As filed with the Securities and Exchange Commission on April 14, 20155, 2017
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form20-F
(Mark One)
or
For the fiscal year ended December 31, 20142016
or
For the transition period from to
or
Date of event requiring this shell company report
For the transition period from to
Commission file number:1-31318
Gold Fields Limited
(Exact name of registrant as specified in its charter)
Republic of South Africa
(Jurisdiction of incorporation or organization)
150 Helen Road
Sandown, Sandton, 2196
South Africa
00-27-11-562-9700011-27-11-562-9700
(Address of principal executive offices)
with a copy to:
Taryn L. Harmse
Executive Vice-President: Group General Counsel
Tel: 00-27-11-562-9724011-27-11-562-9724
Fax: 00-27-86-720-2704011-27-86-720-2704
taryn.harmse@goldfields.co.zaTaryn.Harmse@goldfields.com
150 Helen Road
Sandown, Sandton, 2196
South Africa
(Name, Telephone,E-mail and/or Facsimile number and Address of Company Contact Person)
and
Thomas B. Shrophire,Shropshire, Jr.
Linklaters LLP
Tel: 00-44-20-7456-3223011-44-20-7456-2000
Fax: 00-44-20-7456-2222011-44-20-7456-2222
One Silk Street
London EC2Y 8HQ
United Kingdom
Securities registered or to be registered pursuant to Section 12(b) of the Act
Title of Each Class | Name of Each Exchange on Which Registered | |
Ordinary shares of par value Rand 0.50 each
| New York Stock Exchange*
|
| * | Not for trading, but only in connection with the registration of the American Depositary Shares pursuant to the requirements of the Securities and Exchange Commission. |
Securities registered or to be registered pursuant to Section 12(g) of the Act
None
(Title of Class)
Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act
None
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the Annual Report
775,308,626820,606,945 ordinary shares of par value Rand 0.50 each
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes x☒ No ¨☐
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Yes ¨☐ No x☒
Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x☒ No ¨☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of RegulationS-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x☒ No ¨☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or anon-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule12b-2 of the Exchange Act. (Check one):
Large accelerated filer ☒ Acceleratedxfiler ☐ Non-accelerated Accelerated filer ¨ Non-accelerated filer ¨☐
Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
U.S. GAAP x☐ International Financial Reporting Standards as issued by the International Accounting Standards Board ¨☒ Other ¨☐
If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow: Item 17 ¨☐ Item 18 ¨☐
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). Yes ¨☐ No x☒
(APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PAST FIVE YEARS)
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ¨☐ No ¨☐
Gold Fields — Worldwide Locations(1)
Note:
PRESENTATION OF FINANCIAL INFORMATION
Gold Fields Limited, or Gold Fields or the Company, is a South African company and in fiscal 2014 approximately 9%2016 13%, 32%, 45%43% and 14%12% of Gold Fields’ operations, based on goldgold-equivalent production, were located in South Africa, Ghana, Australia and Peru, respectively. Its books of account are maintained in South African Rand. The reporting currency of the Gold Fields consolidated financial statements is the U.S. dollar. The Group’s annual and interim financial statements are prepared in accordance with International Financial Reporting Standards, or IFRS, as issued by the International Accounting Standards Board and as prescribed by law.law (refer to the “Basis of preparation” section of the accounting policies to the consolidated financial statements). Until December 31, 2015, Gold Fields also preparesprepared annual financial statements in accordance with United States Generally Accepted Accounting Principles, or U.S. GAAP. US GAAP, for inclusion in the annual report on Form20-F (refer note 43 to the consolidated financial statements).
Except as otherwise noted, the financial information included in this annual report has been prepared in accordance with U.S. GAAPIFRS and is presented in U.S. dollars, and for descriptions of critical accounting policies refer to accounting policies under U.S. GAAP.IFRS.
For Gold Fields’ consolidated financial statements, unless otherwise stated, balance sheetstatement of financial position item amounts are translated from Rand and A$ to U.S. dollars at the exchange rate prevailing on the date that it closed its accounts for fiscal 20142016 (Rand 11.5614.03 per $1.00 and $1.00$0.72 per A$1.231.00 as of December 31, 2014)2016), except for specific items included within shareholders’ equity and the statements of cash flows that are translated at the rate prevailing on the date the relevant transaction was entered into, and statements of operationsincome statement item amounts are translated from Rand and A$ to U.S. dollars at the weighted average exchange rate for each period (Rand 10.8214.70 per $1.00 and $1.00 per A$1.110.75 for fiscal 2014)2016).
In this annual report, Gold Fields presents the financial items “all-in“all-in sustaining costs”, or AISC, “all-in“all-in sustaining costs per ounce”, “all-in“all-in costs”, or AIC, and “all-in“all-in costs per ounce”, which have been determined using industry standards promulgated by the World Gold Council, or WGC, and are non-U.S. GAAPnon-IFRS measures. The WGC standard was released by the WGC on June 27, 2013. Gold Fields voluntarily adopted and implemented these metrics as from the quarter ended June 2013. As from fiscal 2014, Gold Fields exclusively reports its costs in accordance with the new World Gold Council definition for AISC and AIC and no longer reports total cash cost and notional cash expenditure, or NCE. An investor should not consider these items in isolation or as alternatives to productionoperating costs, incomeprofit before tax, net income,profit for the year, cash flows from operating cash flowsactivities or any other measure of financial performance presented in accordance with U.S. GAAP.IFRS. While the WGC provided definitions for the calculation of all-in sustaining costsAISC and all-in costs,AIC, the calculation of all-in sustaining costs, all-in sustaining costsAISC, AISC per ounce, all-in costsAIC and all-in costsAIC per ounce may vary significantly among gold mining companies, and by themselves do not necessarily provide a basis for comparison with other gold mining companies. See “Key Information—Selected Historical Consolidated Financial Data”, “Information on the Company—Glossary of MiningTerms—All-in sustaining costs per ounce”costs” and “Information on the Company—Glossary of MiningTerms—All-in costs costs”.
Gold Fields also presents “net cash flow” in this annual report which is a non-IFRS measure. An investor should not consider this item in isolation or as an alternative to cash flow from operating activities, cash and cash equivalents or any other measure presented in accordance with IFRS. Net cash flow is defined as net cash flow from operations less the South Deep dividend, net capital expenditure (additions to property, plant and equipment less proceeds on disposal of property, plant and equipment), and environmental trust fund and rehabilitation payments, as per ounce”the consolidated statements of cash flows. The definition for the calculation of net cash flow may vary significantly between companies, and by itself does not necessarily provide a basis for comparison with other companies. See “Information on the Company—Glossary of Mining Terms—net cash flow”.
The financial results of Sibanye Gold (as defined below) included in this annual report, which include the KDC and Beatrix mines, have been presented as discontinued operations as a result of theSpin-off (as defined below) in the statement of operationsincome statements and statementstatements of cash flows for all relevant periods presented. The financial information presented in this annual report refers to continuing operations unless otherwise stated.
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Market Information
This annual report includes industry data about Gold Fields’ markets obtained from industry surveys, industry publications, market research and other publicly available third-party information. Industry surveys and industry publications generally state that the information they contain has been obtained from sources believed to be reliable but that the accuracy and completeness of such information is not guaranteed. Gold Fields and its advisors have not independently verified this data.
In addition, in many cases, statements in this annual report regarding the gold mining industry and Gold Fields’ position in that industry have been made based on internal surveys, industry forecasts, market research, as well as Gold Fields’ own experiences. While these statements are believed by Gold Fields to be reliable, they have not been independently verified.
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DEFINED TERMS AND CONVENTIONS
In this annual report, all references to the “Group” are to Gold Fields and its subsidiaries. On February 18, 2013, or theSpin-off date, Gold Fields completed the separation of its wholly-owned subsidiary, Sibanye Gold Limited, or Sibanye Gold (formerly known as GFI Mining South Africa Proprietary Limited, or GFIMSA), which includes the KDC and Beatrix mining operations, or theSpin-off. See “Operating and Financial Review and Prospects—Overview—The Spin-off”.
In this annual report, all references to “fiscal 2012” are to the12-month period ended December 31, 2012, all references to “fiscal 2013” are to the12-month period ended December 31, 2013, all references to “fiscal 2014” are to the12-month period ended December 31, 2014, and all references to “fiscal 2015” are to the12-month period ended December 31, 2015, all references to “fiscal 2016” are to the12-month period ended December 31, 2016 and all reference to “fiscal 2017” are to the12-month period ending December 31, 2015.2017. In this annual report, all references to “South Africa” are to the Republic of South Africa, all references to “Ghana” are to the Republic of Ghana, all references to “Australia” are to the Commonwealth of Australia, all references to “Venezuela”“Chile” are to the Bolivarian Republic of Venezuela,Chile, all references to “Finland” are to the Republic of Finland, all references to “Peru” are to the Republic of Peru, all references to “Mali” are to the Republic of Mali, all references to the “Philippines” are to the Republic of the Philippines and all references to the “United States” and “U.S.” mean the United States of America, its territories and possessions and any state of the United States and the District of Columbia.
In this annual report, all references to the “DMR” are references to the South African Department of Mineral Resources, the government body responsible for regulating the mining industry in South Africa.
This annual report contains descriptions of gold mining and the gold mining industry, including descriptions of geological formations and mining processes. In order to facilitate a better understanding of these descriptions, this annual report contains a glossary defining a number of technical and geological terms. See “Information on the Company—Glossary of Mining Terms”.
In this annual report, gold production figures are provided in troy ounces, which are referred to as “ounces” or “oz”, or in kilograms, which are referred as “kg”. Ore grades are provided in grams per metric tonne, which are referred to as “grams per tonne” or “g/t”. All references to “tonnes” or “t” in this annual report are to metric tonnes. All references to “gold” include gold and gold equivalent ounces, unless otherwise specified or where the context suggests otherwise. See “Information on the Company—Glossary of Mining Terms” for further information regarding units of measurement used in this annual report and a table providing rates of conversion between different units of measurement. AIC, net ofby-product revenue, and AISC, net ofby-product revenue, are calculated per ounce of gold sold, excluding gold equivalent ounces. See “Operational“Operating and Financial Review andProspects—All-in Sustaining andAll-in Cost”.
This annual report contains references to the “total recordable injury frequency rate”, or TRIFR, at each Gold Fields operation.operation—which was introduced in 2013. The TRIFR at each operation includes the total number of fatalities, lost time injuries, medically treated injuries, or MTI, and restricted work injuries.injuries, or RWI, per million man hours. A lost time injury, or LTI, is a work-related injury resulting in the employee or contractor being unable to attend work for a period of one or more days after the day of the injury (i.e., the employee or contractor is unable to perform any of his/her duties). An MTI is a work-related injury sustained by an employee or contractor which does not incapacitate that employee and who, after having received medical treatment, is deemed fit to immediately resume his/her normal duties on the next calendar day, immediately following the treatment orre-treatment. An RWI is a work-related injury sustained by an employee or contractor which results in the employee or contractor being unable to perform one or more of their routine functions for a full working day, from the day after the injury occurred but the employee or contractor can still perform some of his/her duties.
In this annual report, “R” and “Rand” refer to the South African Rand and “SA cents” refers to subunits of the South African Rand, “$”, “U.S.$” and “U.S. dollars” refer to United States dollars, “U.S. cents” refers to
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subunits of the U.S. dollar, “A$” and “Australian dollars” refer to Australian dollars, “GH” refers to Ghana Cedi, “S/.” refers to the Peruvian Nuevo Sol and “CAD” refers to Canadian dollars.
Certain information in this annual report presented inFor Gold Fields’ consolidated financial statements, unless otherwise stated, statement of financial position item amounts are translated from Rand and AustralianA$ to U.S. dollars has beenat the exchange rate prevailing on the date that it closed its accounts for fiscal 2016 (Rand 14.03 per $1.00 and $0.72 per A$1.00 as of December 31, 2016), except for specific items included within shareholders’ equity and the statements of cash flows that are translated at the rate prevailing on the date the relevant transaction was entered into, and income statement item amounts are translated from Rand and A$ to U.S. dollars. Unless otherwise stated,dollars at the conversion ratesweighted average exchange rate for these translations are Rand 11.56each period (Rand 14.70 per $1.00 and $1.00 per A$1.23, which were the closing rates on December 31, 2014. By including the U.S. dollar equivalents, Gold Fields is not representing that the Rand or Australian dollar amounts actually represent the U.S. dollar amounts shown or that these amounts could be converted into U.S. dollars at the rates indicated.0.75 for fiscal 2016).
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In this annual report, except where otherwise noted, all production and operating statistics are based on Gold Fields’ total operations, which include production from the Tarkwa and Damang mines in Ghana and from the Cerro Corona mine in Peru which is attributable to the noncontrolling shareholders in those mines. This annual report contains references to “gold equivalent ounces” which are quantities of metals (such as copper) expressed as amounts of gold using the prevailing prices of gold and the other metals. To calculate this, the accepted total value of the metal based on its weight and value is divided by the accepted value of one troy ounce of gold.
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FORWARD-LOOKING STATEMENTS
This annual report contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, or the Exchange Act, with respect to Gold Fields’ financial condition, results of operations, business strategies, operating efficiencies, competitive position, growth opportunities for existing services, plans and objectives of management, markets for stock and other matters.
These forward-looking statements, including, among others, those relating to the future business prospects, revenues and income of Gold Fields, wherever they may occur in this annual report and the exhibits to the annual report, are necessarily estimates reflecting the best judgment of the senior management of Gold Fields and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. As a consequence, these forward-looking statements should be considered in light of various important factors, including those set forth in this annual report. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without limitation:
overall economicthe success of the Group’s business strategy, development activities and business conditionsother initiatives;
decreases in South Africa, Ghana, Australia, Peruthe market price of gold or copper;
fluctuations in exchange rates, currency devaluations and elsewhere;other macroeconomic monetary policies;
changes in assumptions underlying Gold Fields’ mineral reserve estimates;
the ability to achieve anticipated efficiencies and other cost savings in connection with past and future acquisitions;
the ability to achieve anticipated cost savings at existing operations;
changes in relevant government regulations, particularly labor, environmental, tax, royalty, health and safety, water, regulations and potential new legislation affecting mining and mineral rights;
court decisions affecting the successSouth African mining industry, including without limitation regarding the interpretation of mineral rights legislation and the Group’s business strategy, development activitiestreatment of health and other initiatives;safety claims;
the ability of the Group to comply with requirements that it operate in a sustainable manner and provide benefits to affected communities;
decreases in the market price of gold or copper;
the occurrence of hazards associated with underground and surface gold mining or contagious diseases at Gold Field’s operations;
the occurrence of work stoppages related to health and safety incidents;
loss of senior management or inability to hire or retain employees;
fluctuations in exchange rates, currency devaluations and other macroeconomic monetary policies;
the occurrence of labor disruptions and industrial actions;
power cost increases as well as power stoppages, fluctuations and usage constraints;
supply chain shortages and increases in the prices of production imports;
the ability to manage and maintain access to current and future sources of liquidity, capital and credit, including the terms and conditions of Gold Fields’ facilities and Gold Fields’ overall cost of funding;
the occurrence of labor disruptions and industrial actions;
power cost increases as well as power stoppages, fluctuations and usage constraints;
fraud, bribery or corruption at Gold Field’s operations that leads to censure, penalties or negative reputational impacts;
the occurrence of hazards associated with underground and surface gold mining or contagious diseases (and associated legal claims) at Gold Fields’ operations;
loss of senior management or inability to hire or retain employees;
political instability in South Africa, Ghana, Peru or regionally in Africa or South America;
overall economic and business conditions in South Africa, Ghana, Australia, Peru and elsewhere;
the occurrence of work stoppages related to health and safety incidents;
supply chain shortages and increases in the prices of production imports;
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the adequacy of the Group’s insurance coverage; and
the manner, amount and timing of capital expenditures made by Gold Fields on both existing and new mines, mining projects, exploration projectprojects or other initiatives;
changes in relevant government regulations, particularly labor, environmental, tax, royalty, health and safety, water, regulations and potential new legislation affecting mining and mineral rights;
fraud, bribery or corruption at Gold Field’s operations that leads to censure, penalties or negative reputational impacts; and
political instability in South Africa, Ghana, Peru or regionally in Africa or South America.initiatives.
Gold Fields undertakes no obligation to update publicly or release any revisions to these forward-looking statements to reflect events or circumstances after the date of this annual report or to reflect the occurrence of unanticipated events.
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ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS | 1 | |||
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ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | ||||
ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES | ||||
| 282 | ||||
ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS | ||||
ITEM 16D: EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES | ||||
ITEM 16E: PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS | ||||
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ITEM 1: IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS
Not applicable.
ITEM 2: OFFER STATISTICS AND EXPECTED TIMETABLE
Not applicable.
Selected Historical Consolidated Financial Data
The selected historical consolidated financial data set out below for fiscal 2014,2016, fiscal 20132015 and fiscal 20122014 and as of December 31, 2014, 20132016 and 2012 have2015 has been derived from Gold Fields’ audited consolidated financial statements for those years and as of those dates and the related notes.notes, as included elsewhere in this annual report. The selected historical consolidated financial data for fiscal 2011, the six-month period ended December 31, 20102013 and the year ended June 30, 2010fiscal 2012 and as of December 31, 20112014, 2013 and 2010 and June 30, 2010 have2012 has been derived from Gold Fields’ audited consolidated financial statements, as of that date, which are not included in this annual report, and adjusted where applicable as described below.report. The selected historical consolidated financial data presented below have been derived from consolidated financial statements which have been prepared in accordance with U.S. GAAP.IFRS as issued by the International Accounting Standards Board. As a result of theSpin-off, the financial results of Sibanye Gold, which include the KDC and Beatrix mines, have been presented as discontinued operations in the consolidated financial statements for fiscal 2013 and the comparative income statements of operations and statementstatements of cash flows have been presented as if Sibanye Gold had been discontinued for all periods presented below. The Other Operating Data presented has been calculated as described in the footnotes to the table below:
| Fiscal Period Ended June 30, | Six-Month Period Ended December 31, | Fiscal Period Ended December 31, | ||||||||||||||||||||||
| 2010 | 2010 | 2011 | 2012 | 2013 | 2014 | |||||||||||||||||||
Statement of Operations Data | ||||||||||||||||||||||||
Revenues | 2,355.5 | 1,490.8 | 3,499.1 | 3,530.6 | 2,906.3 | 2,868.8 | ||||||||||||||||||
Production costs (exclusive of depreciation and amortization) | 1,342.3 | 756.5 | 1,627.9 | 1,862.6 | 1,819.9 | 1,808.1 | ||||||||||||||||||
Depreciation and amortization | 352.9 | 220.6 | 421.4 | 425.8 | 568.5 | 677.3 | ||||||||||||||||||
Corporate expenditure | 29.2 | 14.2 | 30.8 | 38.2 | 39.4 | 27.3 | ||||||||||||||||||
Employee termination costs | 1.1 | 0.9 | 0.8 | 6.1 | 35.5 | 42.2 | ||||||||||||||||||
Exploration expenditure | 86.6 | 53.2 | 125.4 | 135.3 | 77.9 | 36.2 | ||||||||||||||||||
Feasibility and evaluation costs | — | 9.3 | 95.2 | 103.5 | 68.0 | — | ||||||||||||||||||
Profit/(loss) on sale of property, plant and equipment | 0.1 | 0.3 | (1.0 | ) | 0.2 | 10.2 | (1.3 | ) | ||||||||||||||||
Asset impairments and write-offs | — | — | 9.5 | 41.6 | 215.3 | 14.0 | ||||||||||||||||||
Decrease in provision for post-retirement health care costs | (0.2 | ) | — | — | — | — | — | |||||||||||||||||
Royalties(1) | — | (30.1 | ) | (109.6 | ) | (116.8 | ) | (90.5 | ) | (86.1 | ) | |||||||||||||
Accretion expense on provision for environmental rehabilitation | 8.8 | 5.1 | 11.1 | 13.9 | 10.4 | 15.4 | ||||||||||||||||||
Interest and dividends | 7.6 | 4.9 | 11.8 | 16.3 | 8.5 | 4.2 | ||||||||||||||||||
Finance expense | (38.0 | ) | (23.8 | ) | (52.3 | ) | (55.6 | ) | (72.4 | ) | (80.8 | ) | ||||||||||||
Gain/(loss) on financial instruments | 27.7 | 1.0 | 4.4 | (0.4 | ) | (0.3 | ) | (11.5 | ) | |||||||||||||||
Foreign exchange (losses)/gains | (8.5 | ) | (1.4 | ) | 9.1 | (13.8 | ) | 7.3 | 8.4 | |||||||||||||||
Profit/(loss) on disposal of investments and subsidiaries | 111.7 | (0.4 | ) | 12.8 | 27.6 | 17.8 | 78.0 | |||||||||||||||||
| Fiscal Period Ended December 31, | ||||||||||||||||||||||||||||||||||||
| 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||||||||||
| ($ million, unless otherwise stated) | ||||||||||||||||||||||||||||||||||||
Consolidated Income Statement Data | ||||||||||||||||||||||||||||||||||||
Revenue | 2,749.5 | 2,545.4 | 2,868.8 | 2,906.3 | 3,530.6 | |||||||||||||||||||||||||||||||
Cost of sales | (2,066.7 | ) | (2,066.1 | ) | (2,334.4 | ) | (2,277.8 | ) | (2,151.0 | ) | ||||||||||||||||||||||||||
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Net operating profit | 682.8 | 479.3 | 534.4 | 628.5 | 1,379.6 | |||||||||||||||||||||||||||||||
Investment income | 8.3 | 6.3 | 4.2 | 8.5 | 16.3 | |||||||||||||||||||||||||||||||
Finance expense | (78.3 | ) | (82.9 | ) | (99.2 | ) | (69.5 | ) | (55.3 | ) | ||||||||||||||||||||||||||
Gain/(loss) on financial instruments | 14.4 | (4.7 | ) | (11.5 | ) | (0.3 | ) | (0.5 | ) | |||||||||||||||||||||||||||
Foreign exchange (loss)/gain | (6.4 | ) | 9.5 | 8.4 | 7.3 | (13.8 | ) | |||||||||||||||||||||||||||||
Other costs, net | (16.8 | ) | (21.2 | ) | (62.5 | ) | (97.2 | ) | (15.6 | ) | ||||||||||||||||||||||||||
Share-based payments | (14.4 | ) | (10.9 | ) | (26.0 | ) | (40.5 | ) | (45.5 | ) | ||||||||||||||||||||||||||
Long-term incentive plan | (11.0 | ) | (5.3 | ) | (8.7 | ) | — | — | ||||||||||||||||||||||||||||
Exploration expense | (92.2 | ) | (53.5 | ) | (47.2 | ) | (65.9 | ) | (128.5 | ) | ||||||||||||||||||||||||||
Feasibility and evaluation costs | — | — | — | (47.7 | ) | (44.1 | ) | |||||||||||||||||||||||||||||
Share of results of equity accounted investees after taxation | (2.3 | ) | (5.7 | ) | (2.4 | ) | (18.4 | ) | (49.7 | ) | ||||||||||||||||||||||||||
Restructuring costs | (11.7 | ) | (9.3 | ) | (42.0 | ) | (39.4 | ) | (50.8 | ) | ||||||||||||||||||||||||||
Impairment of investments and assets | (76.5 | ) | (221.1 | ) | (26.7 | ) | (809.5 | ) | (98.2 | ) | ||||||||||||||||||||||||||
Profit on disposal of investments | 2.3 | 0.1 | 0.5 | 17.8 | 27.6 | |||||||||||||||||||||||||||||||
Profit on disposal of Chucapaca | — | — | 4.6 | — | — | |||||||||||||||||||||||||||||||
Profit/(loss) on disposal of assets | 48.0 | (0.1 | ) | (1.3 | ) | 1.6 | 0.3 | |||||||||||||||||||||||||||||
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Profit/(loss) before royalties and taxation | 446.2 | 80.5 | 224.6 | (524.7 | ) | 921.8 | ||||||||||||||||||||||||||||||
Impairment of investments South African Equity Empowerment Transactions Other expenses Income/(loss) before tax, impairment of investment in equity investee, share of equity investees’ (losses)/income and discontinued operations Income and mining tax expense Income before impairment of investment in equity investee, share of equity investees’ (losses)/income and discontinued operations Impairment of investment in equity investee Share of equity investees’ (losses)/income Income/(loss) from continuing operations Income/(loss) from discontinued operations, net of tax Net income/(loss) Less: Net income/(loss) attributable to non-controlling interests Continuing operations Discontinued operations Net income/(loss) attributable to Gold Fields shareholders Continuing operations Discontinued operations Basic earnings/(loss) per share attributable to Gold Fields shareholders ($) Continuing operations Discontinued operations Diluted earnings/(loss) per share attributable to Gold Fields shareholders ($) Continuing operations Discontinued operations Dividend per share (Rand) Dividend per share ($) Other Operating Data—Continuing Operations All-in-sustaining costs net of by-product revenue per ounce of gold sold(2) All-in-cost net of by-product revenue per ounce of gold sold(2) All-in-sustaining costs gross of by-product revenue per equivalent ounce of gold sold(2) All-in-cost gross of by-product revenue per equivalent ounce of gold sold(2) Royalties Profit/(loss) before taxation Mining and income taxation Profit/(loss) from continuing operations Profit from discontinued operations, net of taxation Profit/(loss) for the year Profit/(loss) attributable to: Owners of the parent —Continuing operations —Discontinued operations Non-controlling interest holders —Continuing operations —Discontinued operations Earnings/(loss) per share attributable to ordinary shareholders of the Company: Basic earnings/(loss) per share from continuing operations—cents Basic earnings per share from discontinued operations—cents Diluted basic earnings/(loss) per share from continuing operations—cents Diluted basic earnings per share from discontinued operations—cents Dividend per share (Rand) Dividend per share ($) Other Operating Data—Continuing Operations All-in-sustaining costs net ofby-product revenue per ounce of gold sold(1) All-in-cost net ofby-product revenue per ounce of gold sold(1) All-in-sustaining costs gross ofby-product revenue per equivalent ounce of gold sold(1) All-in-cost gross ofby-product revenue per equivalent ounce of gold sold(1) Fiscal Period
Ended
June 30, Six-Month
Period
Ended
December 31, Fiscal Period Ended
December 31, 2010 2010 2011 2012 2013 2014 (8.1 ) — (0.5 ) (10.5 ) (10.3 ) (6.8 ) — (126.3 ) — — — — (25.7 ) (25.4 ) (47.3 ) (37.9 ) (104.2 ) (44.2 ) 601.6 229.8 1,004.4 712.7 (162.5 ) 108.2 (266.5 ) (136.9 ) (384.5 ) (359.4 ) (105.7 ) (121.6 ) 335.1 92.9 619.9 353.3 (268.2 ) (13.4 ) — — (6.8 ) — — (7.4 ) (31.1 ) 1.8 (0.8 ) (63.1 ) (18.4 ) (4.4 ) 304.0 94.7 612.3 290.2 (286.6 ) (25.2 ) 166.3 (28.8 ) 340.7 362.3 20.5 — 470.3 65.9 953.0 652.5 (266.1 ) (25.2 ) 79.3 53.3 71.5 (1.8 ) (18.2 ) 2.0 80.1 54.1 71.6 (1.9 ) (18.2 ) 2.0 (0.8 ) (0.8 ) (0.1 ) 0.1 — — 391.0 12.6 881.5 654.3 (247.9 ) (27.2 ) 223.9 40.6 540.7 292.1 (268.4 ) (27.2 ) 167.1 (28.0 ) 340.8 362.2 20.5 — 0.32 0.06 0.75 0.40 (0.36 ) (0.04 ) 0.24 (0.04 ) 0.47 0.50 0.03 — 0.32 0.06 0.74 0.40 (0.36 ) (0.04 ) 0.24 (0.04 ) 0.47 0.50 0.03 — 1.30 0.70 1.70 3.90 0.75 0.42 0.17 0.10 0.24 0.50 0.08 0.04 — — — 1,310 1,202 1,053 — — — 1,537 1,312 1,087 — — — 1,331 1,206 1,053 — — — 1,539 1,307 1,086 Fiscal Period Ended December 31, 2016 2015 2014 2013 2012 ($ million, unless otherwise stated) (80.4 ) (76.0 ) (86.1 ) (90.5 ) (116.7 ) 365.8 4.5 138.5 (615.2 ) 805.1 (192.1 ) (247.1 ) (118.1 ) 20.1 (456.6 ) 173.7 (242.6 ) 20.4 (595.1 ) 348.5 — — — 287.9 384.9 173.7 (242.6 ) 20.4 (307.2 ) 733.4 162.8 (242.1 ) 12.8 (295.7 ) 701.2 162.8 (242.1 ) 12.8 (583.6 ) 316.4 — — — 287.9 384.8 10.9 (0.5 ) 7.6 (11.5 ) 32.2 10.9 (0.5 ) 7.6 (11.5 ) 32.1 — — — — 0.1 173.7 (242.6 ) 20.4 (307.2 ) 733.4 20 (31 ) 2 (79 ) 44 — — — 39 53 20 (31 ) 2 (79 ) 43 — — — 39 53 0.71 0.24 0.42 0.75 3.90 0.05 0.02 0.04 0.08 0.50 980 1,007 1,053 1,202 1,310 1,006 1,026 1,087 1,312 1,537 987 1,000 1,053 1,206 1,331 1,012 1,018 1,086 1,307 1,539
Notes:
Note:
| (1) |
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| Gold Fields has calculated |
| current operations. |
| As of | ||||||||||||||||||||||||
| June 30, 2010 | December 31, | |||||||||||||||||||||||
| 2010 | 2011 | 2012 | 2013 | 2014 | ||||||||||||||||||||
| ($ million, unless otherwise stated) | ||||||||||||||||||||||||
Balance Sheet Data | ||||||||||||||||||||||||
Cash and cash equivalents | 500.7 | 809.5 | 744.0 | 655.6 | 325.0 | 458.0 | ||||||||||||||||||
Assets held for sale | — | — | — | — | 47.0 | 31.0 | ||||||||||||||||||
Receivables | 305.4 | 411.4 | 483.4 | 522.7 | 272.6 | 226.5 | ||||||||||||||||||
Inventories | 234.9 | 256.3 | 297.7 | 402.1 | 402.7 | 373.3 | ||||||||||||||||||
Short-term deferred income and mining taxes | — | — | — | — | 29.0 | 6.9 | ||||||||||||||||||
Material contained on heap leach pads | 91.5 | 111.3 | 187.9 | 65.0 | — | — | ||||||||||||||||||
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Total current assets | 1,132.5 | 1,588.5 | 1,713.0 | 1,645.4 | 1,076.3 | 1,095.7 | ||||||||||||||||||
Property, plant and equipment, net | 6,639.7 | 7,482.0 | 7,016.8 | 7,388.9 | 4,933.0 | 4,453.3 | ||||||||||||||||||
Goodwill | 1,154.9 | 1,295.2 | 1,075.4 | 1,020.1 | 845.5 | 756.3 | ||||||||||||||||||
Deferred income and mining taxes | — | — | — | 24.1 | 22.6 | 10.9 | ||||||||||||||||||
Inventories | — | — | — | 111.8 | 109.0 | 148.1 | ||||||||||||||||||
Non-current investments | 254.3 | 344.3 | 272.2 | 458.0 | 268.9 | 286.5 | ||||||||||||||||||
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Total assets | 9,181.4 | 10,710.0 | 10,077.4 | 10,648.3 | 7,255.3 | 6,750.8 | ||||||||||||||||||
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| As of December 31, | ||||||||||||||||||||||||||||||||||||
| 2016 | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||||||||||||||||
| ($ million, unless otherwise stated) | ||||||||||||||||||||||||||||||||||||
Consolidated Statement of Financial Position Data | ||||||||||||||||||||||||||||||||||||
ASSETS | ||||||||||||||||||||||||||||||||||||
Non-current assets | 5,282.0 | 4,969.6 | 5,764.9 | 6,234.7 | 7,197.1 | |||||||||||||||||||||||||||||||
Property, plant and equipment | 4,547.8 | 4,312.4 | 4,895.7 | 5,388.9 | 6,258.4 | |||||||||||||||||||||||||||||||
Goodwill | 317.8 | 295.3 | 385.7 | 431.2 | 520.3 | |||||||||||||||||||||||||||||||
Inventories | 132.8 | 132.8 | 132.8 | 93.8 | 96.3 | |||||||||||||||||||||||||||||||
Equity-accounted investees | 170.7 | 129.1 | 252.4 | 237.5 | 232.1 | |||||||||||||||||||||||||||||||
Investments | 19.7 | 10.9 | 5.5 | 7.5 | 38.4 | |||||||||||||||||||||||||||||||
Environmental trust funds | 44.5 | 35.0 | 30.4 | 23.9 | 10.0 | |||||||||||||||||||||||||||||||
Deferred taxation | 48.7 | 54.1 | 62.4 | 51.9 | 41.6 | |||||||||||||||||||||||||||||||
Current assets | 1,052.7 | 908.1 | 1,092.8 | 1,061.4 | 3,875.5 | |||||||||||||||||||||||||||||||
Inventories | 329.4 | 298.2 | 368.3 | 404.5 | 427.8 | |||||||||||||||||||||||||||||||
Trade and other receivables | 170.2 | 168.9 | 226.5 | 272.7 | 450.5 | |||||||||||||||||||||||||||||||
Deferred stripping costs | — | — | — | — | 2.0 | |||||||||||||||||||||||||||||||
Financial instrument | — | — | — | — | 7.0 | |||||||||||||||||||||||||||||||
Cash and cash equivalents | 526.7 | 440.0 | 458.0 | 325.0 | 606.3 | |||||||||||||||||||||||||||||||
Assets held for sale/distribution | 26.4 | 1.0 | 40.0 | 59.2 | 2,381.9 | |||||||||||||||||||||||||||||||
Total assets | 6,334.7 | 5,877.7 | 6,857.7 | 7,296.1 | 11,072.6 | |||||||||||||||||||||||||||||||
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EQUITY AND LIABILITIES | ||||||||||||||||||||||||||||||||||||
Equity attributable to owners of the parent | 3,067.0 | 2,656.1 | 3,538.8 | 3,851.4 | 5,981.6 | |||||||||||||||||||||||||||||||
Share capital | 59.6 | 58.1 | 57.9 | 57.8 | 55.9 | |||||||||||||||||||||||||||||||
Share premium | 3,562.9 | 3,412.9 | 3,412.9 | 3,412.9 | 4,544.0 | |||||||||||||||||||||||||||||||
Other reserves | (2,126.4 | ) | (2,262.2 | ) | (1,636.5 | ) | (1,340.8 | ) | (700.8 | ) | ||||||||||||||||||||||||||
Retained earnings | 1,570.9 | 1,447.3 | 1,704.5 | 1,721.5 | 2,082.5 | |||||||||||||||||||||||||||||||
Non-controlling interest | 122.6 | 111.9 | 124.5 | 193.8 | 209.4 | |||||||||||||||||||||||||||||||
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Total equity | 3,189.6 | 2,768.0 | 3,663.3 | 4,045.2 | 6,191.0 | |||||||||||||||||||||||||||||||
Non-current liabilities | 2,285.7 | 2,545.6 | 2,481.3 | 2,627.4 | 2,681.0 | |||||||||||||||||||||||||||||||
Deferred taxation | 465.5 | 487.3 | 387.0 | 399.4 | 589.5 | |||||||||||||||||||||||||||||||
Borrowings | 1,504.9 | 1,761.6 | 1,765.7 | 1,933.6 | 1,828.8 | |||||||||||||||||||||||||||||||
Provisions | 291.7 | 284.1 | 320.3 | 294.4 | 262.7 | |||||||||||||||||||||||||||||||
Long-term incentive plan | 23.6 | 12.6 | 8.3 | — | — | |||||||||||||||||||||||||||||||
Accounts payable and provisions Short-term deferred income and mining taxes Interest payable Income and mining taxes payable Current portion of long-term loans Total current liabilities Long-term loans Deferred income and mining taxes Provision for environmental rehabilitation Provision for post-retirement health care costs Long-term incentive plan Other non-current liabilities Total liabilities Share capital Additional paid-in capital Retained earnings Accumulated other comprehensive (loss)/income Total equity attributable to Gold Fields shareholders Noncontrolling interests Total equity Total liabilities and equity Other Financial Data Number of ordinary shares as adjusted to reflect changes in capital structure (including treasury shares) Net Assets (excluding non-controlling interest) As of June 30,
2010 December 31, 2010 2011 2012 2013 2014 ($ million, unless otherwise stated) 551.9 670.6 669.9 734.0 445.0 498.5 — — — 17.9 16.0 10.3 4.5 4.1 11.2 11.0 12.4 11.2 104.3 156.1 264.4 192.1 34.6 58.2 691.1 261.7 547.0 40.0 121.5 140.2 1,351.8 1,092.5 1,492.5 995.0 629.5 718.4 430.0 1,136.6 1,360.7 2,321.2 1,938.6 1,770.7 982.5 1,051.8 1,019.4 901.8 309.3 252.9 275.7 324.4 336.9 373.6 269.2 300.1 2.8 2.7 2.1 2.1 — — — — — — — 8.3 — 19.7 13.5 13.9 10.9 9.1 3,042.8 3,627.7 4,225.1 4,607.6 3,157.5 3,059.5 57.8 58.8 59.0 61.0 62.9 63.0 5,005.4 5,313.2 5,374.6 5,452.3 4,439.0 4,465.0 834.4 779.6 772.5 1,054.3 741.1 684.1 (96.5 ) 562.4 (423.3 ) (653.0 ) (1,249.0 ) (1,617.4 ) 5,801.1 6,714.0 5,782.8 5,914.6 3,994.0 3,594.7 337.5 368.3 69.5 126.1 103.8 96.6 6,138.6 7,082.3 5,852.3 6,040.7 4,097.8 3,691.3 9,181.4 10,710.0 10,077.4 10,648.3 7,255.3 6,750.8 705,903,511 720,796,887 724,591,516 730,393,143 768,016,593 772,272,821 5,801.1 6,714.0 5,782.8 5,914.6 3,994.0 3,594.7
Current liabilities Trade and other payables Royalties payable Taxation payable Current portion of borrowings Liabilities held for sale/distribution Total equity and liabilities Net assets (excludingnon-controlling interest) or equity attributable to owners of the parent Net debt Other Financial Data Number of ordinary shares as adjusted to reflect changes in capital structure (including treasury shares) As of December 31, 2016 2015 2014 2013 2012 ($ million, unless otherwise stated) 859.4 564.1 713.1 623.5 2,200.6 543.3 427.6 509.7 462.4 538.4 20.2 18.5 20.4 23.1 32.5 107.9 59.3 37.8 11.5 148.4 188.0 58.7 145.2 126.5 40.0 — — — — 1,441.3 6,334.7 5,877.7 6,857.7 7,296.1 11,072.6 3,067.0 2,656.1 3,538.8 3,851.4 5,981.6 1,166.2 1,380.3 1,452.9 1,735.1 1,262.5 820,606,945 777,450,492 772,272,821 768,016,593 730,393,143
Exchange Rates
The following tables set forth, for the periods indicated, the average, high and low exchange rates of Rand for U.S. Dollars, expressed in Rand per $1.00. All exchange rates are sourced fromI-Net Bridge (Proprietary) Limited, orI-Net Bridge, being the average rate.
Year ended | Average | |||
| ||||
| ||||
December 31, 2012 | 8.19 | (1) | ||
December 31, 2013 | 9.60 | (1) | ||
December 31, 2014 | 10.82 | (1) | ||
| (1) | |||
| ||||
December 31, | (1) | |||
Through April 3, 2017 | 13.22 | (1) | ||
Note:
| (1) | The daily average of the closing rate during the relevant period as reported byI-Net Bridge. |
Month ended | High | Low | ||||||
October 31, 2014 | 11.33 | 10.84 | ||||||
November 30, 2014 | 11.26 | 10.94 | ||||||
December 31, 2014 | 11.70 | 11.00 | ||||||
January 31, 2015 | 11.72 | 11.40 | ||||||
February 28, 2015 | 11.80 | 11.29 | ||||||
March 31, 2015 | 12.47 | 11.74 | ||||||
Month ended | High | Low | ||||||
October 31, 2016 | 14.35 | 13.46 | ||||||
November 30, 2016 | 14.42 | 13.24 | ||||||
December 31, 2016 | 14.13 | 13.45 | ||||||
January 31, 2017 | 13.79 | 13.24 | ||||||
February 28, 2017 | 13.47 | 12.87 | ||||||
March 31, 2017 | 13.44 | 12.42 | ||||||
The closing rate for the Rand on April 7, 20153, 2017, as reported byI-Net Bridge was Rand 11.8013.69 per $1.00. Fluctuations in the exchange rate between the Rand and the U.S. dollar will affect the dollar equivalent of the price of the ordinary shares on the JSE, which may affect the market price of the American Depositary Shares, or ADSs, on the New York Stock Exchange, or NYSE. These fluctuations will also affect the U.S. dollar amounts received by owners of ADSs on the conversion of any dividends paid in Rand on the ordinary shares.
In addition to the other information included in this annual report, the considerations listed below could have a material adverse effect on Gold Fields’ business, financial condition or results of operations, resulting in a decline in the trading price of Gold Fields’ ordinary shares or ADSs. The risks set forth below comprise all material risks currently known to Gold Fields. These factors should be considered carefully, together with the information and financial data set forth in this document.
Gold Fields may experience unforeseen difficulties, delays or costs in implementing its business strategy and projects, including any strategic projects, cost-cutting initiatives, divestments and other initiatives and any such strategy or project may not result in the anticipated benefits.
The ability to grow the business will depend on the successful implementation of Gold Fields’ existing and proposed strategic initiatives, such as the ramping up of production at South Deep (which accounts for 72% of Gold Fields’ mineral reserves as at December 31, 2016), the reinvestment of Damang, the development of the Gruyere Gold project, or the Gruyere Gold Project or Gruyere, as well as the achievement of a 15% free cash flow margin, or FCF Margin, at a gold price of U.S.$1,300 per ounce. See “Information on the Company—Strategy”. The Gruyere Gold Project is exposed to all of the risks described below in “—To the extent that Gold Fields seeks to add to or replace its reserve base through exploration, it may experience problems associated with mineral exploration or developing mining projects.”
The successful implementation of the Company’s strategic initiatives depends upon many factors, including those outside its control. For example, the successful achievement of a 15% FCF Margin at a gold price of U.S.$1,300 per ounce. will depend on, among other things, prevailing market prices for input costs.
Gold Fields may also prove unable to deliver on production targets and other strategic initiatives. Unforeseen difficulties, delays or costs may adversely affect the successful implementation of Gold Fields’ business strategy and projects, and such strategy and projects may not result in the anticipated benefits. For example, Gold Fields is in the process of implementing an operational and ramp up plan at South Deep intended to improve productivity at the mine, which includes the alignment of the mine’s planning process with realistic productivity levels, the implementation of business improvement projects and the implementation of revised support strategies, mining sequence and pillar configuration changes. The implementation of this operational and ramp up plan is complex and there can be no assurance that the implementation of the plan will achieve the result intended or that it will not result in delays, increased costs or other issues. In addition, the reinvestment in the Damang mine may not yield the extension of reserves or life of mine expected. Any such difficulties, delays or costs could prevent Gold Fields from fully implementing its business strategy, which could have a material adverse effect on its business, operating results and financial condition.
Gold Fields is in the process of implementing initiatives relating to its strategic restructuring, including the reduction of marginal mining, cost-efficiency initiatives, increased brownfield exploration, production planning, cost-cutting and divestments. Any future contribution of these measures to profitability will be influenced by the actual benefits and savings achieved and by Gold Fields’ ability to sustain these ongoing efforts. Strategic restructuring and cost-cutting initiatives may involve various risks, including, for example, labor unrest and operating license withdrawal. The risk is elevated in South Africa, given Gold Fields’ mining rights obligations. See “—Gold Fields’ mineral rights are subject to legislation, which could impose significant costs and burdens and which impose certain ownership requirements, the interpretation of which are the subject of dispute”.
In addition, these initiatives may not be implemented as planned; turn out to be less effective than anticipated; only become effective later than anticipated; or not be effective at all. Depending on the nature of the outcomes of the initiatives, they, individually or in combination, may have a material adverse effect on Gold Fields’ business, operating results and financial condition.
As part of its strategy, Gold Fields has stated that it intends to dispose of certain of its exploration and development assets, as well as the Darlot mine. With respect to these and any other dispositions, Gold Fields may not be able to obtain prices that it expects for assets it seeks to dispose of or to complete the contemplated disposals in the timeframe contemplated or at all.
Any of the above could have a negative impact on Gold Fields’ business, operating results and financial condition.
Changes in the market price for gold, and to a lesser extent copper, which in the past have fluctuated widely, affect the profitability of Gold Fields’ operations and the cash flows generated by those operations.
Gold Fields’ revenues are primarily derived from the sale of gold that it produces. Gold Fields does not generally enter into forward sales, derivatives or other hedging arrangements in orderThe Group’s policy is to establish aremain unhedged to the gold price, in advancethough hedges are sometimes undertaken to protect cash flows at times of significant expenditure, for specific debt servicing requirements and to safeguard the saleviability of its gold production.higher cost operations. As a result, it is exposed to changes in the gold price, which could lead to reduced revenue should the gold price decline. For example, during 2014,After falling 45% between September 2011 and December 2015, when it hit a low of U.S.$1,060 per ounce, the gold price fluctuated between $1,142recovered in fiscal 2016, ending the year at U.S.$1,130 per ounce. As at April 3, 2017, it was U.S.$1,247 per ounce, as trading in the metal remains volatile amid global political and $1,385 per ounce.economic uncertainties. See “Quantitative and Qualitative Disclosures about Market Risk”. The market price for gold has historically been volatile and is affected by numerous factors over which Gold Fields has no control, such as general supply and demand, speculative trading activity and global economic drivers.
Further, over the period from 2011 to 2016, the gold price has declined from an average price of U.S.$1,571 per ounce to an average price of U.S.$1,241 per ounce. Should the gold price decline below Gold Fields’ production costs, it may experience losses and should this situation remaincontinue for an extended period, Gold Fields may be forced to curtail or suspend some or all of its growth projects, operations and/or reduce operational capital expenditures. Gold Fields might not be able to recover any losses it incurred during, or after, such events. A sustained period of significant gold price volatility may also adversely affect Gold Fields’ ability to undertake new capital projects or continue with existing operations or make other long-term strategic decisions. The use of lower gold prices in reserve calculations and life of mine plans could also result in material impairments of Gold Fields’ investment in mining properties or a reduction in its reserve estimates and corresponding restatements of its reserves and increased amortization, reclamation and closure charges.
In Peru, copper accounts for a significant proportion of the revenues at Gold Fields’ Cerro Corona mine, although copper is not a major element of Gold Fields’ overall revenues. Over the period from 2011 to 2016, the price of copper has declined from an average price of U.S.$8,836 per tonne to an average price of U.S.$4,848 per tonne. A variety of factors have and may depress global copper prices and a decline in copper prices, which have also fluctuated widely, would adversely affect the revenues, profit and cash flows of the Cerro Corona mine.
Because gold is sold in U.S. dollars, while a significant portion of Gold Fields’ production costs are in Australian dollars, Rand and othernon-U.S. dollar currencies, Gold Fields’ operating results and financial condition could be materially harmed by a material change in the value of thesenon-U.S. dollar currencies.
Gold is sold throughout the world in U.S. dollars. Gold Fields’ costs of production are incurred principally in U.S. dollars, Australian dollars, Rand and other currencies. Recent volatility in the Rand (including significant depreciation of the Rand against the U.S. dollar in recent years) and depreciation of the Australian dollar against the U.S. dollar in fiscal 2014, 2015 and 2016 has made our reported costs in South Africa and Australia and results of operations less predictable than when exchange rates are more stable. As a result, any significant and sustained appreciation of any of thesenon-U.S. dollar currencies against the U.S. dollar may materially increase Gold Fields’ costs in U.S. dollar terms, which could materially adversely affect Gold Fields’ business, operating results and financial condition.
Conversely, inflation in any of the countries in which it operates could increase the prices Gold Fields pays for products and services and could have a material adverse effect on Gold Fields’ business, operating results and financial condition if not offset by increased gold prices.
Gold Fields’ mineral reserves are estimates based on a number of assumptions, which, if changed, may require Gold Fields to lower its estimated mineral reserves.
The mineral reserves stated in this annual report are estimates based on assumptions regarding, among other things, Gold Fields’ costs, expenditures, commodity prices, exchange rates, geology models, geological criteria, mining methods, mining equipment and metallurgical and mining recovery assumptions, which may prove inaccurate due to a number of factors, many of which are beyond Gold Fields’ control. In the event that Gold Fields adversely revises any of the assumptions that underlie its mineral reserves reporting, Gold Fields may need to revise its mineral reserves downwards. See “Information on the Company—Reserves of Gold Fields as ofat December 31, 2014.”2016”.
During fiscal 2015 and 2016, Gold Fields is in the processcompleted a strategic review of rebasing the production profile of its South Deep mine. Asand delivered a result,revised plan, or the mineral reserve informationRebase Plan, to the market in February 2017. The Rebase Plan defines the updated Mineral Reserve and life of mine, or LoM, plan for South Deep asand incorporates all recent revisions and improvements in mine design, production scheduling and geotechnical parameters. The Rebase Plan required a diagnostic of December 31, 2014 primarily reflect mining depletion of last year’s figures except where material differences were encounteredthe full value chain, from design to skills training, conducted by management and external consultants. This review highlighted opportunities for technical or economic reasons, in which case suitably revised modelsimprovement and schedules were implemented. Therefore, the information regarding South Deep’s own technical abilities were strengthened along withon-boarding various technical experts as part of developing a technically assured and deliverable mine plan. South Deep is now targeting steady-state annual production of approximately 500,000 ounces by fiscal 2022 at an AIC of U.S.$900 per ounce. There can be no assurance that the implementation of the Rebase Plan will not result in lower than expected long-term steady state production volumes, cost fluctuations, reduced reported ore reserves asand life of December 31, 2014 has not been preparedmine, or other associated issues at South Deep, which could have a material adverse effect on the same basis as the ore reserves information for Gold Fields’ other operations or on the same basis as in fiscal 2013 or 2012;business, operating results and may not be directly comparable to that reported by the Group’s other mines in the current year or South Deep and the Group’s other mines in prior years. For further information about the methodology used to prepare South Deep’s ore reserves information as of December 31, 2014, seefinancial condition. See “Information on the Company—Reserves of Gold Fields as ofat December 31, 2014—2016—Methodology”.
To the extent that Gold Fields seeks to add to or replace its reserve base through exploration, it may experience problems associated with mineral exploration or developing mining projects.
Gold Fields’ reserve base is depleted annually through its production activities. In fiscal 2016, four out of Gold Fields’ sevennon-South African mines reported lower ore reserves after taking depletion into account. In order to replace its mineral reserves at its international operations or expand its operations and reserve base, Gold Fields expects to rely, in part, on exploration for gold, and other metals associated with gold, as well as its ability to develop mining projects. Exploration for gold and other metals associated with gold is speculative in nature, involves many risks and is frequently unsuccessful. To the extent that ore bodies are to be developed, it can take a number of years and substantial expenditures from the initial phases of drilling until production commences, during which time the economic feasibility of production may change. In addition, to the extent Gold Fields participates in the development of a project through a joint venture or any other multi-party commercial structure, such as the Gruyere Gold Project in Western Australia in which Gold Fields holds a 50% interest, there could be disagreements, legal or otherwise, or divergent interests or goals among the parties, which could jeopardize the success of the project. There can be no assurances that Gold Fields will be able to replace its reserves through exploration, development or otherwise and, if Gold Fields is unable to replace its reserves, this could have a material adverse effect on its business, operating results and financial condition.
Furthermore, significant capital investment is required to achieve commercial production from exploration efforts. There is no assurance that Gold Fields will have, or be able to raise, the required funds to engage in these activities or to meet its obligations with respect to the exploration properties in which it has or may acquire an interest.
To the extent that Gold Fields makes acquisitions, it may experience problems in executing the acquisitions or managing and integrating the acquisitions with its existing operations.
In order to maintain or expand its operations and reserve base, Gold Fields may seek to make acquisitions of selected precious metal producing companies or assets. For example, on October 1, 2013, Gold Fields completed the acquisition of the Granny Smith, Darlot and Lawlers gold mines, or the Yilgarn South Assets, in Western Australia from Barrick Gold Corporation, or Barrick. See “Information on the Company—Gold Fields’ Mining Operations—Australasia Operations”. Any such acquisition may change the scale of the Company’s business and operations and may expose it to new geographic, geological, political, social, operating, financial, legal, regulatory and contractual risks. There can be no assurance that any acquisition will achieve the results intended, and, as such, could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Gold Fields’ operations and profits have been and may be adversely affected by union activity and new and existing labor laws.
Over recent periods, there has been an increase in union activity in some of the countries in which Gold Fields operates that has had a material adverse impact on Gold Fields’ operations, production and financial performance.
In South Africa, a recent increase in labor unrest has resulted in more frequent industrial disputes and extended negotiations that have negatively affected South Africa’s sovereign debt rating and subsequently the credit ratings of a number of the country’s leading mining companies, including Gold Fields. In particular, strikes during the second half of fiscal 2012 impacted Gold Fields’ operations and caused work stoppages, resulting in significant production losses, primarily at the Spin-off operations. While the outcome of the wage negotiations with the unions in fiscal 2015 was relatively positive, and while Gold Fields now has fewer employees in South Africa after the Spin-off, in light of the recent labor unrest there can be no guarantee that future negotiations will not be accompanied by further strikes, work stoppages or other disruptions.
Furthermore, guidelines and targets have been provided to facilitate compliance with the open-ended broad-based socio-economic empowerment requirements espoused in Section 2 of the Mineral and Petroleum Resources and Development Act, or MPRDA, and in the broad-based socio-economic empowerment charter for the South African mining and minerals industry known as the Mining Charter, as well as the amendments to that charter that took effect from September 13, 2010, known as the Amended Mining Charter. The Mining Charter, as amended, contains guidelines which provide that all mining companies must achieve, among other things, 26% ownership by historically disadvantaged South Africans, or HDSAs, of mining assets by March 2015 and a minimum of 40% HDSA demographic representation at the executive management, senior management, middle management, junior management and core and critical skills levels (subject to offsets) in order to comply with the empowerment requirements of the MPRDA. The government of South Africa has also announced that it intends to conduct a review of the Mining Charter in fiscal 2015. See “—Gold Fields’ mineral rights are subject to legislation, which could impose significant costs and burdens and which impose certain ownership requirements, the interpretation of which are the subject of dispute.” and “Information on the Company—Environmental and Regulatory Matters—South Africa—Mineral Rights”. The ongoing implementation and enforcement of these requirements, including as a result of any changes thereto following the announced review, may be contentious.
Gold Fields’ operations in Ghana and Peru have recently been, and may in the future be, impacted by increased union activities and new labor laws. In particular, there can be no guarantee that (i) labor unions in either country will not undertake strikes or “go-slow” actions impacting the Group’s operations or those of other related industries or suppliers, or that (ii) changes in local regulations will not result in increased costs and penalties being incurred by the Group.
In Ghana, in April 2013, employees represented by the Ghana Mineworkers Union, or GMWU, the Professional Managerial Staff Union and the Branch Union at both Tarkwa and Damang undertook illegal
industrial action, resulting in the temporary suspension of production at both operations. The strike lasted six days and ended after Gold Fields and the GMWU reached a settlement. While the wage negotiations with the unions in fiscal 2013 were completed, in light of the recent labor unrest there can be no guarantee that negotiations in the future will not be difficult or accompanied by further strikes, work stoppages or other labor actions.
In Peru, the Group may see increased union activity over the course of fiscal 2015 as a result of reduced commodity and mineral prices which may lead to reductions in the annual income of employees. This may in turn cause unions to seek better and/or additional benefits to compensate for any such decrease in their annual income, such as through increased activities and/or industrial action. In addition, while the Peruvian government has introduced a three year remediation program which prioritizes the imposition of corrective measures and establishes a three-year moratorium on the imposition of environmental fines save in exceptional cases, there has been an increase in labor inspection activities over the course of fiscal 2014, and this may continue into fiscal 2015. See “Information on the Company—Environmental and Regulatory Matters—Peru.”
