusually high at 112.4%, including a $38.3 million valuation allowance on tax assets. Gold and copper reserves attributable to Gold Fields were approximately 48.1 million ounces and 620 million pounds, respectively.
Material changes versus FY2013
- Equivalent gold production rose about 9.0%, mainly because the acquired Yilgarn South assets contributed for a full year rather than one quarter. The average realized gold price declined.
- South Deep production fell 34% to 201,000 ounces, reflecting safety stoppages and ground-support remediation. Tarkwa production declined 12% after heap-leach operations ceased; Damang production increased 16%.
- Group AISC and AIC per ounce fell substantially. Management attributed the improvement to cost initiatives, lower sustaining and growth spending, and the absence of FY2013 inventory write-offs.
- Net loss narrowed, but FY2014 included $78.0 million of gains on investment disposals, including $72.8 million from Chucapaca. FY2013 included $215.3 million of asset impairments and write-offs, compared with $14.0 million in FY2014.
- Gold Fields sold its interests in Chucapaca and Yanfolila and continued to focus growth on near-mine exploration and selective acquisitions.
Outlook, management priorities and key risks
- FY2015 outlook: Management estimated attributable production of approximately 2.2 million equivalent ounces, AISC of $1,055 per ounce and AIC of $1,075 per ounce. Estimates assumed R11.50 per U.S. dollar and U.S.$0.80 per Australian dollar; they were unaudited and subject to change.
- Strategic targets: Management’s objective is a 15% free-cash-flow margin at a $1,300 gold price. FY2015 priorities include South Deep, cash generation, dividends of 25%–35% of normalized earnings, and reducing net debt to EBITDA to 1.0 times by end-2016.
- South Deep execution: The mine was undergoing a production-plan rebasing and geotechnical review. Management was evaluating mining-method and pillar-layout changes; commercial implementation and production effects remained uncertain.
- Debt and liquidity: Approximately $1.017 billion of committed facilities was undrawn at year-end. About $0.79 billion of consolidated debt securities was due over the 36 months following the report date. The company reported compliance with debt covenants and no default.
- Legal and regulatory exposure: The SEC and South African Hawks were investigating the South Deep BEE transaction. Silicosis and tuberculosis class-action certification proceedings and an individual claim were pending. Gold Fields also disputed SARS’s disallowance of a South Deep tax capital allowance. These matters were not quantifiable in the filing; no related provision was recorded for the cited proceedings.
- Other material risks: Gold and copper price volatility, currency movements, power cost and supply constraints, labor disruption, mine safety, permitting and South African empowerment requirements, community opposition, environmental obligations and potentially significant post-closure acid drainage. The filing states that a reliable estimate of the potential long-term acid-drainage impact at South Deep and Cerro Corona was not available.
- Unusual contingent exposure: Gold Fields guaranteed $1 billion of notes issued by Orogen; Sibanye Gold remained a guarantor at filing, with a consent solicitation to release it still pending. Gold Fields’ indemnity to Sibanye Gold could become relevant if payments were required.
KPMG issued an unqualified opinion on the U.S. GAAP financial statements and concluded that internal control over financial reporting was effective as of December 31, 2014.
Important facts for investors to verify
- Whether South Deep’s remediation, revised mine plan and safety performance support the FY2015 production and cost estimates.
- Whether FY2014 cash generation and lower AISC are sustainable without relying on working-capital releases, asset disposals or favorable exchange rates.
- The schedule and refinancing plan for debt maturities, and progress toward the net-debt-to-EBITDA target.
- Developments in the BEE investigations, South Deep tax dispute, occupational-disease litigation, and Ngadju native-title appeal.
- Whether environmental rehabilitation provisions adequately reflect future closure costs, especially unresolved acid-drainage risks.
- How the company’s non-GAAP AISC/AIC measures reconcile with reported financial statements and compare with peers.