In the event that Gold Fields experiences further industrial relations related interruptions at any of its operations or in other industries that impact its operations, or increased employment-related costs due to union or employee activity, these may have a material adverse effect on its business, production levels, operating costs, production targets, operating results, financial condition, reputation and future prospects. In addition, lower levels of mining activity can have a longer term impact on production levels and operating costs, which may affect operating life. Mining conditions can deteriorate during extended periods without production, such as during and after strikes, and Gold Fields will not re-commence mining until health and safety conditions are considered appropriate to do so.
Existing labor laws (including those that impose obligations on Gold Fields regarding worker rights) and any new or amended labor laws may increase Gold Fields’ labor costs and have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Gold Fields’ mineral rights are subject to legislation, which could impose significant costs and burdens and which impose certain ownership requirements, the interpretation of which are the subject of dispute.
Gold Fields’ right to own and exploit mineral reserves and deposits is governed by the laws and regulations of the jurisdictions in which the mineral properties are located. Currently, a significant portion of Gold Fields’ reserves and deposits are located in countries where mining rights could be suspended or canceled should it breach its obligations in respect of the acquisition and exploitation of these rights.
In all of the countries where Gold Fields operates, the formulation or implementation of governmental policies on certain issues may be unpredictable. This may include changes in laws relating to mineral rights and ownership of mining assets and the right to prospect and mine, and, in extreme cases, nationalization, expropriation or nullification of existing rights, concessions, licenses, permits, agreements and contracts. For example, Gold Fields’ operations in South Africa are subject to legislation regulating the exploitation of mineral resources through the granting of rights required to prospect and mine for minerals. This includes broad-based BEEblack economic empowerment, or BBBEE, legislation designed to effect the entry of historically disadvantaged South Africans, or HDSAs, into the mining industry and to increase their participation in the South African economy.
The Mineral and Petroleum Resources and Development Act, or the MPRDA, came into effect on May 1, 2004 and transferred ownership of mineral resources to the South African people, with the South African government acting as custodian in order to, among other things, promote equitable access to the nation’s mineral resources by South Africans, expand opportunities for historically disadvantaged persons who wish to participate in the South African mining industry and advance social and economic development. As custodian, the South African government exercises regulatory control over the exploitation of mineral resources and does so by exercising the power to grant, including, subject to terms and conditions, the rights required to prospect and mine for minerals. MiningThe MPRDA required mining companies were required to apply for the right to mine and/or prospect and to convert then-existingapply for the conversion of “old order” prospecting rights and mining rights to “new order” prospecting rights and mining rights. In order to qualify for these rights, applicants need to satisfy the South African government that
the granting of such a right will advance the open-ended broad-based socio-economic empowerment requirements of the MPRDA.Mining Charter published pursuant to the MPRDA, or the Mining Charter. The MPRDA also required that mining companies submit social and labor plans, or SLPs, which set out their commitments relating to human resource development, labor planning and economicsocio-economic development planning to the DMR. In order to provide guidance on the fulfillment of these broad-based socio-economic empowerment requirements to the mining industry, the DMR published the Mining Charter, which became effective on May 1, 2004. The Mining Charter includes guidelines envisaging that each mining company should achieve arequired 15% HSDAHDSA ownership of mining assets within five yearsby 2009 and a 26% HSDAHDSA ownership of mining assets within 10 years.by 2014, or the 2014 Deadline. See “Information on the Company—Environmental and Regulatory Matters—South Africa—Mineral Rights—The MPRDA”.
In 2010, the DMR introduced the Amended Mining Charter containing guidelines envisaging, among other things, that mining companies should achieve a minimum of 40% HDSA demographic representation by 2014 at
executive management (board) level, senior management (executive committee) level, core and critical skills, middle management level and junior management level. See “Information on the Company—Environmental and Regulatory Matters—South Africa—Mineral Rights.”Rights”. In April 2013, Gold Fields submitted a new SLP for South Deep to replace its original SLP submitted in 2010 and is awaiting a response from the DMR.
In fiscal 2014, with the 2014 Deadline in view, the DMR launched auditsinitiated a process of assessing mining companies, which were conducted by a third party appointed by the DMR to assess such companies’, including Gold Fields’, compliance with the BEEBBBEE guidelines of the Mining Charter and Amended Mining Charter. However, the DMR subsequently abandoned the externally conducted audit process. It is therefore unclear what the status of theThis review process is and what the outcomes were. It is also unclear whether or not the information provided during this audit process will be considered or used by the DMR for any purpose in the future. In fiscal 2015, the DMR directed mining companies to provide information related to compliance with the Amended Mining Charter via an electronic reporting template. This template has raised a number of concerns among mining companies due to its inflexible approach towards the assessment of compliance with the Amended Mining Charter.
On March 31, 2015, the DMR madereleased to the public an interim report of the consolidated results of the self-assessment by reporting companies ofassessment, which showed relatively general compliance with the Mining Charter, reporting relatively broad compliance with the non-ownership requirements of the Amended Mining Charter. However, the DMR did not report the results of compliance with the HDSA ownership guidelines of the Mining Charter and noted that there is no consensus on certain applicable principles.
On the same date, the Chamber of Mines, or the Chamber, reported that the DMR believes that empowerment transactions by mining companies concluded after 2004 where the HDSA ownership level has fallen due to HDSA disposal of assets or for other reasons, should not be included in the calculation of HDSA ownership for the purposes of, among other things, the 26% HDSA ownership guidelines under the Mining Charter. The position of Gold Fields is consistent with that of the Chamber of Mines, and it is that such empowerment transactions should be included in the calculation of HDSA ownership. The DMR and the Chamber of Mines have jointly agreed to approach the South African courts jointly to seek a declaratory order whichthat will provide a ruling on the relevant legislation and the status of the Mining Charter.Charter, including clarity on the status of previous empowerment transactions concluded by mining companies. The Chamber and the DMR filed papers in court and the matter, or the Main Application, was placed on the roll to be heard on March 15, 2016. In February 2016, an application was filed by a third party, Malan Scholes Inc., to consolidate the Main Application with its own application for a declaratory order on the empowerment aspects of the Mining Charter, or the Scholes Application. The Chamber opposed the consolidation of these applications on the basis that, among other things, the right to relief in the respective applications does not depend substantially on the same questions of law and/or fact. On May 3, 2016, the court refused to consolidate the two applications. The court reserved judgment in the Scholes Application after a hearing on February 7, 2017. The court is yet to hear the Main Application, which has not been enrolled pending an attempt to settle the Main Application outside of court.
If the DMR were to prevail in court,the Main Application or alternatively, the Scholes Application, mining companies, including Gold Fields, may be required to undertake further empowerment transactions in order to increase their HDSA ownership, which would result in the dilution of existing shareholders.shareholders and could have a negative impact on the financial indebtedness of Gold Fields. In such event, mining companies may be required to maintain a minimum HDSA ownership level indefinitely. While it remains to be seen whether the Chamber will prevail in court, on April 15, 2016, the DMR published a new draft mining charter, or the New Draft Mining Charter, which seeks to, among other things, maintain HDSA equity ownership in mining companies at a minimum of 26% which could result, once published in its final form, in mining companies being required to undertake further empowerment transactions within a prescribed period of time in order to increase their HDSA ownership, which would result in the dilution of existing shareholders. Under the New Draft Mining Charter, current holders of mining rights will have a three year transitional period from the coming into effect of the New Draft Mining Charter to align themselves with the new ownership requirements. Where empowerment transactions have been concluded and empowerment partners have sold their shares and exited the structure, new empowerment transactions will need to be concluded for mining right holders to be compliant with the New Draft Mining Charter. Having first been introduced in the Amended Mining Charter, the New Draft Mining Charter also proposed that HSDA entrepreneurs, communities and employees are brought into the ownership structure and all hold a mining equity stake of no less than 5% each. The New Draft Mining Charter was open for public comment and various submissions on the New Draft Mining Charter were made as part of the public commentary process. During the latter part of 2016, the Chamber and the DMR initiated consultation in relation to the New Draft Mining Charter, which is continuing. The Minister of Mineral Resources announced on
February 6, 2017, that a revised version of the New Draft Mining Charter would be published in the government gazette in March 2017. A revised version of the New Draft Mining Charter is yet to be published in the government gazette.
Any adjustment to the ownership structure of Gold Fields’ mining assets in order to meet BBBEE requirements could have a material adverse effect on the value of Gold Fields’ securities. Further, Gold Fields may alsoin the future incur significant costs or have to issue additional ordinary shares as a result of changes in the interpretation of existing laws and guidelines or the imposition of new laws relating to HDSA ownership requirements, which may have a material adverse effect on Gold Field’s business, operating results and financial condition.
In terms of section 47 of the MPRDA, the Minister of Mineral Resources may suspend or cancel the existing mining rights, or under section 23(3) of or prevent the obtaining ofMPRDA, refuse to grant applications for new mining rights by mining companies, including Gold Fields, should such holders of mining rights be deemed not to be in compliance with the ownership requirements of the MPRDA. ItMPRDA as read with South Africa’s mining industry empowerments requirements. However, it is this very issue which also possible, should the Chamber of Mines prevail in court, that the DMR may enact new regulations to, among other things, increase HDSA ownership guidelines for mining companies which would result in the dilution of existing shareholders. The DMR may also suspend or cancel existing mining rights of, or prevent the obtaining of new mining rights by, mining companies, including Gold Fields, deemed not to be in compliance with the other requirementsforms part of the MPRDA.court application by the Chamber. If the DMRMinister were to determine that Gold Fields is not in compliance with the other requirements of the MPRDA and its empowerment requirements, Gold Fields may be required to engage in remedial steps, including changes to management and actions that require shareholder approval.
There is currently uncertainty whether mining companies are, in addition to its required compliance with the MPRDA, required to comply with the BBBEE Act, 2003, or BBBEE Act, and the BBBEE Codes, which apply generally to other industries in South Africa. The MPRDA does not require mining companies to comply with the BBBEE Act and the BBBEE Codes but the Minister of Mineral Resources has expressed a desire to align the New Draft Mining Charter with the BBBEE Act and the more onerous BBBEE Codes. The current version of the New Draft Mining Charter reflects the Minister’s attempts at alignment notwithstanding the questionable need to do so. Accordingly, if brought into effect in its current form, the New Draft Mining Charter could potentially create further uncertainty.
If the DMR were to determine that Gold Fields is not in compliance with the MPRDA, for any reason, including HDSA ownership, Gold Fields may challenge such a decision in court. Any such court action may be expensive and there is no guarantee that Gold Fields’ challenge would be successful.
There is no guarantee that any steps Gold Fields has already taken or might take in the future will ensure the retention of its existing mining rights, the successful renewal of its existing mining rights, the retaining of new mining rights, the granting of furtherapplications for new mining rights or that the terms of renewals of its rights would not be significantly less favorable to Gold Fields than the terms of its current rights. Any further adjustment to the ownership structure of Gold Fields’ South African mining assets in order to meet BEEBBBEE requirements could have a material adverse effect on the value of Gold Fields’ securities.
An amendment bill to the MPRDA, namely the MPRDB, was passed by both the National Assembly and the National Council of Provinces, or NCOP, on March 27, 2014. In January 2015, the President referred the MPRDB back to parliament for reconsideration and on November 1, 2016, the Portfolio Committee on Mineral Resources tablednon-substantial revisions to the MPRDB in the National Assembly and a slightly revised version of the MPRDB was passed by the National Assembly and referred to the NCOP. There is a large degree of uncertainty regarding the changes that will be brought about should the MPRDB be made law. Among other things, the MPRDB seeks to require the consent of the Minister of Mineral Resources for the transfer of any interest in an unlisted company or any controlling interest in a listed company where such companies hold a prospecting right or mining right and to give the Minister of Mineral Resources broad discretionary powers to prescribe the levels required for beneficiation in promoting the beneficiation of minerals. For further information, see “Information on the Company—Environmental and Regulatory Matters—South Africa—Mineral Rights—The MPRDA”.
Failure by Gold Fields to comply with mineral rights legislation in any of the jurisdictions in which it operates may cause it to lose the right to mine, fail to acquire new rights to mine and may have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Further, Gold Fields may, in the future, incur significant costs as a result of changes in the interpretation of existing laws and guidelines such as through the review of the Mining Charter in fiscal 2015 that has been announced by the South African government, or the imposition of new laws, whether relating to the mining industry or otherwise, which may have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Gold Fields is subject to various regulatory costs, such as mining taxes and royalties, changes to which may have a material adverse effect on Gold Fields’ operations and profits.
In recent years, governments, communities,non-governmental organizations, or NGOs, and trade unions in several jurisdictions have sought and, in some cases, have implemented greater cost imposts on the mining industry, including through the imposition of additional taxes and royalties. Such resource nationalism, whether in the form of cost imposts, interference in project management, mandatory social investment requirements, local content requirements or creeping expropriation could impact the global mining industry and Gold Fields’ business, operating results and financial condition.
In South Africa, the African National Congress, or the ANC, has adopted two recommended approaches to interacting with the mining industry. While the ANC has rejected the possibility of mine nationalization for now, the first approach contemplates, among other things, greater state intervention in the mining industry, including the revision of existing royalties, the imposition of new taxes and an increase in the South African government’s holdings in mining companies. The second approach contemplates the South African government taking a more active role in the mining sector, including through the introduction of a state mining company to be involved in new projects either through partnerships or individually.
The adopted policies may impose additional restrictions, obligations, operational costs, taxes or royalty payments on gold mining companies, including Gold Fields, any of which could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
In South Africa, the President has appointed the Davis Tax Committee to look into and review the current mining tax regime. The committee’s first interim report on mining, which was released for public comment on August 13, 2015, proposed no changes to the royalty regime but recommended the discontinuation of the upfront capital expenditurewrite-off regime in favor of an accelerated capital expenditure depreciation regime. In addition, the report recommended retaining the so called “gold formula” for existing gold mines only, as new gold mines would be unlikely to be established in circumstances where profits are marginal or where gold mines would conduct mining of the type intended to be encouraged by the formula. The committee also recommended the phasing out of additional capital allowances available to gold mines in order to bring the gold mining corporate income tax regime in line with the tax system applicable to all taxpayers. For a description of the gold formula, see “Operating and Financial Review and Prospects—Income and Mining Taxes—South Africa”. A further report is awaited from the committee after receiving public comment.
In Ghana, the ownership of land on which there are mineral deposits is separate from the ownership of the minerals. On January 1, 2017, in line with the development agreement concluded between Gold Fields and the government of Ghana, or the Development Agreement, Gold Fields’ royalty rate changed from a flat 5% of revenue to a sliding scale royalty based on the price of gold, starting at a rate of 3% on a gold price below U.S.$1,300 per ounce. The Development Agreement also resulted in a reduction in the corporate tax rate from 35% to 32.5%, effective March 17, 2016. The government of Ghana has a right to obtain a 10% free-carried interest in mining leases. In addition, stool/land rents of approximately U.S.$3 to U.S.$3.2 per acre are (depending on the exchange rate) payable to the government of Ghana. See “Information on the Company—Environmental and Regulatory Matters—Ghana—Mineral Rights”.
In Peru, the general corporate income tax rate was increased from 28% to 29.5% with effect from January 1, 2017. In turn, the dividends income tax rate applicable tonon-resident shareholders has reduced from 6.8% to 5%. Since July 2012, mining companies have also been required to pay an annual supervisory contribution to the Supervisory Body of Investment in Energy and Mining (Organismo Supervisor de la Inversión en Energía y Minería), or the OSINERGMIN, as well as to the Assessment and Environment Supervising Agency (Organismo de Evaluación y Fiscalización Ambiental), or the OEFA. See “Information on the Company—Environmental and Regulatory Matters—Peru—Mining Royalty and Other Special Mining Taxes and Charges”.
In addition, a consultation law has been enacted, requiring the government to consult with indigenous or native populations on legislative or administrative proposals that may have an impact on their collective rights. See “Information on the Company—Environmental and Regulatory Matters—Peru—Mining Royalty and Other Special Mining Taxes and Charges”.
Australia operates a state based royalty regime, and a federal income tax regime. Each of Gold Fields’ Australian mines are in the State of Western Australia, which imposes a 2.5% royalty on the value of gold produced. In the 2012–13 State Budget, the Western Australian government announced a mineral royalty rate analysis to review Western Australia’s royalty arrangements. This review was conducted jointly by the Department of State Development and the Western Australian Department of Mines & Petroleum, or DMP, and the final report was released to the public on March 25, 2015.
The review examined the efficacy and appropriateness of the royalty system and assessed alternative systems. It recommended that the gold royalty rate increase from 2.5% to 3.75%. The government noted the recommendation of the review, but announced that it would not implement any of the recommended changes.
The Australian federal government levies a corporate income tax at the rate of 30%. It is existing government policy to reduce this to 25% over time. However, as the government does not have the support of the opposition parties, it is considered unlikely that this change will occur in the near time, if at all.
The impositions of additional restrictions, obligations, operational costs, taxes or royalty payments could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Mining companies are increasingly required to operate in a sustainable manner and to provide benefits to affected communities. Failure to comply with these requirements can result in legal suits, additional operational costs, investor divestment and loss of ‘social license to operate’, which could adversely impact Gold Fields’ business, operating results and financial condition.
Many mining companies face increasing pressure over their “social license to operate” which can be understood as the acceptance of the activities of these companies by local stakeholders. While formal permission to operate is ultimately granted by host governments, many mining activities require social permission from host communities and influential stakeholders to carry out operations effectively and profitably.
These businesses are under pressure to demonstrate that, while they seek a satisfactory return on investment for shareholders, the environment, human rights and other key sustainability issues are responsibly managed and stakeholders, such as employees, host communities and the countries in which they operate, also benefit from their commercial activities. The potential consequences of these pressures and the adverse publicity in cases where companies are believed not to be creating sufficient social and economic benefit or are perceived to not be responsibly managing other sustainability issues may result in additional operating costs, higher capital expenditures, reputational damage, active community opposition (possibly resulting in delays, disruptions and stoppages), allegations of human rights abuses, legal suits, regulatory intervention and investor withdrawal.
In order to maintain its social license to operate, Gold Fields may need to design or redesign parts of its mining operations to minimize their impact on such communities and the environment, either by changing
mining plans to avoid such impact, by modifying operations, changing planned capital expenditures or by relocating the affected people to an agreed location. Responsive measures may require Gold Fields to take costly and time consuming remedial measures, including the full restoration of livelihoods of those impacted. In addition, Gold Fields is obliged to comply with the terms and conditions of all the mining rights it holds in South Africa. In this regard, the SLP provisions of our mining rights must make provision for local economic development, among other obligations. See “Information on the Company—Environmental and Regulatory Matters—South Africa—Mineral Rights”. Gold Fields also undertakes social and economic development spending in Australia, Ghana and Peru, both voluntarily and as a condition of its mining rights. See “Information on the Company—Community Relations and Creating Shared Value”. In addition, as Gold Fields has a long history of mining operations in certain regions or has purchased operations which have a long history, issues may arise regarding historical as well as potential future environmental or health impacts in those areas.
Delays in projects attributable to a lack of community support or other community-related disruptions or delays can translate directly into a decrease in the value of a project or into an inability to bring the project to, or maintain, production. The cost of measures and other issues relating to the sustainable development of mining operations has placed significant demands on our resources, and could increase capital and operating costs and have a material adverse impact on Gold Fields’ reputation, business, operating results and financial condition.
Economic, political or social instability in the countries or regions where Gold Fields operates may have a material adverse effect on Gold Fields’ operations and profits.
In fiscal 2016, 13%, 32%, 43% and 12% of Gold Fields’ gold-equivalent production was in South Africa, Ghana, Australia and Peru, respectively. Changes or instability in the economic, political or social environment in any of these countries or in neighboring countries could affect an investment in Gold Fields.
High levels of unemployment and a shortage of critical skills in South Africa, despite increased government expenditure on education and training, remain issues and deterrents to foreign investment. The volatile and uncertain labor and political environments, which severely impacts the local economy and investor confidence, has led, and may lead, to further downgrades in national credit ratings, making investment more expensive and difficult to secure. See “—Gold Fields’ operations and profits have been and may be adversely affected by union activity and new and existing labor laws” and “—A further downgrade of South Africa’s credit rating may have an adverse effect on Gold Fields’ ability to secure financing.” This may restrict Gold Fields’ future access to international financing and could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Furthermore, while the South African government has stated that it does not intend to nationalize mining assets or mining companies, certain political parties have stated publicly and in the media that the government should embark on a program of nationalization. Any threats of, or actual proceedings to, nationalize any of Gold Fields’ assets, could halt or curtail operations, resulting in a material adverse effect on Gold Fields’ business, operating results and financial condition and could cause the value of Gold Fields’ securities to decline rapidly and dramatically, possibly causing investors to lose the entirety of their respective investments.
In 2016, Australia, Ghana and Peru held national elections. Additionally, state elections for the government of Western Australia (the state in which Gold Fields’ Australian interests are located) were held on March 11, 2017. It is not certain what if any political, economic or social impacts the newly elected governments will have on Australia, Ghana and Peru, respectively, or on Gold Fields specifically.
There has also been regional social and community-related instability in the area around Gold Fields’ mining operations in Peru, where political developments in fiscal 2014 resulted in the election of local and regional officeholders who have taken public positions opposed to mining operations. In addition, engagement with community stakeholders, including in Peru and South Africa, can pose challenges to local management and any inability to properly manage these relationships may have a negative impact on our production or associated
costs. There is also the potential for social instability or protests regarding mining activity in the communities near Gold Fields’ South Deep mine relating to, among other things, community investment, environmental concerns, service delivery by local government or other issues. Occurrence of any of the above mentioned developments could result in Gold Fields experiencing opposition or disruptions in connection with any of its operations. Such opposition or disruptions at any of Gold Fields’ operations, in particular if it has an adverse impact or costs or causes any stoppages (including as a result of any protests aimed at other mining operations that affect operations) could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
A further downgrade of South Africa’s credit rating may have an adverse effect on Gold Fields’ ability to secure financing.
Prior to 2017, the challenges facing the mining industry and other sectors, among other factors, had resulted in the downgrading of South Africa’s sovereign credit rating to one level above non-investment grade, or junk, by Standard & Poor’s and Fitch Ratings. However, on April 3, 2017, Standard & Poor’s downgraded South Africa’s sovereign credit rating to non-investment grade (BB+) with a negative outlook due to, among other things, political and economic uncertainty caused by changes in the government cabinet in South Africa. South Africa’s sovereign credit rating also suffered downgrades in fiscal 2015. As of April 3, 2017, Moody’s South African sovereign credit rating was Baa2 with a negative outlook and Fitch Ratings’ wasBBB- with a negative outlook, two and one notches above non-investment grade, respectively. On April 3, 2017, Moody’s announced that it had put South Africa’s sovereign credit rating on a watch for a possible downgrade.
Further downgrading of South Africa’s sovereign credit rating to non-investment grade status by Moody’s or Fitch Ratings may adversely affect the South African gold mining industry and Gold Fields’ business, operating results and financial condition by making it more difficult to obtain external financing or could result in any such financing being available only at greater cost or on more restrictive terms than might otherwise be available. A downgrade to non-investment grade status by either of these two agencies may have a material adverse effect on the South African economy as many pension funds and other large investors are required by internal rules to sell bonds once two separate agencies rate them as non-investment grade. Any such negative impact on the South African economy may adversely affect the South African gold mining industry and Gold Fields’ business, operating results and financial condition.
Gold Fields’ operations are subject to water use licenses, which could impose significant costs and burdens.
Gold Fields operations are subject to water use licenses and regulations that govern each operation’s water usage and that require, among other things, mining operations to achieve and maintain certain water quality limits regarding all water discharges. Gold Fields is required to comply with these regulations under its permits and licenses and any failure to do so could result in the curtailment or halting of production at the affected locations.
Gold Fields continues to use measures to remove underground water to permit the routine safe functioning of South Deep. South Deep was issued with a water use license in November 2011. Certain conditions and other aspects of the approved license were identified as requiring modification and an application to address these was submitted to the Department of Water Affairs and Sanitation, or DWS, in February 2012. A further amended water use license application was submitted to the DWS in November 2013, primarily to reflect the results of are-assessment of expected water use requirements and a changing water balance. No response was received from the DWS in relation to the 2013 amendment. In November 2014, an agreement was reached with the DWS to withdraw the 2013 amendment and to submit an updated amendment application in May 2015. The May 2015 amendment application reflects the proposed changes to the approved 2011 water use license conditions. In addition, the updated amendment reflects a variety of water management projects and initiatives that were implemented during fiscal 2014 and that are planned for implementation during fiscal 2015 and beyond. A presentation was provided to the DWS in March 2015 to appraise them of the proposed structure and content
of the new amendment, prior to there-submission in May 2015. Gold Fields continued to make representations to the DWS during fiscal 2016 and is currently waiting to receive an approved amended license. The existing approved license will remain in place while the application is processed by the DWS.
In 2015, South Deep concluded a water supply agreement with Sibanye Gold to supply water from Sibanye’s Ezulwini mine, via the Leeuspruit stream. The plan to secure water to support South Deep during productionramp-up could also be negatively impacted by Sibanye’s announcement on August 31, 2016 that it will be closing the Ezulwini (Cooke 4) mine. South Deep is currently assessing the implications of the closure if such application is granted.
South Deep has implemented a water and environmental management strategy in an effort to satisfy the conditions of its water use license and other relevant water and environmental regulatory requirements. However, there can be no assurance that Gold Fields will be able to meet all of its water and environmental regulatory requirements, primarily due to the inherent uncertainties related to certain requirements of the legislation, which are subject to ongoing discussions between government and the mining industry through the Chamber.
Any failure on Gold Fields’ part to achieve or maintain compliance with the requirements of its water use licenses with respect to any of its operations could result in Gold Fields being subject to substantial claims, penalties, fees and expenses; significant delays in operations; or the loss of the relevant water use license, which could curtail or halt production at the affected operation.
Further, any constraint on the water supply to South Deep could result in delays or constraints on the ramp up of that operation. Any of the above could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Gold Fields has experienced and may experience further acid mine drainage related pollution, which may compromise its ability to comply with legislative requirements or results in additional operating or closure cost liabilities.
Acid mine drainage, and acid rock drainage, or ARD (collectively called acid drainage, or AD), are caused when certain sulphide minerals in rocks are exposed to oxidizing conditions (such as the presence of oxygen, combined with water). AD can occur under natural conditions or as a result of the sulphide minerals that are encountered and exposed to oxidation during mining or during storage in waste rock dumps, ore stockpiles or tailings dams. The acidic water that forms usually contains iron and other metals if they are contained in the host rock.
AD generation, and the risk of potential long-term AD issues, specifically at Gold Fields’ Cerro Corona, Damang and South Deep mines, is ongoing. Immaterial levels of surface AD generation also occur at Gold Fields’ Tarkwa and St. Ives mines. The AD issues at Damang are confined to the Rex open pit. Any AD which is currently generated is contained on Gold Fields property at all operations where it occurs and is managed as part of each mine’s operational water management strategy. The relevant regulatory authorities are also kept appraised of the Group’s efforts to manage AD through various submissions and other communications.
Gold Fields continues to investigate technical solutions at its South Deep, Damang and Cerro Corona mines to better inform appropriate strategies for long-term AD management (mainly post-closure), as well as to work towards a reliable cost estimate of these potential issues. None of these studies have allowed Gold Fields to generate a reliable estimate of the total potential impact on the Group. In addition, there can be no assurance that Gold Fields will be successful in preventing or managing long-term potential AD issues at these operations.
Gold Fields’ mine closure cost estimate (namely environmental rehabilitation provisions) for fiscal 2016 contains the aspects of AD management (namely tailings facilities, waste rock dumps, ore stockpiles and other surface infrastructure), which management has been able to reliably estimate. However, there could be no guarantee that Gold Fields’ current cost estimate, including the cost of post-closure water treatment, reflects all relevant factors and as such, the actual closure costs may be higher.
No adjustment for any effects on the Company that may result from potentially material (mainly post-closure) AD impacts at South Deep, Damang and Cerro Corona, has been made in the consolidated financial statements, other than through the Group’s normal environmental rehabilitation provisions.
The existence of material long-term AD issues at any of Gold Fields’ operations could cause it to fail to comply with its water use license requirements and could expose Gold Fields to fines, mine closures, production curtailment, additional operating costs and other liabilities, any of which could have a material adverse effect on Gold Fields’ business, production, operating results and financial condition.
Gold Fields’ operations are subject to environmental and health and safety regulations, which could impose additional costs and compliance requirements and Gold Fields may face claims and liability for breaches, or alleged breaches, of such regulations and other applicable laws.
Gold Fields’ operations are subject to various environmental and health and safety laws, regulations, permitting requirements and standards. For example, Gold Fields is required to secure estimated mine closure liabilities. The funding methods used to make provision for the required portion of the mine closure cost liabilities, in accordance within-country legislation, are as follows:
South Africa: contributions to environmental trust funds and guarantees;
Ghana: reclamation bonds underwritten by banks, and restricted cash;
Australia: due to legislative changes in Western Australia becoming effective in July 2014, an annual levy to the State of 1% of the total mine closure liability which goes into a State-administered fund known as the Mine Rehabilitation Fund is used to rehabilitate legacy sites or sites that have been prematurely closed or abandoned. As a consequence, Gold Fields’ Australian operations now self fund all mine closure liabilities; and
Peru: bank guarantees.
Gold Fields may in the future incur significant costs to comply with such environmental and health and safety requirements imposed under existing or new legislation, regulations or permit requirements or to comply with changes in existing laws and regulations or the manner in which they are applied. Gold Fields may also be subject to litigation and other costs as well as actions by authorities relating to environmental and health and safety matters, including mine closures, the suspension of operations and prosecution for industrial accidents as well as significant penalties and fines fornon-compliance. These costs could have a material adverse effect on Gold Fields’ business, results of operations and financial condition. See “Information on the Company—Environmental and Regulatory Matters”.
In 2014, the Peruvian government established a three-year moratorium on the application of fines and other punitive sanctions against persons and entities operating in Peru, prioritizing instead the imposition of corrective measures. This moratorium expires in July 2017 and it is not expected that it will be extended. The expiry of the moratorium increases the chances that Gold Fields’ Peruvian operations could be subject to greater focus by regulators on compliance with its environmental obligations.
The principal health risks associated with Gold Fields’ mining operations in South Africa arise from occupational exposure and potential community environmental exposure to silica dust, noise and certain hazardous substances, including toxic gases and radioactive particulates. The most significant occupational diseases affecting Gold Fields’ workforce include lung diseases (such as silicosis, tuberculosis, a combination of the two and chronic obstructive airways disease, or COAD) as well as noise-induced hearing loss, or NIHL. Employees have sought and may continue to seek compensation for certain illnesses, such as silicosis, from their employer under workers’ compensation and also, at the same time, in civil actions under common law (either as individuals or as a class) as is the case with the silicosis individual and class action lawsuits. Such actions may also arise in connection with the alleged incidence of such diseases in communities proximate to Gold Fields’ mines.
A consolidated application has been brought against several South African mining companies, including Gold Fields, for certification of a class action on behalf of current or former mineworkers (and their dependents) who have allegedly contracted silicosis and/or tuberculosis while working for one or more of the mining companies listed in the application. On May 13, 2016, the South Gauteng High Court ordered, among other things the certification of the two separate classes for silicosis and tuberculosis. Subsequently, the mining companies listed in the application were granted leave to appeal against all aspects of the class certification judgment. In addition to the class action, an individual silicosis-related action has been instituted against Gold Fields and one other mining company. See “Information on the Company—Legal Proceedings and Investigations—Silicosis”. If a significant number of such claims were suitably established against it, the payment of compensation for the claims and for any significant additional costs arising out of these issues could have a material adverse effect on Gold Fields’ business, reputation, operating results and financial condition. On March 4, 2016, AngloGold Ashanti Limited, or AngloGold Ashanti, and Anglo American South Africa reached a settlement to resolve approximately 4,400 combined silicosis claims, under which both companies will contribute, in stages, toward a total amount of up to R464 million (approximately U.S.$30 million) to an independent trust which will administer individual claims.
South Africa’s deputy Minister of Mineral Resources has stated that the ministry may increase sanctions, including closures, for mines in which fatalities occur because of violations of health and safety rules. The DMR can and does issue, in the ordinary course of its operations, instructions, including Section 54 orders, following safety incidents or accidents to partially or completely halt operations at affected mines. It is also Gold Fields’ policy to halt production at its operations when serious accidents occur in order to rectify dangerous situations and, if necessary, retrain workers. In fiscal 2016, 13 Section 54 stoppages were issued following visits by the DMR due to either perceived or actual unsafe working conditions, inadequate safety procedures or untrained personnel. Five of the work stoppages were to address safety issues. In addition, there can be no assurance that the unions will not take industrial action in response to such accidents which could lead to losses in Gold Fields’ production. Any additional stoppages in production, or increased costs associated with such incidents, could have a material adverse effect on Gold Fields’ business, operating results and financial condition. Such incidents may also negatively affect Gold Fields’ reputation with, among others, employees and unions, South African regulators and regulators in other jurisdictions in which Gold Fields operates.
Gold Fields could incur significant costs as a result of pending or threatened litigation, which could have a material adverse effect on Gold Fields’ business, operating results and financial condition. See “Information on the Company—Legal Proceedings and Investigations”. Further, any new regulations, potential litigation or any changes to the health and safety laws which increase the burden of compliance or the penalties fornon-compliance may cause Gold Fields to incur further significant costs and could have a material adverse effect on Gold Fields’ business, operating results and financial condition. See “Information on the Company—Environmental and Regulatory Matters”.
Regulation of greenhouse gas emissions and climate change issues may materially adversely affect Gold Fields’ operations.
Energy is a significant input and cost to Gold Fields’ mining and processing operations, with its principal energy sources being electricity, purchased petroleum products, natural gas and coal. A number of governments or governmental bodies, including the United Nations Framework Convention on Climate Change and the Kyoto Protocol, have introduced or are contemplating regulatory changes in response to the potential impact of climate change. Many of these contemplate restricting emissions of greenhouse gases in jurisdictions in which Gold Fields operates.
The South African government plans to introduce a carbon tax. The carbon tax was intended to come into effect from January 1, 2015 but, in order to align the framework of the proposed carbon tax with the desired reduction outcomes, the implementation of the carbon tax was postponed in order to allow sufficient time for consultation on draft legislation and the implementation process. In November 2015, the national treasury, or the
National Treasury, published for comment a draft carbon tax bill, or the Draft Carbon Tax Bill, with a view to the implementation of the tax by January 2017. However, this time-frame has been extended as a new draft bill is expected to be published for public comment with an anticipated implementation of the new legislation in fiscal 2018. The National Treasury has stated that the carbon tax will be designed to ensure that it has no net impact on the electricity price. In June 2016, the National Treasury published the draft carbon offset regulations, or the Draft Carbon Offset Regulations. Carbon offsets are one of the allowances that carbontax-liable entities can employ to reduce theirtax-related exposure. A further iteration of the carbon offset regulations is expected bymid-fiscal 2017, as are regulations providing for further limitation of exposure for those liable entities that reduce their greenhouse gas emissions intensity. In addition, the Department of Environmental Affairs, or the DEA, is currently working on draft legislation that will imposeso-called “carbon budgets” on entities in identified high-emitting industries, including mining, which are intended to operate as statutory limits for carbon dioxide equivalent emissions, or CO2e, emissions in excess of which may entail a fine or other punitive measures. Further clarification of the carbon budgets and the carbon tax, which will both target industrial greenhouse gas emissions, is expected by the end of fiscal 2017. In terms of the current Draft Carbon Tax Bill, companies that participate in the carbon budget system will be eligible for a 5% allowance under the carbon tax. While many aspects of the proposed carbon tax remain uncertain, the financial implications of government’s proposed carbon tax for Gold Fields, at an anticipated rate of R120 per tonne of CO2e, would have been between approximately R0.2 million and R0.6 million for fiscal 2016.The potential net effect of proposed allowances is to permit the reduction of a carbon tax liability by 60% to 95%. In other words, Gold Fields’ final liability will be significantly informed by the extent it is able to make use of the full suite of allowances that are built into the carbon tax design. Since these may be revised in a further iteration of the Bill, this estimated liability is subject to change. See “Information on the Company—Environmental and Regulatory Matters—South Africa—Environmental”.
In addition, a number of other regulatory initiatives are underway in countries in which Gold Fields operates that seek to reduce or limit industrial greenhouse gas emissions. These regulatory initiatives will be either voluntary or mandatory and are likely to impact Gold Fields’ operations directly or by affecting the cost of doing business, for example by increasing the costs of its suppliers or customers. Inconsistency of regulations particularly between developed and developing countries may affect both Gold Fields’ decision to pursue opportunities in certain countries and its costs of operations. Furthermore, additional, new and/or different regulations in this area, such as the imposition of lower limits than those currently contemplated, could be enacted, all of which could have a material adverse effect on Gold Field’s business, financial condition, results of operations and prospects. Assessments of the potential impact of future climate change regulation are uncertain, given the wide scope of potential regulatory change in countries in which Gold Fields operates.
Furthermore, the potential physical impacts of climate change on Gold Fields’ operations are uncertain and may adversely impact the business, operating results and financial condition of Gold Fields’ operations.
Our high debt levels pose risks to our viability and may make us more vulnerable to adverse economic and competitive conditions, as well as other adverse developments.
Gold Fields carries significant debt relative to its shareholder equity. As of December 31, 2016, Gold Fields’ consolidated debt was U.S.$1.7 billion. U.S.$0.2 billion of Gold Fields’ consolidated debt securities becomes due over the 24 months following December 31, 2016.
Gold Fields’ significant levels of debt can adversely affect it in several respects, including:
limiting its ability to access the capital markets;
exposing it to the risk of credit rating downgrades, which would raise its borrowing costs and could limit its access to capital;
hindering its flexibility to plan for or react to changing market, industry or economic conditions;
limiting the amount of cash flow available for future operations, acquisitions, dividends, or other uses;
making it more vulnerable to economic or industry downturns, including interest rate increases;
increasing the risk that it will need to sell assets, possibly on unfavorable terms, to meet payment obligations;
increasing the risk that it may not meet the financial covenants contained in its debt agreements or timely make all required debt payments; or
affecting its ability to service the interest on its debt.
The effects of each of these factors could be intensified if Gold Fields increases its borrowings. Any failure to make required debt payments could, among other things, adversely affect Gold Fields’ ability to conduct operations or raise capital, which could have a material adverse effect on Gold Fields’ business, operating results or financial condition.
Gold Fields’ operations and profits have been and may be adversely affected by union activity and new and existing labor laws.
Over recent periods, there has been an increase in union activity in some of the countries in which Gold Fields operates. Any union activity that affects Gold Fields could have a material adverse impact on its operations, production and financial performance.
In South Africa, a recent increase in labor unrest has resulted in more frequent industrial disputes and extended negotiations that have negatively affected South Africa’s sovereign debt rating and subsequently the credit ratings of a number of the country’s leading mining companies, including Gold Fields. While widespread strikes in the gold mining industry have not occurred since the second half of fiscal 2012, the South African platinum industry was subject to a five month strike in 2014. Negotiations on a new agreement between Gold Fields and the registered trade unions of South Deep, which is due in fiscal 2018, will commence in fiscal 2017. While the outcome of Gold Fields’ wage negotiations with the unions in fiscal 2015 was relatively positive and resulted in a three year wage agreement with the National Union of Mineworkers, or NUM, and UASA, in light of the ongoing labor unrest there can be no guarantee that future negotiations, including the negotiations scheduled for fiscal 2017, will not be accompanied by further strikes, work stoppages or other disruptions.
Furthermore, guidelines and targets have been provided to facilitate compliance with the open-ended broad-based socio-economic empowerment requirements espoused in Section 2 of the MPRDA and in the broad-based socio-economic empowerment charter for the South African mining and minerals industry known as the Mining Charter, as well as the amendments to that charter that took effect from September 13, 2010, or the Amended Mining Charter. The Amended Mining Charter, contains guidelines which provide that all mining companies must achieve, among other things, 26% ownership by HDSAs of mining assets and a minimum of 40% HDSA demographic representation at the executive management, senior management, middle management, junior management and core and critical skills levels (subject to offsets) in order to comply with the empowerment requirements of the MPRDA. See “—Gold Fields’ mineral rights are subject to legislation, which could impose significant costs and burdens and which impose certain ownership requirements, the interpretation of which are the subject of dispute” and “Information on the Company—Environmental and Regulatory Matters—South Africa—Mineral Rights”. The ongoing implementation and enforcement of these requirements, including as a result of any changes thereto following the announced review, may be contentious.
Gold Fields’ operations in Ghana and Peru have recently been, and may in the future be, impacted by increased union activities and new labor laws. In particular, there can be no guarantee that labor unions in either country will not undertake strikes or“go-slow” actions impacting the Group’s operations or those of other related industries or suppliers, or that changes in local regulations will not result in increased costs and penalties being incurred by the Group.
In Ghana, in April 2013, employees represented by the Ghana Mineworkers Union, or GMWU, the Professional Managerial Staff Union and the Branch Union at both Tarkwa and Damang undertook illegal industrial action, resulting in the temporary suspension of production at both operations. The strike lasted six days and ended after Gold Fields and the GMWU reached a settlement. Subsequently, the wage negotiations with the unions in fiscal 2015 and fiscal 2016 were completed and wage agreements for fiscal 2016 and fiscal 2017 have been signed, with a 10% basic salary increase for fiscal 2016 (to be backdated) and a 6% increase for fiscal 2017. Nevertheless, in light of the recent labor unrest there can be no guarantee that negotiations in the future will not be difficult or accompanied by further strikes, work stoppages or other labor actions.
In Peru, the Group may see increased union activity over the course of fiscal 2017 as a result of reduced commodity and mineral prices which may lead to reductions in the annual income of employees. This may in turn cause unions to seek better and/or additional benefits to compensate for any such decrease in their annual income, such as through increased activities and/or industrial action. However, in January 2017, Gold Fields executed a three year agreement with Cerro Corona’s union that provides for a S/. 220 annual wage increase in fiscal 2017 which is equivalent to a 5.3% annual wage increase on average for this group of employees, 5.5% increase in fiscal 2018 and 5.8% increase in fiscal 2019. In addition, there was an increase in labor inspection activities over the course of fiscal 2016, and this may continue into fiscal 2017. See “Information on the Company—Environmental and Regulatory Matters—Peru”.
In the event that Gold Fields experiences further industrial relations related interruptions at any of its operations or in other industries that impact its operations, or increased employment-related costs due to union or employee activity, these may have a material adverse effect on its business, production levels, operating costs, production targets, operating results, financial condition, reputation and future prospects. In addition, lower levels of mining activity can have a longer term impact on production levels and operating costs, which may affect operating life. Mining conditions can deteriorate during extended periods without production, such as during and after strikes, and Gold Fields will notre-commence mining until health and safety conditions are considered appropriate to do so.
Existing labor laws (including those that impose obligations on Gold Fields regarding worker rights) and any new or amended labor laws may increase Gold Fields’ labor costs and have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Power cost increases may adversely affect Gold Fields’ business, operating results and financial condition.
Gold Fields’ South Deep mining operation depends upon electrical power generated by the state-owned power provider, Eskom Limited, or Eskom. See “Operating and Financial Review and Prospects—Overview—Costs”. Eskom holds a monopoly on power supply in the South African market. Eskom tariffs are regulated by the National Energy Regulator of South Africa, or NERSA. During Eskom’s 2013-2014 fiscal year, through a third multi-year-price determination process, or MYPD3, NERSA granted Eskom 8% tariff increases for each fiscal year until 2018-2019. For 2015, NERSA granted Eskom an average tariff increase of 12.69% effective April 1, 2015, being 8% plus 4.69% due to the clawing back by Eskom of prudent costs from the “regulatory clearing account” applicable from April 2010 to March 2013, the first year of the MYPD3. On March 1, 2016, NERSA gave permission to Eskom to raise rates by an additional 9.4%, being 8% plus a net 1.4% due to the 2016 regulatory clearing account charge (for the second year of the MYPD3), in order to make up a cash flow shortfall. A regional group of intensive electricity users challenged NERSA’s decision in court. On August 16, 2016, the North Gauteng High Court overturned NERSA’s decision. On November 17, 2016, the North Gauteng High Court granted NERSA’s appeal to the Supreme Court of Appeal, which is currently pending. The outcome of the Supreme Court of Appeal’s judgment, and possibly the outcome of a further appeal to the Constitutional Court, will likely have notable impacts on the cost of electricity. The increase granted to Eskom for the period beginning April 1, 2017 is 2.2%. Should Gold Fields experience further power tariff increases, its business, operating results and financial condition may be adversely impacted.
In Australia, Gold Fields’ St. Ives and Agnew/Lawlers mines contract for the supply of electricity with BHP Nickel-West under a power purchasing agreement. Granny Smith receives its entire electricity supply from a newgas-fired power station, sourcing gas from a nearby gas pipeline, which has been constructed for the nearby Tropicana mine to supply gas to its operations. Access to this pipeline is facilitated through a newly constructed gas power station, which provides a 24 megawatt power generating system to Granny Smith. If any of Gold Fields’ Australian operations were to lose their supply, replacement of this supply may entail a significant increase in costs due to the volatile Western Australian gas market. Any such increase in costs could have a material adverse impact on Gold Fields’ business and operating results.
The Ghanaian state electricity supplier, the Volta River Authority, or the VRA, supplies power to Gold Fields Ghana Limited (Tarkwa mine), or Gold Fields Ghana, and the Electricity Company of Ghana, or the ECG, provides power to Abosso Goldfields Limited (Damang mine), or Abosso. The ECG’s tariff from January 1, 2015 to December 31, 2015 was U.S.$0.23/kWh. Following negotiations with management, the ECG agreed to decrease its tariff to U.S.$0.20/kWh from August 1, 2015 to January 31, 2016. There has been no revision of the ECG tariff to date. Gold Fields Ghana has agreed tariffs with the VRA with a base tariff of U.S.$0.1674/kWh with effect from January 1, 2015 using a tariff model which inputs actual variables (including the generation mix and input prices) of the previous quarter to determine the tariff for each quarter on a rolling basis. The average VRA tariff for fiscal 2016 was U.S.$0.158/kWh. On December 11, 2015, the Public Utilities Regulatory Commission increased the average electricity tariffs for the transmission grid, or GRIDCo, by approximately 59.2% increasing the tariff paid by Tarkwa only from U.S.$0.01539/kWh to U.S.$0.024252/kWh. In addition, the new Energy Sector Levies Act enacted in 2015 (Act 899) imposed a levy of 9% per kilowatt hour of electricity, on both public lighting and national electrification, applicable to all consumers (resulting in an increased charge to Tarkwa from the VRA of 1.2 c/kWh). While in his budget speech on March 2, 2017, the Minister of Finance announced that the levy of 9% on public lighting and national electrification will be reduced to 2% and 3% respectively there can be no guarantee that this reduction will be enacted. Although Gold Fields Ghana has also entered into an agreement with Genser Power, or Genser, for the supply ofoff-grid electricity, Genser will require a period of time to stabilize its operational performance and during this phase there is a risk of incurring periods of downtime which, if extended, would require Damang to revert back to ECG grid power. Any further increase in the electricity price could have a material adverse effect on the Group’s business and operating results. See “Information on the Company—Description of Mining Business”.
Power stoppages, fluctuations and usage constraints may force Gold Fields to halt or curtail operations.
Electricity supply in South Africa remains constrained and future power disruptions are possible. In the first quarter of fiscal 2014, rain impacted coal supply and placed serious strain on Eskom’s ability to provide power. In November 2014, Eskom declared a power emergency and required large industrial users, including Gold Fields’ South Deep operation, to reduce their electricity usage by 10% for five hours as part of a broader load shedding program. Gold Fields also experienced rolling load shedding during fiscal 2015. In addition, although NERSA approved an electricity tariff increase of 9.4% for 2016 and 2017, Eskom has expressed concern that this increase may not be adequate to prevent future electricity interruptions.
Gold Fields has been warned of possible load shedding under its voluntary load curtailment agreement with Eskom. While no load shedding was requested by Eskom in 2016, under this agreement, Gold Fields is required to reduce demand by up to 25% of load, depending on the severity of the shortage, for a specified period of time during which the national grid is unable to maintain its load. Any further disruption or decrease in the electrical power supply available to Gold Fields’ South Deep operation could have a material adverse effect on its business, operating results and financial condition.
The Department of Energy is developing a power conservation program in an attempt to improve the power situation in South Africa and Eskom is embarking on the construction of new power stations, among other resources. However, there can be no assurance that these and other interventions will provide sufficient supply for the needs of the country or for Gold Fields to run its operations at full capacity or at all.
Although the VRA has not imposed any power cuts in Ghana since August 2006, frequent power interruptions have occurred in the power supplied by the ECG. In 2015, the Ghanaian government imposed a 33% load shedding program on all mining and industrial companies. While the power supply stabilized during fiscal 2016, there can be no guarantee that further power interruptions will not occur. While Gold Fields has taken steps to source power from an independent power producer to complement its self-generation source, there can be no guarantee that Gold Fields will be able to source enough power to make up for any shortfall in the power supplied by the ECG.
Should Gold Fields continue to experience power outages, fluctuations or usage constraints at any of its operations, then its business, operating results and financial condition may be materially adversely impacted.
An actual or alleged breach or breaches in governance processes, or fraud, bribery and corruption may lead to public and private censure, regulatory penalties, loss of licenses or permits and impact negatively upon our empowerment status and may damage Gold Fields’ reputation.
Gold Fields operates globally in multiple jurisdictions and with numerous and complex frameworks, and its governance and compliance processes may not prevent potential breaches of law or accounting or other governance practices. Gold Fields’ operating and ethical codes, among other standards and guidance, may not prevent instances of fraudulent behavior and dishonesty, nor guarantee compliance with legal and regulatory requirements.
In September 2013, Gold Fields has beenwas informed that it is the subject of a regulatory investigation in the United States by the U.S. Securities and Exchange Commission, or SEC relating to the Black Economic Empowerment, or BEE,BBBEE transaction associated with the granting of the mining licenserights for its South Deep operation. In South Africa, the Directorate for Priority Crime Investigation, or the Hawks, hasBBBEE informed the Company that it hashad started a preliminary investigation into this BEE transaction to determine whether or not to proceed to a formal investigation, following a complaint by the Democratic Alliance. At this stage,While Gold Fields was informed on June 22, 2015 that the Foreign Corrupt Practices Act Unit of the SEC concluded its investigation in connection with the BBBEE transaction related to South Deep and, based on the information available to them, would not recommend to the SEC that enforcement action be taken against Gold Fields, it is not possible to determine at this stage what effect the ultimate outcome of these investigations, any regulatory findings and any related developments may have on the Company. Among other things, the notice provided by the SEC regarding the conclusion of its investigation noted that the notice “must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff’s investigation”. See “Information on the Company—Legal Proceedings and Investigations—Regulatory Investigations.”Investigation”.
To the extent that Gold Fields suffers from any actual or alleged breach or breaches of relevant laws (including South African anti-bribery and corruption legislation or the U.S. Foreign Corrupt Practices Act of 1977)1977, or the FCPA) under any circumstances, they may lead to investigations and examinations, regulatory and civil fines, litigation, public and private censure, loss of operating licenses or permits and impact negatively upon our empowerment status and may damage Gold Fields’ reputation. The occurrence of any of these events could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Due to the nature of mining and the extensive environmental footprint of the operations, environmental and industrial accidents and pollution may result in operational disruptions such as stoppages which could result in increased production costs as well as financial and regulatory liabilities.
Gold mining by its nature involves significant risks and hazards, including environmental hazards and industrial and mining accidents. These may include, for example, seismic events, fires,cave-ins and blockages, flooding, discharges of gases and toxic substances, contamination of water, air or soil resources, radioactivity and
other accidents or conditions resulting from mining activities including, among other things, blasting and the transport, storage and handling of hazardous materials.
The occurrence of any of these hazards or risks could delay or halt production, increase production costs and result in financial and regulatory liability for Gold Fields (including as a result of the occurrence of hazards that took place at theSpin-off operations when they were owned by Gold Fields), which could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Due to ageing infrastructure at our operations, unplanned breakdowns and stoppages may result in production delays, increased costs and industrial accidents.
Once a shaft or a processing plant has reached the end of its intended lifespan, more than normal maintenance and care is required. Some of Gold Fields’ infrastructure in South Africa, Ghana and Australia falls into this category. Ageing infrastructure may also cause the Group to be unable to maintain throughput at its operations in Peru. Although Gold Fields has comprehensive strategies in place to address these issues, including maintenance and process plant optimization projects, incidents resulting in production delays, increased costs or industrial accidents may occur. Such incidents may have a material adverse effect on Gold Fields’ business, operating results and financial condition.
If Gold Fields loses senior management or is unable to hire and retain sufficient technically skilled employees or sufficient HDSA representation in management positions, its business may be materially adversely affected.
Gold Fields’ ability to operate or expand effectively depends largely on the experience, skills and performance of its senior management team and technically skilled employees. However, the mining industry, including Gold Fields, continues to experience a global shortage of qualified senior management and technically skilled employees. In particular, there is a shortage of mechanized mining skills in the South African gold mining industry. Gold Fields may be unable to hire or retain appropriate senior management, technically skilled employees or other management personnel, or may have to pay higher levels of remuneration than it currently intends in order to do so. Additionally, as a condition of our mining licenserights at South Deep, we must ensure that there is sufficient HDSA participation in our management and core and critical skills, and failure to do so could result in fines or the loss or suspension of our mining license.rights. If Gold Fields is not able to hire and retain appropriate management and technically skilled personnel or is unable to obtain sufficient HDSA representation in management positions or if there are not sufficient succession plans in place, this could have a material adverse effect on its business (including production levels), operating results and financial position.
Because gold is generally sold in U.S. dollars, while some of Gold Fields’ production costs are in Australian dollars, Rand and other non-U.S. dollar currencies, Gold Fields’ operating results and financial condition could be materially harmed by a material change in the value of these non-U.S. dollar currencies.
Gold is principally sold throughout the world in U.S. dollars. Gold Fields’ costs of production are incurred principally in U.S. dollars, Australian dollars, Rand and other currencies. Recent volatility in the Rand (including significant depreciation of the Rand against the U.S. dollar in recent years) and depreciation of the Australian dollar against the U.S. dollar in fiscal 2014 has made our costs in South Africa and Australia and results of operations less predictable than when exchange rates are more stable. As a result, any significant and sustained appreciation of any of these non-U.S. dollar currencies against the U.S. dollar may materially increase Gold Fields’ costs in U.S. dollar terms, which could materially adversely affect Gold Fields’ business, operating results and financial condition.
Conversely, inflation in any of the countries in which it operates could increase the prices Gold Fields pays for products and services and could have a material adverse effect on Gold Fields’ business, operating results and financial condition if not offset by increased gold prices.
Gold Fields may experience unforeseen difficulties, delays or costs in implementing its business strategy and projects, including any strategic projects, cost-cutting initiatives, divestments and other initiatives and any such strategy or project may not result in the anticipated benefits.
The ability to grow the business will depend on the successful implementation of Gold Fields’ existing and proposed strategic initiatives, such as the ramping up of production at South Deep (which accounts for 73% of Gold Fields’ mineral reserves), and the achievement of a 15% free cash flow margin, or FCF Margin, at U.S.$1,300/oz. See “Information on the Company—Strategy.”
The successful implementation of the Company’s strategic initiatives depends upon many factors, including those outside its control. For example, the successful achievement of a 15% FCF Margin at U.S.$1,300/oz. will depend on, among other things, prevailing market prices for input costs. Gold Fields may also prove unable to deliver on production targets and other strategic initiatives, including ramping-up of key capital projects, such as the South Deep mine in South Africa. Unforeseen difficulties, delays or costs may adversely affect the successful implementation of Gold Fields’ business strategy and projects, and such strategy and projects may not result in the anticipated benefits. For example, in 2014 South Deep experienced a 34% decrease in production principally due to the introduction of an extensive safety-related ground support remediation intervention and the imposition of a work stoppage by the DMR following three fatalities at the mine. Any such difficulties, delays or costs could prevent Gold Fields from fully implementing its business strategy, which could have a material adverse effect on its business, operating results and financial condition.
Gold Fields is in the process of implementing initiatives relating to its strategic alignment, including the reduction of marginal mining, cost-efficiency initiatives, increased brownfield exploration, production planning, cost-cutting and divestments. Any future contribution of these measures to profitability will be influenced by the actual benefits and savings achieved and by Gold Fields’ ability to sustain these ongoing efforts. Strategic alignment and cost-cutting initiatives may involve various risks, including, for example, labor unrest, operating licence withdrawal, and potential knock-on effects to other company projects and jurisdictions. The risk is elevated in South Africa, given Gold Fields’ mining licence obligations. See “—Gold Fields’ mineral rights are subject to legislation, which could impose significant costs and burdens and which impose certain ownership requirements, the interpretation of which are the subject of dispute.”
In addition, these measures may not be implemented as planned; turn out to be less effective than anticipated; only become effective later than anticipated; or not be effective at all. Any of these outcomes, individually or in combination, may have a material adverse effect on Gold Fields’ business, operating results and financial condition.
As part of its strategy, Gold Fields has stated that it intends to dispose of certain of its exploration and development assets. With respect to these and any other dispositions, Gold Fields’ may not be able to obtain prices that it expects for assets it seeks to dispose of or to complete the contemplated disposals in the timeframe contemplated or at all. Any of the above could have a negative impact on Gold Fields’ business, operating results and financial condition.
Mining companies are increasingly required to operate in a sustainable manner and to provide benefits to affected communities. Failure to comply with these requirements can result in legal suits, additional operational costs, investor divestment and loss of ‘social licence to operate’, which could adversely impact Gold Fields’ business, operating results and financial condition.
Many mining companies face increasing pressure over their “social license to operate” which can be understood as the acceptance of the activities of these companies by local stakeholders. While formal permission to operate is ultimately granted by host governments, many mining activities require social permission from host communities and influential stakeholders to carry out operations effectively and profitably.
These businesses are under pressure to demonstrate that, while they seek a satisfactory return on investment for shareholders, the environment, human rights and other key sustainability issues are responsibly managed and stakeholders, such as employees, host communities and the countries in which they operate, also benefit from their commercial activities. The potential consequences of these pressures and the adverse publicity in cases where companies are believed not to be creating sufficient social and economic benefit or are perceived to not be
responsibly managing other sustainability issues may result in additional operating costs, reputational damage, active community opposition (possibly resulting in stoppages), allegations of human rights abuses, legal suits and investor withdrawal.
In order to maintain its social license to operate, Gold Fields may need to design or redesign parts of its mining operations to minimize their impact on such communities and the environment, either by changing mining plans to avoid such impact, by modifying operations, or by relocating the affected people to an agreed location. Responsive measures may also include the full restoration of livelihoods of those impacted. In addition, Gold Fields is obliged to comply with the terms and conditions of all the mining rights it holds in South Africa. In this regard, the SLP provisions of our mining rights must make provision for local economic development, among other obligations. See “Information on the Company—Environmental and Regulatory Matter—South Africa—Mineral Rights”. Gold Fields also undertakes social and economic development spending in Australia, Ghana and Peru, both voluntarily and as a condition of its mining licenses. See “Information on the Company—Sustainable Development”. In addition, as Gold Fields has a long history of mining operations in certain regions or has purchased operations which have a long history, issues may arise regarding historical as well as potential future environmental or health impacts in those areas.
Delays in projects attributable to a lack of community support can translate directly into a decrease in the value of a project or into an inability to bring the project to, or maintain, production. The cost of measures and other issues relating to the sustainable development of mining operations could place significant demands on personnel resources, could increase capital and operating costs and could have a material adverse impact on Gold Fields’ reputation, business, operating results and financial condition.
Gold Fields is subject to various regulatory costs, such as mining taxes and royalties, changes to which may have a material adverse effect on Gold Fields’ operations and profits.
In recent years, governments (local and national), communities, non-governmental organizations and trade unions in several jurisdictions have sought and, in some cases, have implemented greater cost imposts on the mining industry, including through the imposition of additional taxes and royalties. Such resource nationalism, whether in the form of cost imposts, interference in project management, mandatory social investment requirements, local content requirements or creeping expropriation could impact the global mining industry and Gold Fields’ business, operating results and financial condition.
In South Africa, the African National Congress, or the ANC, has adopted two recommended approaches to interacting with the mining industry. While the ANC has rejected the possibility of mine nationalization for now, the first approach contemplates, among other things, greater state intervention in the mining industry, including the revision of existing royalties, the imposition of new taxes and an increase in the South African government’s holdings in mining companies. The second approach contemplates the South African government taking a more active role in the mining sector, including through the strengthening of a state mining company to be involved in new projects either through partnerships or individually.
The adopted policies may impose additional restrictions, obligations, operational costs, taxes or royalty payments on gold mining companies, including Gold Fields, any of which could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
In 2012, the Ghanaian government increased taxes on mining companies. These changes included an increase in the corporate income tax from 25% to 35%, an increase in stool/land rents to U.S.$3,750 per km2 from U.S.$0.2 per km2, an increase in customs duties on mining equipment to 5% and the introduction of a temporary special import levy of 1% to 2%. Further, in Ghana, the ownership of land on which there are mineral deposits is separate from the ownership of the minerals. Mining companies must pay royalties of 5% of the total revenue earned from minerals. The government also has a right to obtain a 10% free-carried interest in mining leases. See “Information on the Company—Environmental and Regulatory Matters—Ghana—Mineral Rights.”
In Peru, the general corporate income tax rate was reduced from 30% to 28% with effect from January 1, 2015, and will be further reduced in future until it reaches 26% in 2019. In turn, the dividends income tax rate
applicable to non-resident shareholders has increased from 4.1% to 6.8% and will be further increased until it reaches 9.3% in 2019. These changes in rates are not immediately applicable to Gold Fields La Cima and Gold Fields Corona (BVI) as they have executed Legal Stability Agreements, which provide stability regarding certain aspects of the income tax, hiring and export legal regimes, with the Private Investment Promotion Agency, or PROINVERSION, which have stabilized the income tax rates in force on the date of their execution. However, after 2017, when the Legal Stability Agreements expire, Gold Fields La Cima and Gold Fields Corona (BVI) will be subject to the general regime in force at that time.
Since July 2012, mining companies have also been required to pay an annual supervisory contribution to the the Supervisory Body of Investment in Energy and Mining (Organismo Supervisor de la Inversión en Energía y Minería), or the OSINERGMIN, as well as to the Assessment and Environment Supervising Agency (Organismo de Evaluación y Fiscalización Ambiental), or the OEFA. See “Information on the Company—Environmental and Regulatory Matters—Peru—Mining Royalty and Other Special Mining Taxes and Charges.”
In addition, a consultation law has been enacted, requiring the government to consult with indigenous or native populations on legislative or administrative proposals that may have an impact on their collective rights. See “Information on the Company—Environmental and Regulatory Matters—Peru—Mining Royalty and Other Special Mining Taxes and Charges.”
The impositions of additional restrictions, obligations, operational costs, taxes or royalty payments could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Economic, political or social instability in the countries or regions where Gold Fields operates may have a material adverse effect on Gold Fields’ operations and profits.
In fiscal 2014, approximately 9%, 32%, 45% and 14% of Gold Fields’ production was in South Africa, Ghana, Australia and Peru, respectively. Changes or instability in the economic, political or social environment in any of these countries or in neighboring countries could affect an investment in Gold Fields.
High levels of unemployment and a shortage of critical skills in South Africa, despite increased government expenditure on education and training, remain issues and deterrents to foreign investment. The volatile and uncertain labor environment, which severely impacts the local economy and investor confidence, has led, and may lead, to further downgrades in national credit ratings, making investment more expensive and difficult to secure. See “—Gold Fields’ operations and profits have been and may be adversely affected by union activity and new and existing labor laws.” This may restrict Gold Fields’ future access to international financing and could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Furthermore, while the South African government has stated that it does not intend to nationalize mining assets or mining companies, certain new smaller political parties have stated publicly and in the media that the government should embark on a program of nationalization. Any threats of, or actual proceedings to, nationalize any of Gold Fields’ assets, could halt or curtail operations, resulting in a material adverse effect on Gold Fields’ business, operating results and financial condition and could cause the value of Gold Fields’ securities to decline rapidly and dramatically, possibly causing investors to lose the entirety of their respective investments.
There has also been regional social instability in the area around Gold Fields’ mining operations in Peru, where recent political developments in fiscal 2014 have resulted in the election of local and regional officeholders who have taken public positions opposed to mining operations. There is also the potential for social instability or protests regarding mining activity in the communities near Gold Fields’ South Deep mine relating to, among other things, community investment, environmental concerns, service delivery by local government or other issues. These developments could result in Gold Fields experiencing opposition in connection with its operations in Peru or South Africa. Such opposition at any of Gold Fields’ operations, in particular if it causes any stoppages, as well as any protests aimed at other mining operations that affect its operations, could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Power cost increases may adversely affect Gold Fields’ business, operating results and financial condition.
Gold Fields’ South Deep mining operation depends upon electrical power generated by the state utility provider, Eskom Limited, or Eskom. See “Operating and Financial Review and Prospects—Overview—Costs.” Eskom holds a monopoly on power supply in the South African market. Eskom applied to the National Energy Regulator of South Africa, or NERSA, for tariff increases and for 2015 NERSA granted Eskom an average tariff increase of 12.69% effective April 1, 2015, being 8% plus 4.69% due to the clawing back by Eskom of prudent costs from the “Regulatory Clearing Account” for the three year period from April 2010 to March 2013. It has also been reported that Eskom intends to request permission to raise the power tariff by 25%, instead of 12.69%, in order to make up a cashflow shortfall. NERSA has given permission for Eskom to raise rates further but it is unclear what the actual rate increase will be. In addition, the South African Minister of Finance has announced a two per cent per kilowatt hour environmental levy on electricity. The actual legislated increase applicable to the South African mining industry effective April 1, 2014 was 8%. Should Gold Fields experience further power tariff increases, its business, operating results and financial condition may be adversely impacted.
In Australia, Gold Fields’ St. Ives and Agnew/Lawlers mines contract for the supply of electricity with BHP Nickel-West under a power purchasing agreement. Granny Smith is expected to receive its future energy supply from a new gas pipeline, which has been constructed by the nearby Tropicana mine to supply gas to its operations. Access to this pipeline is subject to the construction of a gas power station, successful negotiations on gas supply and regulatory approval. If any of Gold Fields’ Australian operations were to lose their supply, or if Granny Smith is not able to access the proposed pipeline, replacement of this supply may entail a significant increase in costs due to the volatile Western Australian gas market. Any such increase in costs could have a material adverse impact on Gold Fields’ business and operating results.
Both Gold Fields Ghana Limited, or Gold Fields Ghana, and Abosso Gold Fields Limited, or Abosso, concluded tariff negotiations for 2013, 2014 and 2015 with their respective power suppliers (the state electricity supplier, the Volta River Authority, or VRA, supplies power to Gold Fields Ghana and the Electricity Company of Ghana, or ECG, provides power to Abosso). ECG’s rate for the period January 1, 2012 to December 31, 2013 was $0.1809/kWh. ECG’s tariffs from January 1, 2014 to December 31, 2014 was $0.216/kWh and that from January 1, 2015 to December 31, 2015 is $0.23/kWh. Gold Fields Ghana has agreed tariffs with VRA with a base tariff of $0.1674/kWh. Although Gold Fields Ghana has also entered into an agreement with Genser Energy, or Genser, for the supply of off-grid electricity, any further increase in the electricity price could have a material adverse effect on the Group’s business and operating results. See “Information on the Company—Description of Mining Business”.
Power stoppages, fluctuations and usage constraints may force Gold Fields to halt or curtail operations.
Electricity supply in South Africa remains constrained and future power disruptions are possible. Labor unrest in South Africa during fiscal 2012 disrupted the supply of coal to Eskom’s power station resulting in interrupted supply. In the first quarter of fiscal 2014, rain impacted coal supply and placed serious strain on Eskom’s ability to provide power. In November 2014, Eskom declared a power emergency and required large industrial users, including Gold Fields’ South Deep operation, to reduce their electricity usage by 10% for five hours as part of a broader load shedding program. Eskom has warned that, while it has adopted a policy of asking households to reduce usage before asking industrial users to do so in order to reduce the economic impact of such disruptions, power constraints will continue.
Gold Fields has been warned of possible load shedding under its voluntary load curtailment agreement with Eskom. Under this agreement, Gold Fields is required to reduce demand by up to 25% of load at the time, depending on the severity of the shortage, for a specified period of time during which the national grid is unable to maintain its load. Any further disruption or decrease in the electrical power supply available to Gold Fields’ South Deep operation could have a material adverse effect on its business, operating results and financial condition.
The Department of Energy is developing a power conservation program in an attempt to improve the power situation in South Africa and Eskom is embarking on the construction of new power stations, among other resources. However, there can be no assurance that these and other interventions will provide sufficient supply for the needs of the country or for Gold Fields to run its operations at full capacity or at all.
Although the VRA has not imposed any power cuts in Ghana since August 2006, frequent power interruptions have occurred in the power supplied by the ECG. There was an increase in power interruptions in fiscal 2014 which has led to an ongoing load shedding exercise. While the Ghanaian Ministry of Power has projected that the situation will improve by the end of March 2015, there can be no guarantee that further power interruptions will not occur. While Gold Fields has taken steps to source power from an independent power producer to complement its self-generation source, there can be no guarantee that Gold Fields will be able to source enough power to make up for any shortfall in the power supplied by ECG.
Should Gold Fields continue to experience power outages, fluctuations or usage constraints at any of its operations, then its business, operating results and financial condition may be materially adversely impacted.
Actual and potential supply chain shortages and increases in the prices of production inputs may have a material adverse effect on Gold Fields’ operations and profits.
Gold Fields’ operating results may be affected by the availability and pricing of raw materials and other essential production inputs, including fuel, steel and cyanide and other reagents. The price and quality of raw materials may be substantially affected by changes in global supply and demand, along with weather conditions, governmental controls and other factors. A sustained interruption in the supply of any of these materials would require Gold Fields to find acceptable substitute suppliers and could require it to pay higher prices for such materials. Any significant increase in the prices of these materials will increase the Company’s operating costs and affect production considerations.
The price of oil has been volatile, fluctuating between $56 and $115U.S.$36.25and U.S.$58.07 per barrel of Brent Crude in 2014.2016. As of March 16, 2015,April 3, 2017, the price of oil was at $53U.S.$53.53 per barrel of Brent Crude. Gold Fields entered intodoes not currently have any significant oil price hedging arrangements in respect of its Australian operations. Absent these arrangements and assuming there is no government intervention to stabilize oil prices, management estimates that for every $10 per barrel increase in the oil price, other factors remaining equal, the total all-in-cost at its operations in Ghana, Australia and Peru would increase by approximately $18, $5 and $7 per ounce, respectively. The all-in cost of certain of Gold Fields’ mines, particularly its West African mines, are most sensitive to changes in the price of oil.hedges.
Furthermore, the price of steel has also been volatile. Steel is used in the manufacture of most forms of fixed and mobile mining equipment, which is a relatively large contributor to the operating costs and capital expenditure of a mine.
Fluctuations in oil and steel prices may have a significant impact on operating costs and capital expenditure estimates and, in the absence of other economic fluctuations, could result in significant changes in the total expenditure estimates for new mining projects or render certain projectsnon-viable.
Gold Fields’ insurance coverage may not adequately satisfy all potential claims in the future.
Gold Fields has an insurance program, however, it may become subject to liability against which it has not insured, cannot insure or has insufficiently insured, including those in respect of past mining activities. Gold Fields’ existing property and liability insurance contains exclusions and limitations on coverage. For example, should Gold Fields be subject to any regulatory or criminal fines or penalties, these amounts would not be covered under its insurance program. Should Gold Fields suffer a major loss, future earnings could be affected. In addition, Gold Fields’ insurance does not cover loss of profits. Further, insurance may not continue to be available at economically acceptable premiums. As a result, in the future, Gold Fields’ insurance coverage may not cover the extent of claims against it or any cross-claims made.
Gold Fields’ financial flexibility could be materially constrained by South African exchange control regulations.
South Africa’s exchange control regulations, or the Exchange Control Regulations, restrict the export of capital from South Africa, the Republic of Namibia, and the Kingdoms of Lesotho and Swaziland, known collectively as the Common Monetary Area, or the CMA. Transactions between South African residents (including companies) andnon-residents of the CMA are subject to exchange controls enforced by the South
African Reserve Bank, or SARB. As a result, Gold Fields’ ability to raise and deploy capital outside the CMA is restricted. These restrictions could hinder Gold Fields’ financial and strategic flexibility, particularly its ability to fund acquisitions, capital expenditures and exploration projects outside South Africa. See “Information on the Company—Environmental and Regulatory Matters—South Africa—Exchange Controls.”Controls”.
Gold Fields may suffer material adverse consequences as a result of its reliance on outside contractors to conduct some of its operations.
A portion of Gold Fields’ operations in South Africa, Ghana, Australia and Peru are currently conducted by outside contractors. As a result, Gold Fields’ operations at those sites are subject to a number of risks, some of which are outside Gold Fields’ control, including contract risk, execution risk, litigation risk, regulatory risk and labor risk.
In addition, Gold Fields may incur liability to third parties as a result of the actions of its contractors. The occurrence of one or more of these risks could have a material adverse effect on Gold Fields’ business, operating results and financial condition. See “Directors, Senior Management and Employees—Employees—Labor Relations—South Africa”, “Directors, Senior Management and Employees—Employees—Labor Relations—Ghana”, “Directors, Senior Management and Employees—Employees—Labor Relations—Australia” and “Directors, Senior Management and Employees—Employees—Labor Relations—Peru.”Peru”.
Regulation of greenhouse gas emissions and climate change issues may materially adversely affect Gold Fields’ operations.
Energy is a significant input and cost to Gold Fields’ mining and processing operations, with its principal energy sources being electricity, purchased petroleum products, natural gas and coal. A number of governments or governmental bodies, including the United Nations Framework Convention on Climate Change and the Kyoto Protocol, have introduced or are contemplating regulatory changes in response to the potential impact of climate change. Many of these contemplate restricting emissions of greenhouse gases in jurisdictions in which Gold Fields operates.
In Australia, the Australian Clean Energy Act 2011 (Cth), or Clean Energy Act, and associated legislation establishing a national carbon pricing scheme, or Scheme, passed into law in November 2011. The Scheme was subsequently repealed with effect from July 1, 2014. The overall impact of the Scheme for the period prior to July 1, 2014 was approximately A$12 million per annum on Gold Fields’ Australian operations (including the Yilgarn South Assets). See “Information on the Company—Environmental and Regulatory Matters—Australia—Environmental.”
A carbon tax has been mooted in South Africa for some time, with the most recent indication of the government’s resolve to introduce the tax being the announcement, by the Minister of Finance in his 2015 Budget Speech, of the South African Treasury’s intention to release draft carbon tax legislation for public consultation during the first half of 2015 with a view to the implementation of the tax by mid-2016. At this time it is not possible to determine the ultimate impact of the proposed carbon tax on the Company. See “Information on the Company—Environmental and Regulatory Matters—South Africa—Environmental.”
In addition, a number of other regulatory initiatives are underway in countries in which Gold Fields operates that seek to reduce or limit industrial greenhouse gas emissions. These regulatory initiatives will be either voluntary or mandatory and are likely to impact Gold Fields’ operations directly or by affecting the cost of doing business, for example by increasing the costs of its suppliers or customers. Inconsistency of regulations particularly between developed and developing countries may affect both Gold Fields’ decision to pursue opportunities in certain countries and its costs of operations. Assessments of the potential impact of future climate change regulation are uncertain, given the wide scope of potential regulatory change in countries in which Gold Fields operates.
Furthermore, the potential physical impacts of climate change on Gold Fields’ operations are highly uncertain and may adversely impact the business, operating results and financial condition of Gold Fields’ operations.
Theft of gold and copper bearing materials and production inputs, as well as illegal and artisanal mining, occur on some of Gold Fields’ properties, are difficult to control, can disrupt Gold Fields’ business and can expose Gold Fields to liability.
A number of Gold Fields’ properties have experienced illegal and artisanal mining activities and theft of gold and copper bearing materials and copper cables (which may be by employees or third parties). The activities of illegal and artisanal miners could lead to depletion of mineral reserves, potentially affecting the economic viability of mining certain areas and shortening the lives of the operations as well as causing possible operational disruption, project delays, disputes with illegal miners and communities, pollution or damage to property for which Gold Fields could potentially be held responsible, leading to fines or other costs. Rising gold and copper prices may result in an increase in gold and copper thefts. The occurrence of any of these events could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Some of Gold Fields’ tenements in Australia are subject to native title claims and include Aboriginal heritage sites, which could impose significant costs and burdens.
Native title and Aboriginal cultural heritage legislation protects the claims and determined rights of Aboriginal people in relation to the land and waters throughout Australia in certain circumstances. Native title claims could require costly negotiations with the registered claimants and could have implications for Gold Fields’ access to or use of its tenements and, as a result, have a material adverse effect on Gold Fields’ business, operating results and financial condition. Similarly, there are risks that if Aboriginal cultural heritage sites are damaged or materially altered as a result of current or future operations, Gold Fields could be subject to criminal and/or civil penalties under relevant legislation. See “Information on the Company—Environmental and Regulatory Matters—Australia—Land Claims”.
HIV/AIDS, tuberculosis and other contagious diseases pose risks to Gold Fields in terms of lost productivity and increased costs.
The prevalence of HIV/AIDS in South Africa poses risks to Gold Fields in terms of potentially reduced productivity and increased medical and other costs. Compounding this are the concomitant infections, such as tuberculosis, that can accompany HIV illness, particularly at the end stages, and cause additional healthcare-related costs. If there is a significant increase in the incidence of HIV/AIDS infection and related diseases among the workforce, this may have a material adverse effect on Gold Fields’ business, operating results and financial condition. See “Directors, Senior Management and Employees—Employees—Safety and Wellness—Employee Health and Safety—Health—Wellness—HIV/AIDS Program.”AIDS”.
Additionally, the spread of contagious diseases such as respiratory diseases are exacerbated by communal housing and close quarters. The spread of such diseases could impact employees’ productivity, treatment costs and, therefore, operational costs.
Gold Fields’ operations are subject to environmental and health and safety regulations, which could impose additional costs and compliance requirements and Gold Fields may face claims and liability for breaches, or alleged breaches, of such regulations and other applicable laws.
Gold Fields’ operations are subject to various environmental and health and safety laws, regulations, permitting requirements and standards. For example, Gold Fields is required to secure estimated mine closure liabilities. The funding methods used to make provision for the required portion of the mine closure cost liabilities, in accordance with in-country legislation, are as follows:
South Africa: contributions into environmental trust funds and guarantees;
Ghana: reclamation bonds underwritten by banks, and restricted cash;
Australia: due to legislative changes in Western Australia becoming effective in July 2014, companies are now required to pay an annual levy to the State of 1% of the total mine closure liability. This levy goes into a State-administered fund known as the Mine Rehabilitation Fund which will be used to rehabilitate legacy sites or sites that have been prematurely closed or abandoned; and
Peru: bank guarantees.
Gold Fields may in the future incur significant costs to comply with such environmental and health and safety requirements imposed under existing or new legislation, regulations or permit requirements or to comply with changes in existing laws and regulations or the manner in which they are applied. Gold Fields may also be subject to litigation and other costs as well as actions by authorities relating to environmental and health and safety matters, including mine closures, the suspension of operations and prosecution for industrial accidents as well as significant penalties and fines for non-compliance. These costs could have a material adverse effect on Gold Fields’ business, results of operations and financial condition. See “Information on the Company—Environmental and Regulatory Matters.”
The principal health risks associated with Gold Fields’ mining operations in South Africa arise from occupational exposure and potential community environmental exposure to silica dust, noise and certain hazardous substances, including toxic gases and radioactive particulates. The most significant occupational diseases affecting Gold Fields’ workforce include lung diseases (such as silicosis, tuberculosis, a combination of the two and chronic obstructive airways disease, or COAD) as well as noise-induced hearing loss, or NIHL. Employees have sought and may continue to seek compensation for certain illnesses, such as silicosis, from their employer under workers compensation and also, at the same time, in a civil action under common law (either as individuals or as a class) as is the case with the silicosis individual and class action lawsuits. Such actions may also arise in connection with the alleged incidence of such diseases in communities proximate to Gold Fields’ mines.
A consolidated application has been brought against several South African mining companies, including Gold Fields, for certification of a class action on behalf of current or former mineworkers (and their dependants) who have allegedly contracted silicosis and/or tuberculosis, while working for one or more of the mining companies listed in the application. The certification application will be heard in October 2015, and will be preceded by various legal technical applications and court processes. In addition to the class action, an individual silicosis-related action has been instituted against Gold Fields and one other mining company. See “Information on the Company—Legal Proceedings and Investigations—Silicosis.” If a significant number of such claims were suitably established against it, the payment of compensation for the claims and for any significant additional costs arising out of these issues could have a material adverse effect on Gold Fields’ business, reputation, operating results and financial condition.
South Africa’s deputy Mineral Resources Minister has stated that the ministry may increase sanctions, including closures, for mines in which fatalities occur because of violations of health and safety rules. The DMR can and does issue, in the ordinary course of its operations, instructions, including Section 54 orders, following safety incidents or accidents to partially or completely halt operations at affected mines. It is also Gold Fields’ policy to halt production at its operations when serious accidents occur in order to rectify dangerous situations and, if necessary, retrain workers. In May and July 2014, the DMR imposed Section 54 work stoppage orders on Gold Fields’ South Deep operation following three fatalities at the mine, which led to the deferral of about 16,000 ounces of production. Gold Fields also embarked on a secondary support intervention which restricted access to certain parts of the mine, leading to the deferral of approximately 48,225 ounces of production in fiscal 2014 with knock-on effects in fiscal 2015. In addition, there can be no assurance that the unions will not take industrial action in response to such accidents which could lead to losses in Gold Fields’ production. Any additional stoppages in production, or increased costs associated with such incidents, could have a material adverse effect on Gold Fields’ business, operating results and financial condition. Such incidents may also negatively affect Gold Fields’ reputation with, among others, employees and unions, South African regulators and regulators in other jurisdictions in which Gold Fields operates.
Gold Fields could incur significant costs as a result of pending or threatened litigation, which could have a material adverse effect on Gold Fields’ business, operating results and financial condition. See “Information on the Company—Legal Proceedings and Investigations—Silicosis.” Further, any new regulations, potential litigation or any changes to the health and safety laws which increase the burden of compliance or the penalties for non-compliance may cause Gold Fields to incur further significant costs and could have a material adverse effect on Gold Fields’ business, operating results and financial condition. See “Information on the Company—Environmental and Regulatory Matters—Health and Safety.”
To the extent that Gold Fields seeks to add to its reserve base through exploration, it may experience problems associated with mineral exploration or developing mining projects.
In order to expand its operations and reserve base, Gold Fields may rely on exploration for gold, and other metals associated with gold, as well as its ability to develop mining projects. Exploration for gold and other metals associated with gold is speculative in nature, involves many risks and is frequently unsuccessful. To the extent that ore bodies are to be developed, it can take a number of years and substantial expenditures from the initial phases of drilling until production commences, during which time the economic feasibility of production may change. In addition, to the extent Gold Fields participates in the development of a project through a joint
venture or any other multi-party commercial structure, there could be disagreements, legal or otherwise, or divergent interests or goals amongst the parties, which could jeopardize the success of the project.
Furthermore, significant capital investment is required to achieve commercial production from exploration efforts. There is no assurance that Gold Fields will have, or be able to raise, the required funds to engage in these activities or to meet its obligations with respect to the exploration properties in which it has or may acquire an interest.
Gold Fields’ operations are subject to water use licenses, which could impose significant costs and burdens.
Under South African and Ghanaian laws, respectively, Gold Fields’ South Deep, Tarkwa and Damang operations are subject to water use licenses that govern each operation’s water usage and that require, among other things, mining operations to achieve and maintain certain water quality limits regarding all water discharges. Gold Fields is required to comply with these regulations under its permits and licenses and any failure to do so could result in the curtailment or halting of production at the affected locations.
Gold Fields continues to use all reasonable and practical measures to remove underground water to permit the routine safe functioning of South Deep. South Deep was issued with a water use licence in November 2011. Certain conditions and other aspects of the approved license were identified as requiring modification and an application to address these was submitted to the Department of Water Affairs and Sanitation, or DWAS, in February 2012. A further amended water use license application was submitted to the DWAS in November 2013, primarily to reflect the results of a re-assessment of expected water use requirements and a changing water balance. No response was received from the DWAS in relation to the 2013 amendment. In November 2014, an agreement was reached with the DWAS to withdraw the 2013 amendment and to submit an updated amendment during the second quarter of fiscal 2015. The new amendment will reflect a variety of water management projects and initiatives that were implemented during fiscal 2014 and that are planned for implementation in fiscal 2015 and 2016. A presentation was provided to the DWAS in March 2015 to appraise them of the proposed structure and content of the new amendment, prior to the planned re-submission in April or May 2015. Gold Fields expects to incur significant expenditure to achieve and maintain compliance with the license requirements at South Deep and other regulatory requirements.
Gold Fields is also implementing a water and environmental management strategy in an effort to satisfy the conditions of its water use license and other relevant water and environmental regulatory requirements. However, there can be no assurance that Gold Fields will be able to meet all of its water and environmental regulatory requirements, primarily due to the inherent uncertainties related to certain requirements of the legislation, which are subject to ongoing discussions between government and the mining industry through the Chamber of Mines.
Any failure on Gold Fields’ part to achieve or maintain compliance with the requirements of its water use licenses with respect to any of its operations could result in Gold Fields being subject to substantial claims, penalties, fees and expenses; significant delays in operations; or the loss of the relevant water use license, which could curtail or halt production at the affected operation. Any of the above could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Gold Fields has experienced and may experience further acid mine drainage related pollution, which may compromise its ability to comply with legislative requirements or results in additional operating or closure cost liabilities.
Acid mine drainage, or AMD, and acid rock drainage, or ARD (collectively called acid drainage, or AD), are caused when certain sulphide minerals in rocks are exposed to oxidizing conditions (such as the presence of oxygen, combined with water). AD can occur under natural conditions or as a result of the sulphide minerals that are encountered and exposed to oxidation during mining or during storage in waste rock dumps, ore stockpiles or tailings dams. The acidic water that forms usually contains iron and other metals if they are contained in the host rock.
AD generation, and the risk of potential long-term AD issues, specifically at Gold Fields’ Cerro Corona and South Deep mines, is ongoing. Immaterial levels of surface AD generation also occur at Gold Fields’ Tarkwa, Damang and St. Ives mines. Any AD which is currently generated is contained on Gold Fields property at all operations where it occurs and is managed as part of each mine’s operational water management strategy. The relevant regulatory authorities are also kept appraised of the Group’s efforts to manage AD through various submissions and other communications.
Gold Fields continues to investigate technical solutions at both its South Deep and Cerro Corona mines to better inform appropriate strategies for long-term AD management (mainly post-closure), as well as to work towards a reliable cost estimate of these potential issues. None of these studies have allowed Gold Fields to generate a reliable estimate of the total potential impact on the Group. In addition, there can be no assurance that Gold Fields will be successful in preventing or managing long term potential AMD issues at these operations.
Gold Fields’ mine closure cost estimate (namely environmental rehabilitation provisions) for fiscal 2014 contains the aspects of AD management (namely tailings facilities, waste rock dumps, ore stockpiles and other surface infrastructure), which Management has been able to reliably estimate.
No adjustment for any effects on the Company that may result from potentially material (mainly post-closure) AD impacts at South Deep and Cerro Corona, has been made in the consolidated financial statements, other than through the Group’s normal environmental rehabilitation provisions.
The existence of material long-term AD issues at any of Gold Fields’ operations could cause it to fail to comply with its water use license requirements and could expose Gold Fields to fines, mine closures, production curtailment, additional operating costs and other liabilities, any of which could have a material adverse effect on Gold Fields’ business, production, operating results and financial condition.
Some of Gold Fields’ tenements in Australia are subject to native title claims and include Aboriginal heritage sites, which could impose significant costs and burdens.
Certain of Gold Fields’ tenements are subject to current native title claims. For example, a number of mining tenements held by St. Ives are the subject of an ongoing native title claim brought by the Ngadju People, or the Ngadju Native Title Claim. In July 2014, the Federal Court of Australia, or the Federal Court, held that the re-granting of certain of St. Ives’ tenements in 2004 by the State of Western Australia was not compliant with processes set out in the Native Title Act 1993 (Cth), or Native Title Act, and that the re-granted tenements were therefore invalid to the extent the exercise of rights under the tenements is inconsistent with the Ngadju People’s native title rights. Gold Fields announced on December 12, 2014 that an appeal had been lodged against the decision. See “Information on the Company—Legal Proceedings and Investigations— Ngadju Native Title Claim.” Other tenements may become the subject of native title claims if Gold Fields seeks to expand or otherwise change its interest in rights to those tenements. There are also a number of recognized Aboriginal cultural heritage sites located on certain of Gold Fields’ tenements.
Native title and Aboriginal cultural heritage legislation protects the claims and determined rights of Aboriginal people in relation to the land and waters throughout Australia in certain circumstances. Native title claims such as the Ngadju Native Title Claim could require costly negotiations with the registered claimants and could have implications for Gold Fields’ access to or use of its tenements and, as a result, have a material adverse effect on Gold Fields’ business, operating results and financial condition. Similarly, there are risks that if Aboriginal cultural heritage sites are damaged or materially altered as a result of current or future operations, Gold Fields could be subject to criminal and/or civil penalties under relevant legislation. See “Information on the Company—Environmental and Regulatory Matters—Australia—Land Claims.”
Gold Fields utilizes information technology and communications systems, the failure of which could significantly impact its operations and business.
Gold Fields utilizes and is reliant on various information technology and communications systems, in particular SAP, payroll and time and attendance applications. Damage or interruption to Gold Fields’ information
technology and communications systems, whether due to accidents, human error, natural events or malicious acts, may lead to important data being irretrievably lost or damaged, thereby adversely affecting Gold Fields’ business, prospects and operating results.
These systems may be subject to security breaches (e.g. cyber-crime or activists) or other incidents that can result in misappropriation of funds, increased health and safety risks to people, disruption to our operations, environmental damage, loss of intellectual property, disclosure of commercially or personally sensitive information, legal or regulatory breaches and liability, other costs and reputational damage. While no material losses related to cyber security breaches have been discovered, given the increasing sophistication and evolving nature of this threat, Gold Fields has provided certain guarantees on notes issuedcannot rule out the possibility of them occurring in the future. An extended failure of critical system components, caused by Gold Fields Orogen Holding (BVI) Limited. If Gold Fields wereaccidental, or malicious actions, including those resulting from a cyber security attack, could result in a significant environmental incident, commercial loss or interruption to become obligated to make payments under these guarantees, its operating results would be materially and adversely impacted.
On September 30, 2010, Gold Fields Orogen Holding (BVI) Limited, or Orogen, announced the issue of $1,000,000,000 4.875% guaranteed notes due October 7, 2020, or the Notes, issued on October 7, 2010. The payment of all amounts due in respect of the Notes was unconditionally and irrevocably guaranteed by Gold Fields, Sibanye Gold, Gold Fields Operations Limited, or GFO, and Gold Fields Holdings Company (BVI) Limited, or GFH, or, together, the Guarantors, on a joint and several basis. The Notes and guarantees constitute direct, unsubordinated and (subject to the negative pledge provisions related to further capital market indebtedness) unsecured obligations of Orogen and the Guarantors, respectively, and rank equally with all other existing and future unsubordinated and unsecured obligations from time to time outstanding of Orogen and the Guarantors, respectively.
Each of Gold Fields and the other Guarantors have entered into an indemnity agreement, or the Indemnity Agreement, in favor of Sibanye Gold in order to indemnify Sibanye Gold against any loss caused to Sibanye Gold in circumstances where Sibanye Gold is required to make a payment to noteholders or the trustee of the Notes by virtue of its guarantee of the Notes.
On March 12, 2015, Orogen launched a consent solicitation process seeking to obtain a consent from the holders of the Notes to, among other things, the release of Sibanye Gold as Guarantor of the Notes, or the Consent Solicitation. A meeting of Note holders seeking to approve the Consent Solicitation was held on April 7, 2015 and was adjourned due to lack of a quorum to April 22, 2015. There can be no guarantee that the Consent Solicitation will be approved and that Sibanye Gold will be released as Guarantor of the Notes. If the Consent Solicitation is not approved, Sibanye Gold will continue to be a Guarantor of Notes and the Indemnity Agreement will remain in place. If Gold Fields or the other Guarantors were to become obligated to indemnify Sibanye Gold, it could have a material adverse effect on Gold Fields’ business, operating results and financial condition.
Further, market conditions may negatively impact Gold Fields’ ability to obtain financing for amounts it becomes required to pay under its obligations as guarantor, as well as the rate of interest required to finance these amounts.
Our high debt levels pose risks to our viability and may make us more vulnerable to adverse economic and competitive conditions, as well as other adverse developments.
Gold Fields carries significant debt relative to its shareholder equity. As of December 31, 2014, Gold Fields’ consolidated debt was approximately $1.91 billion. Approximately $0.79 billion of Gold Fields’ consolidated debt securities come due over the 36 months following the date of this annual report.
Gold Fields’ significant levels of debt can adversely affect it in several other respects, including:
limiting its ability to access the capital markets;
exposing it to the risk of credit rating downgrades, which would raise its borrowing costs and could limit its access to capital;
hindering its flexibility to plan for or react to changing market, industry or economic conditions;
limiting the amount of cash flow available for future operations, acquisitions, dividends, or other uses;
making it more vulnerable to economic or industry downturns, including interest rate increases;
increasing the risk that it will need to sell assets, possibly on unfavorable terms, to meet payment obligations; or
increasing the risk that it may not meet the financial covenants contained in its debt agreements or timely make all required debt payments.
The effects of each of these factors could be intensified if Gold Fields increases its borrowings. Any failure to make required debt payments could, among other things, adversely affect Gold Fields’ ability to conduct operations or raise capital, which could have a material adverse effect on Gold Fields’ business, operating results or financial condition.operations.
Shareholders outside South Africa may not be able to participate in future issues of securities (including ordinary shares) carried out by or on behalf of Gold Fields.
Securities laws of certain jurisdictions may restrict Gold Fields’ ability to allow participation by certain shareholders in future issues of securities (including ordinary shares) carried out by or on behalf of Gold Fields. In particular, holders of Gold Fields securities who are located in the United States (including those who hold
ordinary shares or ADSs) may not be able to participate in securities offerings by or on behalf of Gold Fields unless a registration statement under the Securities Act is effective with respect to such securities or an exemption from the registration requirements of the Securities Act is available thereunder.
Securities laws of certain other jurisdictions may also restrict Gold Fields’ ability to allow the participation of all holders in such jurisdictions in future issues of securities carried out by Gold Fields. Holders who have a registered address or are resident in, or who are citizens of, countries other than South Africa should consult their professional advisors as to whether they require any governmental or other consents or approvals or need to observe any other formalities to enable them to participate in any offering of Gold Fields securities.
Investors in the United States and other jurisdictions outside South Africa may have difficulty bringing actions, and enforcing judgments, against Gold Fields, its directors and its executive officers based on the civil liabilities provisions of the federal securities laws or other laws of the United States or any state thereof or under the laws of other jurisdictions outside South Africa.
Gold Fields is incorporated in South Africa. All of Gold Fields’ directors and executive officers (as well as Gold Fields’ independent registered public accounting firm) reside outside of the United States. Substantially all of the assets of these persons and substantially all of the assets of Gold Fields are located outside the United States. As a result, it may not be possible for investors to enforce against these persons or Gold Fields a judgment obtained in a United States court predicated upon the civil liability provisions of the federal securities or other laws of the United States or any state thereof. In addition, investors in other jurisdictions outside South Africa may face similar difficulties.
Investors should be aware that it is the policy of South African courts to award compensation for the loss or damage actually sustained by the person to whom the compensation is awarded. Although the award of punitive damages is generally unknown to the South African legal system, it does not mean that such awards are necessarily contrary to public policy. South African courts cannot enter into the merits of a foreign judgment and cannot act as a court of appeal or review over the foreign court. South African courts will usually implement their own procedural laws and, where an action based on an international contract is brought before a South African court, the capacity of the parties to the contract will usually be determined in accordance with South African law. It is doubtful whether an original action based on United States federal securities laws or the laws of other jurisdictions outside South Africa may be brought before South African courts. Further, a plaintiff who is not resident in South Africa may be required to provide security for costs in the event of proceedings being initiated in South Africa. In addition, the Rules of the High Court of South Africa require that documents executed outside South Africa must be authenticated for the purpose of use in South Africa.
Investors should also be aware that a foreign judgment is not directly enforceable in South Africa, but constitutes a cause of action which will be enforced by South African courts only if certain conditions are met.
Investors may face liquidity risk in trading Gold Fields’ ordinary shares on JSE Limited.
Historically, trading volumes and liquidity of shares listed on the JSE have been low in comparison with other major markets. The ability of a holder to sell a substantial number of Gold Fields’ ordinary shares on the JSE in a timely manner, especially in a large block trade, may be restricted by this limited liquidity. See “The Offer and Listing—JSE Limited”.
Gold Fields may not pay dividends or make similar payments to its shareholders in the future and any dividend payment may be subject to withholding tax.
Gold Fields pays cash dividends only if funds are available for that purpose. Whether funds are available depends on a variety of factors, including the amount of cash available and Gold Fields’ capital expenditures (on both existing infrastructure as well as on exploration and other projects) and other cash requirements existing at the time. Under South African law, Gold Fields will be entitled to pay a dividend or similar payment to its shareholders
only if it meets the solvency and liquidity tests set out in the Companies Act No. 71 of 2008, or the Companies Act, and Gold Fields’ Memorandum of Incorporation.Incorporation, or MOI. Given these factors and the Board of Directors’ discretion to declare cash dividends or other similar payments, dividends may not be paid in the future. It should be noted that a 15%20% withholding tax on dividends declared by South African resident companies tonon-resident shareholders ornon-resident ADS holders was introduced with effect from April 1, 2012.February 22, 2017. See “Additional Information—Taxation—Certain South African Tax Considerations—Withholding Tax on Dividends”.
Gold Fields’non-South African shareholders face additional investment risk from currency exchange rate fluctuations since any dividends will be paid in Rand.
Dividends or distributions with respect to Gold Fields’ ordinary shares have historically been paid in Rand. The U.S. dollar or other currency equivalent of future dividends or distributions with respect to Gold Fields’ ordinary shares, if any, will be adversely affected by potential future reductions in the value of the Rand against the U.S. dollar or other currencies. In the future, it is possible that there will be changes in South African Exchange Control Regulations,exchange control regulations, such that dividends paid out of trading profits will not be freely transferable outside South Africa to shareholders who are not residents of the CMA. See “Additional Information—South African Exchange Control Limitations Affecting Security Holders”.
Gold Fields’ ordinary shares are subject to dilution upon the exercise of Gold Fields’ outstanding share options.
Shareholders’ equity interests in Gold Fields will be diluted to the extent of future exercises or settlements of rights under the Gold Fields Limited 2012 Share Plan, or the 2012 Plan, the Gold Fields 2005 Share Plan, or the 2005 Plan, the revised Gold Fields Limited 20052012 share plan, or the revised Gold Fields Limited 2012 Share Plan, and any additional rights. See “Directors, Senior Management and Employees—The Gold Fields Limited 20122005 Share Plan” and “Directors, Senior Management and Employees—The Revised Gold Fields Limited 20052012 Share Plan”. Gold Fields shares are also subject to dilution in the event that the Board is required to issue new shares in compliance with BEEBBBEE legislation.
ITEM 4: INFORMATION ON THE COMPANY
Introduction
Gold Fields is a significant producer of gold and a major holder of gold reserves in South Africa, Ghana, Australia and Peru. In Peru, Gold Fields also produces copper. Gold Fields is involved in underground and surface gold and copper mining and related activities, including exploration, development, extraction, processing and smelting. Gold Fields also has an interest in a platinum group metal (and associated by-product metals) exploration project in Finland (currently earmarked for divestment). See “Information on the Company—Planned Disposals”.
In 2014, Gold Fields’2016, the South African, West African, Australasian and South American operations produced 9%13%, 32%,45%, 43% and 14%12% of itsGold Fields total goldgold-equivalent production, respectively. Gold Fields’ currently holds a 91.3% interest in the South African operation, is South Deep. Gold Fields also owns the St. Ives mine, the Agnew mine and the Yilgarn South Assets in Australia and has a 90.0% interest in each of the Tarkwa gold mine and the Damang gold mine in Ghana. Gold Fields also owns a 99.53% economic interest in the Cerro Corona mine.mine in Peru. In November 2016, Gold Fields entered into a 50:50 unincorporated joint venture with Gold Road Resources, or Gold Road, for the development and operation of the Gruyere Gold Project in Western Australia. In addition, Gold Fields has gold and other precious metal exploration activities and interests in Africa, Eurasia, Australasia and the Americas.
As of December 31, 2014,2016, Gold Fields reported attributable proven and probable gold and copper reserves of approximately 48.148.0 million ounces of gold and 620454 million pounds of copper, as compared to the 48.646.1 million ounces of gold and 708532 million pounds of copper, reported as of December 31, 2013.2015. See “—Reserves of Gold Fields as ofat December 31, 2014—Methodology”2016”.
In fiscal 2014,2016, Gold Fields processed 33.51334.2 million tonnes of ore and produced 2.2942.22 million ounces of gold equivalent ounces. On an attributable basis, Gold Fields produced 2.2192.15 million ounces of gold equivalent ounces.
Competitive Position
Gold Fields is a producer of gold and major holder of gold reserves in South Africa, Australia, Ghana, and Peru. Gold is a commodity product generally sold in U.S. dollars, with London being the world’s primary gold trading market. Gold is also actively traded using futures and forward contracts. The price of gold has historically been significantly affected by macroeconomic factors, such as inflation, exchange rates and reserves policy and by global political and economic events, rather than simple supply and demand dynamics. As a general rule, Gold Fields sells the gold it produces at market prices to obtain the maximum benefit from prevailing gold prices.
TheHistorically, the key gold producers globally have historically been Barrick, Gold, Newmont Mining Corporation, or Newmont, AngloGold Ashanti, Goldcorp Inc., or Goldcorp, and Gold Fields which produced 6.25, 4.85, 4.44before theSpin-off. In fiscal 2016, Barrick, Newmont, AngloGold Ashanti and 2.22 millionGoldcorp were, in that order, the four largest gold producers in the world, producing 5,517, 4,898, 3,628 and 2,873 thousand ounces respectively, in 2014 and together accounted for approximately 18%16% of the total global gold production for the year, according to the information provided by the companies and industry reports.
Based on fiscal 2014 production, the first, second and third largest gold producers in the world were Barrick Gold, Newmont Mining and AngloGold, respectively. According to publicly available sources, at March 16, 2015, Barrick Gold had 16 operations in eight countries, Newmont Mining had eight operations in four countries and AngloGold had 20 operations in 10 countries. In fiscal 2014, Gold Fields was the seventh largest gold producer in the world.world in 2016, producing 2.15 million gold equivalent ounces on an attributable basis.
According to publicly available sources, at December 31, 2016 for each of Barrick, Newmont, AngloGold Ashanti and Goldcorp, Barrick had 13 operations in eleven countries, Newmont had 15 operations in five countries, AngloGold Ashanti had 17 operations in nine countries and Goldcorp had 12 operations in six countries.
Gold Fields attempts to attract and retain motivated high caliber employees through a mix of guaranteed and performance-based remuneration, as well as short-term and long-term incentives, andnon-financial rewards relating to work experience. However, the worldwide mining industry, including Gold Fields, continues to
experience a shortage of qualified senior management and technically skilled employees. In order to maintain
competitiveness in the global labor market, regular industry market surveys are conducted to benchmark remuneration practices and to keep abreast of industry movements regarding employee benefits andnon-financial employee reward and recognition programs.
Developments since December 31, 20132015
Since the end of fiscal 2013,2015, the following significant events have occurred:
On March 20, 2014,February 19, 2016, Gold Fields completed the saleAustralasia (Proprietary) Limited, or GFA, a wholly owned subsidiary of the Talas Copper-Gold Project to Robust Resources Limited. See “—Gold Fields’ Mining Operations—West Africa Operations—Talas Copper-Gold Project”. On July 24, 2014, Gold Fields also disposed of its investment in Yanfolila. On August 19, 2014, Gold Fields disposed of its 51% stake in the Chucapaca exploration project in southern Peru. See “Operating and Financial Review and Prospects—Overview—Disposal of Chucapaca” and “Operating and Financial Review and Prospects—Overview—Disposal of Yanfolila”.
On March 12, 2015, Gold Fields, announced an offer to purchase U.S.$200 million of the Consent Solicitation. A meetingnotes due October 7, 2020, issued October 7, 2010, or the U.S.$1 billion Notes. Gold Fields accepted for purchase an aggregate principal amount of Note holders seekingU.S.$1 billion Notes equal to approveU.S.$147.6 million at the Consent Solicitation was heldpurchase price of U.S.$880 per U.S.$1,000 in principal amount of U.S.$1 billion Notes. Gold Fields intends to hold the U.S.$1 billion Notes acquired until their maturity date on AprilOctober 7, 2015 and was adjourned due to lack of a quorum to April 22, 2015.2020. See “Operating and Financial Review and Prospects—Credit Facilities and Other Capital Resources—“Additional Information—Material Contracts—U.S.$1 billion Notes Issue”.
On March 17, 2016, Gold Fields concluded the Development Agreement with the government of Ghana for both the Tarkwa and Damang mines. See “—Environmental and Regulatory Matters—Ghana—Mineral Rights”.
On March 18, 2016, Gold Fields successfully completed a U.S.$151.5 million (R2.3 billion) non-U.S. accelerated equity raising by way of a private placement, or the Placing, to institutional investors. A total number of 38,857,913 new Gold Fields shares were placed at a price of R59.50 per share which represents a discount of 6.0% to the30-day volume weighted average traded price, for the period ended March 17, 2016 and a 0.7% discount to the50-day moving average. The net proceeds from the Placing were applied to the U.S.$1,510 million term loan and revolving credit facilities that were utilized to purchase the U.S.$1 billion U.S.$1 billion Notes amounting to U.S.$147.6 million, as described above.
On March 29, 2016, the Full Court of the Federal Court of Australia overturned a July 2014 Federal Court decision that there-grant of certain tenements to Gold Fields Australia’s St. Ives mine in 2004 by the State was not compliant with the correct processes in the Native Title Act. The Applicants’ application to seek leave to appeal this decision to the High Court of Australia was unsuccessful, and the matter is now finalized. See “—Legal Proceedings and Investigations—Ngadju Native Title Claim”.
On May 13, 2016, the South Gauteng High Court ordered, among other things, the certification of two separate classes for silicosis and tuberculosis on behalf of current or former mineworkers (and their dependents) who have allegedly contracted silicosis and/or tuberculosis while working for one or more of the mining companies listed in the application. Subsequently the mining companies listed in the application were granted leave to appeal against all aspects of the class certification judgment. See “—Legal Proceedings and Investigations—Silicosis”.
On June 7, 2016, Gold Fields successfully refinanced its U.S.$1,510 million credit facilities due in November 2017. The new facilities amount to U.S.$1,290 million and comprise three tranches:
U.S.$380 million: 3 year term loan maturing in June 2019 – margin 250 basis points (bps) over Libor;
U.S.$360 million: 3 year revolving credit facility also maturing in June 2019 (with an option to extend to up to 5 years) – margin 220bps over Libor; and
U.S.$550 million: 5 year revolving credit facility maturing in June 2021 – margin 245bps over Libor.
The new facilities were concluded with a syndicate of 15 banks. On average, the interest rate on the new facilities is similar to the interest rate on the existing facilities. A total of US$645 million was drawn down from the new facilities on 13 June 2016 to repay the group’s existing US$ facilities, with US$645 million remaining unutilized. The refinancing is a key milestone in Gold Fields’ balance sheet management and increases the maturity of its total borrowings, with the first maturity now only in June 2019 (previously November 2017).
On December 13, 2016, Gold Fields acquired a 50% interest in the Gruyere Gold Project for a total purchase consideration of A$350 million (U.S.$259 million) payable in cash and a 1.5% royalty on Gold Field’s share of production after the total mine production exceeds 2 million ounces. The purchase consideration comprises A$250 million (U.S.$185 million) payable on the effective date (December 13, 2016), and A$100 million (U.S.$74 million) payable according to an agreed construction cash call schedule. In addition, transaction costs of A$19 million (U.S.$13 million) were incurred and capitalized. The 1.5% royalty will be accounted for as the production milestones are met. The 50% unincorporated interest in the project was accounted for as a joint operation. Based on an assessment of the relevant facts and circumstances, the Group concluded that the acquisition of the Gruyere Gold Project did not meet the criteria for accounting as a business combination and the transaction was accounted for as an asset acquisition. Refer note 15.2 to the consolidated financial statements.
During fiscal 2016, Gold Fields established a new Technology and Innovation, or the T&I, division This division has technical oversight throughout the Group and has developed a new T&I strategy by determining the best ways to improve safety, increase production and reduce operating costs. See “—Group Performance Scorecard—Business Optimization—Technology and Innovation”.
On February 16, 2017, Gold Fields announced the results of the Rebase Plan. The Rebase Plan defines the updated Mineral Reserve and LoM plan for South Deep and incorporates all recent revisions and improvements in mine design, production scheduling and geotechnical parameters. In addition, the supporting infrastructure equipment, labor, ore handling, ventilation and refrigeration, backfill, water and power provisions required to support the production plan have been incorporated. South Deep is now targeting steady-state annual production of approximately 500,000 ounces by fiscal 2022 at an AIC of U.S.$900 per ounce.
In October 2016, Gold Fields announced its reinvestment plan for the Damang Gold mine in Ghana, or the Damang Reinvestment Plan, which is expected to extend the LoM by eight years from 2017 to 2024. The Damang Reinvestment Plan is expected to enhance Gold Fields presence in one of our key operating regions and result in significant social benefits for the country, including the creation and preservation of 1,850 direct and indirect employment positions.
On December 4, 2016, Gold Fields continued to streamline its portfolio by selling 11 producing and non-producing royalties to Toronto-listed Maverix Metals Inc. in return for a 32% stake in the company (refer note 15.1(b) to the consolidated financial statements).
Effective March 31, 2017, ABSA Bank Limited, GFIJVH, GFO and certain wholly owned subsidiaries of Gold Fields entered into a R500 million Revolving Credit Facility. The purpose of the facility is to fund capital expenditure and general corporate and working capital requirements of the Gold Fields group. The tenor of the facility is six years. The final maturity date of this facility is March 31, 2020.
Effective March 31, 2017, Standard Bank, GFIJVH, GFO and certain wholly owned subsidiaries of Gold Fields entered into a R500 million Revolving Credit Facility. The purpose of the facility is to fund capital expenditure and general corporate and working capital requirements of the Gold Fields group. The tenor of the facility is six years. The final maturity date of this facility is March 31, 2020.
Planned Disposals
During fiscal 2013, Gold Fields, decided to disband the Growthin line with its strategy of efficient portfolio management, identifies and International Projects, or GIP, division. As part of this restructuring, Gold Fields identified and earmarkedearmarks for divestment growth projectsassets that wereare not aligned with the Group’s business objectives. Projects earmarked for divestment include theThe Arctic Platinum Project, or APP, in Finland remains earmarked for divestment.
In addition, Gold Fields has stated that it will, in the first half of fiscal 2017, commence a sales process for Darlot. Darlot was acquired in fiscal 2013 as part of the acquisition of Barrick Gold’s Yilgarn South Assets in Western Australia. Gold Fields has invested heavily to extend the LoM beyond the initial projected six months which has resulted in Darlot producing more than 228,000 ounces of gold in the past three years. The ongoing
multi-year investment in exploration as well as the discovery of new mineral deposits at Darlot could increase the current LoM, which extends to early fiscal 2018 based on current reserves. However, without additional conversion or discovery, the production levels are expected to decline over time, which may adversely affect the current LoM of Darlot tomid-fiscal 2018 and Woodjam in Canada.
The Spin-offthe full reserve may not therefore be exploited. Management believes that Darlot needs a more intensive exploration focus, which Gold Fields is unable to provide given its significant exploration activities at its other Australian assets as well as the development of the Gruyere Gold Project.
See “Operating and Financial Review and Prospects—Overview—The Spin-off”.
Organizational Structure
Gold Fields is a holding company with its significant ownership interests organized as set forth below.
Group Structure(1)(2)
Notes:
| (1) | As of April |
| (2) | See “Additional Information—Material Contracts—Additional Black Economic Empowerment Transactions”. |
| (3) | Not all other subsidiaries and investments are wholly-owned. |
Gold Fields is a limited public company incorporated in South Africa, with a registered office located at 150 Helen Road, Sandown, Sandton, 2196, South Africa, telephone number +27-11-562-9700.+27-11-562-9700.
Strategy
Overview
After almost four years of belt-tightening and consolidation, fiscal 2016 was the year in which Gold Fields started strengthening and expanding its portfolio of mines and projects to ensure longer-term sustainable cash generation.
Gold Fields began fiscal 2016 in much better financial and operational shape than when our transformation journey started in fiscal 2012. While we benefited from a stronger than planned for gold price our 2016 successes are attributable to remaining focused on achieving our key strategic priorities, which were:
GeneralSouth Deep—finalize and successfully implement the Rebase Plan for long-term success;
Cash-flowgeneration—improve cash flow and margin;
Dividends—pay between 25% and 35% of normalized earnings;
Balance sheet—reduce net debt to adjusted EBITDA, ratio to 1.0 times or below by the end of fiscal 2016; and
Growth and expansion—through brownfields exploration, project development and opportunistic, value-accretive acquisitions.
The Company has made progress on each of these priorities during fiscal 2016.
In February 2017, we announced the long-term production and cost guidelines for the South Deep mine in South Africa after two years of extensive rebasing work by the management team appointed in fiscal 2015. We are now targeting steady-state production of approximately 500,000 ounces by fiscal 2022 at an AIC of U.S.$900 per ounce. Of significance, South Deep was cash-positive in fiscal 2016 for the first time, helped by the higher Rand gold price.
During fiscal 2016, we generated U.S.$294 million in net cash flow (non-IFRS measure-see “Information on the Company—Glossary of mining terms—net cash flow” for a reconciliation to “net cash flow from operations” in accordance with IFRS) compared with U.S.$123 million in fiscal 2015. While our Australian mines and South Deep were undoubtedly aided by the weaker Australian Dollar and South African Rand, improved cash generation is also attributable to tight cost management by our operational teams, as well as the improved operating performance at South Deep, which recorded a U.S.$92 million swing in cash-flow from an outflow of U.S.$80 million in fiscal 2015 to an inflow of U.S.$12 million in fiscal 2016. The 17% cash-flow margin at the average gold price received of U.S.$1,241 per ounce in fiscal 2016 is well ahead of target (15% at a gold price of U.S.$1,300 per ounce).
The transformationtotal dividend for the year of R1.10 per share equates to 32% of normalized earnings, at the upper end of our dividend policy and 340% ahead of the total dividend declared in fiscal 2015.
Through a combination of improved cash-flows, debt restructuring and equity raising, we managed to achieve a net debt to adjusted EBITDA ratio of 0.95 times at the end of fiscal 2016 (even after the upfront A$250 million payment for the Gruyere Gold Project), compared with 1.38 times at the end of fiscal 2015. We are confident of maintaining a responsible net debt position during fiscal 2017, despite funding new, lower-cost projects.
A significant investment in the future of Gold Fields has its rootspositions us to generate future profits at the current gold price and offer leverage to a rising gold price. In support of this strategy, we launched some key projects during fiscal 2016, in CEO Nick Holland’s keynote addressaddition to the Melbourne Mining ClubSouth Deep rebase announcement:
In October, we announced a US$341 million investment at our Damang mine to extend the life of the mine by 1.6 million ounces and eight years. Production will be at a low AIC of around US$950/oz and be cash- generative in August 2012.about three years’ time.
In November, we acquired a 50% joint venture interest in and management control of the Gruyere Gold Project in Western Australia owned by Australian exploration company Gold Road Resources for a consideration of A$350 million. Once in production, which is forecast for late fiscal 2018 or early fiscal 2019 and will require a total of A$507 million in capital for the construction, the Gruyere Gold Project will produce about 270,000 ounces a year (100% basis) over a 13-year reserve life at an AIC of less than U.S.$805 per ounce;
Also in Western Australia, we spent A$102 million (U.S.$76 million) on near-mine (brownfields) exploration at our four mines, adding 450,000 ounces in mineral reserves (after depletion) during the year. This was driven by successful exploration programs at St. Ives and Granny Smith. For fiscal 2017, we have planned a further A$89 million (U.S.$65 million) in brownfields exploration spend at the operating mines as well as A$4 million (U.S.$3 million) at the Gruyere Gold Project; and
Finally, we streamlined our portfolio by selling 11 producing andnon-producing royalties to Toronto-listed Maverix Metals Inc., or Maverix, in return for a 32% stake in Maverix, which has already provided a noticeable increase in value.
All of our key decisions regarding the Company’s future growth relied on collaboration with our stakeholders to achieve meaningful cash-flow for the benefit of all stakeholders:
Gold Fields showed a vastly improved safety performance in fiscal 2016. Our TRIFR improved by 33% to 2.27 recordable injuries per million hours worked. Regrettably, we still had one fatality in fiscal 2016, compared to three fatal mine accidents in fiscal 2015. We have found that there is a strong correlation between a safe mine and a strong operating performance, and remain committed to realizing our Zero Harm policy;
The long-term Rebase Plan for South Deep is critically dependent on theco-operation of our employees, and the three-year agreement we entered into with their representative trade unions in fiscal 2015 was a vital underpin to the plan. We have also engaged the local community through a variety of projects focused on improving their social and economic wellbeing with a specific emphasis on host community procurement and employment. This, we believe, will ensure that these communities will grant us our social license to operate, which is critical given South Deep’s significant mine life;
The investment in Damang was facilitated in part by the signing of a Development Agreement with the Ghanaian government in March 2016. This agreement provides tax and other concessions in return for future investment at our operations. Furthermore, the investment guarantees the creation and protection of about 1,850 direct jobs as well as sizeable community programs over the mine’s new eight-year life; and
A significant investment in low-carbon and renewable energy projects at many of our mines is intended to ensure that we reduce the future cost of electricity and facilitate long-term security of supply, thereby mitigating two critical risks facing the Company. A majority of our Australian and Ghanaian operations are now powered by gas, after newgas-fired power plants were commissioned to supply our Granny Smith, Tarkwa (currently 50% supply) and Damang mines. In addition, we have appointed a renewable energy firm to develop a 40MW solar plant at South Deep over the next two years, which apart from lower costs and security of supply, has the added benefit of reducing carbon emissions at the mine.
Supporting our integrated management approach is robust and effective corporate governance throughout the Group. During this speech, he challengedfiscal 2016, the Company revised its Code of Conduct, which forms the ethical basis of the business and informs how we conduct ourselves and interact with all stakeholders. We have also committed to implementing the recommendations of the King IV Report on Corporate Governance.
Our focus on viable cash-generation was supported by the recovery in the gold mining industry to reinvent itself withprice during fiscal 2016. After falling by 45% between September 2011 and December 2015, when it hit a more credible case forlow of U.S.$1,060 per ounce, the gold mining equities,price recovered in fiscal 2016, ending the fiscal year at U.S.$1,130 per ounce. Since then it stabilized at around the U.S.$1,200 per ounce level towards the end of February 2017. To some extent, we were also supported by addressing investor perceptions prevailing at the time, that, collectively, they were not offering sufficient leverage to the then-high gold price.weaker currencies in commodity-exporting nations, though this effect was less pronounced than in fiscal 2015.
Gold Fields’ response to this challenge in the second half of fiscal 2012 was to adopt an ambitious and ongoing transformation process aimed at turning itself into a focused, lean and globally diversified gold mining company that generates meaningful free cash flow and provides investors with superior leverage to the price of gold. At the same time, ourThe ability to generate cash enablesis critical in distributing the benefits from mining to our stakeholders. In fiscal 2016, Gold Fields’ value distribution, as measured by the WGC definitions, totaled U.S.$2.505 billion, slightly more than the U.S.$2.425 billion we distributed in fiscal 2015. This amount was dispensed as follows during fiscal 2016:
U.S.$122 million (fiscal 2015: U.S.$117 million) to shareholders and debt providers, who are seeking a return on their invested capital through dividend and interest payments;
U.S.$482 million (fiscal 2015: U.S.$435 million) to our employees, whose work is rewarded through salaries and other benefits;
U.S.$1,648 billion (fiscal 2015: U.S.$1.663 billion) to contractors and suppliers, from whom we procure goods and services;
U.S.$235 million (fiscal 2015: U.S.$196 million) to governments and regulators, who grant us our mining licenses and who benefit from our tax and royalty payments; and
U.S.$16 million (fiscal 2015: U.S.$14 million) in social investment programs among our host communities, whose support is critical for our social license to meetoperate and who benefit significantly through host community jobs and procurement.
Group Performance Scorecard
Each year, Gold Fields adopts a Group performance scorecard that incorporates the legitimate socio-economic demandsstrategic priorities and seeks to instill the right culture and behaviors among our workforce, driven by the strategic imperative of manycash generation.
By integrating all of the key value drivers into the business, the scorecard also aims to enhance the Group’s sustainability. The scorecard consists of four key performance areas and elements against which we measure our other stakeholders, in line withperformance. These are financial performance; our visionsocial license to operate; people; and business optimization.
Financial Performance
The first key performance area of leadership in sustainable gold mining.
At its core, this process entails a shift away from a focus on the pursuit of growth in production and reserve ounces at any cost, and the adoption of a new focus on growing its margins and improving freeGroup scorecard is financial performance, as measured by cash flow per ounce.
This fundamental shift ingeneration and debt reduction as well as improving investor confidence. Our strategy was embodied in Gold Fields’ overarchingis driven by the objective of achievinggenerating a 15% FCF Margin at a gold price of US$1,300/oz, which has become the guiding principleU.S.$1,300 per ounce, as we believe that this is a reasonable long-term price for what it does, andbullion. The premise is germane to the progressive transformation that the Group has seen over the last two and a half years.
The early adoption of the Group’s focus on improving cash flow proved to be beneficial to the Group by providing it with an inbuilt safety cushion that is able to withstand lower gold prices, especially when the gold price declined significantly early in fiscal 2013trades above U.S.$1,300 per ounce, the FCF Margin will grow commensurately. Conversely, when prices trade below U.S.$1,300 per ounce, as we have seen since 2012, the inclusion of the 15% FCF Margin at that level provides Gold Fields with a safety cushion down to our cash breakeven level of approximately U.S.$1,050 per ounce. The Group’s FCF Margin for 2016 was 17%, despite the fact that at U.S.$1,241 per ounce, the actual annualized gold price received was again below the planning price of U.S.$1,300 per ounce. It illustrates that our strategy of boosting margin growth is paying off.
Net Cash Flow and again in fiscal 2014.
The trade-off between production volumes and production quality inherent in the Group’s strategy has resulted in its adoption of a number of supporting and complementary strategies, first reported on in its 2013 Integrated Annual Review. Progress on these is outlined below:
Focus on what the Group is good atCost
The philosophical orientation guiding Gold Fields’ transformation journeyNet cash flow is to focus on those activities that it is good at. Following a process of serious analysis and introspection, the Group came to the conclusion that its core competencies are the operation of mechanized mines, mergers and acquisitions and brownfields (or near-mine) exploration.
One area in which the Group has been less successful is greenfields exploration and in taking projects from initial discovery through construction into production. Despite having spent in excess of U.S.$1 billion on greenfields exploration since the foundingone of the modern Gold Fields in 1998, and having had some of the best exploration professionals in the business, Gold Fields has never taken a single project through this entire process. This demonstrates how elusive greenfields exploration success can be.
In fact, Gold Fields’ entire portfolio of current operating assets has been acquired. In contrast to its lack of success with greenfields exploration, the Group has been very successful at brownfields exploration, in particular at its orogenic-style assets in Australia and at Damang in Ghana. As a consequence of this outcome, the Group made the difficult decision to stop greenfields exploration as the key driver of growth, and to focus instead on acquisitions and brownfields exploration. Salares Norte in Chile which is a project in resource development, is a product of greenfields exploration but has since graduated up the maturity ladder and continues to be an active project. The Group therefore disbanded its GIP division in late fiscal 2013, and refocused its growth efforts on mergers and acquisitions and brownfields exploration. The Group’s growth strategy and philosophy is discussed in more detail below.
With respect to operating mines, the Group concluded early in fiscal 2012 that its core competency lay in the operation of mechanized mines rather than in hard-rock, deep-level, labor intensive mining that characterized the KDC and Beatrix mines in South Africa, which at that time formed part of the Gold Fields portfolio. In late fiscal 2012, the Group therefore decided to separate those assets from Gold Fields by creating Sibanye Gold Limited under a new, focused management team. Gold Fields’ remaining portfolio is one that comprises mechanized operations throughout the world.
Fit-for-purpose corporate, regional and operational structures
The transformation of Gold Fields, combined with its relentless focus on cash generation, necessitated the implementation of fit-for-purpose corporate, regional and operational structures in which managers and employees are encouraged to act as dynamic, engaged owners, and are rewarded for doing so.
In response, the Group devolved full operational accountability for sustainable cash generation to its regions, supported by appropriate resourcing of its management teams at the different levels in the organization. Inevitably, there was a corresponding rationalization of the Group’s corporate office functions, mainly housed at the Group’s head office in Johannesburg, which now only focuses on a relatively narrow set of strategic and Group activities.
During fiscal 2014, the Group’s new corporate, regional and operational structures were further bedded down and entrenched throughout its operations, including in the South Africa Region. As a result, Gold Fields now enjoys a cost-effective, focused, flexible and fit-for-purpose management structure that is appropriate to both its size and its strategic priorities.
Focus on cash generation and free cash flow margin, not ounces for ounces’ sake
Cost containment is a critical pillarmeasurements of Gold Fields’ cash-generatingturnaround strategy andsince fiscal 2012. Despite the Group made considerable progress, as reflected25% decline in the 17% decline in its AIC per ounce during fiscal 2014. This was on topaverage price of a 15% decline in AIC during fiscal 2013, bringing cumulative cost reductionsgold between fiscal 2012 and fiscal 20142016, Gold Fields’ ability to 29%. A number of initiatives were pivotal in achieving the lower cost base, namely:
The cessation of marginal mining at various operations;
The restructuring and rightsizing of the Group’s corporate regional and operational structures;
An 8% reduction in the Group’s global workforce (equivalent to 1,309 employees and contractors) during fiscal 2014, which is in addition to the 711 employees and contractors that left the Group in fiscal 2013;
The rationalization and prioritization of capital expenditure and the deferral of non-essential capital, while managing the sustainability of our mines;
The cancellation of near-mine growth projects that demonstrated inadequate returns;
The disbandment of the Group’s GIP division; and
General cost savings driven by ongoing business process re-engineering, or BPR.
generate cash has improved substantially. During fiscal 2014, these efforts continued with a view to protecting2016, this was aided by the Group’s margins in the current lowhigher average gold price environment. Effective cost management is also expected to prove beneficial to the Group’s margin when the gold price eventually recovers, as it is expected to.
In addition to the focus on operational cost containment, the Group took the decision to scale down its involvement in activities which are typically the domain of larger, industry-leading companies. The Group no longer aspires to be a pioneer of research and development in areas such as technology, but to be fast adopters of best practice. This has helped the Group to reduce the costs of developing and applying cutting-edge practices, while still ensuring that it is able to leverage their benefits. A noticeable exception is at South Deep, where Gold Fields is continuing to invest heavily in the training of mechanized mining skills, of which there is a critical shortage in South Africa.
Furthermore, the Group has scaled back its participation in a wide range of professional and industry bodies which in the past inflated its corporate costsreceived, as well as its general and administrative expenditure. One example of this is the Group’s cancellation of its membershipa weakening of the World Gold Council. Rand and the Australian dollar against the U.S. dollar. The improved Rand gold price also helped South Deep breakeven for the first time. Our cash flow progression over the past five years has seen us turn around a net cash outflow of U.S.$280 million in fiscal 2012 to a net cash inflow of U.S.$294 million in fiscal 2016.
Central to our ability to generate free cash flow is a commitment to cost management, which we have implemented rigorously over the past few years, though we have been careful not to cut sustaining capital expenditure critical to maintaining the long-term integrity of our ore bodies.
During fiscal 2014, the Group reduced its overall corporate2016, costs to approximatelywere marginally lower than in fiscal 2015 as a result of exchange rate benefits, lower oil prices and cost controls by our operations. Both AIC at U.S.$101,006 per ounce which is among the lowest in the industry.and AISC at U.S.$980 per ounce were below their respective 2016 guidance ranges of U.S.$1,035 per ounce to U.S.$1,045 per ounce and U.S.$1,000 per ounce to U.S.$1,010 per ounce, respectively. Cumulative reduction for AIC between fiscal 2012 and fiscal 2016 has been 35%.
Protecting the long-term sustainability of the Group’s ore bodiesDebt Reduction
One of Gold Fields’ key strategic objectives has been to reduce the serious risks associated withamount of debt on our balance sheet. In this regard, management set itself a low gold price environmenttarget of reducing the net debt to adjusted EBITDA ratio to below 1.0x by the end of fiscal 2016.
Over the year, the Group entered into a number of transactions which impacted the debt balance, including a bondbuy-back of U.S.$148 million funded from an equity raising of U.S.$152 million to decrease the level of net debt. The first upfront payment for the Gruyere transaction (A$250 million) in December 2016 had the effect of increasing the Group’s net debt. Despite this, the bond buy-back and the attendant rationalization, prioritization and deferral of scarce capital is that producers may be tempted to engage in practices that may have a short-term beneficial impact on cash flows, but that have a potentially devastating effect on the long-term sustainability and integrity of their ore bodies. Regrettably, evidence of this is starting to emerge throughout the industry in the form of high-gradingequity raising, as well as excessive cutbacksthe U.S.$294 million in brownfields exploration, stripping and ore reserve development.
To ensure that its business has a strong future,net cash flow generated during the Group has made continued exploration and developmentyear, helped decrease our net debt by U.S.$214 million, from U.S.$1,380 million at the end of its underground and surface ore bodies a strategic priority. These are amongDecember 2015 to U.S.$1,166 million at the last activities that the Group would cutend of December 2016. This resulted in a sustained low gold price environment.
In addition, Gold Fields’ strategic objectivenet debt to adjusted EBITDA ratio of generating a sustainable free cash flow margin0.95x, below our stated target of at least 15%, at a planning gold price of U.S.$1,300 per ounce, provides it with an inbuilt safety cushion that is able to withstand a drop in gold prices. Included in this price are the costs associated with maintaining the integrity of the Group’s ore bodies. Should prices go down to levels of around U.S.$1,100/oz or lower for a sustained period of time, the Group would be looking at a new operating and planning protocol for these lower prices to protect the integrity of its ore bodies.
The Group’s strategic guidance to all of its mines is to mine at or below the reserve grades of their ore bodies and, when prices recover, to maintain and grow its margins rather than be lured by incremental increases in ounces produced.1.0x.
A new paradigm in growth—proactive portfolio managementImproving Investor Confidence
Our portfolio has undergone a fundamental change since fiscal 2013. We spun off the Sibanye Gold Fields’ new strategy has a direct bearing on its approachassets to growth. Not only does it mean that the Group must scrutinize every dollar spent on growth, it also defines the quality of the assets that it seeks to acquire.
In essence, it means that the Group can no longer afford the capital and time-intensive greenfields exploration-led growth strategy of prior years, hence the disbandment of the Group’s GIP division in late fiscal 2013; the closing down of its greenfields exploration portfolio; and the disposal ofshareholders, eliminated marginal mining, stopped all projects in the Group’s portfolioour growth pipeline that weredid not aligned with its overarching group objective, including the Chucapacaprovide an adequate return and, Yanfolila projects in Peru and Mali, respectively.
The projects remaining in the Group’s portfolio are the Woodjam Project in British Columbia, Canada, and the Arctic Platinum Project in Finland, which are earmarked for disposal. The Group also still holds the Far Southeast, or FSE, Project in the Philippines and the Salares Norte Project in Chile, both of which the Group intends to retain in its portfolio in recognition of the embedded value in these assets. See “Information on the Company—Developments Since December 31, 2013—Planned Disposals”, “Information on the Company—Gold Fields’ Mining Operations—Australasia Operations—Far Southeast Scoping Study”, and “Information on the Company—Gold Fields’ Mining Operations—Salares Norte and Piedra”.
To replace its previous exploration-led approach to growth, the Group has adopted a more opportunistic acquisition approach. All new opportunities must meet the following main criteria:
They must be in production and improve the quality of the Group’s portfolio on a free cash flow per ounce basis; and
They should be located in or near the Group’s existing regions, in well-understood, stable countries that offer favorable regulatory regimes, and that offer near-mine growth potential and/or synergies with the Group’s existing operations or regional structures.
These criteria mean that in future, the Group’s growth portfolio will be premised on a larger number of smaller, higher quality and lower-cost mines that offer immediate cash flow benefits. Management believes that the Group’s acquisition ofOctober 2013, acquired the Yilgarn South Assets in Western Australia from Barrick.
In fiscal 2016, we expanded our portfolio to take advantage of the improved gold price and our significant cash-flow generation.
The only operating asset in October 2013 provides the benchmarkGroup that still has to be brought fully to account is our South Deep mine. Here we achieved cash breakeven for the first time in fiscal 2016. The mine reported net cash inflow of U.S.$12 million compared to an outflow of U.S.$80 million in fiscal 2015 and in February 2017 announced the mine’s long-term production and cost metrics (the Rebase Plan).
Gold Fields also remains one of the higher dividend payers among its peers. The total dividend declared for the year of R1.10 per share (fiscal 2015: R0.25 per share) is equivalent to 32% of normalized earnings, close to the top end of our dividend policy of paying out 25% to 35% of normalized earnings as dividends. We believe that Gold Fields has established a solid base which will maintain the confidence of our current shareholders and attract long-term investors seeking value and leverage to the gold price.
Business Optimization
Underpinning the financial performance of the business is Gold Fields’ commitment to running its operations safely, efficiently and cost-effectively without undermining the longevity of our mines. We measure the success of business optimization by looking at our progress on Safety and Health; the performance and growth of our portfolio of mines and projects; setting up the South Deep project for long-term success; running our mines energy efficiently; and using technology and innovation to optimize their future performance.
Gold Fields’ operating and financial performance during fiscal 2016 showed that our efforts in this regard.regard are paying off. Highlights were:
Central
Production of 2.15 million gold-equivalent attributable ounces, broadly in line with our updated guidance for the full year of 2.10 to 2.15 million ounces;
Strong cost management across the Group resulted in a good cost performance with AISC of U.S.$980 per ounce and AIC of U.S.$1,006 per ounce in fiscal 2016, below guidance for the year; and
Net cash flow increased strongly to U.S.$294 million in fiscal 2016 compared with U.S.$123 million in fiscal 2015.
Safety and Health
Safety is management’s first priority in running our operations, and it is critical that we continuously emphasize that our first value is “if we cannot mine safely we will not mine.” Nevertheless, we had one fatality during fiscal 2016 (compared with four fatalities in fiscal 2015, three resulting from operational accidents and one from crime). On September 10, 2016, Mr. Vakele Thafeni, a learner miner, was killed after a 1.5 magnitude seismic event caused an underground rock burst at South Deep. Postyear-end, on January 1, 2017, Thankslord Bekwayo, a dump truck operator, and on February 16, 2017, Nceba Mehlwana, a loco driver, were killed in underground accidents.
While any fatality is an undoubted setback on our journey to Zero Harm, we are encouraged by the progress made in terms of our overall safety performance during 2016. Our TRIFR showed a further 33% improvement to 2.27 per million hours worked from 3.40 in fiscal 2015.
The work on safety is integral to our operational discipline and has been accepted as the foundation for improved performance. As such, there is no conflict between pursuing safety and productivity at the same time. Behavior-based safety programs are in place across the Company and our work at embedding these into ourday-to-day performance, along with visible management leadership on the ground, continues. At South Deep, the CEO’s “Zero Harm” task team has been strengthened with the addition of a Board director to the Group’s new growth strategy isteam. The Group has also intensified operation-specific health and wellness programs, focusing on improving the adoptionphysical and mental health of an “activeour employees.
Quality Portfolio of Assets
During fiscal 2016, Gold Fields made a conscientious effort to invest in enhancing the quality of its existing portfolio while at the same time identifying value-accretive acquisitions. This active portfolio management approach” to the management of all of the assets in its portfolio as well as any future projects that it may consider acquiring.
Thisapproach requires an ongoing strategic review of all existing assets in the portfolio as well as potential acquisition targets with a view to improving the quality of the Group’s overall portfolio. It implies that the Group is prepared to trade existing assets for better, new assets, if they are expected to improve the quality of its portfolio.
Gold Fields is comfortable with its corporate structure, which is defined by its limited red tape and which does not have too many levels of hierarchical responsibilities. The Group believes that its size makes it more flexible and nimble. The Group currently has eight operating mines and conceptually, management would ideally like to add two more mines to its portfolio in the short to medium term.
Innovation, up-skilling and mechanization
The transformation of Gold Fields into a mid-tier producer has clearly had a profound impact on the profile of the Group’s workforce. The most obvious, and painful, impact has been the need to reduce the number of employees to bring down the Group’s cost base to a more sustainable level. This process started in fiscal 2013, when 711 employees were made redundant, and continued in fiscal 2014 with 1,309 retrenchments, or 8% ofagainst our total workforce, mostly at its mines in Ghana and at South Deep. With 8,954 employees and 6,486 contractors on its books at the end of fiscal 2014, management believes that the Group’s human resource base is now close to where it should be in terms of numbers.
However, Gold Fields’ transformation has also required a different set of skills. The profile of the Group’s employees at its operations in Australia, Peru and Ghana by and large meets its skills requirements, and is supported by the continued development and training of its workforce.
At South Deep, Gold Fields is pioneering mechanized gold mining on a scale and depth not previously seen in South Africa, and the success of the operation is largely dependent on its people. The Group’s strategy is to grow its own people through focused internal training efforts and to recruit the best local mechanized mining skills to supplement the existing talent pool. During fiscal 2014, Gold Fields spent around U.S.$13.4 million globally on training and developing its employees.
A significant effort has been made to introduce international best practice standards at South Deep. In addition to its existing mechanized mining training center, the Group also brought over an experienced team from its mines in Australia to transfer skills and mine management is starting to collaborate with the South African platinum industry in setting training baselines for mechanized mining. The Group has also recruited new leadership from the successful Two Rivers mechanized underground platinum mine.
Collaborative value creation at the national and community level
Mining, when executed responsibly, is a significant force for sustainable growth. The Group’s investment has significant multiplier effects on employment, livelihoods and the national economy. This value creation impacts a wide range of stakeholders, including employees, host governments, host communities, businesses and suppliers as well as the providers of risk capital.
Management believes that the mining industry’s ability to create and distribute value could be significantly enhanced if it worked more closely with governments, trade unions and communities in boosting mining economies. In fiscal 2013, CEO Nick Holland alluded to efforts to grow the mining pie that would enable all stakeholders to receive a greater share of the wealth created by mining.
Management remains of the view that this will only be achieved through strong partnerships with all stakeholders, supported by stable fiscal, legislative and regulatory environments and underpinned by recognition of the full costs and benefits of mining. As a committed corporate citizen in all the jurisdictions in which it operates, the Group is willing to play its role in these partnerships.
Entire communities are directly and often exclusively dependent on the sustainability and growth of the mining sector and one of the biggest challenges facing mining companies is addressing what is known as “the social license to operate”, namely the building of relationships and trust with host communities. While the consequences of not obtaining this social license may not always be dramatic, there is potential for operational disruption or even project delays and cancellations.
It takes substantial time, effort and resources to establish and maintain a strong social license to operate and, once it is lost, it is very hard to regain. Furthermore, Gold Fields’ ability to grow through the expansion of existing mines and the development of new projects as and when deemed appropriate, will be determined by its ability to win the trust of communities in its areas of interest. See “Risk Factors—Mining companies are increasingly required to operate in a sustainable manner and to provide benefits to affected communities. Failure to comply with these requirements can result in legal suits, additional operational costs, investor divestment and loss of ‘social licence to operate’, which could adversely impact Gold Fields’ business, operating results and financial condition”.
While the Group has always invested heavily in communities through its corporate social investment programs, in fiscal 2013 it committed to a different strategy for community-level value creation, namely the creation of “Shared Value”. This means pursuing mine-level business strategies that not only generate positive socio-economic impacts but that also enhance the value of the Group’s business. During fiscal 2013, the Group implemented three Shared Value projects, focusing on local procurement, mathematics and science skills and water supply and quality. A range of new, value-creating projects are currently being rolled out.
The Group’s strategic priorities for fiscal 2015
During fiscal 2015, Gold Fields will continue to build on the strategies that it has implemented and rolled out over the past two years. The five strategic priorities for fiscal 2015, which reflect this continued focus, are:
South Deep—the Group’s top priority;
Cash flow and margin—making money at current prices;
Making dividend payments of between 25% and 35% of normalized earnings;
Balance sheet—reducing the net debt to EBITDA ratio to 1.0 times by the end of 2016; and
Growth (in the form of brownfields exploration and opportunistic, value-accretive acquisitions).
These priorities support Management’s long-term Vision for Gold Fields, namely global leadership in sustainable gold mining.
The sustainability of the Group’s business is intended to be ensured by understanding the links between all the inputs and outputs of its operations, enabling management to maximize the benefits for all stakeholders and reduce the risk to the business. Integrated thinking, which is defined by the SA Institute of Chartered Accountants as “ensuring the long-term sustainability of organizations through the sustained creation of value for all stakeholders”, underpins this approach.
Management believes that integrated management of the Group is ensured through four key performance areas that the Group will be focusing on in the years ahead to ensure that integrated thinking is further entrenched in its business. These are: business optimization; people; finance; and the social license to operate. These broad performance areas will inform how the Group measures the business performance of its senior managers and will determine these managers’ annual bonus payments.
Redefining ‘growth’
Management believes thatimperatives. Similarly, growth at Gold Fields is not just a matter of increasing the Group’s mineral resources and mineral reserves or of boosting itsthe production profile, butprofile; it is about growing cash flow per ounce and per share in the medium-medium and long-term.
A strategic shift towards ‘quality’long term.
In this context, Gold Fields’ immediate growthFields continued to focus on improving the cash-generation performance of its existing operations and identifying value-adding projects. The pillars that support this strategy is to generate growth in both reserves per share and in sustained cash flow margin per ounce through a process of ‘Active Portfolio Management’. In fiscal 2014, this resulted in:are:
Protection of the commercial sustainability of our mines by avoiding high-grading and investing in ore development on an ongoing basis;
The cessation of all early greenfields exploration activity;activity and a focus on brownfields (near-mine) exploration for LoM, particularly at our Australian operations;
Refocusing from greenfields exploration to low-risk near-mine explorationProduction and strategic planning based on the delivery of a 15% FCF margin at a gold price of U.S.$1,300 per ounce; and
The identification of cash-generative acquisition opportunities that are aligned with Gold Fields’ core competencies; andcompetencies.
To ensure that our business has a strong future, we have made ongoing investment in brownfields exploration as well as the development of ore bodies strategic priorities. These are among the last activities we would cut, even in a sustained low gold price environment the costs associated with maintaining the integrity of our ore bodies is built into our mines’ cash-flow models.
Key decisions since January 2016 that improved the quality of our portfolio of assets included:
The Damang Reinvestment Plan which will extend the mine’s LoM by eight years to 2024 at costs that will lower the Company’s average cost of production;
The disposalacquisition of growth projects that are marginal, located in ‘high-risk’ locations and/or are primarily focused on metals other than gold.
This has resulted in a short-term reduction in Gold Fields’ mineral resources in fiscal 2014. In the past, this would have been a cause for concern. In light50% of the Group’s new focus, however, it is not only acceptable but to be expected that every new ounceGruyere Gold Fields brings into production should directly support the delivery of superior returns to current and future shareholders and the upgrading of its existing portfolio. It is the starting point for a truly cash-generative growth pipeline that is well-aligned withProject in Western Australia from Gold Fields’ current and long-term business priorities.
Beyond this, the Group intends to, over the next two to three years:
Continue to apply ‘Active Portfolio Management’, including through the application of stringent hurdle rates for all new growth opportunities and the disposal of its ‘non-franchise’ assets;
Try to repeat the successful integration of the Yilgarn South Assets by pursuing further opportunistic, bolt-on mergers and acquisitions where these offer immediate cash generation and strategic alignment;Road;
Fund growth through equity financing, alternative financing or the disposalThe progression of existing projects, rather than through an exclusive focus on debt funding if possible; and
De-risk new growth opportunities through technical or financial partnerships with other companies.
Reflecting these priorities, in fiscal 2014 Gold Fields:
Did not invest any funds in greenfields exploration;
Increased its near-mine exploration (Damang & Australia) spend by 81% to US$58 million (2013: US$32 million);
Reduced its total growth-related expenditure by 78% to US$36 million (2013: US$162 million), of which the bulk was spent on the Salares Norte Project in Chile; and
Raised US$107 million in cash or shares through the disposal of its holding in the Chucapaca project in Peru, excluding future royalty contributions, the Yanfolila Project in Mali and the Talas Project in Kyrgyzstan.
In line with the major organizational restructuring process initiated in fiscal 2013, Gold Fields has consolidated its growth portfolio, including through the selection of appropriate acquisition targets and the disposal of assets, under the Group’s corporate development department to ensure its alignment with strategic objectives. All other growth-related activities, including day-to-day management of projects, fall under the responsibility of Gold Fields’ regional operations, in order to leverage their local expertise, management capabilities and infrastructure.
Active Portfolio Management
Gold Fields’ ‘Active Portfolio Management’ approach is based on the assessment of all existing assets, near-mine exploration opportunities and acquisition targets against three key criteria:
‘The right address’, namely growth opportunities located in stable, ‘mining-friendly’ operating environments in the Group’s existing regions that pose only limited potential barriers to successful project execution and profitable future production;
‘Gold focus’, namely growth opportunities that are well-aligned with Gold Fields’ core competency, including the identification, development and extraction of gold-bearing ore bodies. As such, over 50% of future output needs to be gold; and
‘Commercial sustainability’, namely growth opportunities that can ultimately offer a 15% free cash flow margin at a gold price of US$1,300/oz and add value to its portfolio.
The ultimate aim of this approach is to improve the quality of Gold Fields’ portfolio on an ongoing, long-term basis. To this end, Gold Fields disposed of a number of growth assets that failed to meet these three criteria. Nonetheless, two growth assets were found to be of sufficient quality to justify their retention, namely the Salares Norte project in Chile and the Far Southeast Projectto apre-feasibility study;
The sale of our royalty portfolio to Maverix in return for a 32% holding in the Philippines.company; and
The decision to commence with the sale of the Darlot mine in Western Australia.
An integrated approach to growth
As with production, Gold Fields integrates sustainability into allbelieves that near-mine exploration offers the best route tolow-cost ounce replacement that can generate cash in the short- and medium-term. In fiscal 2016, Gold Fields raised its total near-mine exploration expenditure by 5% to U.S.$80 million, on top of its growth activities. the U.S.$162 million spent in the preceding three years, in pursuit of this strategy. Much of this activity was focused on the Australia region, where the four mines in our portfolio spent A$102 million (U.S.$76 million) in fiscal 2016, in line with the A$91 million (U.S.$72 million) spent in fiscal 2015.
This is duepart of a multi-year strategy to its:both replace and increase quality reserves and resources at our operations in Australia. In addition to exploration drilling to extend current ore bodies, activity focused on developing early-stage generative targets on the prospective leases. Some successes from fiscal 2016 included:
DesireSt. Ives’ Invincible mine was extended to Invincible Underground and Invincible South;
Work at Agnew/Lawlers showed good potential at the Waroonga North ore body, adjacent to the Waroonga underground operation; and
Exploration at Granny Smith indicated further mineralization at depth of the existing Wallaby underground mine.
To build on the work undertaken to date, we have budgeted A$89 million (U.S.$65 million) for fiscal 2017. This includes exploration at the Gruyere Gold Project, which is a departure from the brownfields approach, but which we believe will enhance our portfolio in Western Australia and expand our exposure to this new and emerging goldfield. Furthermore, we have proven our ability to absorb new operations into the Gold Fields Australia portfolio by leveraging off existing resources. Gold Fields took over management of the Gruyere Gold Project on February 1, 2017, and first production is expected by late fiscal 2018 or early fiscal 2019.
Pursuing cash-generative acquisition opportunities is an integral part of our strategy although by necessity, opportunistic in nature. However, given our existing commitments, further merger and acquisitions, or M&A, during fiscal 2017 or fiscal 2018 appears unlikely except in countries in which we already have a presence and where it has synergistic benefits. It would be seen,modelled on our successful U.S.$262 million acquisition of the Yilgarn South Assets from Barrick Gold in October 2013. An acquisition like this will be difficult to replicate in terms of the price we paid, but the structural benefits and subsequent management efforts have given us a model to replicate.
Finally, we are examining whether a return to judicious greenfields exploration would be a viable proposition in view of the sharp price escalation of mines already in operation. This strategic consideration is at an early stage and includes an evaluation of whether Gold Fields should pursue greenfields exploration on its own or inco-operation with junior miners.
During fiscal 2016, Gold Fields increased attributable gold mineral reserves (net of depletion) by 4% to 48.1Moz. Attributable copper mineral reserves totaled 454 million pounds (fiscal 2015: 532 million pounds). Encouragingly, in Australia, we added 450,000oz in mineral reserves (after depletion) during fiscal 2016.
South Deep
In fiscal 2015, the new management team at South Deep took a decision to take a step back and “get the basics right” to ensure a stronger foundation for sustainable growth in the future. During fiscal 2016, this rigorous approach showed signs of success, with the following encouraging indicators of improvement:
The mine’s safety performance was the best it has been since Gold Fields bought the project in fiscal 2006, though we regrettably had one fatal mining accident (fiscal 2015: two fatalities);
Production of 290,400 oz in fiscal 2016 was 47% higher than the 198,000oz produced in fiscal 2015;
Costs were reduced with AIC of U.S.$1,234 per ounce showing a significant 21% improvement on the U.S.$1,559 per ounce reported in fiscal 2015;
Most significantly, South Deep was cash positive for the first time, aided by a currency hedge and the stronger Rand gold price of R584,894/kg (fiscal 2015: R478,263/kg) received during the year. The mine generated U.S.$12 million in net cash flow during fiscal 2016 compared with an outflow of U.S.$80 million in fiscal 2015; and
Full implementation of the high profile destress mining method.
Key to improvements at South Deep were strategic interventions on a number of fronts:
| • | People: The recruitment of identified critical skills was completed during fiscal 2016 and most of the core mining and engineering positions have now been filled, a process supported by intensified training programs for our existing staff. In addition, the signing of a three-year wage deal with trade unions in March 2015, which will govern wages and other working conditions until March 2018, is expected to give South Deep a degree of labor stability as the mine builds up; |
| • | Fleet: As part of the fleet renewal strategy, 58 category 1 units have been commissioned over the past two years. The total category 1 fleet currently stands at 111 units. The renewed fleet is expected to have a positive impact on fleet availability and utilization. The maintenance capacity at South Deep improved during the year through the implementation of supplier maintenance contracts in corridor 2 (approximately 35% of total mining), as well as the commissioning of the 93 level workshop; and |
| • | Mining method: During fiscal 2015, South Deep management, in collaboration with a team of leading international and local geotechnical experts, reviewed the destress mining method. Following the recommendations, we implemented a strategic change in the design of destress methodology, and converted from low profile to high profile destress mining during fiscal 2016. Byyear-end, most of the mine was employing this approach, which contributed significantly to simplifying and de-risking the mining process. |
Building on this work, in February 2017, the Board approved the long-awaited Rebase Plan for South Deep, which sketches the long-term production and cost profile of the mine. The key features of this plan are:
Increasing the tonnes milled to 2,861 kt by fiscal 2022;
Ramping up production to 500,000 oz by fiscal 2022;
Reducing AIC to U.S.$900 per ounce by fiscal 2022; and
Growth of capital expenditure of R2.3 billion (U.S.$151 million) over the next six years.
Managing Energy Costs and Climate Change Risks
Energy remains a major performance driver, accounting for 19% of Group operating costs in fiscal 2016, having gradually risen from 18% in fiscal 2013, amid increasing energy demand and supply constraints in all of our operating regions. As part of the Integrated Energy and Carbon Management strategy implemented in 2014, each of our regions has set energy reduction targets, which have already delivered around U.S.$41 million in savings (against plans) between fiscal 2014 and fiscal 2016. For fiscal 2016, this equates to energy savings of around 3% against our business plans, with an additional benefit of 4% savings in our CO2e. Most critically though is that the average energy spend per ounce of gold produced has declined by 18% to US$130/oz between 2014 and 2016, with energy efficiency initiatives contributing the equivalent of US$5/oz to these savings.
At the same time, the regions have been tasked with securing access to future energy sources. In Ghana, where the government required our mines to reduce their electricity consumption by 25% to 30% over the past few years, both Tarkwa and Damang have signed power purchase agreements with an independent power producer, which successfully commissioned newgas-powered plants at both of these mines during fiscal 2016. The plants at Tarkwa (3 x 11MW units) and Damang (5 x 5.5MW units) are expected to result in reliable supply and significant electricity cost savings for both operations. As at the end of fiscal 2016, 100% of Damang’s and 50% of Tarkwa’s power requirements were supplied by the new gas-powered plants. It is expected that these plants will supply 100% of Tarkwa’s power requirements from the beginning of fiscal 2018.
With the successful commissioning of a new gas power plant at Granny Smith, each of our four mines in Western Australia is now supplied by gas and new long-term supply agreements have been entered into with various utilities. While lower global diesel prices have somewhat mitigated the current cost benefits of a switch to gas, we believe that the long-term price differential will favor gas over diesel. Gas is also a cleaner fuel with resultant environmental benefits. Our Cerro Corona mine in Peru also has a long-term power agreement in place with a private gas company.
The improved power supply environment in South Africa ensured that our South Deep mine was not subject to load-curtailment programs during fiscal 2016. In keeping with our commitment to renewable energy, we solicited proposals for anon-site 40MW photovoltaic solar plant at the mine. In October 2016, we appointed an independent renewable power company to build, own and operate the solar plant for the next 20 years. The plant will provide around 19% of the mine’s annual power requirements at costs that are at least on par with Eskom tariffs.
Gold Fields remains committed to our goal of 20% renewable energy generation over the LoM at all new projects and is investigating this requirement for our Salares Norte project in Chile.
Greater use of renewables has the added benefit of reducing our carbon footprint, which is one of Gold Fields’ key environmental priorities. During fiscal 2016, our total CO2 emissions increased to 1.96 million tonnes (fiscal 2015: 1.75 million tonnes), but we expect longer-term benefits to our emissions arising from the energy efficiency projects we have put in place at our mines. During fiscal 2016, we implemented a Group climate change policy that addresses the risks faced by our operations as a result of its actions, track recordthe change in climate arising from global warming.
Technology and stakeholder relationships, asInnovation
An important addition to our fiscal 2016 scorecard was the ‘partnerinclusion of choice’ for host governments, local communitiesthe T&I division. A new division was established under EVP: Technical, Richard J. Butcher, who joined us from the Minerals and peer companies;Mining Group,
or MMG, in February 2016. Richard J. Butcher and his team developed a new Gold Fields’ T&I strategy which was completed and presented to the Board in November 2016. The key features of this strategy are:
A five-year implementation plan commencing with a foundational phase over the first two years, optimizing our operations by year three and implementing new technologies and innovation over the full five-year period;
Tasking our regions to develop and implement three-year technology plans starting in fiscal 2017, with the corporate office consolidating and driving the process;
Developing a platform to share lessons learned and roll out successful projects across the Group; and
Recognition thatThe ultimate goal of the success or failurestrategy is to work towards the “Gold Fields Mine of major growth projects (as well as the sale value that they can command) increasingly dependsFuture”, which will be premised on how well companies can manage sustainable development issues, particularly relationships with host communities.automation, an integrated digital data platform, remote machine operation, virtual reality and reduced mining waste.
During the foundational phase, Gold Fields has already identified opportunities to enhance efficiencies within Gold Fields’ integrated approach to growth is driven by the management team at each of itscurrent regional operations, in line with Group-level standards. This ensures a consistent approach towards integrated growth management, while also allowing requisite flexibility for locally-appropriate and project-specific decision making. In this context, Gold Fields’ regional growth teams continue to:portfolios:
Apply Group-level best-practice sustainability standards (tailored to suit local circumstances) across all growth projects;The key focus for the Australia region is reducing exploration time through real time data management and the use of leading practice technologies;
Apply ‘integrated’ risk managementIn Ghana, the focus will be on data analysis to all growth activity, covering financial, technical, political, socialachieveend-to-end business optimization. A key part of this program is to complete fleet automation studies and environmental issues and dynamics likely to influence project success;trials;
Integrate the creation of “Shared Value” into core project development activities from the very start;The South Deep mine will upgrade its underground wireless connectivity and radio-communications systems to use technologies such as online maintenance and dispatch systems and remote operating equipment more effectively;
Work with Group sustainabilityThe Cerro Corona mine will be using upgraded operating software and risk management expertsa new dispatch system that will focus on porphyry ore blending to ensure the smooth transitionreduce variation of growth opportunities through the project lifecycle;stock feed, thereby optimizing plant recoveries; and
Implement comprehensive crisisInvestigating the potential for an automated and remote-controlled underground trial mine at one of our Australian operations.
Recent advances in digitization, automation and mechanization make it critical that we develop strategies to implement new technologies and partner with IT companies and original equipment manufacturers, or OEMs, that are leaders in the field.
License to Operate
The success of our business is critically dependent on relationships with a number of key external stakeholders that determine both our regulatory and social licenses to operate: governments at national, regional and local level and, above all, the communities that host our mines. Over the years we have devoted considerable resources and energy to securing and maintaining our relationship with these key stakeholders.
A number of elements are critical in achieving sound and supportive community relations: Extensive engagement work, investment in these communities, as well as the responsible management plans across all growth projects.
The Group’s regional growth teams are supported in this respect by Group-level guidance basedof environmental resources, particularly water. These resources, if not managed sustainably, can have an adverse impact on international best practice. This includes:the nearby environment and create tensions with host communities, thus threatening our licenses to operate. At the same time, we need to ensure that we plan for the closure of our operations throughout the LoM, ensuring that when we eventually exit, we have optimized operating costs, our environmental footprint is mitigated and the economy of the host community continues to thrive.
The ISO 14001- and OHSAS 18001-certified Environment, Health and Safety Management System;
Gold Fields’ Community Policy;
Gold Fields’ Community Relations Handbook;
Gold Fields’Improved Community Relations and Stakeholder Engagement Guidelines;Shared Value
The communities in which we operate are directly and often exclusively dependent on the sustainability and growth of our mines and they seek a greater share of the benefits of mining than they have received to date. One
of the biggest challenges facing mining companies is building relationships and trust with these host communities, without which there is potential for operational disruption, project delays and cancellations—the loss of the “social license to operate” referred to previously.
Host community procurement and employment are critical pillars of our community investment strategies at all our operations in developing countries. At present, host community employment accounts for 23% of our workforce at Cerro Corona in Peru, 13% at South Deep in South Africa (in line with Mining Charter definitions) and 72% at our two Ghanaian operations. The percentages of host community procurement spend was 8%, 14% and 7%, respectively. Gold Fields is proactively looking at ways to increase local employment and procurement opportunities over the next few years, including engaging with our large multi-national suppliers to support investment in these communities. At South Deep, we have set ourselves the target of procuring 25%, equivalent to an estimated R500 million a year, of goods and services from the mine’s Westonaria host community, creating around 500 new jobs in the process. We are making good progress in this regard; in fiscal 2016, host community procurement spend rose by 85% to R356 million, the number of host community suppliers to South Deep increased to 83 (fiscal 2015: 76).
Gold Fields’Fields has also invested in communities through a range of educational, skills development, health and infrastructure projects and, more recently, through Shared Value-based projects. However, it is evident that mining companies need to expand and deepen their investment in and engagement with host communities.
Our contribution to host communities is on a more sustainable footing as we increasingly use a Shared Value strategy.
By buildingapproach to structure our investments in the highest standardscommunity projects, thereby taking into account social and economic benefits rather than just spend.
To date, our regions have implemented six Shared Value projects ranging from the start, the Group’s regional growth teams aimpromotion of mathematics and science education among South Deep’s host communities to ensure that good-practice operationalmulti-lateral water management is built into the ‘DNA’ of any new mines that may ultimately be delivered, asprojects at Cerro Corona and increased sourcing from community suppliers at all our mines. The mosthigh-profile project is the caseU.S.$17 million, three-year upgrade of the dirt road between the Tarkwa and Damang mines in Ghana. We are working with government in building the road which, when completed, will significantly improve access for our operations’ host communities. In addition, the Group’s existing operations. These practices are also intended to give purchasersbulk of the labor required for completing the project is being sourced from these communities.
Environmental Management
Responsible environmental management remains a vital component of Gold Fields’ growth assets confidence that potential legacy issues have been identified and responsibly managed from inception to disposal. This is an increasingly important factor as it is a growing trend that projects have their social liabilities factored into their pricing.
Earning and maintaining a social license to operate
The value offered by an integrated approach to growth is most apparent with respect to the securing and maintenance of a strong politicalregulatory and social license to operate. Indeed, companies’ social license to operate can,at all our operations and projects. In fiscal 2016, we reported three incidents of limitednon-conformance ornon-compliance that resulted in many jurisdictions, be the key determinant of project success. This is true both in higher-risk, ‘frontier’ operating environments, as well as in the kind of better-established, lower-risk growth environments that Gold Fields is increasingly targeting.
Gold Fields places strong emphasis on ‘getting it right from the start’ in respect of projects that it wishes to pursue. This means operating in a way that generates trust and confidence amongst local stakeholders, and ensuring that each project has the kind of early political and social backing that will ultimately support its long-term execution and operation.
One of the advantages of Gold Fields’ strategic refocusing on near-mine exploration is that there is generally support for mine regeneration and expansion within its existing local communities. This is because these communities are often directlyongoing but limited environmental impact, or indirectly economically reliant on the continued and profitable operation of Gold Fields’ mines.
Gold Fields’ approach to growth-focused stakeholder engagement is based on its Community Relations Handbook and Guidelines, which are aligned to the AccountAbility AA 1000 principles of inclusivity, materiality and responsiveness. This includes extensive and ongoing engagement with, among others, local community members, local traditional representatives, local and national government officials, as well as local and national non-governmental organizations, or NGOs. More specifically, this approach is supported by the installation of community relations expertsLevel 3 environmental incidents (fiscal 2015: five). All three incidents took place at each project, ongoing stakeholder mapping, analysis and monitoring, as well as detailed risk analysis and the implementation of effective risk management action plans.
Some of Gold Fields’ key interactions between its regional growth teams and local stakeholders in 2014 include those relating to:
Water availability and access for the Salares Norte project, which is located in an arid, relatively unpopulated part of the Atacama region of Chile. A formal water rights application was made to the local authoritiesour Ghanaian operations in the first quarter of fiscal 2014;2016. The two incidents at our Tarkwa operation involved accidental damage to fuel units and hoses that spilt large volumes of fuel into the environment. The incident in Damang involved the overflow of about 20,000 liters of tailings slurry and supernatant water into a nearby event pond as a result of blockages in the tailings delivery pipeline and heavy rainfall. In all cases, corrective actions were implemented to prevent future recurrence.
Water is a particular focus of our environmental strategy, as it is becoming an increasingly scarce and expensive resource globally. Managing the risks around current and anticipated water security, which includes the quantity and quality of supply as well as associated costs, is essential to ensure sustainable production for existing operations and the future viability of projects. Water withdrawal across the Group decreased to 30,321Mℓ (2015: 35,247Mℓ), while water withdrawal per ounce was lower at 13.67kℓ in fiscal 2016 compared with 15.77kℓ in fiscal 2015.
The Group’s water management guideline requires operations to identify opportunities to enhance water reuse, recycling and conservation practices. In fiscal 2016, a total of 16 initiatives were implemented in line with these guidelines, including the use ofin-pit tailings disposals at our St. Ives and Tarkwa mines. Many of these initiatives
deliver multiple benefits, including cost savings, reduced impact in water scarce areas, improved regulatory compliance, identification and mitigation of water-related risks and reduction of mine closure liabilities, thereby enhancing Gold Fields’ social license to operate. These efforts will continue into the future.
Following the Mount Polley (Canada, August 2014) and Samarco (Brazil, November 2015) tailings dam disasters, the 23 mining companies that are members on the International Council of Mining and Metals, or the ICMM, agreed to convene to review the standards for tailing storage facilities. The resultant working group, which is chaired by Gold Fields, announced in December 2016 a new agreement that will encourage members to further improve the management of mine tailings throughout their global operations. In fiscal 2017, external consultants will conduct Gold Fields’ three-yearly review of all the 26 tailings facilities at our mines and projects and will assess our tailings management against the new position statement.
The total gross mine closure liability for Gold Fields increased from U.S.$353 million in fiscal 2015 to U.S.$381 million in fiscal 2016. We plan on further enhancing our integrated approach to mine closure management with a focus on post-closure water management. The program is currently being finalized and implementation is scheduled for fiscal 2017.
People
The profile of our workforce was profoundly impacted during the initial years of our transformation journey from fiscal 2012 to fiscal 2014, with large-scale reductions in the number of employees and contractors. Since then, our human resource base has stabilized with 8,964 employees and 9,127 contractors at the end of fiscal 2016.
With the shift towards mechanization and automation, we have found that in addition to the continued development and training of our workforce, it is important to recruit the appropriate skills for our mines. At South Deep, we completed the recruitment of necessary mining skills during fiscal 2016 and continue to train our workforce in underground mechanical mining skills. During fiscal 2016, we spent over U.S.$17 million globally on training and development, in addition to recruiting the best mining skills to supplement our existing talent pool.
Since the restructuring process, our smaller, yet more skilled workforce has ensured that Gold Fields works more efficiently to improve productivity. The key to this is that employees are incentivized to deliver against clearly defined performance targets that directly support the achievement of business objectives. Our remuneration strategy is evolving to attract and retain these skills, and our people development approach is
being adjusted to ensure that we build a robust internal skills pipeline that can supply the skills that the Company needs, now and in the future.
Our people strategy is based on achieving the following key objectives, to:
Create and sustain a high-performance culture;
The finalizationBecome an “Employer of an officially-recognized agreementChoice” for the Free, Prior and Informed Consent, or FPIC, of the Kankana-ey community for the progression of the FSE Projectbest talent in the Philippines;industry;
The signing of a memorandum of agreement withEnsure we have the Kankana-ey communities andright people in the passing of a resolution in favour of granting Gold Fields an FTAA license byright jobs at the Kankana-ey people’s elders in February 2015;right time;
The creationEnsure a sufficient supply of local value at the FSE project, including capacity-building for local community members. This is to ensure they are able to positively contribute to this process and benefit from its outcomes as the project develops;right leaders; and
Ongoing engagement with local indigenous groups at the Agnew/Lawlers, Granny Smith and St Ives minesBuild great people managers.
Achievement of this strategy is reflected in Australia regarding land accessour Group scorecard objectives for near-mine drilling and the protection of cultural heritage.
Aside from supporting its own growth activities, a proactive sustainability approach also supports Gold Fields’ ability to divest itself of unsuitable growth projects—a key issue in the context of Active Portfolio Management. Project divestment can place particular pressure on relations with local communities, due to frustrated expectations around employment creation and revenue generation, as well as Gold Fields’ withdrawal from hard-won stakeholder relationships.
In this context, the company’s regional growth teams actively work with community relations specialists to explain the transition process, mitigate the impacts of the Group’s withdrawal and honor its existing commitments. This helps to ensure Gold Fields can maintain the value of its divested assets by handing over a secure political and social license to purchasers. Furthermore, the company actively seeks out purchasers who will not undermine its own reputation through their subsequent operational standards and approach to stakeholder relations.
Gold Fields’ vision of global leadership in sustainable gold mining commits the company to:fiscal 2016:
Maximize the enduring value from gold mining for all stakeholders;Performance management;
Understand and respond to the needs of stakeholders in a responsible manner;Improved people management skills;
RepresentCreate a trusted and valued mining partner;conducive work environment;
Enhance the environments in which its activities take place, while limiting its negative impacts;Improved talent management; and
LeaveCommunication and engagement.
Of these five scorecard objectives, we have identified “communication and engagement” as an especially important component of people management. Our engagement with trade unions is critical in this respect, particularly in Ghana and South Africa, where a positive legacylarge portion of our workforce is represented by creating shared valuevarious unions. In March 2015, we signed a three-year comprehensive wage deal that recognizes the mechanized mining requirements of South Deep as we take it to full production. Negotiations on a new agreement, which is due in fiscal 2018, will commence in fiscal 2017. In Ghana, negotiations with the unions have been concluded with a 10% basic salary increase for fiscal 2016 (to be backdated to January 1, 2016) and a 6% increase for fiscal 2017 being the main outcome of the negotiations.
We continue to invest in building cordial relationships with unions in both Ghana and South Africa, but the journey from confrontation to collaboration is an ongoing one. At South Deep, in particular, the priorities of the business in terms of delivering the mine’s Rebase Plan are sometimes in conflict with the views and aspirations of the main trade union. This potential conflict now requires urgent resolution.
In Ghana, the aspirations of the unions for continued above inflation wage increases is undermining our business and a new wage model is in the process of being evolved through dialogue with the union. Without consensus, a restructuring of our business is likely. Our goal remains to develop our relationships with trade unions further so that they do not compromise the delivery of our business objectives.
Group Strategy
Fiscal 2017 will be a year ofre-investment for Gold Fields, the benefits of which are expected to be realized in the years to follow. In addition to its cash-generative mines within the portfolio, Gold Fields now has development and growth projects in each of the four regions in which it operates.
In South Africa, we have South Deep which is still a mine inbuild-up. In Ghana, there-capitalization of Damang is essentially the equivalent of developing a new mine, while our investment in the Gruyere joint venture will lead to the construction of a new mine in Western Australia. Finally, in the Americas region, we are set to conclude apre-feasibility study on the Salares Norte project in northern Chile by the second half of fiscal 2017.
These projects are important in terms of their contribution to the strategic objectives of Gold Fields, namely to maintain and grow cash flow on a sustainable basis. They are all stakeholders.forecast to operate at AIC which are lower than the current AIC of the Group once steady-state levels of production are realized and as such, the Group’s overall cost of production will reduce over time and the quality of the portfolio will improve.
At South Deep, we have announced the Rebase Plan, which is anticipated to position the mine at a steady-state production of 500,000 ounces per year by fiscal 2022, at AIC (in 2017 terms) of below U.S.$900 per ounce. Similarly, the Damang project has projected AIC, including upfront capital development, of U.S.$950 per ounce, and the Gruyere Gold Project AIC of U.S.$805 per ounce. Although the Salares Nortepre-feasibility study is still being concluded, we anticipate that AIC is likely to be lower than these levels due to the high grades and the likelihood that this will be anopen-pit operation.
Furthermore, we continue to invest in brownfields exploration in Australia with the objective of not only replacing what we mine each year, but also with the aim of increasing our resources and reserves at a higher quality than what has been mined previously. We will continue to look for life extension opportunities at Cerro Corona through economic additions to both the tailings and waste facilities, as well as through brownfields exploration on Cerro Corona porphyry style systems in the vicinity of the mine. Tarkwa has a strong resource position, but we are stepping up our efforts to convert some of these to reserves and to look for opportunities for other styles of mineralization across the lease. The Kobada Hill prospect has emerged as an interesting hydrothermal style target with encouraging geology and controlled mineralization with good continuity. In due course underground mining could also potentially offer opportunities at Tarkwa.
These investments, we believe, will achieve a measure of success over the next three years, thereby maintaining and sustaining strong cash flows from the operations. Amid the strong investment drive at Gold Fields, some shareholders have been asking whether we have changed our strategic focus from cash generation to a drive for long-term production. This is not the case as an employerthe main objective underpinning Gold Fields’ strategy remains the generation of choicesustainable and increasing cash-flow. The focus on cash flow istwo-fold in that it entails growing our cash margin and absolute cash flow and then distributing this in the form of dividends and repaying debt.
To continue expanding margins and distributing cash, the long-term sustainability of the business must be kept intact. This requires investing to extend the life of our assets, ensuring we maintain our regulatory and social licenses to operate, strong corporate governance and retaining our people, who are key to the success of our business. It also entails maintaining a healthy balance sheet and not taking on too much debt, which might lead the Company into financial difficulties should the macro-economic environment turn against it.
The challenge facing Gold Fields’ management will be to balance distributing the cash we generate with reinvestment into our assets to ensure that our portfolio of mines generates cash sustainably into the foreseeable future.
The key financial objectives of Gold Fields’ strategy include:
Meeting our production and cost guidance;
Generating a 15% FCF margin at a U.S.$1,300 per ounce planning gold price;
Paying 25% – 35% of normalized earnings as dividends;
Maintaining a net debt to adjusted EBITDA ratio to 1.0x or below if possible in the long term;
Extending the life of our Australian portfolio through brownfields exploration;
Pursuing value-accretive M&A; and
Successfully implementing the South Deep Rebase Plan.
Fiscal 2017 is a year where the Company is expected to spend more than it will bring in, but with the view to achieving and increasing sustainable cash flow generation over the medium to long-term. The alternative is to harvest the assets over five or six years, which we don’t believe that this is in the best long-term interests of either shareholders or other stakeholders in the Company.
As we embark on the Company’s reinvestment drive, we will pursue only those investments and capital expenditures that have a clear path to pay-backs and returns. Furthermore, we need to optimally manage our ore bodies in terms of grade management and ongoing sustainable capital expenditure by planning for outcomes that optimize the life of the ore body (and thus optionality) and cash flow.
Stakeholder Engagement for Fiscal 2017
Gold Fields’ People Strategy aimsprosperity in the short- and longer-term is critically dependent on societal acceptance. This can only be achieved through transparent and mutually beneficial relationships with governments at all levels (national, regional and local), organized labor and host communities. Our corporate and regional management teams have been tasked with intensifying stakeholder engagements in fiscal 2017 to driveensure that we operate in a high-performance culture acrossbusiness environment that allows us to work profitably to the benefit of all operations. Despitestakeholders.
The Development Agreement that we entered into with the challenges posed byGhanaian government in fiscal 2016 is testament to the currentbenefits of open and honest dialogue with stakeholders. The new royalty regime ensures that both parties share the pain in a low goldgold-price environment but benefit when the price Gold Fields remains committed to being an employer of choice. This means ensuring that employees:rises above targeted levels. It is a model we believe can be replicated in all our jurisdictions.
Receive market-aligned pay and benefits;
Have access to a wide range of training and development opportunities;
Work in a safe, productive and respectful environment; and
Are acknowledged and recognized for their role in value creation.
In line with its new, cash-generative production profile and low-cost operating model, the Group has established a leaner, more efficient and better skilled workforce. This has driven increased emphasis on employee efficiency, accountability and rewards, and enhanced training for key personnel, with particular emphasis on further developing mechanized mining skills at South Deep.
The comprehensive restructuring of Gold Fields since fiscal 2013, in particular the Spin-off, has led to a significant reduction in the size of the Group’s workforce but also to a change in the workforce profile, which now predominantly comprises labor-efficient mechanized mining skills.
These processes continued during 2014, driven by:
The re-basing of production and development at South Deep;
The integration of the Yilgarn South Assets, which included workforce rationalisation at Agnew/Lawlers; and
The closure of Tarkwa’s North Heap Leach facility and workforce restructuring at Damang.
The ongoing right-sizing of Gold Fields’ workforce has played an important role in ensuring the Group’s long-term sustainability in the wake of continued cost pressures and supports the ability to generate free cash flow despite a very challenging gold price.
Following the reduction in its headcount,Africa, Gold Fields has focuseddedicated substantial human and capital resources towards meeting the targets of the 2010 Mining Charter, including the BBBEE target of 26% ownership, which we exceed. We will continue to support the transformation of the sector to make it truly representative of the South African population.
True transformation will take time and cannot happen without the financial backing of investors, many of whom have fled the sector over the past few years amid poor returns on ensuringtheir capital. As the South African government drafts critical policies based on these engagements we urge it to avoid additional fiscal or regulatory burdens that employeeswill inevitably further stifle the growth of the sector. Directly, and contractors are:through the Chamber, we have and will be engaging the South African government on three key issues that were supposed to be addressed in fiscal 2016, but have still not been finalized: The review of the Mining Charter; the once-empowered, always-empowered principle in BBBEE ownership of mining companies; and the finalization of amendments to the MPRDA. In addition, we remain committed to extensive engagement with communities around our South Deep mine, both through direct interaction but also in alliance with other gold miners operating in the area, particularly Sibanye Gold.
Effectively deployed to operate efficiently and safely acrossIn Peru, the remaining production base;
Incentivized in linemining industry is working closely with the company’s sustainable cash-generation targets;new business-friendly government to find joint solutions to the social and
Equipped with environmental issues that appear to be the appropriate skills to achieve a world-class mechanized mining performance.
Government
Asroot causes of the issuers of mining licenses, developers of policy and overseers of regulation, host governments are among Gold Fields’ most important stakeholders.distrust towards the sector by local communities. Engagement with national governments typically takes place on a collective basis through local chambers of mines. Gold Fields also regularly engages with regional regulatory authoritiesthese communities and municipal authorities in its host communities. Ittheir representative organizations is Gold Fields’ policy not to provide financial contributions to political parties and lobby groups, unless explicitly approved by the Gold Fields Board of Directors.
It is natural and right that governments seek to maximize the social benefits that accrue from the extraction of scarce natural resources. As a matter of policy, Gold Fields fully complies with the fiscal and taxation regulations and laws of the countries it operates in, understanding that these fiscal contributions are critical to fund governments, its employees and public sector infrastructure and projects. Nonetheless, attempts to secure
these benefits through higher levels of targeted taxation can,already engrained in the long-term, have the opposite effect. Indeed, the weak commodities market, including the low priceDNA of gold, is throwing into sharp relief just how damaging short-term attempts to secure a greater proportion of companies’ earnings can be. Mining investment is falling, new growth projects are being left undeveloped and existing projects are facing closure even without additional fiscal uncertainty. The implications for longer-term national and host community development are obvious.
Gold Fields generates significant value for all the societies in which it operates, some of which can be quantified and some which cannot. The Group recognizes that the payment of taxes, royalties, dividends and other sums to host governments is vitalour Cerro Corona mine, but will only yield sustainable success if national mineral wealth is to be converted into broad-based, sustainable development. In fiscal 2014, the Company’s payments in this regard amounted to U.S.$194 million, compared to U.S.$380 million in fiscal 2013.
Compared to global norms, all of Gold Fields countries of operation enjoy relatively strong democratic governance standards and are considered to pose low to moderate corruption risks by third-parties. Furthermore, Ghana and Peru adhere to the Extractive Industries Transparency Initiative, or EITI. Collectedly, this helps Gold Fields’ payments to government actively contribute to broader socio-economic development in its host societies.
Gold Fields recognizes that not all of the value it creates at a national-level benefits its host communities. To address this deficit and to maintain its social licence to operate, Gold Fields implements a range of Socio-Economic Development, or SED, initiatives, in addition to community procurement and employment, in its host communities that focus on the key priorities in these communities. Gold Fields spent US$16 million on SED programmes in both fiscal 2014 and fiscal 2013.
Gold Fields is also implementing innovative ‘Shared Value’ projects in local communities. These are sustainable projects that support Gold Fields’ own business objectives, whilst also generating positive socio-economic impacts for local people, whether in the form of skills transfers, enterprise development or employment creation.
Community relations
Overview
Many mining companies face increasing pressures over their “social license to operate”, namely the acceptance or approval of their activities by local stakeholders. While formal permission to operate is ultimately granted by host governments, the practical reality is that many operations also need the ‘social permission’ of host communities and other influential stakeholders to carry out their operations effectively and profitably.
As such, Gold Fields believes it is important to both minimize the negative impacts that its operations have on local stakeholders, while maximizing the positive benefits. In current market conditions, which have the potential to curtail the ability of Gold Fields to deliver local benefits, active stakeholder engagement, in combination with the company’s ‘Shared Value’ development approach (set out below) is particularly important as it shifts the focus from spending to the actual social and business impacts.
In light of this, Gold Fields actively identifies and engages with the representatives of the following groups on a regular basis, both formally and informally:
Centralsupported by government at national, regional and local government;
Informal community groups;
NGOs;
Organized labor; and
Local businesses.
Such engagement is guided by, for example:
Applicable legislation;
South Deep’s mandated Social and Labor Plan, or SLP;
Gold Fields’ Community Policy and Guidelines (including the Community Relations Handbook).
These are aligned with a range of good international industry practice standards, including:
The International Council on Mining and Metal’s, or ICMM’s, 10 Principles and Community Development Toolkit—and Position Statement on Indigenous Peoples;
The International Finance Corporation Performance Standards;
The Equator Principles;
The AA1000 Stakeholder Engagement Standard; and
The ISO 26000 Social Responsibility Standard.
In the case of significant operational changes, relevant public consultation processes are also defined within our Environmental and Social Impact Assessments, or ESIAs.
The finalization of a summary version of the Community Relations Handbook, that will be accessible to all employees, was completed in early fiscal 2015.
Gold Fields requires that all its regional operations establish grievance mechanisms through which communities can voice their concerns and complaints with the Company, including on environmental issues.
Community value distribution
Despite its substantial economic impact on the national level, not all of Gold Fields’ contributions necessarily trickle down to host communities. In order to maintain its social license to operate, Gold Fields is committed to more direct initiatives focused on the delivery of benefits to host communities. These include, for example:
Direct employment;
Indirect employment;
Skills development;
Educational investment;
Health investment; and
Infrastructure support.
Such initiatives are supplemented by Gold Fields’ Shared Value projects.
The relatively low gold price and the restructuring of Gold Fields’ key operations has made maintaining historical levels of SED spending challenging. Furthermore, it is not yet clear whether SED spending is the most effective way in which to support long-term, sustainable community development.
In this context, Gold Fields introduced Shared Value to the business in 2012, making it one of the earliest adopters of this approach. Taking a leadership role is integral to how Gold Fields implements Shared Value; the Company facilitates collaboration between multiple stakeholders to solve environmental issues such as water security, which have been identified as a community priority.
This Shared Value approach is based on four key pillars:
Strategic interventions to proactively address socio-economic challenges that can drive community tensions, NGO activism or more restrictive regulation;
The ‘integration’ of business activities and the management of community relations to maximize contributions to host communities and realize business efficiencies;
Participation in collaborative action with other stakeholders to address shared social challenges; and
Transparency around Gold Fields economic contributions to its host societies, in line with the World Gold Council’s guidelines on ‘Responsible Gold Mining and Value Distribution’.
Given the nature of the Shared Value approach, broad-based, meaningful stakeholder engagement plays a key role in ensuring that SED initiatives deliver well-recognized benefits for all involved.levels.
Reserves of Gold Fields as at December 31, 20142016
Methodology
Gold Fields is in the process of rebasing the production profile of its South Deep mine to ensure the best strategic value option for the asset is operationalized. This process involves comprehensive reviews, assessments, planning and simulation modeling for South Deep as it evolves from a mine-build project into a full production facility. The rebasing exercise remains a work in progress. Consequently, the December 31, 2014 Mineral Reserves for South Deep primarily reflect mining depletion of last year’s figures except where material differences were encountered for technical or economic reasons, in which case suitably revised models and schedules were implemented.
While there are some differences between the definition of the South African Code for Reporting of Exploration Results, Mineral Resources and Mineral Reserves, or SAMREC Code, and that of the Securities and Exchange Commission’s, or SEC’s Industry Guide 7, only the reserves at each of Gold Fields’ operations, growth and advanced exploration projects as at December 31, 20142016 which qualify as reserves for purposes of the SEC’s Industry Guide 7 are presented in the table below. See “—Glossary of Mining Terms”. In accordance with the requirements imposed by the JSE, Gold Fields reports its reserves using the terms and definitions of the SAMREC Code (2007 edition, amended July 2009)(2016 edition). Mineral or ore reserves, as defined under the SAMREC Code, are divided into categories of proved and probable reserves and are expressed in terms of tonnes to be processed at mill feed head grades, allowing for estimated mining dilution, ore loss, mining recovery and other factors.
All of Gold Fields’ operations report reserves usingcut-off grades or net smelter returncut-offs, or NSR, in the case of multi-metal deposits.Cut-off grade is the grade that distinguishes the economic material within an ore body that is to be extracted and treated from the remaining material.Cut-off grade is typically calculated using an appropriate metal price and the development, stoping, processing, general and administration and sustaining capital costs to derive a total cost per tonne. NSR is the net revenue (total revenue less production costs) that the owner of a mining property receives from the sale of the mine’s metal products less transportation and refining costs. Modifying factors used to calculate the cut-off grades include adjustments to mill delivered amounts due to dilution and ore loss incurred in the course of mining, expected return on investment, and sustaining capital. Modifying factors applied in estimating reserves are primarily based on historical empirical information, but commonly incorporate adjustments for planned operational improvements. Tonnage and grade may include some
mineralization below the selectedcut-off grade to ensure that the reserve comprises blocks of adequate size and continuity to facilitate practical mining. Reserves also take into account operating cost levels as well as necessary capital and sustaining capital provisions required at each operation, and are supported by “life of mine” plans.
South Africa
South Deep’s Rebase Plan, which forms the basis for the South Deep’s mineral reserves, will continue to be refined and enhanced as other rebasing project outcomes are delivered and as the mine evolves to steady state production. This plan incorporates all recent improvements in mine design, geotechnical parameters as well as infrastructure required to support the production plan.
At South Deep (except as noted above), the estimation of reserves is based on surface drilling, underground diamond drilling, surface three-dimensional reflection seismics, ore body facies modeling, structural modeling, underground mapping, detailed ore zone wireframes and geostatistical estimation. The reefs, which are sedimentary in nature and reflect extensive intra-basinal fluvial deposits, are initially explored by drilling from the surface on an approximately 500 meter to 2,000 meter grid. Once underground access is available, diamond drilling is undertaken on an approximate 30 meter to 90 meter grid, to provide the necessary ore body definition to support mine design and production scheduling.
The following sets out the drill spacing ranges used to classify the different categories of reserves at South Deep.
Reserve Classification | Sample Spacing Range Min/Max | Maximum Distance Data is Projected | ||||||
| (meters) | ||||||||
Proved | 0 to 60 | 220 | ||||||
Probable | 60 to 650 | 650 | ||||||
For proved reserves, the ore body must be fully destressed, with planned grade control diamond drilling must be designed at an approximate 50 meter by 50 meter grid spacing, depending on the accessibility for the diamond drill rigs. The destress mining extracts 2.22.5 to 5.5 meter high cuts that are generally mined horizontally at 17 meter vertical intervals, and it reduces the in situ rock stress from approximately 80 MPa to 30 to 40 MPa to facilitate bulk mechanized mining. Estimation is constrained within both geologically homogenous structural and defined facies zones, and is generally derived from either ordinary or simple kriged small-scale grids.
For probable reserves, the estimates access a significant number of samples on spacing greater than the spacing for development and stoping bordering these areas. In addition, borehole spacings ranging from tens to hundreds of meters are used in conjunction with 3D seismic survey results that confirm certain structural reef elevations and key stratigraphic surfaces. Reserves classified as probable are generally adjacent to those classified as proved. Estimation is constrained within homogenous structural and facies zones, and is derived using a localized direct conditioning technique (used to derive recoverable block estimates) based on simple kriging.
The primary assumptions of continuity of the geologically homogenous zones are driven by the geological model, which is updated when new information arises. Any changes to the model are subject to peer and internal technical corporate review and external independent consultant review when deemed necessary. Historically, mining at South African deep-level gold mines has shown significant geological continuity, so that new mines were started based on limited surface borehole information. Customarily, geological models are primarily based on the definition of different sedimentary facies within each conglomerate horizon. These facies are extrapolated along palaeocurrent and grade trends into new, undeveloped areas taking into account inherent proximal to distal depositional relationships and any surface borehole data in those areas. Normally these facies are continuous, supported by extensive historical sample databases, and can be incorporated in the macro kriging of large blocks.
Ghana
For the Tarkwa open pit operation, estimation of probable reserves is based on a combination of an initial100- or200-meter grid of diamond drilling and in certain areasproved reserves are typically based on drilling a 12.5 meter to 25 meter grid of reverse circulation
drilling. drill holes. For the Damang open pit operation, estimation of probable reserves is based on a 2040 meter to 80 meter grid of combined reverse circulation and diamond drilling and in certain areas, reverse circulation drillingproved reserves on a five meter by eight meter grid up to a 20 meter grid, depending on an eight- meter by five-meter drill grid.orebody type. Advance grade control drilling is employed in certain areas to provide detailed estimation to greater depths than normal grade control drilling where information is required to confirm structural and grade trends.
Diamond drilling provides continuous (solid) core from diamond drill bits, using water and chemicals for lubrication. Consequently, diamond drilling provides greater resolution of geological parameters such as lithologies, alterations, mineralization, rock hardness and structures.
In surface drilling programs, reverse circulation drilling provides chip samples from percussion hammers powered by compressed air. The chips are transferred to surface up a central tube with the rods to eliminate contamination from the outer hole. Sampling is generally conducted at intervals relevant to the block model and mining dimensions. Reverse circulation drilling is generally quicker and less expensive than diamond drilling. However, there is a depth limitation to reverse circulation drilling and consequently all deep holes are conducted by diamond drilling.
Generally exploration programs will consist of a mix of reverse circulation and diamond drilling in order to provide the necessary geological resolution, as well as bulk analytical data for evaluation, geotechnical and geometallurgical purposes. Infill drilling programs are usually conducted using both diamond drilling and reverse circulation, depending on the resolution required. Grade control drilling programs use reverse circulation.
Australia
At the Australian operations, the estimation of reserves for both underground and open pit operations is based on exploration and sampling information gathered through appropriate techniques, primarily from diamond drilling, reverse circulation drilling,air-core and sonic drilling techniques. The locations of sample points are spaced close enough to deduce or confirm geological and grade continuity. Generally, drilling is undertaken on grids, which range between 1020 meters by 1025 meters for proved reserves and up to 40 meters by 4060 meters typically for probable reserves, although this may vary depending on the continuity of the ore body. Due to the variety and diversity of mineralization at the Australian operations, sample spacing may also vary depending on each particular ore type.
Peru
For the Cerro Corona operation, estimation is based on diamond drill and reverse circulation holes. The spacing of holes at Cerro Corona is generally around 50on a grid ranging from 40 meters to 60 meters for probable reserves with some areas approximating a 25 meter grid.grid where geology becomes more complex. The blast hole rock chips are used as grade control samples and are drilled on an average 5.5 meter by 4.8 meter grid.
Reserve Statement
As at December 31, 2014,2016, Gold Fields had aggregate attributable proved and probable reserves of approximately 48.1 million ounces of gold and 620454 million pounds of copper, as set forth in the following tables:
| Gold ore reserve statement as at December 31, 2014(1) | Gold ore reserve statement as at December 31, 2016(1) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Proved reserves | Probable reserves | Total reserves | Attributable gold production in fiscal 2014(2) | Proved reserves | Probable reserves | Total reserves | Attributable gold production in fiscal 2016(2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Tonnes | Head Grade | Gold | Tonnes | Head Grade | Gold | Tonnes | Head Grade | Gold | Tonnes | Head Grade | Gold | Tonnes | Head Grade | Gold | Tonnes | Head Grade | Gold | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| (million) | (g/t) | (M oz) | (million) | (g/t) | (M oz) | (million) | (g/t) | (M oz) | (M oz) | (million) | (g/t) | (M oz) | (million) | (g/t) | (M oz) | (million) | (g/t) | (M oz) | (M oz) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Underground (“UG”) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South Africa | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South Deep (total)(3) | 13.25 | 5.9 | 2.496 | 191.65 | 5.3 | 32.400 | 204.90 | 5.3 | 34.896 | 0.18 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South Deep(3)(4) | 13.78 | 5.6 | 2.479 | 184.85 | 5.3 | 31.593 | 198.63 | 5.3 | 34.072 | 0.29 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Australia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
St. Ives | 1.06 | 4.8 | 0.163 | 2.80 | 4.9 | 0.445 | 3.86 | 4.9 | 0.608 | 0.3 | 0.29 | 4.4 | 0.041 | 3.28 | 5.1 | 0.533 | 3.57 | 5.0 | 0.574 | 0.10 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Granny Smith | 0.67 | 7.1 | 0.154 | 3.73 | 5.8 | 0.698 | 4.41 | 6.0 | 0.852 | 0.3 | 1.38 | 5.4 | 0.239 | 8.46 | 5.3 | 1.435 | 9.84 | 5.3 | 1.674 | 0.28 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Darlot | — | — | — | 0.36 | 7.4 | 0.085 | 0.36 | 7.4 | 0.085 | 0.1 | — | — | — | 0.45 | 3.8 | 0.056 | 0.45 | 3.8 | 0.056 | 0.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Agnew/Lawlers | 0.26 | 8.9 | 0.074 | 3.30 | 7.4 | 0.786 | 3.56 | 7.5 | 0.860 | 0.3 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Agnew/Lawlers(5) | 0.14 | 5.4 | 0.024 | 2.74 | 5.5 | 0.482 | 2.88 | 5.5 | 0.506 | 0.23 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Underground | 15.25 | 5.9 | 2.887 | 201.84 | 5.3 | 34.414 | 217.09 | 5.3 | 37.301 | 1.1 | 15.59 | 5.6 | 2.783 | 199.78 | 5.3 | 34.098 | 215.38 | 5.3 | 36.882 | 0.97 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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South Deep | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ghana | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tarkwa | 4.51 | 0.7 | 0.106 | 53.97 | 0.4 | 0.694 | 58.49 | 0.4 | 0.800 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Damang | — | — | — | 3.48 | 0.8 | 0.092 | 3.48 | 0.8 | 0.092 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tarkwa(5) | 7.60 | 0.8 | 0.186 | 53.98 | 0.4 | 0.694 | 61.57 | 0.4 | 0.880 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Damang(5) | 2.73 | 0.7 | 0.066 | 2.73 | 0.7 | 0.066 | 2.73 | 0.7 | 0.066 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Australia | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
St. Ives | 4.50 | 1.0 | 0.147 | — | — | — | 4.50 | 1.0 | 0.147 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
St. Ives(5) | 3.32 | 1.0 | 0.107 | — | — | — | 3.32 | 1.0 | 0.107 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Granny Smith | 0.10 | 6.5 | 0.020 | — | — | — | 0.10 | 6.5 | 0.020 | — | 0.09 | 6.3 | 0.019 | — | — | — | 0.09 | 6.3 | 0.019 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Darlot | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Agnew/Lawlers | 0.06 | 2.6 | 0.005 | — | — | — | 0.06 | 2.6 | 0.005 | — | 0.09 | 3.0 | 0.009 | — | — | — | 0.09 | 3.0 | 0.009 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Cerro Corona | 3.82 | 0.8 | 0.101 | — | — | — | 3.82 | 0.8 | 0.101 | — | 3.81 | 0.8 | 0.100 | — | — | — | 3.81 | 0.8 | 0.100 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Tarkwa | 69.91 | 1.3 | 3.028 | 71.75 | 1.3 | 2.913 | 141.66 | 1.3 | 5.941 | 0.50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tarkwa(4) | 48.19 | 1.3 | 1.980 | 66.74 | 1.2 | 2.613 | 114.92 | 1.2 | 4.593 | 0.51 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Damang(4) | 1.56 | 1.5 | 0.078 | 18.09 | 1.6 | 0.942 | 19.64 | 1.6 | 1.019 | 0.16 | 5.08 | 1.5 | 0.238 | 20.76 | 1.8 | 1.203 | 25.85 | 1.7 | 1.441 | 0.13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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St. Ives(4) | 0.02 | 3.9 | 0.003 | 9.46 | 3.4 | 1.045 | 9.48 | 3.4 | 1.048 | 0.11 | 2.51 | 1.9 | 0.152 | 12.12 | 2.3 | 0.908 | 14.63 | 2.3 | 1.060 | 0.27 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gruyere Gold Project | 7.44 | 1.1 | 0.260 | 38.35 | 1.2 | 1.500 | 45.79 | 1.2 | 1.760 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Cerro Corona | 46.54 | 0.9 | 1.419 | 9.83 | 0.7 | 0.229 | 56.37 | 0.9 | 1.648 | 0.15 | 33.32 | 1.0 | 1.028 | 8.77 | 0.6 | 0.168 | 42.09 | 0.9 | 1.196 | 0.15 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total Surface | 131.02 | 1.2 | 4.907 | 166.58 | 1.1 | 5.915 | 297.60 | 1.1 | 10.822 | 0.92 | 114.17 | 1.1 | 4.145 | 200.71 | 1.1 | 7.085 | 314.88 | 1.1 | 11.230 | 1.06 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Grand Total | 146.27 | 1.7 | 7.794 | 368.42 | 3.4 | 40.329 | 514.69 | 2.9 | 48.122 | 2.03 | 129.76 | 1.7 | 6.928 | 400.50 | 3.2 | 41.184 | 530.26 | 2.8 | 48.112 | 2.03 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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South Deep(3) | 13.25 | 5.9 | 2.496 | 191.65 | 5.3 | 32.400 | 204.90 | 5.3 | 34.896 | 0.18 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South Deep | 13.78 | 5.6 | 2.479 | 184.85 | 5.3 | 31.593 | 198.63 | 5.3 | 34.072 | 0.29 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tarkwa | 74.43 | 1.3 | 3.134 | 125.72 | 0.9 | 3.608 | 200.15 | 1.0 | 6.742 | 0.50 | 55.78 | 1.2 | 2.166 | 120.71 | 0.9 | 3.307 | 176.50 | 1.0 | 5.473 | 0.51 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Damang | 1.56 | 1.5 | 0.078 | 21.57 | 1.5 | 1.034 | 23.13 | 1.5 | 1.111 | 0.16 | 5.08 | 1.5 | 0.238 | 23.49 | 1.7 | 1.268 | 28.58 | 1.6 | 1.506 | 0.13 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
St. Ives | 5.58 | 1.7 | 0.313 | 12.26 | 3.8 | 1.490 | 17.84 | 3.1 | 1.803 | 0.36 | 6.11 | 1.5 | 0.300 | 15.40 | 2.9 | 1.441 | 21.51 | 2.5 | 1.740 | 0.36 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Granny Smith | 0.77 | 7.0 | 0.174 | 3.73 | 5.8 | 0.698 | 4.50 | 6.0 | 0.872 | 0.32 | 1.48 | 5.4 | 0.258 | 8.46 | 5.3 | 1.435 | 9.93 | 5.3 | 1.693 | 0.28 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Darlot | — | — | — | 0.36 | 7.4 | 0.085 | 0.36 | 7.4 | 0.085 | 0.08 | — | — | — | 0.45 | 3.8 | 0.056 | 0.45 | 3.8 | 0.056 | 0.07 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Agnew/Lawlers(4) | 0.32 | 7.7 | 0.079 | 3.30 | 7.4 | 0.786 | 3.62 | 7.4 | 0.865 | 0.27 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Agnew/Lawlers | 0.23 | 4.4 | 0.033 | 2.74 | 5.5 | 0.482 | 2.97 | 5.4 | 0.515 | 0.23 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gruyere Gold Project | 7.43 | 1.1 | 0.260 | 38.35 | 1.2 | 1.500 | 45.79 | 1.2 | 1.760 | — | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cerro Corona | 50.36 | 0.9 | 1.520 | 9.83 | 0.7 | 0.229 | 60.19 | 0.9 | 1.749 | 0.15 | 37.13 | 0.9 | 1.129 | 8.77 | 0.6 | 0.168 | 45.90 | 0.9 | 1.296 | 0.15 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Grand Total | 146.27 | 1.7 | 7.794 | 368.42 | 3.4 | 40.329 | 514.69 | 2.9 | 48.122 | 2.03 | 129.76 | 1.7 | 6.928 | 400.50 | 3.2 | 41.184 | 530.26 | 2.8 | 48.112 | 2.03 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Notes:
(1) | (a) | Quoted as mill delivered metric tonnes and Run of Mine, or RoM, grades, inclusive of all mining dilutions and gold losses except mill recovery. Metallurgical recovery factors have not been applied to the reserve figures. The approximate metallurgical recovery factors are as follows: (i) South Deep 96.5%; (ii) Tarkwa |
| (b) |
| (c) | Dilution relates to planned and unplanned waste and/orlow-grade material being mined and delivered to the mill. Ranges are given for those operations that have multiple ore body styles and mining methodologies. The mine dilution factors are as follows: (i) South Deep |
| (d) | The mining recovery factor relates to the proportion or percentage of ore mined from the defined ore body at the gold price used for the declaration of reserves. This percentage will vary from mining area to mining area and reflects planned and scheduled reserves against total potentially available reserves (at the gold price used for the declaration of reserves), with all modifying factors, mining constraints and pillar discounts applied. The mining recovery factors are as follows: (i) Tarkwa 100%; (ii) Damang |
| (e) | Thecut-off grade may vary per shaft, open pit or underground mine, depending on the respective costs, depletion schedule, ore type and dilution. The following are the average or range of values applied in the planning process: (i) South Deep 3.8 to 4.2 g/t; (ii) Tarkwa |
| (f) | Totals may not sum due to rounding. Where this occurs it is not deemed significant. |
| (g) | An ounces-based Mine Call Factor based primarily on historic performance but also on realistic planned improvements where appropriate is applied to the reserves. The following Mine Call Factors have been applied: Damang |
| (2) | Actual |
| (3) |
| (4) | In line with other international operations, all South Deep reserves are classed as above infrastructure, as the reserves will be accessed by means of ongoing declines from current infrastructure. |
| (5) | Includes some gold produced from stockpile material, which cannot be separately measured. |
The following table sets forth the proved and probable copper reserves of the Cerro Corona mine as at December 31, 20142016 that are attributable to Gold Fields.
| Copper ore reserve statement as at December 31, 2014(1)(2) | ||||||||||||||||||||||||||||||||||||||||
| Proved reserves | Probable reserves | Total reserves | Attributable gold production in fiscal 2014 | |||||||||||||||||||||||||||||||||||||
| Tonnes | Grade Cu | Cu | Tonnes | Grade Cu | Cu | Tonnes | Grade Cu | Cu | ||||||||||||||||||||||||||||||||
| (million) | (%) | (million lbs) | (million) | (%) | (million lbs) | (million) | (%) | (million lbs) | (million lbs) | |||||||||||||||||||||||||||||||
Surface (Open Pit & Stockpiles) | ||||||||||||||||||||||||||||||||||||||||
Peru | ||||||||||||||||||||||||||||||||||||||||
Cerro Corona | 50.4 | 0.5 | 525 | 9.8 | 0.4 | 95 | 60.2 | 0.47 | 620 | 71.2 | ||||||||||||||||||||||||||||||
| Copper ore reserve statement as at December 31, 2016(1)(2) | ||||||||||||||||||||||||||||||||||||||||
| Proved reserves | Probable reserves | Total reserves | Attributable copper production in fiscal 2016(2) | |||||||||||||||||||||||||||||||||||||
| Tonnes | Grade Cu | Cu | Tonnes | Grade Cu | Cu | Tonnes | Grade Cu | Cu | ||||||||||||||||||||||||||||||||
| (million) | (g/t) | (M lb) | (million) | (g/t) | (M lb) | (million) | (g/t) | (M lb) | (M lb) | |||||||||||||||||||||||||||||||
Surface (Open Pit & Stockpiles) Peru | ||||||||||||||||||||||||||||||||||||||||
Cerro Corona | 37.1 | 0.5 | 374 | 8.8 | 0.4 | 80 | 45.9 | 0.45 | 454 | 66 | ||||||||||||||||||||||||||||||
Notes:
| (1) | Metallurgical recovery factors have not been applied to the reserve figures. The approximate metallurgical factor for copper at Cerro Corona is |
| (2) | For the copper reserves, the optimized pit is based on a gold price of |
Gold and copper price sensitivity
The amount of gold mineralization that Gold Fields can economically extract, and therefore can classify as reserves, is sensitive to fluctuations in the price of gold. The following table indicates Gold Fields’ attributable reserves at different gold prices that are 10% above and below the $1,300 per ounce gold price used to estimate Gold Fields’ attributable reserves, howeverbase case presented in the ‘gold reserve statement’ table above. The reserve sensitivities are, however, not based on detailed depletion schedules and should be considered on a relative and indicative basis only.
| $1,170/oz(1) | $1,300/oz(1) | $1,430/oz(1) | -10%(1) | Base(1) | +10%(1) | |||||||||||||||||||
| (Moz) | (Moz) | |||||||||||||||||||||||
South Deep(2) | 32.8 | 34.9 | 36.8 | 33.2 | 34.1 | 35.0 | ||||||||||||||||||
Tarkwa | 5.6 | 6.7 | 7.8 | 4.2 | 5.5 | 6.0 | ||||||||||||||||||
Damang | 1.0 | 1.1 | 1.2 | 1.2 | 1.5 | 1.8 | ||||||||||||||||||
St. Ives(3) | 1.4 | 1.8 | 2.1 | 1.4 | 1.7 | 2.0 | ||||||||||||||||||
Agnew/Lawlers(3) | 0.8 | 0.9 | 0.9 | 0.5 | 0.5 | 0.6 | ||||||||||||||||||
Granny Smith(3) | 0.8 | 0.9 | 0.9 | 1.6 | 1.7 | 1.7 | ||||||||||||||||||
Cerro Corona(4) | 1.7 | 1.7 | 1.7 | 1.3 | 1.3 | 1.3 | ||||||||||||||||||
Notes:
| (1) | Darlot is excluded from the sensitivities as a result of the current short life of mine, which is |
| (2) | The equivalent gold prices used for the sensitivities in South Africa are |
| (3) | The equivalent gold prices used for the sensitivities in Australia are A$ |
| (4) | Under the current tailings dam design at Cerro Corona, reserves would not respond to an upward movement of the gold price because of current capacity constraints at the tailings storage facility for the Cerro Corona mine. A decrease of 10% in gold price is insufficient to affect the level of gold reserves. |
The London afternoon fixing price for gold on April 7, 20153, 2017 was U.S.$1,2111,247 per ounce. Gold Fields’ attributable gold reserves decreasedincreased from 48.646.1 million ounces at December 31, 20132015 to 48.1 million ounces at December 31, 2014,2016, primarily due to mining depletion.the acquisition of Gruyere, growth in Australia (Granny Smith and St. Ives) and there-investment plan at Damang.
The London Metal Exchange, or LME, cash settlement price for copper on April 7, 20153, 2017 was U.S.$6,0415,783 per tonne.
Gold Fields’ methodology for determining its reserves is subject to change and is based upon estimates and assumptions made by management regarding a number of factors as noted above under “—Methodology”. Accordingly, the sensitivity analysis of Gold Fields’ reserves provided above should not be relied upon as indicative of what the estimate of Gold Fields’ reserves would actually be or have been at the gold or copper prices indicated, or at any other gold or copper price, nor should it be relied upon as a basis for estimating Gold Fields’ ore reserves based on the current gold or copper price or what Gold Fields’ reserves will be at any time in the future. See “Risk Factors—Gold Fields’ reserves are estimates based on a number of assumptions, which, if changed, may require Gold Fields to lower its estimated reserves.”reserves”.
Description of Mining Business
The discussion below provides a general overview of the mining business as it applies to Gold Fields.
Exploration
Exploration activities are focused on replacing production depletion and on growth in ore reserves to maintain operational flexibility and sustainability. The Group focuses on the extension of existing ore bodies and the
the discovery and delineation of new ore bodies both at existing sites and at undeveloped sites. Once a potential ore body has been discovered, exploration is extended and intensified in conjunction with comprehensive infill drilling, in order to enable clearer definition of the ore body and its technical and economic
characteristics so as to profile the potential portions to be mined. Geological, geochemical, geophysical, geostatistical, geotechnical and geo-metallurgical techniques are constantly refined to improve effectiveness and the economic viability of prospecting and mining activities.
Mining
Gold Fields currently mines only gold, with copper and silver asby-products. The mining process can be divided into two principal activities: (i) developing access to the ore body; and (ii) extracting the ore body once accessed. These two processes apply to both surface and underground mines.
Underground Mining
Underground Mining
Developing access to the ore body
For Gold Fields’ South African underground mine, primary access to the ore body is provided through vertical shaft systems, while access is through single or multiple decline haulages extended from surface portals at the Australian operations.
Horizontal and decline development at various intervals offof the shaft or main decline, known as levels, extend laterally and provide access to the ore horizon. Ore drives open up the ore body for mining.
Extracting the ore body
Once an ore body has been accessed and opened up for mining, production activities consisting of drilling, blasting, supporting and cleaning activities are carried out on a daily basis. All mines are fully mechanized.
At South Deep, the broken ore is loaded from the stope face into trucks using mechanical loaders and hauled along decline corridors to ore pass systems which connect the corridors to the cross cuts below. The ore is then transported by rail or conveyor and tipped into the shaft transfer system, andafter which it is hoisted to the surface. Mining methods employed includede-stress mining (to provide the appropriate geotechnical conditions for subsequent stoping), long hole open stoping (for reef targets greater than 15 meters in height) and drifting and benching (for reef targets less than 15 meters in height). The mining voids generated once the ore is removed are filled with treated tailings product termed backfill which providesprovide ground support for the mined out areas.
At the Australian underground operations, the broken ore is loaded straight from the stope face into trucks, using mechanical loaders, and hauled to the surface by underground dump trucks via the decline. Application of backfill to the mined out areas is based on local conditions and is not always required in shallow underground mining areas.
OpenPit-Mining
Opening up the ore body
Inopen-pit mining, access to the ore is achieved by stripping the overburden in benches of fixed height to expose the ore below. This is most typically achieved by drilling and blasting an area, loading the broken rock with excavators into dump trucks and hauling the rock and/or soil to dumps. The overburden material is placed on designated waste rock dumps.
Extracting the ore body
Extraction of the ore body in open pit mining involves the same activity as in stripping the overburden. Lines on the pit floor are established demarcating ore from waste material and the rock is then drilled and
blasted. Post blasting, the ore is loaded into dump trucks and hauled to the crusher at the metallurgical plant or stockpile, while the waste is hauled to waste rock dumps.
Rock Dump and Production Stockpile Mining
Gold Fields mines surface rock dumps and production stockpiles using mechanized earth-moving equipment.
Mine Planning and Management
Operational and planning management on the mines receives support from regional technical support functions as well as corporate management. The current philosophy is one oftop-down/bottom-up management, with the operational and commercial objectives at each mine defined by the personnel at the mine based on parameters, objectives and guidelines provided by Gold Fields’ corporate office. This is based on the premise that the people on the ground have the best understanding of the local business and what is realistically achievable.
Each operation identifies a preferred strategic option which, once approved by Gold Fields’ Executive Committee, or the Executive Committee, is used to inform how the detailed one-yearone year operational plan is configured, which is rolled out into a life of mine or LoM plan, prior to the commencement of each fiscal year. The plans are based on financial parameters determined by the Gold Fields Executive Committee, or the Executive Committee. See “Directors, Senior Management and Employees—Executive Committee”. The operational plan is presented to the Executive Committee, which takes it to the Board for approval before the commencement of each fiscal year. The planning process is anchored by a Group Planningplanning calendar, and is sequential and based upon geological models, evaluation models, resource models, metal prices, mine design, depletion schedules and, ultimately, financial analysis. Capital planning is formalized pursuant to Gold Fields’ capital spending planning process. Projects are categorized and reviewed in terms of total expenditure, return on investment, net present value and impact on AIC per ounce and all projects involving amounts exceeding R360 million (South Africa), A$40 million (Australia) and U.S.$40 million (Ghana/Peru) are submitted to the Board for approval. Material changes to the plans have to be referred back to the Executive Committee and the Board.
Capital Expenditure
On an IFRS basis (as included in the geographical and segment information included in Note 26 to the consolidated financial statements), Gold Fields spent U.S.$608.9649.9 million, U.S.$739.2634.1 million and U.S.$1,224.0608.9 million in capital expenditure during fiscal 2014, fiscal 20132016, 2015 and fiscal 2012,2014, respectively. The capitalmajor expenditure foritems in fiscal 20132016 were U.S.$77.9 million on the development and fiscal 2014 excludes thatequipping of the KDCSouth Deep mine, U.S.$39.6 million on development and Beatrix mines.infrastructure of the Waroonga and New Holland underground complexes at Agnew/Lawlers, U.S.$25.8 million on capital waste stripping at Damang, U.S.$16.4 million on the tailings storage facility at Cerro Corona, U.S.$32.3 million on development of the Wallaby underground mine at Granny Smith, U.S.$126.2 million on capital waste stripping at Tarkwa and U.S.$88.7 million on underground and open pit development at St. Ives. The major expenditure items in fiscal 2015 were U.S.$66.9 million on the development and equipping of the South Deep mine, U.S.$46.1 million on development and infrastructure of the Waroonga and New Holland underground complexes at Agnew/Lawlers, U.S.$45.4 million on new mining equipment at Tarkwa, U.S.$29.3 million on the tailings storage facility at Cerro Corona, U.S.$28.7 million on development of the Wallaby underground mine at Granny Smith and U.S.$18.5 million on HME componentization at Tarkwa. The major expenditure items in fiscal 2014 were U.S.$106.1 million on capital waste mining at Tarkwa, U.S.$91.9 million on the development and equipping of the South Deep mine, U.S.$55.6 million on the development and infrastructure of the Waroonga and New Holland underground complexes at Agnew/Lawlers, U.S.$29.4 million on the development of underground mines at St. Ives, U.S.$27.7 million on the tailings storage facility at Cerro Corona and U.S.$19.3 million on the tailings storage facility at Tarkwa. The major expenditure items in fiscal 2013 were U.S.$202.4 million on the development and equipping of the South Deep mine, U.S.$112.8 million on capital waste mining at Tarkwa, U.S.$54.7 million on the development of underground mines at St. Ives, U.S.$36.1 million on the development of the Waroonga underground complex at Agnew and U.S.$28.5 million on new mining equipment at Tarkwa. The major expenditure items in fiscal 2012 were U.S.$314.5 million on the development and equipping of the South Deep mine, U.S.$112.4 million on development at underground mines at St. Ives, U.S.$118.0 million on capital waste mining at Tarkwa, U.S.$12.7 million on the water treatment plant and U.S.$62.5 million on new mining equipment at Tarkwa, U.S.$2.6 million on new mining fleet at Damang and U.S.$31.7 million on the development of the Waroonga underground complex at Agnew. For more information regarding Gold Fields’ capital expenditure, see “Information on the Company—“—Gold Fields’ Mining Operations—South AfricanAfrica Operations—South Deep Mine—Capital Expenditure”, “Information on the Company—“—Gold Fields’ Mining Operations—West Africa Operations—
Tarkwa Mine—Capital Expenditure”, “Information on the Company—“—Gold Fields’ Mining Operations—West AfricanAfrica Operations—Damang Mine—Capital Expenditure”, “Information on the Company—“—Gold Fields’ Mining Operations—Australasia Operations—St. Ives—Capital Expenditure”, “Information on the Company—“—Gold Fields’ Mining Operations—Australasia Operations—Agnew/Lawlers—Capital Expenditure”, “Information on the Company—“—Gold Fields’ Mining Operations—Australasia Operations—Darlot—Capital Expenditure”, “Information on the Company—“—Gold Fields’ Mining Operations—Australasia Operations—Granny Smith—Capital Expenditure”, “Information
on the Company—“—Gold Fields’ Mining Operations—Americas Operations—Cerro Corona—Capital Expenditure”, “Operating and Financial Review and Prospects—Capital Expenditures” and “Operating and Financial Review and Prospects—Liquidity and Capital Resources”.
Processing
Gold Fields has eight active gold processing facilities (one in South Africa, two in Ghana, four in Australia and one in Peru). A typical processing plant circuit includes two phases:stages: comminution (crushing and grinding the ore) and treatment/electrowinning (gold recovery)then gold recovery (typically flotation, leaching, carbon adsorption, carbon stripping/EW and/or smelting).
Comminution
Comminution is the process of crushing and breaking up the ore to expose and liberate the gold and make it available for treatment. Conventionally, this process occurs in multi-stage crushing and milling circuits, which include the use of jaw and gyratory or cone crushers andfollowed by rod, tube, ball and semi-autogenous grinding, or SAG, and/or ball mills. MostFor the milling step most of Gold Fields’ milling circuitsprocessing plants utilize both SAG millingand ball mills where the ore itself and steel balls are used as the primary grinding media. Through the comminution process, ore is ground to apre-determined size before proceeding to the treatment phase.gold recovery stage.
TreatmentGold Recovery
In most of the Gold Fields’ metallurgicalprocessing plants, gold is extracted into a leach solution by leaching with cyanide in agitated slurry tanks. GoldThe gold is then extractedadsorbed onto activated carbon from the solution using either the carbon in leach, or CIL, process or the carbon in pulp, or CIP, process. The activated carbon is thenremoved from the tanks, eluted in pressurized columns and the gold then recovered by electrowinning. Certain
Most of the Gold Fields’ minesplants also utilize gravity-recovered-goldgravity recovery circuits that use a centrifugecentrifugal concentrator to separate therecover coarse free gold based on density differences atdifferences. This gravity gold recovery step is usually undertaken within the front endgrinding stage of the treatment circuitprocessing plant before the ore progresses to the CIL or CIP.
As athe final recovery step, the gold recovered fromby the carbon using the above processelectrowinning cells is smelted in a furnace to produce gold doré bars. These gold bars are then transported to a refinery whichthat is responsible for further refining.
At Cerro Corona, gold/copper concentrate is producedrecovered using a standard flotation process. The copper concentrate is then shipped to a third-party smelter for further processing. The Cerro Corona processing plant therefore does not have a CIL or CIP circuit.
Refining and Marketing
Refining and MarketingSouth Africa
South Africa
On October 16, 2013, Gold Fields Operations Limited, or GFO, and GFI Joint Venture Holdings Proprietary Limited, or GFIJVH, acting jointly in their capacities as participants in an unincorporated joint venture which owns and operates the South Deep mine, known as the South Deep Joint Venture, entered into a new refining agreement with Rand Refinery Proprietary Limited, or Rand Refinery. Rand Refinery is anon-listed private company in which Gold Fields holds a 2.8% interest, with the remaining interests held by other South African gold producers.
This new refining agreement superseded and replaced any and all previous refining agreements between the South Deep Joint Venture and Rand Refinery. Pursuant to this new refining agreement, Rand Refinery undertook, among other things, to (i) refine all unrefined gold produced by South Deep, (ii) on each delivery date of unrefined gold to Rand Refinery, notify Gold Fields’ treasury department in writing of the estimated gold and/or silver content of the unrefined gold so delivered, expressed in troy ounces and (iii) retain the refined gold and the refined silver for the South Deep Joint Venture pending written instructions from Gold Fields’ treasury department that the refined gold and/or refined silver have been sold and may be delivered to the buyer in accordance with the buyer’s instructions. Rand Refinery assumes responsibility for the unrefined gold upon arrival of the unrefined gold at the Rand Refinery premises in Johannesburg, South Africa. Rand Refinery invoices the South Deep Joint Venture with the refining charges, who then arranges for direct settlement to Rand
Refinery. The refining agreement will continue indefinitely until either party terminates it upon at least 12 months’ written notice.
Gold Fields’ treasury department sells all the refined gold produced by South Deep to authorized counterparties at a price benchmarked against the London afternoon fixing price.
Silver is accumulated and sold on a quarterly basis by Gold Fields treasury to either Rand Refinery, or to an authorized counterpart at a price benchmarked against the London Bullion Market Association, or LBMA, silver price.
Ghana
Up until January 12, 2015, all gold produced by Gold Fields at the Tarkwa and Damang mines in Ghana was refined by Rand Refinery.
With effect from January 12, 2015, gold produced at the Tarkwa and Damang mines is refined by MKS (Switzerland) S.A., or MKS, pursuant to refining agreements entered into by Gold Fields Ghana (in respect of the Tarkwa mine) and Abosso (in respect of the Damang mine) with MKS. Under these agreements, MKS collects the gold from either the Tarkwa or Damang mine and transports it either to its Switzerland refinery or to its Indian refinery, or the Designated Refinery, where the gold is then refined. The MKS refinery in India will be the default Designated Refinery unless either party provides the other party with notice to the effect that a shipment of gold must be transported to MKS’s refinery in Switzerland, provided that MKS shall only be entitled to provide Gold Fields Ghana (Tarkwa operation) and Abosso (Damang operation) with such notice if (i) the arrival date of the gold at the refinery will fall on a day other than a business day in India or during a period of weak physical demand for gold in India; or (ii) the Indian import regulations for the gold have materially and adversely changed.
Once the gold has been refined, Gold Fields Ghanathe Tarkwa and AbossoDamang operations shall be entitled to (i) sell the refined gold through Gold Fields’ treasury department, acting as agent for and on their behalf; or (ii) require MKS to purchase the refined gold; or (iii) request a prepayment in respect of the refined gold. All sales are benchmarked against the afternoon LBMALondon Bullion Market Association Gold Price. ThePrice, or the London gold fix, or the London Gold Fix pricing mechanism has been replaced by a new electronic LBMA price-discovery process from March 20, 2015. The price continues to be set twice daily, at 10:30 and 15:00 London time. The new LBMA Gold Price is operated and administered by an independent third-party provider, ICE Benchmark Administration, or the IBA, who were chosen following consultation with market participants. IBA provides the price platform, methodology as well as the overall administration and governance for the LBMA Gold Price. The IBA’s platform provides an electronic, auction-based, tradeable, auditable and fully IOSCO-compliant solution for the London bullion market. MKS assumes responsibility for the gold upon collection at either the Tarkwa or Damang mine.
Silver is accumulated and sold on a quarterly basis to MKS, at the LBMA silver price on the date of sale.
The MKS refining agreements expire on January 12, 2018, provided that after January 2017, either party may terminate an agreement by giving the other party no less than three months’ prior written notice of such termination.
Australia
In Australia, all gold produced by St. Ives, Agnew/Lawlers, Darlot and Granny Smith, each an Australian operating company, is refined by the Western Australian Mint. The Western Australian Mint applies competitive charges for the collection, transport and refining services. The Western Australian Mint takes responsibility for the unrefined gold at collection from each of the operations where they engage asub-contractor, Brinks Australia. Brinks delivers the unrefined gold to the Western Australian Mint in Perth, Australia, where it is refined and the refined ounces of gold and silver are credited to the relevant metal accounts held by each Australian Operating Company with the Western Australian Mint. The arrangement with the Western Australian Mint continues indefinitely until terminated by either party upon 90 days’ written notice.
Gold Fields’ treasury department in the corporate office in Johannesburg, South Africa sells all the refined gold produced by the Australian Operating Companies. On collection of the unrefined gold from an Australian Operating Company’s mine site, the relevant Australian Operating Company will notify Gold Fields’ treasury department of the estimated refined gold content, expressed in troy ounces, available for sale. After such confirmation, Gold Fields’ treasury department will sell the refined gold to authorized counterparties at a price
benchmarked against the London afternoon fixing price. All silver is sold to the Western Australian Mint at market rates.the LBMA silver price on the last business day of each month.
Peru
Gold Fields La Cima S.A., or La Cima, has three contracts for the sale of approximately 85%90% of concentrate from the Cerro Corona mine, one with a Japanese refiner, one with a South KoreanGerman refiner and one with a German refiner.global commodities trading entity. Under these contracts, La Cima is to sell approximately 29%30% of the concentrate to each company and to use reasonable efforts to spread the deliveries evenly throughout the year. Risk passes when the concentrate is loaded in the port of Salaverry, Peru for international (cost, insurance and freight) sales or an alternative port chosen by La Cima.at a Salaverry warehouse for local sales. Pricing for copper under each of the contracts is based on the daily LME settlement price for copper. Pricing for gold under each of the contracts is based on the daily average of the London Bullion Market Association initial and final guarantees, which represents an average of the LondonLBMA morning and afternoon fixing price. All production in excess of the amounts sold under long termlong-term contracts is sold on the spot market.
Gold Fields’ Mining Operations
Gold Fields has eight producing mines located in South Africa, Ghana, Australia and Peru. Gold Fields acquired the Yilgarn South Assets from Barrick on October 1, 2013. Of the three operating mines acquired from Barrick, two (Granny Smith and Darlot) remain discrete operating entities, while the third (Lawlers) has now been incorporated with Agnew to form an integrated Agnew/Lawlers mine. See “Information on the Company—Gold Fields’ Mining Operations—“—Australasia Operations”. Gold Fields conducts underground and surface mining operations at St. Ives, underground-only operations at Agnew/Lawlers, Granny Smith, Darlot and South Deep and surface-only open pit mining at Damang, Tarkwa and Cerro Corona. Some processing of surface rock dump material occurs at Damang, andwhile some tailings material is processed at South Deep. Material processed from production stockpiles occurs at Tarkwa, Damang and St. Ives.
Total Operations
The following table details operating and production results (including gold equivalents) for each of fiscal 2012, 20132016, 2015 and 2014, excluding the Sibanye Gold assets.2014.
| Fiscal 2012 | Fiscal 2013(1) | Fiscal 2014(1) | ||||||||||
Production | ||||||||||||
Tonnes (‘000) | 43,926 | 38,255 | 33,513 | |||||||||
Recovered grade (g/t) | 1.5 | 1.7 | 2.1 | |||||||||
Gold produced (‘000 oz)(2) | 2,124 | 2,104 | 2,294 | |||||||||
Results of operations ($ million) | ||||||||||||
Revenues | 3,530.6 | 2,906.3 | 2,868.8 | |||||||||
Operating costs (excluding amortization and depreciation)(3) | 1,673.9 | 1,678.7 | 1,684.9 | |||||||||
All-in sustaining cost net of by-product revenue per ounce of gold sold ($)(3) | 1,310 | 1,202 | 1,053 | |||||||||
All-in cost net of by-product revenue per ounce of gold sold ($)(3) | 1,537 | 1,312 | 1,087 | |||||||||
All-in sustaining cost gross of by-product revenue per equivalent ounce of gold sold ($)(3) | 1,331 | 1,206 | 1,053 | |||||||||
All-in cost gross of by-product revenue per equivalent ounce of gold sold ($)(3) | 1,539 | 1,307 | 1,086 | |||||||||
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes (‘000) | 34,222 | 33,014 | 33,513 | |||||||||
Recovered grade (g/t) | 2.0 | 2.1 | 2.1 | |||||||||
Gold produced (‘000 eq oz)(1) | 2,219 | 2,236 | 2,294 | |||||||||
Results of operations | ||||||||||||
Revenues U.S.$ millions | 2,749.5 | 2,545.4 | 2,868.8 | |||||||||
Operating costs (including gold inventory change but excluding amortization and depreciation) U.S.$ millions(2) | 1,387.5 | 1,456.2 | 1,677.7 | |||||||||
All-in sustaining cost net of by-product revenue per ounce of gold sold (U.S.$)(2) | 980 | 1,007 | 1,053 | |||||||||
All-in cost net ofby-product revenue per ounce of gold sold (U.S.$)(2) | 1,006 | 1,026 | 1,087 | |||||||||
All-in sustaining cost gross ofby-product revenue per equivalent ounce of gold sold (U.S.$)(2) | 987 | 1,000 | 1,053 | |||||||||
All-in cost gross ofby-product revenue per equivalent ounce of gold sold (U.S.$)(2) | 1,012 | 1,018 | 1,086 | |||||||||
Notes:
| (1) |
| In fiscal |
| For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation |
Underground Operations
The following table details the operating and production results for Gold Fields’ underground operations for fiscal 2012, 20132016, 2015 and 2014, excluding the Sibanye Gold assets2014.
| Fiscal 2012 | Fiscal 2013(1) | Fiscal 2014(1) | Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | |||||||||||||||||||
Production | ||||||||||||||||||||||||
Tonnes (‘000) | 4,335 | 5,419 | 6,575 | 5,418 | 5,622 | 6,575 | ||||||||||||||||||
Recovered grade (g/t) | 4.9 | 4.6 | 5.3 | 5.5 | 5.5 | 5.3 | ||||||||||||||||||
Gold produced (‘000 oz) | 689 | 805 | 1,119 | 963 | 989 | 1,119 | ||||||||||||||||||
Notes:Note:
| (1) |
| In fiscal |
Tonnes milled from the underground operations increaseddecreased from 5.6 million tonnes in fiscal 2015 to 5.4 million tonnes in fiscal 2013 to 6.6 million tonnes in fiscal 2014.2016. The amount of gold produced from underground operations increaseddecreased from 0.8050.989 million ounces in fiscal 20132015 to 1.1190.963 million ounces in fiscal 2014.2016. The increasesdecreases in tonnes milled and in gold produced were primarily a result of the inclusionclosure of the YilgarnCave Rocks mine in fiscal 2015 and the Athena mine in fiscal 2016, both at St. Ives in Australia. This was partially offset by increased tonnes milled and gold produced at the South Assets for a full yearDeep mine in 2014 as opposed to one quarter only in 2013.South Africa.
Surface Operations
The following table details the operating and production results (including gold equivalents) for Gold Fields’ surface operations for fiscal 2012, 20132016, 2015 and 2014, excluding the Sibanye Gold assets.2014.
| Fiscal 2012 | Fiscal 2013(1) | Fiscal 2014(1) | Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | |||||||||||||||||||
Production | ||||||||||||||||||||||||
Tonnes (‘000) | 39,591 | 32,836 | 26,938 | 28,804 | 27,392 | 26,938 | ||||||||||||||||||
Recovered grade (g/t) | 1.1 | 1.2 | 1.3 | 1.4 | 1.4 | 1.3 | ||||||||||||||||||
Gold produced (‘000 oz) | 1,435 | 1,292 | 1,175 | 1,256 | 1,246 | 1,175 | ||||||||||||||||||
Notes:Note:
| (1) |
| In fiscal |
Tonnes milled and treated from the surface operations decreasedincreased from 32.827.4 million tonnes in fiscal 20132015 to 26.928.8 million tonnes in fiscal 2014,2016, mainly due to cessationtheramp-up of crushingthe Invincible pit at St. Ives, combined with mining at the heap leach operationsA5 and Neptune pits as part of a strategic shift to a primarily open pit operation at Tarkwa and St. Ives.
South African Operations
Gold Fields’ South African operations consistregion consists of the South Deep mine. South Deep remains a strategic imperative for Gold Fields, and is projected to deliver long-term, cash-generative production to the Group once it hits full production. The successful delivery of South Deep, which accounts for 72% of the Group’s Mineral Reserves, is critical for Gold Fields’ long-term, sustainable growth.
South Deep Mine
Introduction
South Deep is situated 45 kilometers south-west of Johannesburg, in the Gauteng Province of South Africa. South Deep is a capital project and remains a developing mine where the majority of the permanent infrastructure to support expanded production has now been installed. South Deep uses trackless mechanized mining methods comprising an array of techniques and mobile machines to achieve the most efficient extraction system for any given area in the ore body.
South Deep is engaged in underground mining and its primary infrastructure comprises one metallurgical plant and two operating shaft systems, the older South Shaft complex and the newer Twin Shaft complex. The South Shaft complex includes a main shaft and threesub-vertical (SV) shafts, two of which are operational. The Twin Shaft complex consists of a single-barrel main shaft for hoisting personnel, rock materials and an adjacent bratticed ventilation shaft, used for both drawingextracting used air and hoisting rock. The South Shaft complex operates to a depth of 2,650 meters below surface and the Twin Shaft complex operates to a depth of 2,995 meters below surface. South Deep’s workings are at depth and therefore require significant cooling infrastructure. The South Deep operation has access to the national electricity grid, water, and road infrastructure and is located near regional urban centers where it can obtain needed supplies and services.
History
The current South Deep operations derive from the Barrick Gold—Barrick—Western Areas Joint Venture, which Gold Fields acquired in a series of transactions in the second half of fiscal 2007. The Barrick Gold—Barrick—Western Areas Joint Venture was named the South Deep Joint Venture.
Geology
South Deep is a deep-level underground gold mine located along the northern and western margins of the Witwatersrand Basin, which have been the primary contributors to South Africa’s production of a significant portion of the world’s recorded gold output since 1886.
The Witwatersrand Basin comprises a 6,000 meter vertical thickness of sedimentary rocks, extending laterally for some 350 kilometers northeast to southwest by some 1,200 kilometers northwest to southeast, generally dipping at shallow angles toward the center of the basin. The basin outcrops at its northern extent near Johannesburg, but to the west, south and east it is overlaid by up to 4,000 meters of volcanic and sedimentary rocks. The Witwatersrand Basin is Archaean in age, meaning the sedimentary rocks are of the order of 2.8 billion years old.
Gold mineralization occurs within laterally extensive quartz pebble conglomerate horizons called reefs, which are developed above unconformable surfaces near the basin margin. As a result of faulting and primary controls on mineralization processes, the goldfields are not continuous and are characterized by the presence or dominance of different reef units. The reefs are generally less than two meters in thickness and are widely considered to represent laterally extensive braided fluvial deposits or unconfined flow deposits, which formed along the flanks of alluvial fan systems around the edge of an inland sea. Dykes and sills of diabase or dolerite composition are developed within the Witwatersrand Basin and are associated with several intrusive and extrusive events.
Gold generally occurs in native form, often associated with pyrite, carbon and uranium. Pyrite and gold within the reefs display a variety of forms, some obviously indicative of detrital transport within the depositional system and others suggesting crystallization within the reef itself.
The most fundamental controls of gold distribution are the primary sedimentary features such as facies variation and channel directions. Consequently, the modeling of sedimentary features within the reefs and the correlation of payable grades within certain facies is key to in situ reserve estimation as well as effective reef definition drilling programs, operational mine planning and grade control.
Gold mineralization at South Deep is hosted by conglomerates of the Upper Elsburg reefs and the Ventersdorp Contact Reef, or VCR. The Upper Elsburg reefssub-crop against the VCR in a northeasterly trend, which defines their western limits. To the east of thesub-crop, the Upper Elsburg reefs are preserved in an easterly diverging sedimentary wedge attaining a total thickness of approximately 120 meters, which is subdivided into the lower “Individuals” and the overlying “Massives.” To the west of thesub-crop, only the VCR is preserved.
The stratigraphic units at South Deep generally dip southward at approximately 12 to 15 degrees and the gold-bearing reefs occur at depths of 1,500 meters to 3,500 meters below surface.
Production at South Deep is currently derived from the Upper Elsburg Reefs. In general terms, the Upper Elsburg succession represents an easterly prograding sedimentary sequence, with the Massives containing higher gold grades and showing more proximal sedimentological attributes in the eastern sector of the mining authorization than the underlying Individuals. The sedimentary parameters of the Upper Elsburg reef units influence the overall tenor of the reefs with gold grade displaying a gradual, general decrease toward the East,east, away from the sub crop.
The North-South trending “normal” West Rand and Panvlakte faults, which converge on the Western side of the lease area, are the most significant large-scale faults in the area and form the western limit to gold mineralization for the mine.
Mining
South Deep is a mine that has been builtdesigned to extractaccess and exploit one of the largest undeveloped ore bodies in the world. Its 38 million ounces of mineral reserves areThe 37 Moz reserve is understood to a high levelappropriate levels of confidence and keyneeded to support a multi-decade life of mine plan. Key required primary infrastructure has now been installed to deliverand expanded as the mine asis still in productionbuild-up. At a steady state, the mine will be a low cost, long life mechanized mining operation. Due to its deep leveldepth and fully mechanized bulk mining nature, South Deep has no real benchmark operationoperating proxy in the gold mining industry, making benchmarking difficult and the current focus therefore remains on establishing a platform to ensure traction is maintained on driving productivity and leveraging unit costs on an ongoing basis.
South Deep entered a critical stage of its evolution at the basicsbeginning of fiscal 2015 when Gold Fields made the decision to take a step back and fix the operating base at the mine before determining the new long-term steady state profile. As part of this process, Gold Fields removed the previous production and cost targets to drive productivityafford the new South Deep management team the time to get the basics right and leverage unit costs. In addition,determine the way forward. However, in the absence of long-term production targets, Gold Fields stated that it was its goal to get the mine to cash breakeven by the end of fiscal 2016, a wholesale strategic reviewgoal that Gold Fields is pleased to have achieved. For fiscal 2016, South Deep generated net cash flow of U.S.$12 million compared with cash outflows of U.S.$80 million in fiscal 2015. Even after stripping out the benefit of the operation is being undertaken withrand hedge, the objective of positioning and rebasingmine achieved cash breakeven for the year.
In February 2017, South Deep as a core franchise asset, that aimsdelivered the Rebase Plan to market. This plan incorporates all recent improvements in the first instance to achieve self-funding (i.e. breaking even) as soon as possible and then to deliver consistent FCF Margin going forward.
South Deep was hindered in May 2014 by a four-month suspension of production due to the introduction of an extensive ground support remediation program. The remediation program took most of the legacy haulages and arterial routes on 95 level and above, from where a significant proportion of current production is sourced, out of service with a commensurate impact on production. The full implication of the largely completed ground support program on the fiscal 2015 production plan is still being assessed.
The review by an appointed independentmine design, geotechnical review board of South Deep’s current mining layout and methodology,parameters as well as the geotechnicalinfrastructure required to support regime, commencedthe production plan and was approved by the Board in February 2017. The Rebase Plan sets the mine up to reach steady state production of approximately 500,000 oz by fiscal 2022 at an AIC of below U.S.$900 per ounce in fiscal 2014. 2017 terms.
The needRebase Plan required a diagnostic of the full value chain, from design to skills training, conducted by management and external consultants. This review highlighted opportunities for improvements. Consequently, South Deep’s own technical abilities were strengthened, along with input from various technical experts, as part of developing a fundamental changehigh confidence level mine plan. The actions required in the current regional pillar configurationRebase Plan are aimed at laying foundations for long term success. The mine design together with infrastructure design was revised and refined for increased efficiency.
These improvements lay the foundation for long term sustainable gold production, supported by a continuous business improvement strategy based on the Sandcone Model of 240m x 60mimprovement driving quality, dependability, throughput, flexibility and ultimately value, in this order. The process resulted in 68 business improvement projects being identified to create a long-life, sustainable mechanized mine in fiscal 2016. To date, 29 projects have been completed, with 27 expected to be closed out in fiscal 2017 and the remaining 12 expected to be completed in fiscal 2018.
South Deep has been recognized, which will require reduced pillar spacing to strengthen the geotechnical regime and will result in more mining corridors as mining moves deeper.
Importantly, this currently remainsfaced a work in progress and although a 180m x 60m configuration is preferrednumber of challenges over the 150m x 50m or 120m x 40m layouts, geotechnical modelingyears, which can best be summarized in four broad categories: People and final independent peer reviewskills; Fleet and maintenance; Underground working conditions; and Mining method. While Gold Fields has made good progress on all categories over the past two years, continued improvement is scheduledanticipated during theramp-up to steady state:
| • | People and skills: The first priority was to establish an experienced management team with extensive exposure to mechanized and deep level mining. This objective was successfully achieved with most of the new management team now in place sincemid-fiscal 2015. A further 168 critical skill positions requiring experienced and skilled staff were identified at the start of fiscal 2015. Most of these positions were filled by the end of fiscal 2016 with only a limited number of appointments still outstanding. Furthermore, the development of mechanized mining skills was highlighted as a specific and critical requirement for the future success of the mine. As such, a mechanized mining skills development program focusing on supervisors, artisans and operators was implemented and relevant South Deep employees have been receiving ongoing training; |
| • | Fleet and maintenance: South Deep instituted a number of key strategies to upgrade the condition of its mechanized equipment fleet and effectiveness of its maintenance practices. As part of the fleet renewal strategy, 58 category 1 units have been commissioned since early fiscal 2015. The total category 1 fleet currently stands at 111. An expansive and fully equipped underground workshop spanning a total footprint of 200 x 200m was commissioned on 93 level to provide the working conditions necessary for maintenance personnel to perform their tasks more effectively. Maintenance skills development programs were introduced to upskill our engineering personnel. In addition, outsourced OEM maintenance contracts were concluded with two key suppliers to effect immediate improvements, which will be gradually handed over to South Deep teams; |
| • | Underground working conditions: The new management team identified poor underground working conditions as a key impediment to turning South Deep around. A number of business improvement projects were initiated to remediate this deficiency and focused on various elements of the underground infrastructure, including roadways, water management, backfill and ventilation; and |
| • | Mining method: As a deep level bulk mine, geotechnical considerations and mine design are critical elements in implementing the successful extraction of the ore body. To this end, several improvements in the overall design and mining layouts have been implemented during the past two years. |
| • | Regional Pillars: The overall regional support design was improved by reducing the corridor span between regional pillars from 240m to 180m and by increasing the dimensions of crush pillars in the destress cuts from 10 x 6m to 8 x 20m. Regional pillar width has remained at 60m. The design improvements resulted in lower excavation convergence rates and an increase in overall rockmass stability; and |
| • | High Profile Destress: Over the past two years, South Deep converted from a low profile (2.2m) destress mining method to a high profile (5.5m) layout. This has eliminated an inefficient and cumbersome multi-step mining process, which included footwall or hangwall ripping to open excavations for longhole stoping equipment, and enabled mechanized roofbolt installation. In a significant step for the mine, low profile was completely phased out during fiscal 2016 and all destress development will now entail the high profile method. This method was also further improved with a new pillar layout, increasing ground stability and operational efficiency due to less backfill being required. |
The initiatives that were implemented over the past two years have started to yield results during fiscal 2016, which was a milestone year for the first half of fiscal 2015 to validate the work being completed by external consultants. Further optimization and the tailoring of selected pillar layouts to adapt to local conditions across the mine, will still be necessary. Final approval and sign-offSouth Deep.
In terms of the new pillar configuration andRebase Plan, it is anticipated that South Deep will reach steady state production in fiscal 2022. During this ramp-up period, tonnes mined are expected to ramp up at a fairly steady rate from the impact onaverage 135,000 tonnes per month run rate in 2016 to 230,000t/m when at steady state.A big driver of the life ofvolume growth to steady state is the increased contribution from longhole stoping.
The productionramp-up is planned from the current mine plan design parameters can realistically only be expected in the first halfNorth of fiscal 2015.
In addition, two alternativeWrench mining methods are under review. The first methodarea, or NoW, which is the 4.5m x 4.5m destress method and the second is the inclined mining slot method. Both of these methods, if successful, could significantly de-risk the South Deep build-up plan and future production profiles, and could also have a meaningful positive impact on mining costs. It is too early to assess whether either of these methods could be commercially implemented.
The following projects are planned at South Deep for fiscal 2015:
Development on 100 and 105 levels. This development in an easterly direction will provide access to the ore body, additional ore handling facilities plus increase the number of airways and cooling infrastructurelower extension to the current mine;
Constructionmining operations and contains reserves of 10.6 Moz. The NoW expands into six corridors with independent operating and ventilation systems. The NoW will build up in production synchronously with current mine area declining in output. The NoW is designed as a 100 2Wmassive bulk air cooler;mine, while the current mine area employed a more selective method. Current primary production is provided from two discrete mining areas, Current Mine and NoW, and are exploited by means of distinctly different mining methods. The current mine area is characterized by conventional mining that was employed historically and before ownership by Gold Fields, which served as destressing for mechanized massive mining, including long hole stoping above and below these horizons in the remaining Elsburg reefs. Mining activities are largely scattered over the whole of current mine. The NoW area is largely unmined and as such will benefit from utilization of the optimized mine design and extraction sequencing which can be effectively applied to a “blank canvass” with no constraints from historical mining. This massive mining method (long hole stoping) is aimed at
Pilot trialsthe efficient extraction of the thick ore body with minimum dilution and ore loss. Productivity and efficiency of extraction is expected to improve for the 4.5m x 4.5m destress method.future of the mine. Continuous infrastructure expansion is required to support the production build up from the NoW.
Importantly, most of the operating expenditure is now in the cost base of the mine, with the majority of the key skills and fleet now in place. As the mine ramps up to steady state, we expect to see the operational gearing expected from a fixed cost mine like South Deep. As a result, we expect steady state production AIC of below U.S.$900 per ounce (in 2017 terms).
Detailed below are the operating and production results at South Deep for fiscal 2012, 20132016, 2015 and 2014:
| Fiscal 2012 | Fiscal 2013 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes (’000) | 2,106 | 2,347 | 1,323 | |||||||||
Recovered grade (g/t) | 4.0 | 4.0 | 4.7 | |||||||||
Gold produced (’000 oz) | 270 | 302 | 201 | |||||||||
Results of operations ($ million) | ||||||||||||
Revenues | 450.8 | 425.7 | 254.8 | |||||||||
Operating costs (excluding amortization and depreciation)(1) | 302.9 | 321.8 | 245.5 | |||||||||
All-in sustaining cost net of by-product revenues per ounce of gold sold ($)(1) | 732 | 1,541 | 1,548 | |||||||||
All-in costs net of by-product revenues per ounce of gold sold ($)(1) | 2,308 | 1,763 | 1,732 | |||||||||
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes (‘000) | 2,248 | 1,496 | 1,323 | |||||||||
Recovered grade (g/t) | 4.0 | 4.1 | 4.7 | |||||||||
Gold produced (‘000 oz) | 290 | 198 | 201 | |||||||||
Results of operations | ||||||||||||
Revenues (U.S.$ million) | 358.2 | 232.3 | 254.8 | |||||||||
Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(1) | 271.6 | 236.6 | 245.5 | |||||||||
All-in sustaining cost net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 1,207 | 1,490 | 1,548 | |||||||||
All-in costs net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 1,234 | 1,559 | 1,732 | |||||||||
Notes:Note:
| (1) | For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation |
Total tonnes milled and gold production decreasedincreased by 47% from 2.31.5 million tonnes and 0.302in fiscal 2015 to 2.2 million tonnes in fiscal 2016. Gold produced increased from 0.198 million ounces in fiscal 20132015 to 1.3 million tonnes and 0.2010.290 million ounces in fiscal 2014, respectively, primarily2016. Due to the 40% improvement in tonnes mined, which resulted in higher consumable spend and higher utility consumption as well as improved bonuses, operating costs including gold inventory change but excluding amortization and depreciation, or “net operating costs” increased by 15% from U.S.$236.6 million in fiscal 2015 to U.S.$271.6 million in fiscal 2016 in U.S. dollar terms. The increased costs were also due to negotiated annual salary hikes as well as higher staff numbers following the reasons discussed above.employment of an additional 164 mechanized mining professionals during fiscal 2015. A decreased AIC of U.S.$1,234 per ounce in fiscal 2016, compared with AIC of U.S.$1,559 per ounce in fiscal 2015, was due to higher gold production, partially offset by higher operating costs and capital expenditure.
South Deep’s power usage has increased over the years as it builds up production and prepares for the development of long-term infrastructure. Eskom has suppliedAll required power related infrastructure is installed to support the additional power requirements for the build upproduction ramp up. South Deep sourced its electricity supply from Eskom. See “Risk Factors—Power cost increases may adversely affect Gold Fields’ business, operating results and has installed additional transformers and new transmission lines. Eskom applied to the National Energy Regulator of South Africa, or NERSA, for tariff increases and for 2015 NERSA granted Eskom an average tariff increase of 12.69% effective April 1, 2015 being 8% plus 4.69% due to the clawing back by Eskom of prudent costs from the “Regulatory Clearing Account” for the three year period from April 2010 to March 2013. It has also been reported that Eskom intends to request permission to raise the power tariff by 25%, instead of 12.69%,
in order to make up a cashflow shortfall. NERSA has given permission for Eskom to raise rates further but it is unclear what the actual rate increase will be. In addition, the South African Minister of Finance has announced a two per cent per kilowatt hour environmental levy on electricity.financial condition”. In order to mitigate the cost impact of these increases, numerous power saving projects were initiated to reduce power consumption. South Deep will be developing a long-term energy security plan (which will include an assessment of renewable energy options) to manage supply risks currently faced by Eskom. In the short term, a load curtailment arrangement has been negotiated with Eskom to minimize production disruptions and ensure the continued safe operation of the mine. See “Risk Factors—Power cost increases may adversely affect Gold Fields’ business, operating results and financial condition”.
Given
Assuming there are no material changes to the material influence that the broad spectrum of current studies and initiatives can potentially have on thereserves estimates at South Deep, plan, a “holding pattern” has been adopted with regard to the mineral reserve declaration for December 2014, in that the December 2013 model will be depleted by the fiscal 2014 mining production. The depleted fiscal 2013 model will by nature reflect last year’s assumptions on modifying factors, production rates and cost modeling, but until new metrics and rates are validated this is deemed to be prudent. This approach is meant to ensure that this year’s mineral reserve declaration does not invoke untested and unconfirmed revisions to various technical inputsor to the life of mine plan, which could prove inaccurate or potentially misleading. See “—Reserves of Gold Fields as of December 31, 2014—Methodology”.
Assuming that Gold Fields does not materially increase or decrease reserves estimates at South Deep and that there are no significant changes to the life of mine plan and based on the method described above, South Deep’s December 31, 20142016 proven and probable managed reserves of 38.037.3 million ounces (approximately 34.9(34.1 million ounces of which are attributable to Gold Fields, with the rest attributable tonon-controlling shareholders) will be sufficient to maintain production through to approximately fiscal 2087.2095 (79 years). However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors which can affect reserve estimates and the mine plan, which could thus materially change the life of mine.
South Deep is engaged in underground mining and is thus subject to all of the underground mining risks discussed in “Risk Factors”. The primary safety issues facing South Deep underground operations include seismicity (including seismically induced falls of ground), falls of ground due to gravity and the risk of pedestrians being struck by mobile equipment. To prevent falls of ground accidents, South Deep has implemented a comprehensive health and safety strategy. For more information about this strategy as well as details about workplace injuries at South Deep, see “Directors, Senior Management and Employees—Employees—HealthSafety and Safety—Safety”Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”.
There were no strikes and/or labor stoppages at South Deep in fiscal 2016 and none to date since December 31, 2016.
Processing
All processing at South Deep is carried out at a single gold extraction plant. The following table sets forth the year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and metallurgical recovery factors during fiscal 20142016 for the plant.
Processing Techniques
Plant | Year commissioned(1) | Comminution phase | Treatment phase | Capacity(1) | Average milled for fiscal 2014 | Approximate recovery factor for fiscal 2014(2) | Year commissioned(1) | Comminution | Treatment phase | Capacity(1) | Average milled for fiscal 2016 | Approximate recovery factor for fiscal 2016 | ||||||||||||||||||||||||||||
| (tonnes/month) | (tonnes/month) | |||||||||||||||||||||||||||||||||||||||
Twin Shaft Plant | 2002 | Primary SAG and Secondary Ball milling | Leach or CIP, with elution and electrowinning | 330,000 | 110,250 | 97 | % | 2002 | Primary SAG and Secondary Ball milling | Leach CIP, with elution and electrowinning | 330,000 | 187,000 | 96 | % | ||||||||||||||||||||||||||
Note:
| (1) | Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in a level of throughput over and above the designed nameplate capacity. |
Capital Expenditure
On an IFRS basis (as included in the geographical and segment information included in Note 26 to the consolidated financial statements), Gold Fields spent U.S.$91.977.9 million on capital expenditures at the South Deep operation in fiscal 2014,2016, primarily on development, infrastructurefleet, the refurbishment of the main winder at the Twin Shaft complex and trackless equipment and housing and living conditions of employees.higher spending on employee accommodation. Gold Fields expects to spend approximately U.S.R1,309 million (U.S.$78 million92.6 million) on capital expenditures at South Deep in fiscal 2015,2017, primarily on infrastructure, trackless equipment, new mine development, infrastructuresecondary support and trackless equipment.the 80 level fridge plant at south shaft.
West Africa Operations
The West Africa operations comprise the Tarkwa and Damang gold mines in Ghana. The West Africa region also had responsibility for, until its sale on June 2014 to Hummingbird Resources PLC,oversight of Gold Fields’ Yanfolila projectAPP in Mali. Until early 2014,Finland, prior to the West Africa region also had responsibility for Gold Fields’ Talas Copper-Gold project in Kyrgyzstan which was soldtransfer of its management to Robust Resources Limited.the Corporate office. Gold Fields Ghana, which holds the interest in the Tarkwa mine, and Abosso, which owns the interest in the Damang mine, are 90% owned 90.0% by Gold Fields and 10% by the Ghanaian government.
Both
For a discussion on the energy supply in Gold Fields Ghana, and Abosso concluded tariff negotiations for 2014 and 2015 with their respective power suppliers (the state electricity supplier, the VRA, supplies power to Gold Fields Ghana and the ECG, provides power to Abosso). The ECG’s rate for the period January 1, 2012 to December 31, 2013 was US$0.1809/kWh. ECG’s tariffs from January 1, 2014 to December 31, 2014 were $0.216/kWh and from January 1, 2015 to December 31, 2015 is US$0.23/kWh. Gold Fields Ghana has agreed tariffs with VRA with a base tariff of US$0.1674/kWh with effect from January 1, 2015 using a tariff model which inputs actual variables (including the generation mix and input prices) of the previous quarter to determine the tariff for the current quarter.
Although Gold Fields Ghana has concluded tariff negotiations with the VRA, there has been a delay in finalizing the draft Power Sale and Purchase Agreement, or PSPA, with the VRA, mainly because of a delay in the implementation of the Energy Commission’s proposed Wholesale Electricity Market, or WEM, which would impact provisions of the PSPA. The implementation of the WEM is presently on hold due to load shedding exercises being carried out in Ghana.
The VRA is now proposing an interim PSPA, subject to regulatory changes made by the Energy Commission when the WEM is fully rolled out. Gold Fields Ghana intends to discuss the interim PSPA with the VRA in April 2015.
In order to reduce their reliance on power supplied by VRA and ECG, Gold Fields Ghana and Abosso have entered into a ten year power purchase agreement, or PPA, with independent power producer Genser Energy, or Genser. Genser has agreed to commission a ‘clean coal’ power generation facility at Tarkwa. The delivery of power up to 7MW is expected to begin in April 2015 from an alternative Genser plant while the new facility is being completed. This power supply is expected to eventually replace all or a significant proportion of Tarkwa and Damang’s current supply from the VRA and ECG. Over the ten-year contract, the PPA could potentially save around 47% on the cost of power currently supplied by the VRA and ECG. The PPA will, however, increase the company’s carbon emissions, by replacing electricity currently generated mainly through hydropower with coal-generated electricity. Seesee “Risk Factors—Power cost increases may adversely affect Gold Fields’ business, operating results and financial condition”.
Tarkwa Mine
Introduction
The Tarkwa mine is located in southwestern Ghana, about 300 kilometers by road, west of Accra. The Tarkwa mine consists of several open pit operations on the original Tarkwa property and the adjacent southern portion of the property, which was formerly referred to as the Teberebie property and was acquired by Gold Fields in August 2000. Gold Fields added a SAG mill, twoa ball millsmill and a CIL plant and a High Pressure Grinding Roll Facility.
The Tarkwa mine operates under mining leases with a total area of approximately 20,800 hectares, the entirety of which are surface operations. The Tarkwa mine has access to the national electricity grid, water, road and railway infrastructure, although rail service has beennon-operational for many years. Most supplies are trucked in from either the nearest seaport, which is approximately 90 kilometers away by road in Takoradi, or from Tema, near Accra, which is approximately 300 kilometers away by road.
History
Investment in large-scale mining in the Tarkwa area commenced in the last quarter of the nineteenth century. In 1993, Gold Fields of South Africa or GFSA, took over an area previously operated by the State Gold Mining Corporation, or SGMC. SGMC had, in turn, acquired the property from private companies owned by European investors. Mining operations by Gold Fields commenced in 1997 following initial drilling, feasibility studies and project development (which included the removal of overburden and the resettlement of approximately 22,000 people).
Geology
Gold mineralization at Tarkwa is hosted by Proterozoic Tarkwaian metasediments, which overlie but do not conform to a Birimian greenstone belt sequence. Gold mineralization is concentrated in conglomerate reefs and has some similarities to deposits in the Witwatersrand Basin in South Africa. The deposit comprises a succession of stacked, tabular palaeoplacer units consisting of quartz pebble conglomerates. Approximately 10 such separate economic units occur in the concession area within a sedimentary package ranging from 40 meters to 110 meters in thickness.Low-grade to barren quartzite units are interlayered between the separate reef units.
Mining
The existing surface operation currently exploits narrow auriferous conglomerates from six pits, namely Pepe, Akontansi, Teberebie, Atuabo, Maintrain and Kottraverchy. Tarkwa uses the typical open pit mining methods of drilling, blasting, loading and hauling.
During fiscal 2014,2016, mineral reserves at Tarkwa increaseddecreased by 3%9.8% (net of depletion) to 7.56.1 million ounces. Restructuring the mine to operate at lower total mining volumes (90 – 100Mtpa total mining) is expected to ensure operational flexibility and underpin targeted head grades to deliver 500,000520,000 to 550,000570,000 ounces of gold per year.
Production decreased by 12% at Tarkwa in fiscal 2014 due to the closure of its heap leach facilities (with all ore now being processed through Tarkwa’s existing, high recovery CIL plant), higher-than-average rainfall during the first quarter of fiscal 2014 which reduced total tonnes mined from Tarkwa’s open-pits and a shortage of blasted ore due to poor drill-rig availability between the first and third quarters of fiscal 2014. This was partly offset by an overall improvement in process plant performance.
Due to the increasing hardness of the ore as the pits drive deeper and the resultant lower dissolution recoveries, the North Heap Leach operation was stopped at the end of December 2013. Various alternative mining and processing options have been investigated to identify the best value option for Tarkwa. A carbon-in-leach only option proved to be the most operationally and financially viable choice, as it offers an increased throughput rate to 13.3Mtpa from fiscal 2015, with processing of the spent South Heap Leach material at the end of the production profile. The mineral reserves declared as at December 31, 2014 take into account the above strategy, with the objective of optimizing Tarkwa’s mineral reserve, cash flow and net present value.
No greenfields projects were commenced in fiscal 2014.2016. A geochemical soil sampling program was carried out in Tarkwa in fiscal 2014 to explore part of the concession, which previously had limited exploration. A number of hydrothermal and paleo placer targets were identified as a result of this program, and initial drilling commenced in fiscal 2015. The continuation of the drilling program in respect of these targets was a focal point in fiscal 2016.
Detailed below are the operating and production results at Tarkwa for fiscal 2012, 20132016, 2015 and 2014.
| Fiscal 2012 | Fiscal 2013 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes milled (‘000) | 22,910 | 19,275 | 13,553 | |||||||||
Recovered grade (g/t) | 1.0 | 1.0 | 1.2 | |||||||||
Gold produced (‘000 oz)(1) | 719 | 632 | 558 | (3) | ||||||||
Results of operations ($ million) | ||||||||||||
Revenues | 1,198.9 | 893.1 | 706.7 | |||||||||
Operating costs (excluding amortization and depreciation)(2) | 494.4 | 473.7 | 373.9 | |||||||||
All-in sustaining cost net of by-product revenues per ounce of gold sold ($)(2) | 1,117 | 1,291 | 1,068 | |||||||||
All-in costs net of by-product revenues per ounce of gold sold ($)(2) | 1,117 | 1,291 | 1,068 | |||||||||
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes milled (‘000) | 13,608 | 13,520 | 13,553 | |||||||||
Recovered grade (g/t) | 1.3 | 1.3 | 1.2 | |||||||||
Gold produced (‘000 oz)(1) | 568 | 586 | 558 | |||||||||
Results of operations | ||||||||||||
Revenues (U.S.$ million) | 708.9 | 680.7 | 706.7 | |||||||||
Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(2) | 327.3 | 326.9 | 371.5 | |||||||||
All-in sustaining cost net ofby-product revenues per ounce of gold sold (U.S.$)(2) | 959 | 970 | 1,068 | |||||||||
All-in costs net ofby-product revenues per ounce of gold sold (U.S.$)(2) | 959 | 970 | 1,068 | |||||||||
Notes:
| (1) | In fiscal |
| (2) | For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation |
In fiscal 2014, overall ore tonnage mined was 13.6 million tonnes compared with 19.3 million tonnes for fiscal 2013. Total waste mined2016, gold production decreased by 44.73% to 0.568 million tonnes,ounces from 118.40.586 million tonnesounces in fiscal 20132015, mainly due to 73.7shift away from the Teberebie pillar and surrounding high grade areas. Net operating costs increased marginally to U.S.$ 327.3 million tonnes in fiscal 2014. Compared to fiscal 2013 levels, gold production at Tarkwa decreased significantly2016 from U.S.$326.9 million in fiscal 2014 because of the closure of the Heap Leach facilities.2015. AIC improved by 1% to U.S.$959 per ounce in fiscal 2016 from U.S.$970 per ounce in fiscal 2015 primarily due to lower capital expenditure, partially offset by lower gold sold.
Assuming that Gold Fields does not increase or decrease ore reserves estimates at Tarkwa and that there are no changes to the current mine plan at Tarkwa, Tarkwa’s December 31, 20142016 proven and probable reserves of 7.56.1 million ounces (6.75(5.5 million ounces of which are attributable to Gold Fields, with the remainder attributable to the GhanianGhanaian government) will be sufficient to maintain production through approximately fiscal 2031 which includesre-treatment of the South Heap Leach at the end of the life of mine. However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors which can affect reserve estimates and the mine plan, which could thus materially change the life of mine.
The Tarkwa mine is engaged in open pit mining and is thus subject to all the risks associated with open pit mining discussed in “Risk Factors”. For more information about workplace injuries at Tarkwa, see “Directors, Senior Management and Employees—Employees—HealthSafety and Safety—Safety”Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”.
There were no strikes and/or labor stoppages at Tarkwa in fiscal 20142016 and none to date since December 31, 2014.2016.
Processing
Tarkwa’s ore is processed using SAG milling at its CIL plant. Prior to the restructuring, the operation also incorporated two separate heap leach circuits, the North Plant and the South Plant. As part of the restructuring, the South Heap Leach Facility was closed in December 2012 and stacking of ore ceased at the North Heap Leach facility in December 2013. The following table sets forth year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and metallurgical recovery factors during fiscal 2014,2016, for each of the plants at Tarkwa.
Processing Techniques
Plant | Year commissioned | Comminution phase | Treatment phase | Capacity(1) | Average milled for fiscal 2014 | Approximate recovery factor for fiscal 2014(2) | Year commissioned | Comminution phase | Treatment phase | Capacity(1) | Average milled for fiscal 2016 | Approximate recovery factor for fiscal 2016(2) | ||||||||||||||||||||||||||||
| (tonnes/month) | (tonnes/month) | |||||||||||||||||||||||||||||||||||||||
CIL Plant | 2004 | SAG milling (with ball mill)(3) | CIL treatment | 1,025,000 | 1,113,417 | 97 | % | 2004 | SAG milling (with ball mill)(3) | CIL treatment | 1,125,000 | 1,134,000 | 97 | % | ||||||||||||||||||||||||||
Notes:
| (1) | Nameplate capacity as designed. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. |
| (2) | Percentages are rounded to the nearest whole |
| (3) | The ball mill was added in December 2008. |
The expansion ofIn fiscal 2016, the Carbon in Leach (CIL)carbon-in leach plant throughput increased from an annual throughput of 12.313.5Mt to 13.3 million tonnes per annum was completed by the end of December 2014. The expansion is expected13.6Mt, with yield decreasing from 1.35g/t to enable Tarkwa1/30g/t due to increase its future production profile to a steady state level of approximately 550,000 ounces per annum.lower grades processed.
Capital Expenditure
On an IFRS basis (as included in the geographical and segment information included in Note 26 to the consolidated financial statements), Gold Fields spent U.S.$174.1168.0 million on capital expenditures at the Tarkwa operation in fiscal 2014,2016, principally for capital waste mining, primary and ancillary mining fleet,due to deferred stripping to expose ore, upgrading of the tailings storage facility constructionfacilities and the CIL plant capacity increase.purchasing of new mining vehicles and equipment. Gold Fields has budgeted approximately U.S.$197180.4 million for capital expenditures at Tarkwa for fiscal 2015, principally for capital waste2017, as it plans to continue to focus on prestripping and heavy mining primary and ancillary mining fleet and tailings storage facilities.equipment, or HME, major components.
Damang Mine
Introduction
The Damang deposits are located in the Wassa West District in southwestern Ghana approximately 330 kilometers by road west of Accra and approximately 30 kilometers by road northeast of the Tarkwa mine. The mine exploits hydrothermal in addition to Witwatersrand-style palaeoplacer gold. The Damang mine consists of an open pit operation with a SAG and ball mill and CIL processing plant. Damang operates under a mining lease with a total area of approximately 8,100 hectares. The Damang mine has access to the national electricity grid and water and road infrastructure. Most supplies are brought in by road from the nearest seaport, Takoradi, which is approximately 135 kilometers away, or from Accra, which is approximately 360 kilometers away by road.
History
Mining on the Abosso concession began with underground mining in the early twentieth century. Surface mining at Damang commenced in August 1997 and Gold Fields assumed control of operations on January 23, 2002. Historically, the underground mine was in operation from 1878 until 1956.
Geology
Damang is located on the Damang Anticline, which is marked by Tarkwaian metasediments on the east and west limbs, around a core of Birimian metasediments and volcanics. Gold in the Tarkwaian metasediments and volcanics is predominantly found in the conglomerates of the Banket Formation and is similar to the Witwatersrand in South Africa; however, at Damang, hydrothermal processes have enriched much of this palaeoplacer mineralization.
and the adjacent metasediments within the Banket formation. Within the region, the contact between the Birimian and Tarkwaian metasediments and volcanics is commonly marked by zones of intense shearing and is host to a number of significant shear hosted gold deposits, including Prestea, Bogoso, and Obuasi.
Palaeoplacer mineralization occurs on the west limb of the anticline at Abosso, Chida, and Tomento, and on the east limb of the anticline at the Kwesie, Lima South, and Bonsa North locations. Hydrothermal enrichment of the Tarkwaian palaeoplacer occursand metasediments also occur at the Rex, Amoanda, and Nyame areas on the west limb and the Damang and Bonsa areas on the east limb.
Mining
Damang uses the typical open pit mining methods of drilling, blasting, loading and hauling. The primary operational challenges include improved grade and dilution control, blasting optimization and maintaining load and haul efficiencies given that the mine has a number of different ore sources (Huni, Saddle Area, Juno and Lima South), and maintaining adequate and timely supply of appropriate plant feed blend (i.e. where possible a blend of fresh and oxide materials).
Damang experienced a significant improvement in operational performance during fiscal 2014, following extensive restructuring atA comprehensive review of the mine to ensure its commercial sustainability. In fiscal 2013, Gold Fields undertook a restructuringaddress the loss making position of Damang, and introduced business improvement initiatives across the whole of Damang’s operations which started yielding positive results incommenced during the fourth quarter of fiscal 2013. This turnaround2015, continued throughduring fiscal 2014. The focus on employee health and safety, operational efficiencies, mining mix, grade management and key activity costs has brought Damang2016 with a final decision made to do a push back to commercial levels of production with a realistic time frame now available to bring additional brownfield opportunities to account.
In fiscal 2014, production atexpose the higher grade ore under the original Damang increased 16%, mainly due to a focus on high-quality mining, a higher head grade, improved recovery as a result of the installation of an additional CIL tank, the transition from a three-shift mining system to a two-shift mining system with a commensurate reduction in the workforce by around 130 employees and lower capital expenditure. Mining activity at Damang was focused on areas with a lower strip ratio, while production levels were increased by reducing dilution and focusing on the optimumcut-off grades over the lifespan of the mine. Despite these interventions, in fiscal 2014 Damang’s mine grade was still below the estimated reserve grade. In addition, production was affected by unplanned mill stoppages in the second and third quarters of fiscal 2014, resulting in the temporary shutdown of all processing at the mine for seven days.
The main focus at Damang remains the identification of additional ore sources along the 27 kilometres of strike between Damang and Tarkwa, where historical open pits were last drilled and mined when the gold price was between US$300/oz and US$400/oz. This strategy could contribute to an appreciable addition to mineral reserves over the next three years. A three year phased exploration program has been designed to test prioritized targets that show the potential to deliver cash generative ounces to the LoM plan to replace depletion, increase flexibility and grow the reserve base. Targets are prioritized if they represent extensions to active pits or known ore bodies in reasonable proximity to the plant and are favored if they are hydrothermal in style due to their generally higher gold grades.
In fiscal 2014, near mine exploration continued at Huni, Saddle and Juno South pits. Tomento North drilling and modelling was completed in fiscal 2014 and further infill drilling to refine the geological domains and identify pay shoots is scheduled for fiscal 2015.
Mineral reserves at Damang increased from 1.1 million ounces to 1.2 million ounces, net of depletion, as a result of the inclusion of Amoanda and Huni Cut-back 2. The mine has re-positioned well in fiscal 2014 and remains dedicated to achieving targeted head grades and sustaining plant throughput to deliver increased ounces and stabilize the all-in cost per ounce. Advance grade control, or AGC, drilling programs have continued with the objective of de-risking the operational plan and keeping 9 to 12 months of production within the AGC window on a rolling basis. Mining is designed to prioritize extraction from the pits with the highest economic value and is focused on the Huni, Saddle and Juno pits.
The mineral reserves declared as at December 31, 2014 were constrained by the existing east tailings storage facility adjacent to the Damang pit. Re-assessment of all options across the entire mining lease will continue in fiscal 2015 to determine the best business case to improve cash flow. This will include potential extensions to the Amoanda and Tomento open pits, testing potential at Nyame and Chida, as well as a review of underground options compared against the existing Cut-back 2 option.
During the period under review, exploration activities at Gold Fields’ West African operations were dominated by resource conversion projects through infill drilling and extensions to known targets at Damang. No greenfields projects were commenced in fiscal 2014.2016.
In October 2016, Gold Fields announced the U.S.$341 million Damang Reinvestment Plan, which is expected to extend the LoM by eight years from fiscal 2017 to fiscal 2024. The Damang Reinvestment Plan will enhance the Group’s presence in one of our key operating regions and result in significant social benefits for the country, including the creation and preservation of 1,850 direct employment positions.
The Damang Reinvestment Plan entails a major cutback to both the eastern and western walls of the DPCB. The cutback will have a total depth of 341m, comprising of a 265mpre-strip to access the base of the existing pit. This will be followed by a deepening of the pit by a further 76m which will ultimately provide access to the full Damang orebody including the high grade Tarkwa Phyllite lithology. To provide short term ore supply whilst the Damangpre-strip is in progress, mining will occur at the Amoanda, and paleaoplacer satellite pits (Lima South, Kwesi Gap and Tomento East). In addition, the plan feed will be supplemented by low grade surface stockpiles. Mining will be undertaken by two mining contractors, which are expected to be mobilized early in fiscal 2017.
Inclusion of the Damang cutback as the key component of the Damang Reinvestment Plan has impacted an increase of 72% in proven and probable reserves from those declared in December 2015, from 0.97 Moz to 1.67 Moz.
Detailed below are the operating and production results at Damang for fiscal 2012, 20132016, 2015 and 2014.
| Fiscal 2012 | Fiscal 2013 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes milled (‘000) | 4,416 | 3,837 | 4,044 | |||||||||
Recovered grade (g/t) | 1.2 | 1.2 | 1.4 | |||||||||
Gold produced (‘000 oz)(1) | 166 | 153 | 178 | |||||||||
Results of operations ($ million) | ||||||||||||
Revenues | 277.8 | 216.4 | 224.6 | |||||||||
Operating costs (excluding amortization and depreciation)(2) | 179.1 | 171.1 | 177.6 | |||||||||
All-in sustaining cost net of by-product revenues per ounce of gold sold ($)(2) | 1,707 | 1,558 | 1,175 | |||||||||
All-in costs net of by-product revenues per ounce of gold sold ($)(2) | 1,753 | 1,558 | 1,175 | |||||||||
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes milled (‘000) | 4,268 | 4,295 | 4,044 | |||||||||
Recovered grade (g/t) | 1.1 | 1.2 | 1.4 | |||||||||
Gold produced (‘000 oz)(1) | 148 | 168 | 178 | |||||||||
Results of operations | ||||||||||||
Revenues (U.S.$ million) | 183.4 | 194.8 | 224.6 | |||||||||
Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(2) | 136.1 | 186.4 | 179.7 | |||||||||
All-in sustaining cost net ofby-product revenues per ounce of gold sold (U.S.$)(2) | 1,254 | 1,326 | 1,175 | |||||||||
All-in costs net ofby-product revenues per ounce of gold sold (U.S.$)(2) | 1,254 | 1,326 | 1,175 | |||||||||
Notes:
| (1) | In fiscal |
| (2) | For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation |
Total tonnes milled increasedIn fiscal 2016, managed gold production decreased by 12% to 0.148 million ounces from 3.8 million in fiscal 2013 to 4.0 million in fiscal 2014 primarily due to higher mill and crusher availability. Gold production increased from 0.1530.168 million ounces in fiscal 2013 to 0.178 million ounces in fiscal 2014 primarily2015, mainly as a result of lower than planned plant feed grade. Net operating costs decreased by 27% to U.S.$136.1 million in fiscal 2016 from U.S.$186.4 million in fiscal 2015 mainly due to lower mining and consumable costsin-line with the higher throughput. Aslower production. Total AISC decreased by 5% to U.S.$1,254 per ounce in fiscal 2016 from U.S.$1,326 per ounce in fiscal 2015, due to lower use of diesel generators as the plant is ageing, preventative maintenance has been increased to provide sustainable processing capacity, particularly givennumber of power outages dropped during the increase in ore reserves and resources and extended mine life.year.
Assuming that Gold Fields does not increase or decrease reserves estimates at Damang and that there are no changes to the current mine plan, Damang’s December 31, 20142016 proven and probable reserves of 1.21.67 million ounces (approximately 0.12(0.17 million of which are attributable to the Ghanaian government, with the remainder attributable to Gold Fields) will be sufficient to maintain production through approximately fiscal 2020.2024 (8 years). However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are many factors that can affect reserve estimates and the mine plan, which could thus materially change the life of mine.
The Damang mine comprises open pit mining, and is thus subject to all of the risks associated with open pit mining discussed in “Risk Factors”. For more information about workplace injuries at Damang, see “Directors, Senior Management and Employees—Employees—HealthSafety and Safety—Safety”Wellness—Safety Management” and “Directors, Senior Management and Employees—Safety and Wellness—Employees—TRIFR, Fatalities and Fatal Injury Frequency Rate”.
There were no strikes and/or work stoppages at Damang in fiscal 20142016 and none to date since December 31, 2014.2016.
Processing
All ore at Damang is processed through a single facility. The following table sets forth the year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and metallurgical recovery factor during fiscal 20142016 for the plant.
Processing Techniques
Plant | Year commissioned | Comminution phase | Treatment phase | Capacity(1) | Average milled for fiscal 2014 | Approximate recovery factor for fiscal 2014(2) | Year commissioned | Comminution phase | Treatment phase | Capacity(1) | Average milled for fiscal 2016 | Approximate recovery factor for fiscal 2016(2) | ||||||||||||||||||||||||||||
| (tonnes/month) | (tonnes/month) | |||||||||||||||||||||||||||||||||||||||
Processing Plant | 1997 | (3) | Primary and two- stage secondary crushing with SAG and ball milling | CIL treatment | 333,333 | 337,000 | 91 | % | 1997 | (3) | Primary and two- stage secondary crushing with SAG and ball milling | CIL treatment | 350,000 | 356,000 | 91.9 | |||||||||||||||||||||||||
Notes:
| (1) | Nameplate capacity as designed. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. |
| (2) | Percentages are rounded to the nearest whole per cent. |
| (3) | The secondary crusher was commissioned in 2010. |
Preparatory construction works on the new Far East Tailings Storage Facility, or FETSF, commenced in fiscal 2013 but the project was suspended in September 2013, when Abosso received notice of an application for an injunction to restrain from proceeding with the FETSF construction on the basis that it was outside its mining lease. In fiscal 2014, Gold Fields settled with these claimants and resumed work on the FETSF project but the construction was delayed in fiscal 2015 when the investment plan scenarios for the mine were being considered. In fiscal 2015, the ETSF was raised by 5 meters to an elevation of 1,005 mRL. The facility is currently being raised a further 2.5 meters to an elevation of 1,007.5 mRL. The construction began in the fourth quarter of fiscal 2016 and is expected to be completed by end of the first quarter of fiscal 2017.
The ETSF has 3.8Mt of remaining capacity and it is estimated that the ETSF will be at full capacity by November 2017. The FETSF is being constructed to sustain production for the remaining LoM requirement. The full design capacity of the FETSF is 44.4Mt to a 1,000 mRL and the construction will occur in two stages:
Stage 1—19.7Mt capacity to a 980mRL; and
Stage 2—24.7Mt additional capacity to the 1,000mRL.
Stage 1 construction will commence in the first quarter of fiscal 2017 and is estimated to be completed by end of fiscal 2017 to ensure continuous production.
Capital Expenditure
Abosso spent U.S.$37.9 million on capital expenditure in fiscal 2016, principally on Amoanda capital waste stripping, ETSF raise and resource infill drilling. Abosso has budgeted approximately U.S.$139.6 million for capital expenditures at Damang for fiscal 2017.
Australasia Operations
St. Ives
Introduction
St. Ives is located 80 kilometers south of Kalgoorlie and 20 kilometers south of Kambalda, straddling Lake Lefroy in Western Australia. It holds exploration licenses, prospecting licenses and mining leases covering a total area of approximately 123,291 hectares. St. Ives is both a surface and underground operation, with a number of
open pits, one operating underground mine and a metallurgical CIP plant. The St. Ives operation obtains electricity pursuant to a contract with BHP Nickel West that expires in January 2023 and has access to water, rail, air and road infrastructure. Consumables and supplies are trucked in locally from both Perth and Kalgoorlie.
History
Gold mining began in the St. Ives area in 1897, with intermittent production until Resources Ltd, or WMC, commenced gold mining operations at St. Ives in 1980. Gold Fields acquired the St. Ives gold mining operation from WMC in November 2001.
Geology
The gold deposits of St. Ives are located at the southern end of the Norseman-Wiluna greenstone belt of the West Australian Goldfields Province. In the St. Ives area, the belt consists of Kalgoorlie Group volcanic rocks, Black Flag group felsic volcanic rocks and sediments and a variety of intrusive and overlying post-tectonic sediments. The area is structurally complex, with metamorphism ranging from lower greenschist and lower amphibolite facies. Shear hosted gold mineralization has been discovered in all stratigraphic units. Deposit styles and ore controls are varied ranging from minor structures, including vein arrays, breccia zones and central, to quartz-rich and mylonitic parts of shear zones.
Mining
Gold production takes place over an extensive tenement area at St. Ives. St. Ives has the Lefroy processing plant and SAG mill that treats primary ore. St. Ives previously had a heap leach facility which treatedlow- and marginal-grade ore. This heap leach facility operated in a residual leach mode during fiscal 2014, 2015 and through to April 2016 when it closed as leaching was no longer economic.
In fiscal 2016, St. Ives reported decreased production and decreased operational costs. The decreased production was mainly due to lower grades associated with increased open pit mining and a decline in mining at the Athena, underground mine which closed in February 2016. The decreased operational costs were mainly due to a reduction of mining costs in the open pit areas.
In fiscal 2016, exploration expenditure decreased by A$1.0 million to A$40.9 million and 241km of drilling was completed. This exploration discovery and extensional drilling replaced all the 376,000 ounces depleted in 2016 and added a further 198,000 ounces to reserve. This included an additional of 288,000 ounces to the Invincible underground reserve and the declaration of a maiden open pit reserve of 47,000 ounces at Incredible.
Positive results were returned from broad gold intercepts in shallow drilling at the Retribution project. Extensive follow up drilling is expected to be completed during fiscal 2017 to further define the gold mineralization and to define resources.
The exploration strategy at St. Ives is to continue to develop the exploration pipeline and define further resources, with a priority on open pit resources. In addition, St. Ives plans to investigate the potential for significant palaeochannel hosted mineralization, along with alternate methods for mining these gold deposits.
Detailed below are the operating and production results at St. Ives for fiscal 2016, 2015 and 2014.
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes (‘000) | 4,046 | 3,867 | 4,553 | |||||||||
Recovered grade (g/t) | 2.8 | 3.0 | 2.4 | |||||||||
Gold produced (‘000 oz) | 363 | 372 | 362 | |||||||||
Results of operations | ||||||||||||
Revenues (U.S.$ million) | 452.3 | 431.8 | 458.8 | |||||||||
Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(1) | 181.8 | 220.3 | 282.3 | |||||||||
All-in sustaining cost net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 949 | 969 | 1,164 | |||||||||
All-in costs net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 949 | 969 | 1,164 | |||||||||
Note:
| (1) | For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net ofby-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review andProspects—All-in Sustaining andAll-in Cost”. AIC and AISC are calculated per ounce of gold sold, excluding gold equivalent ounces. See “Operating and Financial Review andProspects—All-in Sustaining andAll-in Cost”. |
In fiscal 2016, gold production decreased by 2% to 0.363 million ounces from 0.372 million ounces in fiscal 2015, primarily due to lower grades associated with increased open pit mining and a decline in mining at the Athena underground mine which closed in the first half of fiscal 2016. Net operating costs decreased by 17% to U.S.$181.8 million in fiscal 2016 from U.S.$220.3 million in fiscal 2015 due to the closure of the Cave Rocks and Athena underground mines, efficiencies in the open pits on larger volumes and productivity improvements and agold-in-process credit of U.S.$11.0 million in fiscal 2016, compared with a charge of U.S.$25.3 million in fiscal 2015. Total AIC decreased to U.S.$949 per ounce in fiscal 2016 compared with U.S.$969 per ounce in fiscal 2015.
Assuming that Gold Fields does not increase or decrease reserves estimates at St. Ives and that there are no changes to the current mine plan, St. Ives’ December 31, 2016 proven and probable reserves of 1.7 million ounces will be sufficient to maintain production through fiscal 2021. However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors which can affect reserve estimates and the mine plan, which could thus materially change the life of mine.
St. Ives is engaged in underground mining and in both open pit and production stockpile surface mining, and is thus subject to all of the underground and surface mining risks discussed in “Risk Factors”. The primary safety risk at St. Ives is falls of ground at the underground operations, which is addressed through the use of ground support, paste filling of open stopes and sequencing of mine operations to improve overall stability of the ground. For more information about workplace injuries at St. Ives, see “Directors, Senior Management and Employees—Employees—Safety and Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”.
The St. Ives mine is currently in the process of re-certification following an initial negative finding by the International Cyanide Management Institute, or ICMI. See “License to Operate—Waste and Training”.
There were no strikes and/or material work stoppages at St. Ives in fiscal 2016 and none to date since December 31, 2016.
Processing
The table below sets forth year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and metallurgical recovery factors during fiscal 2016, for the plant at St. Ives.
Processing Techniques
Plant | Year commissioned | Comminution phase | Treatment phase | Capacity(1) | Average milled for fiscal 2016 | Approximate recovery factor for fiscal 2016(2) | ||||||||||||||
| (tonnes/month) | ||||||||||||||||||||
Lefroy Plant | 2005 | Single-stage crushing and SAG milling | CIP | 375,000 | 337,000 | 93 | % | |||||||||||||
Notes:
| (1) | Nameplate capacity as designed. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. |
| (2) | Percentages are rounded to the nearest whole percent. |
Capital Expenditure
Gold Fields spent A$188.0 million or U.S.$140.0 million on capital expenditures at St. Ives in fiscal 2016. This was primarily on exploration across the site, the development of the Invincible and Neptune open pit mines and the development of the Hamlet underground mine. Gold Fields has budgeted approximately A$184.6 million, or U.S.$135 million, for capital expenditures at St. Ives in fiscal 2017. These funds are principally earmarked for exploration, underground mining development and mine infrastructure.
Agnew/Lawlers
Introduction
Agnew/Lawlers is located 23 kilometers west of Leinster, approximately 375 kilometers north of Kalgoorlie and 630 kilometers northwest of Perth, Western Australia. Together, Agnew and Lawlers hold exploration licenses, prospecting licenses and mining leases covering a total area of approximately 88,180 hectares.
Agnew/Lawlers has one metallurgical plant in operation and is serviced by sealed road infrastructure to the mine gate. Supplies are generally trucked in from Perth or Kalgoorlie. Agnew/Lawlers is largely afly-infly-out operation with local services, including air transport with a sealed runway and accommodation, provided pursuant to an arrangement with a nearby major mining company. Agnew/Lawlers has access to electricity pursuant to a contract with the same major mining company as St. Ives which expires in May 2019. The bulk of the water is supplied from the mining operations and recovered from thein-pit tailings facility and previously mined pits.
History
Gold was discovered at Agnew in 1895 and production was intermittent until WMC acquired the operation in the early 1980s and constructed the current mill in 1986. Since that time, numerous open pits and underground operations have been mined.
Gold was discovered around the same time at Lawlers. In 1984, Forsayth NL purchased the Great Eastern lease and constructed the Lawlers processing plant, or the Lawlers Mill. Mechanized open pit mining commenced in 1986. The New Holland underground mine opened in 1998 and in 2001 Barrick acquired Lawlers as part of its merger with Homestake. In 2013, Gold Fields purchased Lawlers from Barrick and the Lawlers Mill was placed on care and maintenance.
Geology
The Agnew and Lawlers deposits are located within the northwest portion of the Norseman-Wiluna greenstone belt of the Western Australian Goldfields. This greenstone belt consists of an older sequence of ultramafic flows, gabbros, basalts, felsic volcanics and related sedimentary rocks. The rocks are folded about the large, moderately north plunging Lawlers Anticline. The Agnew deposits are located on the western limb of this anticline, and major deposits discovered to date lie on sheared contacts between stratigraphic units. The anticline is cut by north-northeast trending faults such as the Waroonga and East Murchison Unit shear zones. The Lawlers deposits occur along the eastern limb of the Lawlers Anticline with the mainGenesis-New Holland deposit located within the Scotty Creek Sediments west of Waroonga.
Mining
The principal production sources at Agnew/Lawlers are the Waroonga and New Holland underground mining complexes. The mining method at Waroonga involves longhole open stoping with paste filling. Access to the ore body is through a decline tunnel which accommodates workers, materials and equipment.
At the New Holland underground mine at Lawlers, the selection of the stoping method is dependent upon the geometry of the ore structure. Two primary methods are employed: uphole retreat open stoping and room and pillar longhole. Access to the mine is via two declines.
At both Waroonga and New Holland, ore is trucked to a mine ore pad located at the base of either the Waroonga or New Holland open pits, where it is then hauled to the Agnew processing facility using haul trucks operated by a contractor.
Waroonga is in transition as the Kim lode matures. During fiscal 2015, the new drive from the Kim decline to the FBH ore bodies was completed. Development activities have commenced with production from FBH reducing dependence on the Kim ore body in fiscal 2016. In addition, production at the Cinderella ore body in the New Holland complex commenced in fiscal 2016.
Exploration at Agnew/Lawlers in fiscal 2016 focused on extensions to both the Waroonga and New Holland mineralized systems. Drill testing north of Waroonga has continued to return significant gold intersections with frequent visible gold intersections from both the Kath and Waroonga North projects. A reserve of 59,000 was declared for Waroonga North at December 31, 2016.
At New Holland, drilling focused on extending the 500 Series lode and also targeted the 600/700 Series, which is located beneath the current mine development. The drilling has confirmed that the 500 Series structure is breaking up to the north. There is potential for smaller discrete mineable blocks but the overall tenor of the lode has clearly diminished. Drilling of the 600/700 Series during fiscal 2016 failed to significantly increase these resources.
At Cinderella, several drilling campaigns were completed, initially asstep-out programs, to define the extent of the resource and subsequentlyin-fill programs to delineate the reserve. Cinderella comprises two main lodes. Both lodes remain open to the east and to the south and potentially to the north, further extensional and infill drilling is planned in fiscal 2017 to test the extent of this mineralization.
Detailed below are the operating and production results at Agnew/Lawlers for fiscal 2016, 2015 and 2014.
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes (‘000) | 1,176 | 1,218 | 1,246 | |||||||||
Recovered grade (g/t) | 6.1 | 6.0 | 6.8 | |||||||||
Gold produced (‘000 oz) | 229 | 237 | 271 | |||||||||
Results of operations | ||||||||||||
Revenues (U.S.$ million) | 285.4 | 273.9 | 342.5 | |||||||||
Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(1) | 140.5 | 141.4 | 172.6 | |||||||||
All-in sustaining cost net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 971 | 959 | 990 | |||||||||
All-in costs net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 971 | 959 | 990 | |||||||||
Note:
| (1) | For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net ofby-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review andProspects—All-in Sustaining andAll-in Cost”. AIC and AISC are calculated per ounce of gold sold, excluding gold equivalent ounces. See “Operating and Financial Review andProspects—All-in Sustaining andAll-in Cost”. |
In fiscal 2016, gold production decreased by 3% to 0.23 million ounces from 0.24 million ounces in fiscal 2015, primarily due to a drop in tonnes processed. Net operating costs decreased marginally from U.S.$141.4 million in fiscal 2015 to U.S.$140.5 million in fiscal 2016. In U.S. dollar terms, total AIC increased to U.S.$971 per ounce in fiscal 2016 compared with U.S.$959 per ounce in fiscal 2015 due primarily to a reduction in ounces sold.
Assuming that Gold Fields does not increase or decrease reserves estimates at Agnew/Lawlers and that there are no changes to the current mine plan, the December 31, 2016 proven and probable reserves at 0.5 million ounces will be sufficient to maintain production at Agnew/Lawlers through fiscal 2019 (three years). However, as discussed earlier in “Risk Factors” and “Description of Mining Business—Mine Planning and Management,” there are numerous factors which can affect reserve estimates and the mine plan, which could thus materially change the life of mine.
Agnew/Lawlers is engaged in underground mining and is thus subject to all of the underground and surface mining risks discussed in “Risk Factors”. The primary safety risk at Waroonga is falls of ground at the underground operations, which is addressed through the use of ground support, paste filling of open stopes and sequencing of mine operations to improve overall stability of the ground. The primary safety risk at New Holland is falls of ground at the underground operations, which is addressed through the use of ground support and sequencing of mine operations to improve stability of the ground. For more information about workplace injuries at Agnew/Lawlers, see “Directors, Senior Management and Employees—Employees—Safety and Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”.
There were no strikes or material work stoppages at Agnew/Lawlers in fiscal 2016 and none to date since December 31, 2016.
Processing
All processing at Agnew/Lawlers is undertaken through a single processing facility. The following table sets forth year commissioned, processing techniques and processing capacity per month, as well as average tonnes
milled per month and the metallurgical recovery factor during fiscal 2016 for the plant. The Lawlers Mill was placed on a care and maintenance basis after existing stockpiles were treated shortly after the acquisition was completed.
Processing Techniques
Plant | Year commissioned | Comminution phase | Treatment phase | Capacity(1) | Average milled for fiscal 2016 | Approximate recovery factor for fiscal 2016(2) | ||||||||||||||
| (tonnes/month) | ||||||||||||||||||||
Agnew Mill | 1986 | Two-stage ball milling | CIP treatment | 100,000 | 98,000 | 94 | % | |||||||||||||
Notes:
| (1) | Nameplate capacity as stated by the manufacturer. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. |
| (2) | Percentages are rounded to the nearest whole per cent. |
Capital Expenditure
Gold Fields spent A$94.0 million or U.S.$70.0 million on capital expenditures at Agnew/Lawlers in fiscal 2016, primarily on capital development at Waroonga and New Holland and on exploration. Gold Fields has budgeted approximately A$86.8 million, or U.S.$63.7 million, for capital expenditures at Agnew/Lawlers for fiscal 2017, primarily for exploration, ventilation at Waroonga north, the cyanide detoxification plant and the newin-pit tailings facility.
Granny Smith
Introduction
Granny Smith is located 27 kilometers southwest of the town of Laverton in the Northern Goldfields of Western Australia and is accessible via the Mt. Weld Road. Laverton has sealed road to Perth, 950 kilometers to the southwest, and Kalgoorlie, 400 kilometers to the south.
Granny Smith holds exploration licenses, prospecting licenses and mining leases covering a total area of approximately 72,236 hectares.
The operation runs on afly-infly-out basis with variable rosters. A well-maintained unsealed airstrip located approximately eight kilometers northeast of the camp provides air access from Perth for the majority of employees. Flights are made four days per week and the average flight time is approximately 1.5 hours.
History
The Granny Smith deposits were discovered in 1987. In 1989, mining at Granny Smith commenced in the Granny Smith pit and continued in subsequent years, with the development of a series of open pits. In 1998 the Wallaby deposit was discovered 11 kilometers southwest of Granny Smith. In November 2001, the first Wallaby ore was delivered to the mill.
The Wallaby Open Pit was mined from October 2001 until December 2006. Underground mining at Wallaby commenced in December 2005 and is ongoing. As noted above, Gold Fields acquired the mine in October 2013.
Geology
Granny Smith is located in the Eastern Yilgarn Craton. At a regional scale, the map patterns of Laverton are dominated by the Mt. Margaret Dome in the northwest and the Kirgella Dome in the southeast. These domes are flanked to the east and west by north-northwest-striking shear zones, and the central zone between the two domes is dominated by north to north-northeast-striking sigmoidal shear zones. These distinctly different strikes to the shear zones developed early in the tectonic evolution and resulted in a favorable architecture for late-stage orogenic gold mineralization.
Mining
The Wallaby underground operation has been in operation since December 2005. Access to the Wallaby underground mine is via a portal established within the completed Wallaby open pit. The mine operation is trackless, with truck haulage from underground via the ramp to the surface. The Wallaby underground mine is currently designed to exploit six stacked mineralized lodes to a depth of 1.1 kilometers.
Two primary underground mining methods are used, with minor adjustments to suit localized geometry. Inclined room and pillar is used in areas with a moderate dip and moderate width zones, and transverse longhole stoping is used in zones which are thicker (six to 15 meters) with variable dips. Two other mining methods are used to a lesser extent. Narrow vein longhole stoping may be utilized in some areas with the benefit of reduced planned footwall dilution, and bulk longhole stoping is used in thicker zones under varying dip conditions.
In fiscal 2016, Granny Smith continued its extensive program of mine development. The mine development program advanced 6.1km of horizontal capital development to provide access to lower ore horizons at the Wallaby mine. Extensive vertical development was also undertaken to enhance ventilation to access these lower levels.
The exploration activity was on a range of activities from early stage target identification through to the definition of extensions to the Wallaby deposit. Granny Smith was again successful in extending reserves, replacing the full 323,000 oz of gold mined and adding a further 375,000 mineable ounces to it reserve.
Detailed below are the operating and production results at Granny Smith for fiscal 2016, 2015 and 2014.
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes (‘000) | 1,446 | 1,451 | 1,472 | |||||||||
Recovered grade (g/t) | 6.1 | 6.5 | 6.7 | |||||||||
Gold produced (‘000 oz) | 284 | 301 | 315 | |||||||||
Results of operations | ||||||||||||
Revenues (U.S.$ million) | 355.8 | 348.4 | 399.8 | |||||||||
Operating costs (excluding amortization and depreciation) (U.S.$ million)(1) | 133.8 | 141.3 | 182.6 | |||||||||
All-in sustaining cost net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 834 | 764 | 809 | |||||||||
All-in costs net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 834 | 764 | 809 | |||||||||
Note:
| (1) | For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net ofby-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review andProspects—All-in Sustaining andAll-in Cost”. AIC and AISC are calculated per ounce of gold sold, excluding gold equivalent ounces. See “Operating and Financial Review andProspects—All-in Sustaining andAll-in Cost”. |
In fiscal 2016, gold production decreased by 6% to 0.28 million ounces from 0.30 million ounces in fiscal 2015, primarily due to lower grades and an increase in stockpiled ore because of the timing of the December milling campaign. Net operating costs decreased by 5% to U.S.$133.8 million from U.S.$141.3 million in fiscal 2015, primarily due to higher mining cost as a result of higher mining volumes offset by agold-in-process credit to cost associated with the timing of milling campaigns. Total AIC in Australian dollar terms increased by 10% due to a drop in gold output and higher capital expenditures, partially offset by lower net operating costs. In U.S. dollar terms, total AIC increased to U.S.$834 per ounce in fiscal 2016 compared with U.S.$764 per ounce in fiscal 2015 as a result of lower gold sold and higher capital expenditure partially offset by lower operating costs.
Assuming that Gold Fields does not increase or decrease reserves estimates at Granny Smith and that there are no changes to the current mine plan, Granny Smith’s December 31, 2016 proven and probable reserves of 1.7 million ounces will be sufficient to maintain production through fiscal 2025. However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors which can affect reserve estimates and the mine plan, which could thus materially change the life of mine.
Granny Smith is engaged in underground mining and is thus subject to all of the underground and surface mining risks discussed in “Risk Factors”. The primary safety risk at Granny Smith is falls of ground at the underground operations, which is addressed through the use of ground support, backfilling of open voids and sequencing of mine operations to improve overall stability of the ground. For more information about workplace injuries at Granny Smith, see “Directors, Senior Management and Employees—Employees—Safety and Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”.
There were no strikes and/or material work stoppages at Granny Smith in fiscal 2016 and none to date since December 31, 2016.
Processing
The Granny Smith processing plant consists of a crushing circuit, SAG and ball milling, leach and CIP circuits and a gravity tailings retreatment circuit to concentrate and fine-grind sulphide minerals, primarily pyrite, for gold recovery. As the processing plant was designed to treat much larger tonnages of open pit ore than the tonnages that the Wallaby underground mine can supply, the plant is run on a campaign basis.
The table below provides details of the Granny Smith plant, including year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and metallurgical recovery factors during fiscal 2016.
Processing Techniques
Plant | Year commissioned | Comminution phase | Treatment phase | Capacity(1)(2) | Average milled for fiscal 2016 | Approximate recovery factor for fiscal 2016(3) | ||||||||||||||
| (tonnes/month) | ||||||||||||||||||||
Granny Smith Processing Facility | 1990 | Crushing and SAG and Ball milling | Leaching/CIP, gravity circuit and refinery | 283,000 | 120,000 | 93 | % | |||||||||||||
Notes:
| (1) | Nameplate capacity as stated by the manufacturer. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. |
| (2) | The plant has gone through a number of upgrades andre-configurations over the years and has treated ore from different sources. The throughput capacity is in excess of three million tonnes per annum, however it is currently operated on a campaign basis of up to approximately 1.5 million tonnes per annum, and is only used to treat the ore from the Wallaby underground mine. |
| (3) |
Preparatory construction worksCapital Expenditure
Gold Fields spent A$121.0 million, or U.S.$90.0 million, on capital expenditures at Granny Smith in fiscal 2016, primarily on capital development, exploration and the establishment of new ventilation raises. Gold Fields has budgeted approximately A$114.7 million, or U.S.$84.1 million, for capital expenditures at Granny Smith in fiscal 2017. These funds are principally earmarked for development, exploration and procurement of mining equipment.
Darlot
Introduction
Darlot is located in the Eastern Yilgarn Craton, approximately 55 kilometers southeast of Leinster and some 700 kilometers northeast of Perth in Western Australia. It holds exploration licenses, prospecting licenses and mining leases covering a total area of approximately 13,981 hectares. Darlot is currently an underground operation. The Darlot operation obtains electricity pursuant to a contract with an electricity generating contractor that expires in March 2020 and has access to water, rail, air and road infrastructure. Consumables and supplies are trucked in locally from both Perth and Kalgoorlie.
History
Gold was first discovered in the Lake Darlot region in an alluvial field in late 1894, which triggered a gold rush that lasted until 1913.
Modern exploration commenced in the late 1970s and focused on are-evaluation of historical mining camps, and extensions and repetitions of known mineralized veins.
During August 1996, while diamond drilling astep-out program, a drill hole intersected a 33 meter section at a grade of 8.0g/t Au. This discovery drill hole for the Centenary orebody was approximately 1.2 kilometers east of the Darlot open pit. Underground development to the Centenary orebody from Darlot was initiated during December 1996 and by December 1998 stoping activities commenced. The Centenary orebody thereafter became the primary production source. Gold Fields acquired the mine in October 2013.
Geology
Darlot is located in the eastern portion of the Yilgarn Craton in Western Australia. The Yilgarn Craton is Archean-aged and comprises north-northwesterly trending greenstone belts and granitic intrusions. The Darlot Centenary deposit is located within the Mount Margaret mineral field which lies to the southern end of the Yandal Greenstone Belt.
The Centenary orebody is located approximately 1.2 kilometers east of the Darlot open pit and has been defined from approximately 150 to 700 meters below surface. Gold mineralization occurs withinsub-horizontal to 20 degrees westerly dipping stacked quartz veins bounded to the west by the Oval Fault and to the east by the Lords Fault.
Mining
The underground mine is accessed via two portals within the Darlot open pit, namely the Centenary and Millennium declines. A third decline named Federation with access to the underground mine is accessed from the Centenary decline. The mine issub-divided into two mining areas, the Darlot lodes and Centenary orebody. The former is thedown-dip extension of lodes, mined in the pit whereas the latter is located approximately 1.2 kilometers from the open pit. The Darlot lodes and Centenary orebody are furthersub-divided into various lodes and mining areas. A number of laddered raises connect levels to a fresh air base and declines. Decline and lateral development is by electro-hydraulic twin boom jumbos. Ore is transported to the processing plant by haul trucks operating through the two declines. Gold production takes place at Darlot solely from underground operations.
Sustained mining and extensions to the underground Lords South Lower, or LSL, area were achieved in fiscal 2016. During fiscal 2016, Darlot also started a decline to the Oval ore body which will become the primary ore source in fiscal 2017. This capital was funded from cash generated during the year.
In fiscal 2016, the continued focus remained on supporting self-funded integrated exploration programs to replace production depletion and to extend the LoM for Darlot. During the year, surface and underground exploration processes and methodologies were reviewed and a number of new exploration strategies and applications were initiated. In late fiscal 2016, work commenced on the new Far East Tailings Storage Facility,development and construction of an integrated three dimensional structural model for the mine and regional tenement area. The survey within a one kilometer radius of the existing mine will generate a three dimensional seismic cube to map out all potential structures and develop potential targets that could be accessed from the existing infrastructure. The survey is expected to be fully complete and interpreted by the end of March 2017.
Detailed below are the operating and production results at Darlot for fiscal 2016, 2015 and 2014.
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes (‘000) | 454 | 457 | 525 | |||||||||
Recovered grade (g/t) | 4.6 | 5.3 | 5.0 | |||||||||
Gold produced (‘000 oz) | 66 | 78 | 84 | |||||||||
Results of operations | ||||||||||||
Revenues (U.S.$ million) | 83.1 | 91.3 | 106.2 | |||||||||
Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(1) | 57.7 | 59.2 | 83.6 | |||||||||
All-in sustaining cost net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 1,238 | 1,057 | 1,222 | |||||||||
All-in costs net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 1,238 | 1,057 | 1,222 | |||||||||
Note:
| (1) | For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net ofby-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review andProspects—All-in Sustaining andAll-in Cost”. AIC and AISC are calculated per ounce of gold sold, excluding gold equivalent ounces. See “Operating and Financial Review andProspects—All-in Sustaining andAll-in Cost”. |
In fiscal 2016, gold production decreased by 15% to 0.07 million ounces from 0.08 million ounces in fiscal 2015, due to lower grades mined. Net operating costs decreased by 3% in 2016 to U.S.$57.7 million from U.S.$59.2 million in fiscal 2015 due to cost reductions in mining activities. Total AIC in Australian dollar terms increased by 18% due to lower gold output and higher capital expenditures, partially offset by lower operating costs. In U.S. dollar terms, total AIC increased to U.S.$1,238 per ounce in fiscal 2016 compared with U.S.$1,057 per ounce in fiscal 2015, due to lower gold sold and higher capital expenditures partially offset by lower operating costs.
Assuming that Gold Fields does not increase or FETSF,decrease reserves estimates at Darlot and that there are no changes to the current mine plan, Darlot’s December 31, 2016 proven and probable reserves of 0.06 million ounces will be sufficient to continue decreasing levels of production through early tomid-fiscal 2018. Without additional conversion or discovery, the production levels are however expected to decline over time. As discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors which can affect reserve estimates and the mine plan.
Darlot is engaged in underground mining and is thus subject to all of the underground mining risks discussed in “Risk Factors”. The primary safety risk at Darlot is falls of ground at the underground operations, which is addressed through the use of ground support and sequencing of mine operations to improve overall stability of the ground. For more information about workplace injuries at Darlot, see “Directors, Senior Management and Employees—Employees—Safety and Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”.
There were no strikes or material work stoppages at Darlot in fiscal 2016 and none to date since December 31, 2016.
Processing
Darlot has a mill that treats primary ore. The table below sets forth year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and metallurgical recovery factors during fiscal 2016, for the plant at Darlot.
Processing Techniques
Plant | Year commissioned | Comminution phase | Treatment phase | Capacity(1) | Average milled for fiscal 2016 | Approximate recovery factor for fiscal 2016(2) | ||||||||||||||
| (tonnes/month) | ||||||||||||||||||||
Darlot Mill | 1988 | Three stage crushing and two stage ball mills | CIL | 64,000 | 38,000 | 95 | % | |||||||||||||
Notes:
| (1) | Nameplate capacity as stated by the manufacturer. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. |
| (2) | Percentages are rounded to the nearest whole percent. |
Capital Expenditure
Gold Fields spent A$28.7 million, or U.S.$21.4 million, on capital expenditures at Darlot in fiscal 2016, primarily on exploration and capital development. Gold Fields has budgeted approximately A$11.8 million, or U.S.$8.4 million, for capital expenditures at Darlot in fiscal 2017. These funds are principally earmarked for capital development and exploration.
Americas Operations
Prior to fiscal 2013, Gold Fields owned a 98.5% economic interest in the Cerro Corona mine through its shareholding in La Cima. Gold Fields increased its economic interest in La Cima to 99.53% through a reduction in capital carried out in December 2013.
Cerro Corona
Introduction
The Cerro Corona mine became operational by the end of the third quarter of fiscal 2008. It forms part of a porphyry copper-gold deposit situated within the Hualgayoc Mining District in northern Peru. It is located in the highest part of the Western Cordillera of the Andes, in northern Peru, close to the headwaters of the Atlantic continental basin. Cerro Corona is located approximately 80 kilometers by road north of the City of Cajamarca. La Cima holds mining concessions covering a total area of approximately 4,400 hectares and Cerro Corona is being developed over an area of approximately 1,300 hectares of superficial land (the rights to which are held by Gold Fields). Cerro Corona’s electricity is supplied through a long-term contract with a Peruvian power supplier and transported through the national power transmission system and a 34 kilometer transmission line constructed by the project. Cerro Corona’s water requirements are provided primarily by retention of rainfall and pit dewatering; water is continuously recycled.
History
In December 2003, Gold Fields, through a subsidiary, signed a definitive agreement to purchase an 80.7% economic and 92% voting interest in the Cerro Corona mine from a Peruvian family-owned company, Sociedad Minera Corona S.A. The agreement called for a reorganization whereby the assets of Cerro Corona were transferred to La Cima, in July 2004. Following the approval of an environmental impact assessment, or EIA, on December 2, 2005, Gold Fields completed the purchase of the 92% voting interest (80.7% economic interest) in La Cima in January 2006, for a total consideration of U.S.$40.5 million. La Cima subsequently obtained all requisite additional permits to construct the mine. Construction commenced in fiscal 2013 but were suspended on September 13, 2013, when Abosso received noticeMay 2006.
Geology
The Cerro Corona gold-copper deposit is hosted by a600- to700-meter diametersub-vertical cylindrical-shaped quartz diorite porphyry stock emplaced intomid-Cretaceous limestone and marls and siliclastic rocks. Within the porphyry, gold-copper mineralization is primarily hosted by extensive zones of an application for an injunctionstockwork veining. There are at least two phases of diorite placement, only one of which is mineralized. Thenon-mineralized diorite is generally regarded as the last phase, and is referred to restrain it from proceedingas “barren core.” The latestre-modeling suggests that the Cerro Corona porphyry is probably composed of four or five satellite stocks with the FETSFlast two being barren. The intrusive has been emplaced at the intersection of Andean-parallel and Andeannormal (transandean) structures. Supergene oxidation and leaching processes at Cerro Corona have led to the development of a weak to moderate copper enrichment blanket, allowing for the subdivision of the deposit, from the surface downward, into an oxide zone, a mixed oxide-sulphide zone, a secondary enriched (supergene) sulphide zone and a primary (hypogene) sulphide zone.
Mining
The Cerro Corona deposit is mined by conventional, bulk surface mining methods. The Cerro Corona operation involves a single surface mine. This ore is treated in a conventional milling and sulphide flotation concentrator capable of treating 6.7 million tonnes per annum of ore and producing between 100,000 and 150,000 tonnes per annum of concentrate containing copper and gold, which is treated mainly at smelters in Japan and Germany.
The single largest contractor employer is San Martin Contratistas Generales S.A., or San Martin. San Martin carries out all mining activities. All mine planning, excavation and head grade and engineering specifications to meet the required design performance through the life of mine are directly managed by La Cima personnel. Other contractors provide camp administration and catering, security, safety and laboratory operations. In addition, approximately 500 temporary contractors are involved in the construction of the tailings facility.
Apre-feasibility study has been completed to determine if the prevailing tailings storage facility constraint on Cerro Corona’s mineral reserves could be lifted and allow for the basis that it was outside its mining lease area. placement of additional tailings material over the life of mine. The study builds on previous work by incorporating the latest design updates for the tailings storage facility, including optimization of the mine in the potential expanded case, as well as the assessment of additional new opportunities. In fiscal 2016, additional studies were completed (including a study for the possibility to increase the level of the tailings dam), and final assessment of the available opportunities and the preferred case is planned for fiscal 2017.
The option to process both oxide stockpiles and sulphide ore through the current sulphide plant in conjunction with each other is under review. During fiscal 2016, a number of studies with respect to treating the oxide stockpiles were conducted, including the completion of the flotation test work and leaching in tanks.
In fiscal 2014, Gold Fields settledextended its electricity supply agreement with these claimants and resumed work on the FETSF. A final five meter raiseprivate utility Kallpa Generacion S.A. to supply power to the East Tailings Storage Capacitymine until 2027.
Detailed below are the operating and production results at Cerro Corona in fiscal 2016, 2015 and 2014.
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes (‘000) | 6,977 | 6,710 | 6,797 | |||||||||
Gold Head grade (g/t) | 1.03 | 1.07 | 1.06 | |||||||||
Copper Head grade (%) | 0.53 | 0.52 | 0.58 | |||||||||
Combined yield (g/t) | 1.2 | 1.4 | 1.5 | |||||||||
Gold produced (‘000 oz) | 150 | 159 | 151 | |||||||||
Copper produced (‘000 tonnes) | 31 | 29 | 32 | (1) | ||||||||
Gold equivalent ounces (‘000 eq oz) | 270 | 296 | 327 | |||||||||
Results of operations | ||||||||||||
Revenues (U.S.$ million) | 322.3 | 292.2 | 375.5 | |||||||||
Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(2) | 139.9 | 144.8 | 159.7 | |||||||||
All-in sustaining cost net ofby-product revenue per ounce of gold sold (U.S.$)(2) | 499 | 718 | 316 | |||||||||
All-in costs net ofby-product revenue per ounce of gold sold (U.S.$)(2) | 499 | 718 | 316 | |||||||||
All-in sustaining cost gross ofby-product revenue per equivalent ounce of gold sold (U.S.$)(2) | 762 | 777 | 702 | |||||||||
All-in costs gross ofby-product revenue per equivalent ounce of gold sold (U.S.$)(2) | 762 | 777 | 702 | |||||||||
Notes:
| (1) | Equates to 136,700 ounces on a gold equivalent basis at a price of U.S.$1,163 per ounce of gold and U.S.$5,533 per tonnes of copper. |
| (2) | For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net ofby-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review andProspects—All-in Sustaining andAll-in Cost”. |
In fiscal 2016, total managed gold equivalent production decreased by 9% to 0.27 million equivalent ounces from 0.30 million equivalent ounces in fiscal 2015, mainly as a result of the lower gold-copper price ratio, lower gold head grades treated and reduced gold recoveries. Net operating costs decreased by 3% to U.S.$140.0 million from U.S.$145.0 million in fiscal 2015, mainly due to a U.S.$3.8 million buildup of concentrate inventory in fiscal 2016 compared to a U.S.$1.0 million drawdown in fiscal 2015. AISC and AIC amounted to U.S.$499 per ounce in fiscal 2016 compared with U.S.$718 per ounce in fiscal 2015 due to higherby-product credits and lower capital expenditure, partially offset by the drop in gold sold. AISC and AIC, on a gold equivalent basis, totaled
U.S.$762 per ounce in fiscal 2016 compared with U.S.$777 per ounce in fiscal 2015 due to higherby-product credits and lower capital expenditure, partially offset by the drop in gold sold.
Assuming that Gold Fields does not increase or decrease reserve estimates at Cerro Corona and that there are no changes to the current mine plan, Cerro Corona’s December 31, 2016 proven and probable reserves of 1.30 million ounces of gold and 456 million pounds of copper (of which, 1.30 million ounces of gold and 454 million pounds of copper are attributable to Gold Fields, with the remainder attributable tonon-controlling shareholders at La Cima) will be sufficient to maintain production through fiscal 2023 (seven years). However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors that can affect reserve estimates and the mine plan, which could thus materially change the life of mine.
The Cerro Corona mine involves open pit mining, and is also being consideredthus subject to all of the risks associated with open pit mining discussed in “Risk Factors”. For more information about workplace injuries at Cerro Corona, see “Directors, Senior Management and a detailed engineering studyEmployees—Employees—Safety and Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”.
Cerro Corona experienced no work stoppages in fiscal 2016 and has been commissioned.experienced none to date since December 31, 2016.
Processing
The following table sets forth year commissioned, processing techniques and processing capacity per month, for the processing plant at Cerro Corona:
Processing Techniques
Plant | Year commissioned | Comminution | Treatment phase | Capacity(1) | Average milled for fiscal 2016 | Approximate recovery factor for fiscal 2016(2) | ||||||||||||||
| (tonnes/month) | ||||||||||||||||||||
Main Plant | 2008 | SAG/ball milling | Conventional sulphide floatation circuit | 560,000 | 581,000 | | Gold 64.5% Copper 86.57 |
| ||||||||||||
Notes:
| (1) | Nameplate capacity as designed. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. |
| (2) | Percentages are rounded to the nearest whole percent. |
Capital Expenditure
On an IFRS basis (as included in the geographical and segment information included in Note 26 to the consolidated financial statements), Gold Fields spent U.S.$16.042.8 million on capital expenditures at the Damang operationCerro Corona in fiscal 2014, principally2016, primarily on the FETSF, heavy mining equipment, or HME, capital component replacementtailing dam storage and Huni and Juno resource drilling.waste storage construction. Gold Fields has budgeted approximately U.S.$1952.9 million for capital expenditures at DamangCerro Corona for fiscal 2015, principally2017, primarily on the tailings storage facility and the water treatment plant for the FETSF, HME sustaining capital component, capital waste mining and Huni and Juno resource drilling.tailings water.
Projects
Talas Copper-Gold Project
In northwestern Kyrgyzstan, Gold Fields owned a 100% interest in the Talas Copper-Gold Project which was previously with Orsu Metals Corporation, or Orsu. A transaction was completed on July 20, 2012 transferring the outstanding 40% of the project to Gold Fields for consideration of $10 million and a private placement for 25 million units of Orsu at a price of CAD$0.40 per unit, or the Subscription. Each unit consisted of one common share of Orsu and one-half of one common share purchase warrant. Each whole common share purchase warrant will be exercisable for a period of three years from the date of issue to acquire one common share of Orsu at a price of CAD$0.50.
The Talas Copper-Gold Project covered four exploration licenses which are prospective for copper-gold porphyry deposits. Gold Fields completed the sale of the Talas Copper-Gold Project to Robust Resources
Limited in March 2014. The proceeds included U.S.$2.0 million in cash and issuance of shares to the value of U.S.$2 million in Robust Resources Limited (which have subsequently been sold), as well as a two percent net smelter royalty of all future metals recovered from the concession.
Arctic Platinum Project
APP is located approximately 60 kilometers south of the city of Rovaniemi in northern Finland. APP is assessing a number of potential surface mineable platinum group elements plus copper and nickel deposits located within the Portimo and Narkaus mafic layered intrusions. The principal prospects under consideration occur within the Suhanko Project area, comprising of the Konttijarvi, Ahmavaara, and Suhanko North deposits. APP has been earmarked for disposal due to the focus of the Group’s strategy on gold deposits, following the dissolution of the Group’s GIP division in fiscal 2013. Pending the sale, Gold Fields has reduced the APP’s utilization of cash resources.
Yanfolila Project
Until June 2014, Gold Fields owned an 85% interest in the Yanfolila gold project in southwestern Mali (assuming a 10% interest will go to the Mali government upon granting of the mining license). Following the dissolution of the Group’s GIP division in late fiscal 2013 and the Group’s revision of its strategy (see “Information on the Company—Strategy”), the Yanifolila project was earmarked for disposal. In June 2014, Gold Fields sold its 85% interest in the Yanfolila project in Mali to London-listed Hummingbird Resources for U.S.$21.1 million in the form of Hummingbird shares.
Australasia Operations
On October 1, 2013, Gold Fields acquired the Yilgarn South Assets in Western Australia from Barrick. Gold Fields acquired the assets for a total net consideration of U.S.$262 million after adjustments for working capital and employee entitlements. Gold Fields satisfied the purchase price by delivering 28.7 million of its common shares to Barrick and U.S.$135 million in cash.
The Yilgarn South Assets consist of the Granny Smith Darlot and Lawlers gold mines. Following the acquisition, Gold Fields undertook a restructuring of its Australian operations which included the integration of Lawlers with Gold Fields’ adjacent Agnew mine.
Gold Fields’ Australian operations now consist of four gold mines: St. Ives, Agnew/Lawlers, Granny Smith and Darlot. Following the dissolution of the GIP division in fiscal 2013, Gold Fields relocated its exploration projects to its existing regional structures. As part of this restructuring, the Far Southeast Project now reports to the Australasia region.
St. Ives
Introduction
St. IvesGranny Smith is located 8027 kilometers southsouthwest of the town of Laverton in the Northern Goldfields of Western Australia and is accessible via the Mt. Weld Road. Laverton has sealed road to Perth, 950 kilometers to the southwest, and Kalgoorlie, and 20400 kilometers south of Kambalda, straddling Lake Lefroy in Western Australia. Itto the south.
Granny Smith holds exploration licenses, prospecting licenses and mining leases covering a total area of approximately 112,80072,236 hectares. St. Ives
The operation runs on afly-infly-out basis with variable rosters. A well-maintained unsealed airstrip located approximately eight kilometers northeast of the camp provides air access from Perth for the majority of employees. Flights are made four days per week and the average flight time is both a surface and underground operation, with a number of open pits, three operating underground mines and a metallurgical CIP plant. The St. Ives operation obtains electricity pursuant to a contract with BHP Nickel West that expires in January 2023 and has access to water, rail, air and road infrastructure. Consumables and supplies are trucked in locally from both Perth and Kalgoorlie.approximately 1.5 hours.
History
GoldThe Granny Smith deposits were discovered in 1987. In 1989, mining beganat Granny Smith commenced in the St. Ives areaGranny Smith pit and continued in 1897,subsequent years, with WMC commencing goldthe development of a series of open pits. In 1998 the Wallaby deposit was discovered 11 kilometers southwest of Granny Smith. In November 2001, the first Wallaby ore was delivered to the mill.
The Wallaby Open Pit was mined from October 2001 until December 2006. Underground mining operations at St. IvesWallaby commenced in 1980.December 2005 and is ongoing. As noted above, Gold Fields acquired the St. Ives gold mining operation from WMCmine in November 2001.October 2013.
Geology
The gold deposits of St. Ives areGranny Smith is located at the southern end of the Norseman-Wiluna greenstone belt of the West Australian Goldfields Province. In the St. Ives area, the belt consists of Kalgoorlie Group volcanic rocks, Black Flag group felsic volcanic rocks and sediments and a variety of intrusive and overlying post-tectonic sediments. The area is structurally complex, with host rocks metamorphosed to upper greenschist and lower amphibolite facies. Gold mineralization discovered to date is best developed in the mafic-dominated partsEastern Yilgarn Craton. At a regional scale, the map patterns of Laverton are dominated by the sequence, hostedMt. Margaret Dome in minor structures, including vein arrays, brecciathe northwest and the Kirgella Dome in the southeast. These domes are flanked to the east and west by north-northwest-striking shear zones, and the central quartz-rich and mylonitic parts ofzone between the two domes is dominated by north to north-northeast-striking sigmoidal shear zones. Deposit stylesThese distinctly different strikes to the shear zones developed early in the tectonic evolution and ore controls are varied, but deposits are commonly associated with subsidiary structures which splay off the regionally extensive Boulder-Lefroy Fault.resulted in a favorable architecture for late-stage orogenic gold mineralization.
Mining
Gold production takes place over an extensive tenement area at St. Ives. St. IvesThe Wallaby underground operation has been in operation since December 2005. Access to the Lefroy processing plantWallaby underground mine is via a portal established within the completed Wallaby open pit. The mine operation is trackless, with truck haulage from underground via the ramp to the surface. The Wallaby underground mine is currently designed to exploit six stacked mineralized lodes to a depth of 1.1 kilometers.
Two primary underground mining methods are used, with minor adjustments to suit localized geometry. Inclined room and SAG mill that treats primary ore. St. Ives previously hadpillar is used in areas with a heap leach facilitymoderate dip and moderate width zones, and transverse longhole stoping is used in zones which treated low-are thicker (six to 15 meters) with variable dips. Two other mining methods are used to a lesser extent. Narrow vein longhole stoping may be utilized in some areas with the benefit of reduced planned footwall dilution, and marginal-grade ore. This heap leach facility operatedbulk longhole stoping is used in a residual leach mode during fiscal 2013 and 2014. It will continue to do so during fiscal 2015.thicker zones under varying dip conditions.
In fiscal 2014, St. Ives reported decreased production and decreased operational costs.2016, Granny Smith continued its extensive program of mine development. The mine development program advanced 6.1km of horizontal capital development to provide access to lower production was due to higher-than-average rainfall in the first quarter of fiscal 2014 which inhibited open-pit operationsore horizons at the Neptune operation and the closureWallaby mine. Extensive vertical development was also undertaken to enhance ventilation to access these lower levels.
The exploration activity was on a range of the underground Argo operation in the first quarter of fiscal 2014. The decreased operational costs were due to, among other things, lower volumes of material moved in the open pit and underground operations.
Capital development has commenced on the newly discovered high-grade Invincible deposit with a view to first open pit production during the second quarter of fiscal 2015. Neptune open pit stage 1 mining was completed in fiscal 2014, and evaluation of future stages is currently underway. The Cave Rocks and Athena underground mines are nearing completion and mining of final stopes is scheduled in the middle of fiscal 2015 for Cave Rocks and the end of fiscal 2015 for Athena.
Exploration ofactivities from early stage targets alongtarget identification through to the highly prospective Invincible (Speedway) trend have provided positive results. Ongoing evaluationdefinition of extensions to the Wallaby deposit. Granny Smith was again successful in extending reserves, replacing the full 323,000 oz of gold mined and elimination of marginal mineral reserves has contributedadding a further 375,000 mineable ounces to improved quality but lower volumes, primarily at the Greater Santa Ana and Cave Rocks mines.it reserve.
Detailed below are the operating and production results at St. IvesGranny Smith for fiscal 2012, 20132016, 2015 and 2014.
| Fiscal 2012 | Fiscal 2013 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes (‘000) | 7,038 | 4,763 | 4,553 | |||||||||
Recovered grade (g/t) | 2.0 | 2.6 | 2.4 | |||||||||
Gold produced (‘000 oz) | 450 | 403 | 362 | |||||||||
Results of operations ($ million) | ||||||||||||
Revenues | 752.2 | 569.0 | 458.8 | |||||||||
Operating costs (excluding amortization and depreciation)(1) | 378.0 | 345.5 | 292.3 | |||||||||
All-in sustaining cost net of by-product revenues per ounce of gold sold ($)(1) | 1,659 | 1,218 | 1,164 | |||||||||
All-in costs net of by-product revenues per ounce of gold sold ($)(1) | 1,659 | 1,218 | 1,164 | |||||||||
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes (‘000) | 1,446 | 1,451 | 1,472 | |||||||||
Recovered grade (g/t) | 6.1 | 6.5 | 6.7 | |||||||||
Gold produced (‘000 oz) | 284 | 301 | 315 | |||||||||
Results of operations | ||||||||||||
Revenues (U.S.$ million) | 355.8 | 348.4 | 399.8 | |||||||||
Operating costs (excluding amortization and depreciation) (U.S.$ million)(1) | 133.8 | 141.3 | 182.6 | |||||||||
All-in sustaining cost net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 834 | 764 | 809 | |||||||||
All-in costs net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 834 | 764 | 809 | |||||||||
Notes:Note:
| (1) | For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation |
FromIn fiscal 2013 to fiscal 2014, ore processed at St. Ives decreased from 4.763 million tonnes to 4,553 million tonnes, respectively, due to a failure of the grinding circuit which resulted in a five-day maintenance shut-down in June and reduced throughput in the fourth quarter of fiscal 2014, due to the processing characteristics of the Neptune ore. Gold2016, gold production decreased by 10.2%6% to 0.3620.28 million ounces from 0.30 million ounces in fiscal 2014 compared to 0.403 million ounces achieved during fiscal 20132015, primarily due to the reduced throughput, closurelower grades and an increase in stockpiled ore because of the Argo underground mine and delayed productiontiming of the December milling campaign. Net operating costs decreased by 5% to U.S.$133.8 million from the open pitsU.S.$141.3 million in fiscal 2015, primarily due to two significant rainfall eventshigher mining cost as a result of higher mining volumes offset by agold-in-process credit to cost associated with the timing of milling campaigns. Total AIC in the first quarterAustralian dollar terms increased by 10% due to a drop in gold output and higher capital expenditures, partially offset by lower net operating costs. In U.S. dollar terms, total AIC increased to U.S.$834 per ounce in fiscal 2016 compared with U.S.$764 per ounce in fiscal 2015 as a result of fiscal 2014.lower gold sold and higher capital expenditure partially offset by lower operating costs.
Assuming that Gold Fields does not increase or decrease reserves estimates at St. IvesGranny Smith and that there are no changes to the current mine plan, St. Ives’Granny Smith’s December 31, 20142016 proven and probable reserves of 1.801.7 million ounces will be sufficient to maintain production through approximately fiscal 2020.2025. However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors which can affect reserve estimates and the mine plan, which could thus materially change the life of mine.
St. IvesGranny Smith is engaged in underground mining and in both open pit and production stockpile surface mining and is thus subject to all of the underground and surface mining risks discussed in “Risk Factors”. The primary safety risk at St. IvesGranny Smith is falls of ground at the underground operations, which is addressed through the use of ground support, paste fillingbackfilling of open stopesvoids and sequencing of mine operations to improve overall stability of the ground. For more information about workplace injuries at St. Ives,Granny Smith, see “Directors, Senior Management and Employees—Employees—HealthSafety and Safety—Safety”Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”.
There were no strikes and/or material work stoppages at St. IvesGranny Smith in fiscal 20142016 and none to date in fiscal 2015.since December 31, 2016.
Processing
The Granny Smith processing plant consists of a crushing circuit, SAG and ball milling, leach and CIP circuits and a gravity tailings retreatment circuit to concentrate and fine-grind sulphide minerals, primarily pyrite, for gold recovery. As the processing plant was designed to treat much larger tonnages of open pit ore than the tonnages that the Wallaby underground mine can supply, the plant is run on a campaign basis.
The table below sets forthprovides details of the Granny Smith plant, including year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and metallurgical recovery factors during fiscal 2014, for the plant at St. Ives.2016.
Processing Techniques
Plant | Year commissioned | Comminution phase | Treatment phase | Capacity(1) | Average milled for fiscal 2014 | Approximate recovery factor for fiscal 2014(2) | Year commissioned | Comminution phase | Treatment phase | Capacity(1)(2) | Average milled for fiscal 2016 | Approximate recovery factor for fiscal 2016(3) | ||||||||||||||||||||||||||||
| (tonnes/month) | (tonnes/month) | |||||||||||||||||||||||||||||||||||||||
Lefroy Plant | 2005 | Single-stage crushing and SAG milling | CIP | 375,000 | 379,417 | 94 | % | |||||||||||||||||||||||||||||||||
Granny Smith Processing Facility | 1990 | Crushing and SAG and Ball milling | Leaching/CIP, gravity circuit and refinery | 283,000 | 120,000 | 93 | % | |||||||||||||||||||||||||||||||||
Notes:
| (1) | Nameplate capacity as |
| (2) | The plant has gone through a number of upgrades andre-configurations over the years and has treated ore from different sources. The throughput capacity is in excess of three million tonnes per annum, however it is currently operated on a campaign basis of up to approximately 1.5 million tonnes per annum, and is only used to treat the ore from the Wallaby underground mine. |
| (3) | Percentages are rounded to the nearest whole percent. |
Capital Expenditure
On an IFRS basis (as included in the geographical and segment information included in Note 26 to the consolidated financial statements), Gold Fields spent A$130.1121.0 million, or U.S.$117.590.0 million, on capital expenditures at St. IvesGranny Smith in fiscal 20142016, primarily on undergroundcapital development, exploration and capital works.the establishment of new ventilation raises. Gold Fields has budgeted approximately A$157114.7 million, or U.S.$84.1 million, for capital expenditures at St. IvesGranny Smith in fiscal 2015.2017. These funds are principally earmarked for development, exploration underground development, capital wasteand procurement of mining capital works and pre-strip of the Invincible open pit.equipment.
Agnew/LawlersDarlot
Introduction
Agnew/LawlersDarlot is located 23in the Eastern Yilgarn Craton, approximately 55 kilometers westsoutheast of Leinster approximately 375and some 700 kilometers north of Kalgoorlie and 630 kilometers northwestnortheast of Perth in Western Australia. Together, Agnew and Lawlers holdIt holds exploration licenses, prospecting licenses and mining leases covering a total area of approximately 69,30013,981 hectares. During fiscal 2014, ore was mined from the Waroonga and New HollandDarlot is currently an underground mines.
Agnew/Lawlers has one metallurgical plant inoperation. The Darlot operation and is serviced by sealed road infrastructure to the mine gate. Supplies are generally trucked in from Perth or Kalgoorlie. Agnew is largely a fly-in fly-out operation with local services, including air transport with a sealed runway and accommodation, provided pursuant to an arrangement with a nearby major mining company. Agnew has access toobtains electricity pursuant to a contract with the same major mining company as St. Ives which expired onan electricity generating contractor that expires in March 31, 2014, following which it was extended by interim agreements until June 2014 when a new PPA2020 and has access to supply electricity until May 31, 2019 was agreed. The bulk of the water, is suppliedrail, air and road infrastructure. Consumables and supplies are trucked in locally from the mining operationsboth Perth and recovered from the in-pit tailings facility and previously mined pits. Gold Fields closed the Lawlers processing plant following the acquisition of the Yilgarn South Assets. As part of the integration of the Agnew and Lawlers mines, the plant remains on care and maintenance.Kalgoorlie.
History
Gold was first discovered in the Lake Darlot region in an alluvial field in late 1894, which triggered a gold rush that lasted until 1913.
Modern exploration commenced in the late 1970s and focused on are-evaluation of historical mining camps, and extensions and repetitions of known mineralized veins.
During August 1996, while diamond drilling astep-out program, a drill hole intersected a 33 meter section at Agnew in 1895a grade of 8.0g/t Au. This discovery drill hole for the Centenary orebody was approximately 1.2 kilometers east of the Darlot open pit. Underground development to the Centenary orebody from Darlot was initiated during December 1996 and by December 1998 stoping activities commenced. The Centenary orebody thereafter became the primary production was intermittent until WMCsource. Gold Fields acquired the operationmine in the early 1980s and constructed the current mill in 1986. Since that time, numerous open pits and underground operations have been mined.
Gold was discovered around the same time at Lawlers. In 1984, Forsayth NL purchased the Great Eastern lease and constructed the Lawlers processing plant, or the Lawlers Mill. Modern open pit mining commenced in 1986. Genesis open pit mining commenced in 1991 with Fairyland open pit mining commencing in 1997. New Holland underground mine opened in 1998 and in 2001 Barrick acquired Lawlers as part of its merger with Homestake. In 2013, Gold Fields purchased Lawlers from Barrick, mining was stopped at Fairyland and the Lawlers Mill was placed on care and maintenance.October 2013.
Geology
Darlot is located in the eastern portion of the Yilgarn Craton in Western Australia. The AgnewYilgarn Craton is Archean-aged and Lawlers deposits arecomprises north-northwesterly trending greenstone belts and granitic intrusions. The Darlot Centenary deposit is located within the northwest portionMount Margaret mineral field which lies to the southern end of the Norseman-Wiluna greenstone beltYandal Greenstone Belt.
The Centenary orebody is located approximately 1.2 kilometers east of the Western Australian Goldfields. This greenstone belt consists of an older sequence of ultramafic flows, gabbros, basalts, felsic volcanicsDarlot open pit and related sedimentary rocks. The rocks are folded abouthas been defined from approximately 150 to 700 meters below surface. Gold mineralization occurs withinsub-horizontal to 20 degrees westerly dipping stacked quartz veins bounded to the large, moderately north plunging Lawlers Anticline. The Agnew deposits are located onwest by the western limb of this anticline,Oval Fault and major deposits discovered to date lie on sheared contacts between stratigraphic units. The anticline is cutthe east by north-northeast trending faults such as the Waroonga and East Murchison Unit shear zones. The Lawlers deposits occur along the eastern limb of the Lawlers Anticline with the main Genesis-New Holland deposit located within the Scotty Creek Sediments west of Waroonga.Lords Fault.
Mining
The principal production sources at Agnew/Lawlers areunderground mine is accessed via two portals within the Waroonga and New Holland underground mining complexes. The northern cutback of the SongvangDarlot open pit, was completed in 2012namely the Centenary and this ore has supplemented underground feedMillennium declines. A third decline named Federation with access to the Agnew Mill.underground mine is accessed from the Centenary decline. The mine issub-divided into two mining method at Waroonga involves longholeareas, the Darlot lodes and Centenary orebody. The former is thedown-dip extension of lodes, mined in the pit whereas the latter is located approximately 1.2 kilometers from the open stoping with paste filling. Accesspit. The Darlot lodes and Centenary orebody are furthersub-divided into various lodes and mining areas. A number of laddered raises connect levels to a fresh air base and declines. Decline and lateral development is by electro-hydraulic twin boom jumbos. Ore is transported to the processing plant by haul trucks operating through the two declines. Gold production takes place at Darlot solely from underground operations.
Sustained mining and extensions to the underground Lords South Lower, or LSL, area were achieved in fiscal 2016. During fiscal 2016, Darlot also started a decline to the Oval ore body is through a decline tunnel which accommodates workers, materials and equipment.
Atwill become the New Holland underground mine at Lawlers,primary ore source in fiscal 2017. This capital was funded from cash generated during the selection of the stoping method is dependent upon the geometry of the ore structure. Two primary methods are employed: uphole retreat open stoping and room and pillar longhole. Access to the mine is via two declines.
At both Waroonga and New Holland, ore is trucked to a mine ore pad located at the base of either the Waroonga or New Holland open pits, where it is then hauled to the Agnew processing facility using haul trucks operated by a contractor.year.
In fiscal 2014, Agnew/Lawlers reported increased2016, the continued focus remained on supporting self-funded integrated exploration programs to replace production duedepletion and to extend the fullLoM for Darlot. During the year, impactsurface and underground exploration processes and methodologies were reviewed and a number of new exploration strategies and applications were initiated. In late fiscal 2016, work commenced on the development and construction of an integrated three dimensional structural model for the mine and regional tenement area. The survey within a one kilometer radius of the acquisition ofexisting mine will generate a three dimensional seismic cube to map out all potential structures and develop potential targets that could be accessed from the Lawlers mine.
At the Waroonga mine, access development has begun into the new high-grade, underground FBH deposit, or FBH, where first productionexisting infrastructure. The survey is expected duringto be fully complete and interpreted by the fourth quarterend of fiscal 2015. Continued delineation of the high-grade ore shoots beneath Main North – FBH reflected improved mineral reserves in fiscal 2014. Exploration drilling to the north of Kim lode has continued to return positive results from the Kath and Waroonga North projects, with initial resource models expected in fiscal 2015. Drilling at Cinderella has confirmed the interpretation and increased the size of two targeted lodes at depths of approximately 80 and 140m. Higher grade shoots have been interpreted within the Main North and Main South lodes during 2014. Capital development to mine FBH commenced in late fiscal 2014 and is progressing on plan.March 2017.
Detailed below are the operating and production results at AgnewDarlot for fiscal 2012, 20132016, 2015 and 2014. Lawlers amounts are included for the fourth quarter of fiscal 2013 and fiscal 2014.
| Fiscal 2012 | Fiscal 2013(1) | Fiscal 2014(1) | ||||||||||
Production | ||||||||||||
Tonnes (‘000) | 943 | 974 | 1,246 | |||||||||
Recovered grade (g/t) | 5.8 | 6.9 | 6.8 | |||||||||
Gold produced (‘000 oz) | 177 | 216 | 271 | |||||||||
Results of operations ($ million) | ||||||||||||
Revenues | 294.4 | 302.8 | 342.5 | |||||||||
Operating costs (excluding amortization and depreciation)(2) | 148.1 | 135.0 | 173.0 | |||||||||
All-in sustaining cost net of by-product revenues per ounce of gold sold ($)(2) | 1,253 | 909 | 990 | |||||||||
All-in costs net of by-product revenues per ounce of gold sold ($)(2) | 1,253 | 909 | 990 | |||||||||
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes (‘000) | 454 | 457 | 525 | |||||||||
Recovered grade (g/t) | 4.6 | 5.3 | 5.0 | |||||||||
Gold produced (‘000 oz) | 66 | 78 | 84 | |||||||||
Results of operations | ||||||||||||
Revenues (U.S.$ million) | 83.1 | 91.3 | 106.2 | |||||||||
Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(1) | 57.7 | 59.2 | 83.6 | |||||||||
All-in sustaining cost net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 1,238 | 1,057 | 1,222 | |||||||||
All-in costs net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 1,238 | 1,057 | 1,222 | |||||||||
Notes:Note:
| (1) |
| For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation |
FromIn fiscal 20132016, gold production decreased by 15% to fiscal 2014, tonnes of ore processed at Agnew increased0.07 million ounces from 0.974 million tonnes to 1,246 million tonnes. Gold production increased to 0.2710.08 million ounces in fiscal 2014 compared2015, due to 0.216lower grades mined. Net operating costs decreased by 3% in 2016 to U.S.$57.7 million ouncesfrom U.S.$59.2 million in fiscal 20132015 due to Lawlers being included for the full yearcost reductions in 2014 as opposedmining activities. Total AIC in Australian dollar terms increased by 18% due to only one quarterlower gold output and higher capital expenditures, partially offset by lower operating costs. In U.S. dollar terms, total AIC increased to U.S.$1,238 per ounce in 2013.fiscal 2016 compared with U.S.$1,057 per ounce in fiscal 2015, due to lower gold sold and higher capital expenditures partially offset by lower operating costs.
Assuming that Gold Fields does not increase or decrease reserves estimates at Agnew/LawlersDarlot and that there are no changes to the current mine plan, theDarlot’s December 31, 20142016 proven and probable reserves at 0.87of 0.06 million ounces will be sufficient to maintaincontinue decreasing levels of production at Agnew/Lawlers through approximately fiscal 2019. However, asearly tomid-fiscal 2018. Without additional conversion or discovery, the production levels are however expected to decline over time. As discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management,”Management”, there are numerous factors which can affect reserve estimates and the mine plan, which could thus materially change the life of mine.
Agnew/LawlersDarlot is engaged in underground mining and reclaiming stockpiles arising from the mined out Songvang operation. Agnew/Lawlers is thus subject to all of the underground and surface mining risks discussed in “Risk Factors”. The primary safety risk at Waroonga is falls of ground at the underground operations, which is addressed through the use of ground support, paste filling of open stopes and sequencing of mine operations to improve overall stability of the ground. The primary safety risk at New HollandDarlot is falls of ground at the underground operations, which is addressed through the use of ground support and sequencing of mine operations to improve overall stability of the ground. For more information about workplace injuries at Agnew/Lawlers,Darlot, see “Directors, Senior Management and Employees—Employees—HealthSafety and Safety—Safety”Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”.
There were no strikes or material work stoppages at Agnew/LawlersDarlot in fiscal 20142016 and none to date in fiscal 2015.since December 31, 2016.
Processing
All processing at Agnew/Lawlers is provided through byDarlot has a single processing facility.mill that treats primary ore. The following table below sets forth year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and the metallurgical recovery factorfactors during fiscal 20142016, for the plant. The Lawlers Mill was placed on a care and maintenance basis after existing stockpiles were treated shortly after the acquisition was completed.plant at Darlot.
Processing Techniques
Plant | Year commissioned | Comminution | Treatment phase | Capacity(1) | Average milled for fiscal 2014 | Approximate recovery factor for fiscal 2014(2) | Year commissioned | Comminution phase | Treatment phase | Capacity(1) | Average milled for fiscal 2016 | Approximate recovery factor for fiscal 2016(2) | ||||||||||||||||||||||||||||
| (tonnes/month) | (tonnes/month) | |||||||||||||||||||||||||||||||||||||||
Agnew Mill | 1986 | Two-stage ball milling | CIP treatment | 100,000 | 103,863 | 94 | % | |||||||||||||||||||||||||||||||||
Darlot Mill | 1988 | Three stage crushing and two stage ball mills | CIL | 64,000 | 38,000 | 95 | % | |||||||||||||||||||||||||||||||||
Notes:
| (1) | Nameplate capacity as stated by the manufacturer. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. |
| (2) | Percentages are rounded to the nearest whole percent. |
Capital Expenditure
On an IFRS basis (as included in the geographical and segment information included in Note 26 to the consolidated financial statements), Gold Fields spent A$92.328.7 million, or U.S.$83.421.4 million, on capital expenditures at AgnewDarlot in fiscal 2014,2016, primarily on mine development, exploration and capital works.development. Gold Fields has budgeted approximately A$8411.8 million, or U.S.$8.4 million, for capital expenditures at AgnewDarlot in fiscal 2017. These funds are principally earmarked for capital development and exploration.
Americas Operations
Prior to fiscal 2013, Gold Fields owned a 98.5% economic interest in the Cerro Corona mine through its shareholding in La Cima. Gold Fields increased its economic interest in La Cima to 99.53% through a reduction in capital carried out in December 2013.
Cerro Corona
Introduction
The Cerro Corona mine became operational by the end of the third quarter of fiscal 2008. It forms part of a porphyry copper-gold deposit situated within the Hualgayoc Mining District in northern Peru. It is located in the highest part of the Western Cordillera of the Andes, in northern Peru, close to the headwaters of the Atlantic continental basin. Cerro Corona is located approximately 80 kilometers by road north of the City of Cajamarca. La Cima holds mining concessions covering a total area of approximately 4,400 hectares and Cerro Corona is being developed over an area of approximately 1,300 hectares of superficial land (the rights to which are held by Gold Fields). Cerro Corona’s electricity is supplied through a long-term contract with a Peruvian power supplier and transported through the national power transmission system and a 34 kilometer transmission line constructed by the project. Cerro Corona’s water requirements are provided primarily by retention of rainfall and pit dewatering; water is continuously recycled.
History
In December 2003, Gold Fields, through a subsidiary, signed a definitive agreement to purchase an 80.7% economic and 92% voting interest in the Cerro Corona mine from a Peruvian family-owned company, Sociedad Minera Corona S.A. The agreement called for a reorganization whereby the assets of Cerro Corona were transferred to La Cima, in July 2004. Following the approval of an environmental impact assessment, or EIA, on December 2, 2005, Gold Fields completed the purchase of the 92% voting interest (80.7% economic interest) in La Cima in January 2006, for a total consideration of U.S.$40.5 million. La Cima subsequently obtained all requisite additional permits to construct the mine. Construction commenced in May 2006.
Geology
The Cerro Corona gold-copper deposit is hosted by a600- to700-meter diametersub-vertical cylindrical-shaped quartz diorite porphyry stock emplaced intomid-Cretaceous limestone and marls and siliclastic rocks. Within the porphyry, gold-copper mineralization is primarily hosted by extensive zones of stockwork veining. There are at least two phases of diorite placement, only one of which is mineralized. Thenon-mineralized diorite is generally regarded as the last phase, and is referred to as “barren core.” The latestre-modeling suggests that the Cerro Corona porphyry is probably composed of four or five satellite stocks with the last two being barren. The intrusive has been emplaced at the intersection of Andean-parallel and Andeannormal (transandean) structures. Supergene oxidation and leaching processes at Cerro Corona have led to the development of a weak to moderate copper enrichment blanket, allowing for the subdivision of the deposit, from the surface downward, into an oxide zone, a mixed oxide-sulphide zone, a secondary enriched (supergene) sulphide zone and a primary (hypogene) sulphide zone.
Mining
The Cerro Corona deposit is mined by conventional, bulk surface mining methods. The Cerro Corona operation involves a single surface mine. This ore is treated in a conventional milling and sulphide flotation concentrator capable of treating 6.7 million tonnes per annum of ore and producing between 100,000 and 150,000 tonnes per annum of concentrate containing copper and gold, which is treated mainly at smelters in Japan and Germany.
The single largest contractor employer is San Martin Contratistas Generales S.A., or San Martin. San Martin carries out all mining activities. All mine planning, excavation and head grade and engineering specifications to meet the required design performance through the life of mine are directly managed by La Cima personnel. Other contractors provide camp administration and catering, security, safety and laboratory operations. In addition, approximately 500 temporary contractors are involved in the construction of the tailings facility.
Apre-feasibility study has been completed to determine if the prevailing tailings storage facility constraint on Cerro Corona’s mineral reserves could be lifted and allow for the placement of additional tailings material over the life of mine. The study builds on previous work by incorporating the latest design updates for the tailings storage facility, including optimization of the mine in the potential expanded case, as well as the assessment of additional new opportunities. In fiscal 2016, additional studies were completed (including a study for the possibility to increase the level of the tailings dam), and final assessment of the available opportunities and the preferred case is planned for fiscal 2017.
The option to process both oxide stockpiles and sulphide ore through the current sulphide plant in conjunction with each other is under review. During fiscal 2016, a number of studies with respect to treating the oxide stockpiles were conducted, including the completion of the flotation test work and leaching in tanks.
In fiscal 2014, Gold Fields extended its electricity supply agreement with private utility Kallpa Generacion S.A. to supply power to the mine until 2027.
Detailed below are the operating and production results at Cerro Corona in fiscal 2016, 2015 and 2014.
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes (‘000) | 6,977 | 6,710 | 6,797 | |||||||||
Gold Head grade (g/t) | 1.03 | 1.07 | 1.06 | |||||||||
Copper Head grade (%) | 0.53 | 0.52 | 0.58 | |||||||||
Combined yield (g/t) | 1.2 | 1.4 | 1.5 | |||||||||
Gold produced (‘000 oz) | 150 | 159 | 151 | |||||||||
Copper produced (‘000 tonnes) | 31 | 29 | 32 | (1) | ||||||||
Gold equivalent ounces (‘000 eq oz) | 270 | 296 | 327 | |||||||||
Results of operations | ||||||||||||
Revenues (U.S.$ million) | 322.3 | 292.2 | 375.5 | |||||||||
Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(2) | 139.9 | 144.8 | 159.7 | |||||||||
All-in sustaining cost net ofby-product revenue per ounce of gold sold (U.S.$)(2) | 499 | 718 | 316 | |||||||||
All-in costs net ofby-product revenue per ounce of gold sold (U.S.$)(2) | 499 | 718 | 316 | |||||||||
All-in sustaining cost gross ofby-product revenue per equivalent ounce of gold sold (U.S.$)(2) | 762 | 777 | 702 | |||||||||
All-in costs gross ofby-product revenue per equivalent ounce of gold sold (U.S.$)(2) | 762 | 777 | 702 | |||||||||
Notes:
| (1) | Equates to 136,700 ounces on a gold equivalent basis at a price of U.S.$1,163 per ounce of gold and U.S.$5,533 per tonnes of copper. |
| (2) | For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net ofby-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review andProspects—All-in Sustaining andAll-in Cost”. |
In fiscal 2016, total managed gold equivalent production decreased by 9% to 0.27 million equivalent ounces from 0.30 million equivalent ounces in fiscal 2015, mainly as a result of the lower gold-copper price ratio, lower gold head grades treated and reduced gold recoveries. Net operating costs decreased by 3% to U.S.$140.0 million from U.S.$145.0 million in fiscal 2015, mainly due to a U.S.$3.8 million buildup of concentrate inventory in fiscal 2016 compared to a U.S.$1.0 million drawdown in fiscal 2015. AISC and AIC amounted to U.S.$499 per ounce in fiscal 2016 compared with U.S.$718 per ounce in fiscal 2015 due to higherby-product credits and lower capital expenditure, partially offset by the drop in gold sold. AISC and AIC, on a gold equivalent basis, totaled
U.S.$762 per ounce in fiscal 2016 compared with U.S.$777 per ounce in fiscal 2015 due to higherby-product credits and lower capital expenditure, partially offset by the drop in gold sold.
Assuming that Gold Fields does not increase or decrease reserve estimates at Cerro Corona and that there are no changes to the current mine plan, Cerro Corona’s December 31, 2016 proven and probable reserves of 1.30 million ounces of gold and 456 million pounds of copper (of which, 1.30 million ounces of gold and 454 million pounds of copper are attributable to Gold Fields, with the remainder attributable tonon-controlling shareholders at La Cima) will be sufficient to maintain production through fiscal 2023 (seven years). However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors that can affect reserve estimates and the mine plan, which could thus materially change the life of mine.
The Cerro Corona mine involves open pit mining, and is thus subject to all of the risks associated with open pit mining discussed in “Risk Factors”. For more information about workplace injuries at Cerro Corona, see “Directors, Senior Management and Employees—Employees—Safety and Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”.
Cerro Corona experienced no work stoppages in fiscal 2016 and has experienced none to date since December 31, 2016.
Processing
The following table sets forth year commissioned, processing techniques and processing capacity per month, for the processing plant at Cerro Corona:
Processing Techniques
Plant | Year commissioned | Comminution | Treatment phase | Capacity(1) | Average milled for fiscal 2016 | Approximate recovery factor for fiscal 2016(2) | ||||||||||||||
| (tonnes/month) | ||||||||||||||||||||
Main Plant | 2008 | SAG/ball milling | Conventional sulphide floatation circuit | 560,000 | 581,000 | | Gold 64.5% Copper 86.57 |
| ||||||||||||
Notes:
| (1) | Nameplate capacity as designed. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. |
| (2) | Percentages are rounded to the nearest whole percent. |
Capital Expenditure
Gold Fields spent U.S.$42.8 million on capital expenditures at Cerro Corona in fiscal 2016, primarily on tailing dam storage and waste storage construction. Gold Fields has budgeted approximately U.S.$52.9 million for exploration, mine developmentcapital expenditures at Cerro Corona for fiscal 2017, primarily on the tailings storage facility and capital works.the water treatment plant for tailings water.
Projects
Granny Smith
Introduction
Granny Smith is located approximately 400 kilometers northeast of the town of Kalgoorlie in the Laverton Region in the Eastern Yilgarn Crater in Western Australia. Granny Smith is situated at an elevation of 400 meters above sea level.
Granny Smith is located 27 kilometers southwest of the town of Laverton in the Northern Goldfields of Western Australia and is accessible via the Mt. Weld Road. Laverton is 950 kilometers southeast by sealed road from Perth, and 400 kilometers south byhas sealed road to Kalgoorlie. Perth, 950 kilometers to the southwest, and Kalgoorlie, 400 kilometers to the south.
Granny Smith holds exploration licenses, prospecting licenses and mining leases covering a total area of approximately 64,30072,236 hectares.
The operation runs on a fly-in fly-outfly-infly-out basis with variable rosters. A well-maintained unsealed airstrip located approximately eight kilometers northeast of the camp provides air access from Perth for the majority of employees. Flights are made on weekdaysfour days per week and the average flight time is approximately two1.5 hours.
History
The Granny Smith deposits were discovered in 1987. In 1989, mining at Granny Smith commenced in the Granny Smith pit and continued in subsequent years, with the development of a series of open pits, including Wallaby. In 1990, the first gold from Granny Smith was poured.pits. In 1998 the Wallaby deposit was discovered 11 kilometers southwest of Granny Smith. In November 2001, the first Wallaby ore was delivered to the mill.
The Wallaby Open Pit was mined from October 2001 until December 2006. Underground mining at Wallaby commenced in December 2005 and is ongoing. As noted above, Gold Fields acquired the mine in October 2013.
Geology
The Laverton region,Granny Smith is located in the Eastern Yilgarn Craton in Western Australia, is second only to the Kalgoorlie region for gold endowment.Craton. At a regional scale, the map patterns of Laverton are dominated by the Mt. Margaret Dome in the northwest and the Kirgella Dome in the southeast. These domes are flanked to the east and west by north-northwest-striking shear zones, and the central zone between the two domes is dominated by north to north-northeast-striking sigmoidal shear zones. These distinctly different strikes to the shear zones developed early in the tectonic evolution and resulted in a favorable architecture for late-stage orogenic gold mineralization.
Mining
The Wallaby underground operation has been in full operation since December 2005. Access to the Wallaby underground mine is via a portal established within the completed Wallaby open pit. The mine operation is trackless, with truck haulage from underground via the ramp to the surface. The Wallaby underground mine is currently designed to exploit its six stacked mineralized lodes to a depth of 1.1 kilometers.
Two primary underground mining methods are used, with minor adjustments to suit localized geometry. Inclined room and pillar is used in areas with a moderate dip and moderate width zones, and transverse longhole stoping is used in zones which are thicker (six to 15 meters) with variable dips. Two other mining methods are used to a lesser extent. Narrow vein longhole stoping may be utilized in some areas with the benefit of reduced planned footwall dilution, and bulk longhole stoping is used in thicker zones under varying dip conditions.
In fiscal 2014,2016, Granny Smith experienced reduced dilution, higher in-situ grades and greater mining recoveries than incontinued its extensive program of mine development. The mine development program advanced 6.1km of horizontal capital development to provide access to lower ore horizons at the fourth quarterWallaby mine. Extensive vertical development was also undertaken to enhance ventilation to access these lower levels.
The exploration activity was on a range of fiscal 2013.activities from early stage target identification through to the definition of extensions to the Wallaby deposit. Granny Smith also benefitted fromwas again successful in extending reserves, replacing the enhancementfull 323,000 oz of process plant recovery from around 88%gold mined and adding a further 375,000 mineable ounces to 93% through improved process flow controls and replacement of larger cyclones with smaller cyclone.it reserve.
Exploration during fiscal 2014 provided further support for the replication of numerous deeper lodes in the Wallaby underground deposit. Going forward, the Group’s development strategy at Granny Smith will focus on identifying the potential of the Wallaby system.
Detailed below are the operating and production results at Granny Smith for the three months ended December 31, 2013 (the period of Gold Fields’ ownership of the mine in fiscal 2013)2016, 2015 and fiscal 2014.
| Three months ended December 31, 2013 | Fiscal 2014 | |||||||
Production | ||||||||
Tonnes (‘000) | 330 | 1,472 | ||||||
Recovered grade (g/t) | 5.9 | 6.7 | ||||||
Gold produced (‘000 oz)(1) | 62 | 315 | ||||||
Results of operations ($ million) | ||||||||
Revenues | 82.3 | 399.8 | ||||||
Operating costs (excluding amortization and depreciation)(2) | 48.8 | 182.6 | ||||||
All-in sustaining cost net of by-product revenues per ounce of gold sold ($)(2) | 885 | 809 | ||||||
All-in costs net of by-product revenues per ounce of gold sold ($)(2) | 885 | 809 | ||||||
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | ||||||||||
Production | ||||||||||||
Tonnes (‘000) | 1,446 | 1,451 | 1,472 | |||||||||
Recovered grade (g/t) | 6.1 | 6.5 | 6.7 | |||||||||
Gold produced (‘000 oz) | 284 | 301 | 315 | |||||||||
Results of operations | ||||||||||||
Revenues (U.S.$ million) | 355.8 | 348.4 | 399.8 | |||||||||
Operating costs (excluding amortization and depreciation) (U.S.$ million)(1) | 133.8 | 141.3 | 182.6 | |||||||||
All-in sustaining cost net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 834 | 764 | 809 | |||||||||
All-in costs net ofby-product revenues per ounce of gold sold (U.S.$)(1) | 834 | 764 | 809 | |||||||||
Notes:Note:
| (1) |
| For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation |
In fiscal 2014, ore processed at Granny Smith amounted2016, gold production decreased by 6% to 1,4720.28 million tonnes compared with 0.330 million tonnes in fiscal 2013. Gold production increased by 408.1%ounces from 0.0620.30 million ounces in fiscal 20132015, primarily due to 0.315lower grades and an increase in stockpiled ore because of the timing of the December milling campaign. Net operating costs decreased by 5% to U.S.$133.8 million ouncesfrom U.S.$141.3 million in fiscal 2014.2015, primarily due to higher mining cost as a result of higher mining volumes offset by agold-in-process credit to cost associated with the timing of milling campaigns. Total AIC in Australian dollar terms increased by 10% due to a drop in gold output and higher capital expenditures, partially offset by lower net operating costs. In U.S. dollar terms, total AIC increased to U.S.$834 per ounce in fiscal 2016 compared with U.S.$764 per ounce in fiscal 2015 as a result of lower gold sold and higher capital expenditure partially offset by lower operating costs.
Assuming that Gold Fields does not increase or decrease reserves estimates at Granny Smith and that there are no changes to the current mine plan, Granny Smith’s December 31, 20142016 proven and probable reserves of 0.871.7 million ounces will be sufficient to maintain production through approximately fiscal 2019.2025. However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors which can affect reserve estimates and the mine plan, which could thus materially change the life of mine.
Granny Smith is engaged in underground mining and production stockpile surface mining and is thus subject to all of the underground and surface mining risks discussed in “Risk Factors”. The primary safety risk at Granny Smith is falls of ground at the underground operations, which is addressed through the use of ground support, backfilling of open voids and sequencing of mine operations to improve overall stability of the ground. For more information about workplace injuries at Granny Smith, see “Directors, Senior Management and Employees—Employees—HealthSafety and Safety—Safety”Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”.
There were no strikes and/or material work stoppages at Granny Smith in fiscal 20142016 and none to date in fiscal 2015.since December 31, 2016.
Processing
The Granny Smith processing plant consists of two parallela crushing circuits,circuit, SAG and ball milling, leach and CIP circuits and a gravity tailings retreatment circuit to concentrate and fine-grind sulphide minerals, primarily pyrite, for gold recovery. As the processing plant is capablewas designed to treat much larger tonnages of treating much higheropen pit ore than the tonnages thanthat the Wallaby underground mine can supply, not all of the installed equipmentplant is required for the processing of the Wallaby underground ore.run on a campaign basis.
The table below sets forthprovides details of the Granny Smith plant, including year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and metallurgical recovery factors during fiscal 2014, for the plant at Granny Smith.2016.
Processing Techniques
Plant | Year commissioned | Comminution phase | Treatment phase | Capacity(1)(2) | Average milled for fiscal 2014 | Approximate recovery factor for fiscal 2014(3) | Year commissioned | Comminution phase | Treatment phase | Capacity(1)(2) | Average milled for fiscal 2016 | Approximate recovery factor for fiscal 2016(3) | ||||||||||||||||||||||||||||
| (tonnes/month) | (tonnes/month) | |||||||||||||||||||||||||||||||||||||||
Granny Smith Processing Facility | 1990 | Crushing and SAG and Ball milling | Leaching/CIP, gravity circuit and refinery | 283,000 | 122,650 | 93 | % | 1990 | Crushing and SAG and Ball milling | Leaching/CIP, gravity circuit and refinery | 283,000 | 120,000 | 93 | % | ||||||||||||||||||||||||||
Notes:
| (1) | Nameplate capacity as stated by the manufacturer. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. |
| (2) | The plant has gone through a number of upgrades andre-configurations over the years and has treated ore from different sources. The throughput capacity is in excess of three million tonnes per annum, however it is currently operated on a campaign basis of up to approximately 1.5 million tonnes per annum, and is only used to treat the ore from the Wallaby underground mine. |
| (3) | Percentages are rounded to the nearest whole percent. |
Capital Expenditure
On an IFRS basis, (as included in the geographical and segment information included in Note 26 to the consolidated financial statements) Gold Fields spent A$65.2121.0 million, or U.S.$58.990.0 million, on capital expenditures at Granny Smith in fiscal 2014,2016, primarily on processing, miningcapital development, exploration and development.the establishment of new ventilation raises. Gold Fields has budgeted approximately A$96114.7 million, or U.S.$84.1 million, for capital expenditures at Granny Smith in fiscal 2015.2017. These funds are principally earmarked for development, exploration processing,and procurement of mining and development.equipment.
Darlot
Introduction
Darlot is located in the Eastern Yilgarn Craton, approximately 55 kilometers southeast of Leinster and some 700 kilometers northeast of Perth in Western Australia. It holds exploration licenses, prospecting licenses and mining leases covering a total area of approximately 11,40013,981 hectares. Darlot is currently an underground operation. The Darlot operation obtains electricity pursuant to a contract with an electricity generating contractor that expires in March 20152020 and has access to water, rail, air and road infrastructure. Consumables and supplies are trucked in locally from both Perth and Kalgoorlie.
History
Gold was first discovered in the Lake Darlot region in an alluvial field in late 1894, which triggered a gold rush that lasted until 1913. Initial mining focused on alluvial deposits and production from these areas is poorly documented.
Modern exploration commenced in the late 1970s and focused on are-evaluation of historical mining camps, and extensions and repetitions of known mineralized veins.
During August 1996, while diamond drilling a 320 meter by 320 meter step-out program, a drill hole intersected a 33 meter section at a grade of 8.0g/t Au. This discovery drill hole for the Centenary orebody was approximately 1.2 kilometers east of the Darlot open pit. Underground development to the Centenary orebody from Darlot was initiated during December 1996 and by December 1998 stoping activities commenced. The Centenary orebody thereafter became the primary production source. As noted above, Gold Fields acquired the mine in October 2013.
Geology
Darlot is located in the Easterneastern portion of the Yilgarn Craton in Western Australia. The Yilgarn Craton is Archean-aged and comprises north-northwesterly trending greenstone belts and granitic intrusions. The Darlot Centenary deposit is located within the Mount Margaret mineral field which lies to the southern end of the Yandal Greenstone Belt.
The Centenary orebody is located approximately 1.2 kilometers east of the Darlot open pit and has been defined from approximately 150 to 700 meters below surface. Gold mineralization occurs withinsub-horizontal to 20 degreedegrees westerly dipping stacked quartz veins bounded to the west by the Oval Fault and to the east by the Lords Fault.
Mining
The underground mine is accessed via two portals within the Darlot open pit, namely the Centenary and Millennium declines. A third decline named Federation with access to the underground mine is accessed from the Centenary decline. The mine issub-divided into two mining areas, the Darlot lodes and Centenary orebody. The former is thedown-dip extension of lodes, mined in the pit whereas the latter is located approximately 1.2 kilometers from the open pit. The Darlot lodes and Centenary orebody are furthersub-divided into various lodes and mining areas. A number of laddered raises connect levels to a fresh air base and declines. Decline and lateral development is by electro-hydraulic twin boom jumbos. Ore is transported to the processing plant by haul trucks operating through the two declines. Gold production takes place at Darlot solely from underground operations.
Near-mine exploration during fiscal 2014 has delineated sufficient ore reservesSustained mining and extensions to secure stable productionthe underground Lords South Lower, or LSL, area were achieved in fiscal 2015. Exploration2016. During fiscal 2016, Darlot also started a decline to the Oval ore body which will become the primary ore source in fiscal 2015 will be focused2017. This capital was funded from cash generated during the year.
In fiscal 2016, the continued focus remained on replacingsupporting self-funded integrated exploration programs to replace production depletion and reserve growth to provide critical massextend the LoM for Darlot. During the year, surface and flexibility.underground exploration processes and methodologies were reviewed and a number of new exploration strategies and applications were initiated. In late fiscal 2016, work commenced on the development and construction of an integrated three dimensional structural model for the mine and regional tenement area. The Group has also confirmedsurvey within a one kilometer radius of the presenceexisting mine will generate a three dimensional seismic cube to map out all potential structures and develop potential targets that could be accessed from the existing infrastructure. The survey is expected to be fully complete and interpreted by the end of a Centenary Depth Analogue, which will be the key focus for exploration and resource definition programs in fiscal 2015.March 2017.
Detailed below are the operating and production results at Darlot for the three-month period from October 1, 2013 to December 31, 2013 (the period of Gold Fields’ ownership of the mine in fiscal 2013)2016, 2015 and fiscal 2014.
| Three months ended December 31, 2013 | Fiscal 2014 | |||||||
Production | ||||||||
Tonnes (‘000) | 158 | 525 | ||||||
Recovered grade (g/t) | 3.9 | 5.0 | ||||||
Gold produced (‘000 oz)(1) | 20 | 84 | ||||||
Results of operations ($ million) | ||||||||
Revenues | 26.0 | 106.2 | ||||||
Operating costs (excluding amortization and depreciation)(2) | 21.6 | 81.9 | ||||||
All-in sustaining cost net of by-product revenues per ounce of gold sold ($)(2) | 1,132 | 1,222 | ||||||
All-in costs net of by-product revenues per ounce of gold sold ($)(2) | 1,132 | 1,222 | ||||||
Production Tonnes (‘000) Recovered grade (g/t) Gold produced (‘000 oz) Results of operations Revenues (U.S.$ million) Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(1) All-in sustaining cost net ofby-product revenues per ounce of gold sold (U.S.$)(1) All-in costs net ofby-product revenues per ounce of gold sold (U.S.$)(1) Fiscal 2016 Fiscal 2015 Fiscal 2014 454 457 525 4.6 5.3 5.0 66 78 84 83.1 91.3 106.2 57.7 59.2 83.6 1,238 1,057 1,222 1,238 1,057 1,222
Notes:Note:
| (1) |
| For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation |
In fiscal 2014, ore processed at Darlot was 0.525 million tonnes compared2016, gold production decreased by 15% to 0.158 million tonnes in 2013. Gold production was 0.020.07 million ounces in fiscal 2013 andfrom 0.08 million ounces in fiscal 2014.2015, due to lower grades mined. Net operating costs decreased by 3% in 2016 to U.S.$57.7 million from U.S.$59.2 million in fiscal 2015 due to cost reductions in mining activities. Total AIC in Australian dollar terms increased by 18% due to lower gold output and higher capital expenditures, partially offset by lower operating costs. In U.S. dollar terms, total AIC increased to U.S.$1,238 per ounce in fiscal 2016 compared with U.S.$1,057 per ounce in fiscal 2015, due to lower gold sold and higher capital expenditures partially offset by lower operating costs.
Assuming that Gold Fields does not increase or decrease reserves estimates at Darlot and that there are no changes to the current mine plan, Darlot’s December 31, 20142016 proven and probable reserves of 0.100.06 million ounces will be sufficient to maintaincontinue decreasing levels of production through approximately fiscal 2016. However, asearly tomid-fiscal 2018. Without additional conversion or discovery, the production levels are however expected to decline over time. As discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors which can affect reserve estimates and the mine plan.
Darlot is engaged in underground mining and is thus subject to all of the underground mining risks discussed in “Risk Factors”. The primary safety risk at Darlot is falls of ground at the underground operations, which is addressed through the use of ground support and sequencing of mine operations to improve overall stability of the ground. For more information about workplace injuries at Darlot, see “Directors, Senior Management and Employees—Employees—HealthSafety and Safety—Safety”Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”.
There were no strikes or material work stoppages at Darlot in fiscal 2014 or2016 and none to date in fiscal 2015.since December 31, 2016.
Processing
Darlot has a mill that treats primary ore. The table below sets forth year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and metallurgical recovery factors during fiscal 2014,2016, for the plant at Darlot.
Processing Techniques
Plant | Year commissioned | Comminution | Treatment phase | Capacity(1) | Average milled for fiscal 2014 | Approximate recovery factor for fiscal 2014(2) | Year commissioned | Comminution phase | Treatment phase | Capacity(1) | Average milled for fiscal 2016 | Approximate recovery factor for fiscal 2016(2) | ||||||||||||||||||||||||||||
| (tonnes/month) | (tonnes/month) | |||||||||||||||||||||||||||||||||||||||
Darlot Mill | 1988 | Three stage crushing and two stage ball mills | CIL | 64,000 | 43,738 | 96 | % | 1988 | Three stage crushing and two stage ball mills | CIL | 64,000 | 38,000 | 95 | % | ||||||||||||||||||||||||||
Notes:
| (1) | Nameplate capacity as stated by the manufacturer. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. |
| (2) | Percentages are rounded to the nearest whole percent. |
Capital Expenditure
On an IFRS basis (as included in the geographical and segment information included in Note 26 to the consolidated financial statements), Gold Fields spent A$16.328.7 million, or U.S.$14.721.4 million, on capital expenditures at Darlot in fiscal 2014,2016, primarily on exploration and capital development. Gold Fields has budgeted approximately A$2611.8 million, or U.S.$8.4 million, for capital expenditures at Darlot in fiscal 2015.2017. These funds are principally earmarked for exploration,capital development and capital works.exploration.
Far Southeast Scoping Study
In September 2010, Gold Fields entered into two option agreements with Lepanto, the 60% owner, and Liberty, the 40% owner of the gold-copper FSE in the Philippines, granting Gold Fields an option to acquire a total 60% interest in FSE for a total consideration of $340 million, or the Liberty and Lepanto options. After paying option fees of $10 million and making two down-payments of $44 million and $66 million in September 2010 and September 2011 respectively. In March 2012, Gold Fields exercised its 40% option and acquired Liberty’s 40% interest in FSE after making a further $110 million payment. Gold Fields continues to hold its option to acquire an additional 20% stake in FSE from Lepanto for a further $110 million, which, if exercised, would increase its total interest in FSE to 60%.
The Liberty and Lepanto options were initially granted to Gold Fields for the later of 18 months from signature in September 2010 or the date of receiving a FTAA for the project. A FTAA license allows a foreign corporation to control a majority interest in a Philippine mining project. Notwithstanding this provision, Gold Fields had the discretion to exercise either option prior to the FTAA being granted as it did by exercising its Liberty option to acquire ownership of 40% of FSE.
The FTAA application for the FSE project was filed in November 2011. The application requires FPIC of the Kankana-ey indigenous people for Gold Fields’ exploration activities. In July 2013, the Kankana-ey people’s elders voted in favor of FPIC for the project. In February 2015, a memorandum of agreement was signed with the communities, and the Kankana-ey people’s elders passed a resolution in favour of granting Gold Fields an FTAA. Gold Fields targets completion of the FTAA process in 2016.
Americas Operations
Prior to fiscal 2013, Gold Fields owned a 98.5% economic interest in the Cerro Corona mine through its shareholding in La Cima. Gold Fields increased its economic interest in La Cima to 99.53% through a reduction in capital carried out in December 2013. Following the dissolution of the GIP division in fiscal 2013, Gold Fields relocated its exploration projects to its existing regional structures. As part of this restructuring, the Woodjam Project, Salares Norte and Piedra, and the Chucapaca Feasibility Study (which has since been sold) were relocated to Americas operations.
Cerro Corona
Introduction
The Cerro Corona mine became operational by the end of the firstthird quarter of 2009.fiscal 2008. It forms part of a porphyry copper-gold deposit situated within the Hualgayoc Mining District in northern Peru. It is located in the highest part of the Western Cordillera of the Andes, in northern Peru, close to the headwaters of the Atlantic continental basin. Cerro Corona is located approximately 80 kilometers by road north of the City of Cajamarca. La Cima holds mining concessions covering a total area of approximately 4,400 hectares and Cerro Corona is being developed over an area of approximately 1,2441,300 hectares of superficial land (the rights to which are held by Gold Fields). Cerro Corona’s electricity is supplied through a long-term contract with a Peruvian power supplier and transported through the national power transmission system and a 34 kilometer transmission line constructed by the project. Cerro Corona’s water requirements are provided primarily by retention of rainfall and pit dewatering; water is continuously recycled.
History
In December 2003, Gold Fields, through a subsidiary, signed a definitive agreement to purchase an 80.7% economic and 92% voting interest in the Cerro Corona mine from a Peruvian family-owned company, Sociedad Minera Corona S.A., or SMC. The agreement called for a reorganization whereby the assets of Cerro Corona were transferred to La Cima, in July 2004. Following the approval of an environmental impact assessment, or EIA, on December 2, 2005, Gold Fields completed the purchase of the 92% voting interest (80.7% economic interest) in La Cima in January 2006, for a total consideration of $40.5U.S.$40.5 million. La Cima subsequently obtained all requisite additional permits to construct the mine. Construction commenced in May 2006.
Geology
The Cerro Corona gold-copper deposit is hosted by a600- to700-meter diametersub-vertical cylindrical-shaped quartz diorite porphyry stock emplaced intomid-Cretaceous limestone and marls and siliclastic rocks. Within the porphyry, gold-copper mineralization is primarily hosted by extensive zones of stockwork veining. There are at least two phases of diorite placement, only one of which is mineralized. Thenon-mineralized diorite is generally regarded as the last phase, and is referred to as “barren core.” The latestre-modeling suggests that the Cerro Corona porphyry is probably composed of four or five satellite stocks with the last two being barren. The intrusive has been emplaced at the intersection of Andean-parallel and Andeannormal (transandean) structures. Supergene oxidation and leaching processes at Cerro Corona have led to the development of a weak to moderate copper enrichment blanket, allowing for the subdivision of the deposit, from the surface downward, into an oxide zone, a mixed oxide-sulphide zone, a secondary enriched (supergene) sulphide zone and a primary (hypogene) sulphide zone.
Mining
The Cerro Corona deposit is mined by conventional, bulk surface mining methods. The Cerro Corona operation involves a single surface mine. This ore is treated in a conventional milling and sulphide flotation concentrator capable of treating 6.26.7 million tonnes per annum of ore and producing between 100,000 and 190,000150,000 tonnes per annum of concentrate containing copper and gold, containing concentrate, which is treated mainly at smelters in Japan Korea and Germany.
The single largest contractor employer is San Martin Contratistas Generales S.A., or San Martin. San Martin carries out all mining activities. All mine planning, excavation and head grade and engineering specifications to meet the required design performance through the life of mine are directly managed by La Cima personnel. Other contractors provide camp administration and catering, security, safety and laboratory operations. In addition, approximately 500 temporary contractors are involved in the construction of the tailings facility.
In fiscal 2014, Cerro Corona increased gold equivalent production by 3% and remained the Group’s lowest cost producer by all-in cost per ounce, producing high-margin gold and copper.
A 66 kilometer re-logging program was completed in fiscal 2014 as part of a geo-metallurgy project, which is expected to increase the overall definition of the lithological contacts and increase knowledge of the ore body at depth including hypogene alteration, clay, density, rock hardness and silicification. This will improve metallurgical response modeling for the deeper sections of the hypogene ore body.
A pre-feasibility study has also been launchedcompleted to determine if the prevailing tailings storage facility constraint on Cerro Corona’s mineral reserves could be lifted and allow for the placement of additional tailingtailings material over the life of mine. The study builds on previous work by incorporating the latest design updates for the tailings storage facility, including optimization of the mine in the potential expanded case, as well as the assessment of additional new opportunities. In fiscal 2016, additional studies were completed (including a study for the possibility to increase the level of the tailings dam), and final assessment of the available opportunities and the preferred case is planned for fiscal 2017.
The option to process both oxide stockpiles and sulphide ore through the current sulphide plant in conjunction with each other is under review. During fiscal 2014,2016, a number of laboratory tests were performed with a mixture of material from the upper part of oxide stockpile number 2 and hypogene mineralization from the pit. Additional studies with respect to treating the oxide stockpiles will bewere conducted, in fiscal 2015, including the completion of the flotation test work.work and leaching in tanks.
In fiscal 2014, Gold Fields extended its electricity supply agreement with private utility Kallpa Generacion S.A. to supply power to the mine until 2027, significantly increasing Cerro Corona’s long-term energy security.2027.
Detailed below are the operating and production results at Cerro Corona in fiscal 2012, fiscal 20132016, 2015 and fiscal 2014.
| Fiscal 2012 | Fiscal 2013 | Fiscal 2014 | Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | |||||||||||||||||||
Production | ||||||||||||||||||||||||
Tonnes (‘000) | 6,513 | 6,571 | 6,797 | 6,977 | 6,710 | 6,797 | ||||||||||||||||||
Gold Head grade (g/t) | 1.24 | 1.13 | 1.06 | 1.03 | 1.07 | 1.06 | ||||||||||||||||||
Copper Head grade (%) | 0.68 | 0.55 | 0.58 | 0.53 | 0.52 | 0.58 | ||||||||||||||||||
Combined yield (g/t) | 1.6 | 1.5 | 1.5 | 1.2 | 1.4 | 1.5 | ||||||||||||||||||
Gold produced (‘000 oz) | 170 | 159 | 151 | 150 | 159 | 151 | ||||||||||||||||||
Copper produced (‘000 tonnes) | 36 | 30 | 32 | (1) | 31 | 29 | 32 | (1) | ||||||||||||||||
Gold equivalent ounces (‘000 eq oz) | 342 | 317 | 327 | 270 | 296 | 327 | ||||||||||||||||||
Results of operations ($ million) | ||||||||||||||||||||||||
Revenues | 556.6 | 390.9 | 375.5 | |||||||||||||||||||||
Operating costs (excluding amortization and depreciation)(2) | 171.4 | 161.3 | 158.2 | |||||||||||||||||||||
All-in sustaining cost net of by-product revenue per ounce of gold sold ($)(2) | 82 | 206 | 316 | |||||||||||||||||||||
All-in costs net of by-product revenue per ounce of gold sold ($)(2) | 82 | 206 | 316 | |||||||||||||||||||||
All-in sustaining cost gross of by-product revenue per equivalent ounce of gold sold ($)(2) | 819 | 707 | 702 | |||||||||||||||||||||
All-in costs gross of by-product revenue per equivalent ounce of gold sold ($)(2) | 819 | 707 | 702 | |||||||||||||||||||||
Results of operations | ||||||||||||||||||||||||
Revenues (U.S.$ million) | 322.3 | 292.2 | 375.5 | |||||||||||||||||||||
Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(2) | 139.9 | 144.8 | 159.7 | |||||||||||||||||||||
All-in sustaining cost net ofby-product revenue per ounce of gold sold (U.S.$)(2) | 499 | 718 | 316 | |||||||||||||||||||||
All-in costs net ofby-product revenue per ounce of gold sold (U.S.$)(2) | 499 | 718 | 316 | |||||||||||||||||||||
All-in sustaining cost gross ofby-product revenue per equivalent ounce of gold sold (U.S.$)(2) | 762 | 777 | 702 | |||||||||||||||||||||
All-in costs gross ofby-product revenue per equivalent ounce of gold sold (U.S.$)(2) | 762 | 777 | 702 | |||||||||||||||||||||
Notes:
| (1) | Equates to |
| (2) | For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation |
In fiscal 2016, total managed gold equivalent production decreased by 9% to 0.27 million equivalent ounces from 0.30 million equivalent ounces in fiscal 2015, mainly as a result of the lower gold-copper price ratio, lower gold head grades treated and reduced gold recoveries. Net operating costs decreased by 3% to U.S.$140.0 million from U.S.$145.0 million in fiscal 2015, mainly due to a U.S.$3.8 million buildup of concentrate inventory in fiscal 2016 compared to a U.S.$1.0 million drawdown in fiscal 2015. AISC and AIC amounted to U.S.$499 per ounce in fiscal 2016 compared with U.S.$718 per ounce in fiscal 2015 due to higherby-product credits and lower capital expenditure, partially offset by the drop in gold sold. AISC and AIC, on a gold equivalent basis, totaled
U.S.$762 per ounce in fiscal 2016 compared with U.S.$777 per ounce in fiscal 2015 due to higherby-product credits and lower capital expenditure, partially offset by the drop in gold sold.
Assuming that Gold Fields does not increase or decrease reserve estimates at Cerro Corona and that there are no changes to the current mine plan, Cerro Corona’s December 31, 20142016 proven and probable reserves of 1.81.30 million ounces of gold and 623456 million pounds of copper (of which, 1.791.30 million ounces of gold and 620.1454 million pounds of copper are attributable to Gold Fields, with the remainder attributable tonon-controlling shareholders at La Cima) will be sufficient to maintain production through approximately fiscal 2023.2023 (seven years). However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors that can affect reserve estimates and the mine plan, which could thus materially change the life of mine.
The Cerro Corona mine involves open pit mining, and is thus subject to all of the risks associated with open pit mining discussed in “Risk Factors”. For more information about workplace injuries at Cerro Corona, see “Directors, Senior Management and Employees—Employees—HealthSafety and Safety—Safety”Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”.
Cerro Corona experienced no work stoppages in fiscal 20142016 and has experienced none to date in fiscal 2015.since December 31, 2016.
Processing
The following table sets forth year commissioned, processing techniques and processing capacity per month, for the processing plant at Cerro Corona:
Processing Techniques
Plant | Year commissioned | Comminution phase | Treatment phase | Capacity(1) | Average milled for fiscal 2014 | Approximate recovery factor for fiscal 2014(2) | Year commissioned | Comminution | Treatment phase | Capacity(1) | Average milled for fiscal 2016 | Approximate recovery factor for fiscal 2016(2) | ||||||||||||||||||||||||||||
| (tonnes/month) | (tonnes/month) | |||||||||||||||||||||||||||||||||||||||
Main Plant | 2008 | SAG/ball milling | Conventional sulphide floatation circuit | 560,000 | 566,405 | | Gold 68% Copper 86% | | 2008 | SAG/ball milling | Conventional sulphide floatation circuit | 560,000 | 581,000 | | Gold 64.5% Copper 86.57 |
| ||||||||||||||||||||||||
Notes:
| (1) | Nameplate capacity as designed. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. |
| (2) | Percentages are rounded to the nearest whole percent. |
In July 2014, two new mobile jaw crushers were installed to facilitate the delivery of six-inch material to the SAG mill. This is expected to assist plant throughput with increasing hardness of the ore as mining from the pit goes deeper.
Capital Expenditure
On an IFRS basis, (as included in the geographical and segment information included in Note 26 to the consolidated financial statements) Gold Fields spent U.S.$51.042.8 million on capital expenditures at Cerro Corona in fiscal 2014, consisting2016, primarily of construction of the tailingson tailing dam storage and completion of improvements of the process plant facilities.waste storage construction. Gold Fields has budgeted approximately U.S.$7452.9 million for capital expenditures at Cerro Corona for fiscal 2015,2017, primarily on the tailings storage facility and waste storage facilities.the water treatment plant for tailings water.
Projects
Arctic Platinum Project
APP is located approximately 60 kilometers south of the city of Rovaniemi in northern Finland. APP is assessing a number of potential surface mineable platinum group elements plus copper and nickel deposits located within the Portimo and Narkaus mafic layered intrusions. The principal prospects under consideration occur within the Suhanko Project area, comprising of the Konttijarvi, Ahmavaara, and Suhanko North deposits. APP has been earmarked for disposal due to the focus of the Group’s strategy on gold deposits, following the dissolution of the Group’s GIP division in fiscal 2013. Pending the sale, Gold Fields has reduced the APP’s utilization of cash resources. Management of the APP has been transferred from the West Africa region to the corporate development department at Gold Fields’ corporate office, pending sale.
Gruyere, Western Australia
In December 2016, Gold Fields entered into a 50:50 unincorporated joint venture with Australian miner Gold Road for the development and operation of the Gruyere Gold Project in Western Australia, one of the country’s largest undeveloped gold projects. It comprises the Gruyere gold deposit and 144 km2 of exploration tenure.
Gruyere is a large shear hosted porphyry gold deposit, with reserves of 3.5Moz. It is located in Australia’s newest goldfield, the Yamarna Belt, 200 kilometers east of Laverton in Western Australia, where our Granny Smith mine is located.
Gold Fields acquired a 50% interest in the Gruyere Gold Project for a total purchase consideration of A$350 million (U.S.$259 million) and a 1.5% royalty on Gold Fields’ share of production when total mine production exceeds 2Moz. The cash consideration will be split, with A$250 million paid on completion of the transaction and A$100 million payable according to an agreed construction cash call schedule. Gold Fields is funding the deal through existing cash resources and banking facilities in Australia.
The feasibility study for the Gruyere Gold Project, which was completed in October 2016 by Gold Road, indicated that the Gruyere Gold Project’s current reserves will support average annualized production of 270,000 oz for a13-year LoM. AISC over the LoM are expected to be A$945 per ounce (U.S.$690 per ounce) and AIC are expected to be A$1,103 per ounce (U.S.$805 per ounce), withun-escalated construction capital expenditure estimated at A$507 million (U.S.$385 million).
First production from the Gruyere Gold Project is expected at the end of fiscal 2018 or early fiscal 2019. Gold Fields took over management of the project in February 2017. The Gruyere Gold Project will comprise an open pit mining operation utilizing conventional drill, blast, load and haul activities with a process plant and associated infrastructure including an accommodation village, power station, gas pipeline and sealed airstrip. The power station and gas pipeline are contracted out as part of a build own and operated strategy and the capital cost is excluded from construction capital expenditure. The process plant will be a conventional gravity andcarbon-in-leach plant.
The joint venture will continue to explore for similar-scale deposits near the Gruyere Gold Project and has budgeted A$11m (U.S.$8 million) comprising of 57,000m of drilling for this exploration program during fiscal 2017.
The required environmental and regulatory approvals have been received from the Western Australian government.
The Gruyere Gold Project’s tenements are subject to the native title rights of the local indigenous population. In May 2016, Gold Road concluded a native title agreement with the registered claim group, the Yilka and Cosmo Newberry Aboriginal Corporation, or CNAC. This agreement provides access to the area, subject to the provision of financial, contracting and employment benefits to the Yilka and CNAC. This
agreement has been assigned to Gold Fields. On June 29, 2016, the Federal Court of Australia determined the registered Yilka native title claim group and the unregistered Sullivan and Edwards native title claim group were entitled to hold native title together. The final form of the determination is yet to be settled.
Far Southeast, Philippines
The Far Southeast project, or FSE, is a proposed underground mine, which is approximately 250km north of Manila. The project is held by FSE Gold Resources, or FSGRI, in which Gold Fields has a 40% interest, with an option to increase its stake to 60%, and is adjacent to an existing mining operation with established infrastructure. Lepanto Consolidated Mining Company, or LCMC, of the Philippines holds the remaining 60% interest and manages the existing LCMC mining operation. Gold Fields has partially impaired its investment in FSE to U.S.$129 million in fiscal 2015, as determined by an evaluation of LCMC’s market value on the Philippine Stock Exchange.
For Gold Fields to obtain a further 20% interest in the project, a Financial or Technical Assistance Agreement, or FTAA, is required from the Philippine government, and is dependent on obtaining the Free, Prior and Informed Consent, or FPIC, of the localKankana-ey indigenous people. A further condition is the renewal for a further 25 years of the mineral production sharing agreement, or the Mineral Production Sharing Agreement, in which most of the FSE deposit occurs. The legal process for renewal is pending resolution. The application for a FTAA was denied by the Mines andGeo-Sciences Bureau, or MGB, in November 2015. FSGRI filed a motion for reconsideration with the MGB to reinstate the FTAA application but this motion remains pending. The application for Certification Precondition from the National Commission on Indigenous People, or NCIP, which will complete the FPIC process, also remains under consideration by the NCIP.
Amid the legal and administrative delays, the holding costs of this project have been reduced to approximately U.S.$210,000 per month, related mainly to environmental baseline monitoring, community engagement work as well as activities to support the permitting process. Further material development of the project will be dependent on the renewal of the Mineral Production Sharing Agreement and Gold Fields obtaining majority ownership of the project.
The project’s copper-gold porphyry is a deeply concealed deposit associated with a Pleistocene diorite-dacite intrusion complex intruded into Eocene basaltic country rocks. The mineralization is mostly hosted in the intrusion complex and to a lesser extent the basaltic country rocks and is characterized by disseminated sulphides and multi-phase sulphide-bearing quartz and quartz-anhydrite vein sets and stockworks. No exploration or additional conceptual mine design studies were conducted on the project during fiscal 2016.
There is no reserve reported for the project but the resource was reported inside a mining constraint, which assumed an eventualnon-selective, bulk underground mining method. The lower confidence classification for the resource was applied based on drill hole spacing, estimation quality, geological continuity and geological understanding of the deposit in early 2012, supported by a view on reasonable prospects for eventual economic extraction. The resource has a lower relative confidence and cannot therefore be converted to a mineral reserve at this stage.
Salares Norte, and PiedraChile
In Chile, Gold Fields exercised an option, as part of an agreement, in February 2012 to acquire 100% of two properties, Salares Norte and Piedra, from SBX Asesorias e Inversiones, a private Chilean company, and the concessions were registered under the name Minera Gold Fields Salares Norte Limitada, a wholly owned subsidiary of Gold Fields. The project was promoted to “Advanced Drilling” status in July 2012. The Salares Norte advanced drilling project is 100% owned by Gold Fields and is focused on a gold-silver deposit in the Atacama region of northern Chile. Mineralization is contained within a high-sulphidation epithermal system, offering high-grade oxide mineralization (shallow oxides).oxides. The project is located within a core 900ha1,800ha concession area andarea. Gold Fields has optionsan option to purchase twoone adjoining concessionsconcession that would add a further 2,100ha.1,200ha.
The Group spent U.S.$39 million onpre-feasibility study work and further drilling in fiscal 2016, following on the U.S.$17 million spent in fiscal 2015. Almost 100km of drilling has been completed to date. The Group has budgeted U.S.$64 million for further drilling and studies in fiscal 2017 with a decision on whether the project should progress to feasibility status expected by the second half of fiscal 2017.
In fiscal 2013,December 2016, Gold Fields reported a maiden inferred mineral resource.updated the project’s resources for the Brecha Principal area (atpre-feasibility status) as well as the nearby Agua Amarga deposit (scoping study status). Preliminary indications supported bysuggest Salares Norte could be an open pit mine, while metallurgical test work suggest suggests that hybridcarbon-in-leach processing could deliver recovery rates of around 90%. Furthermore, for gold. On completion and review of the PFS work for Agua Amarga, the project is locatedwill be in a favorable mining jurisdiction.position to assess the viability of reporting a maiden reserve for Agua Amarga and the Brecha Principal.
Water security is not expected to poseImportantly, a material challenge to project executionland easement for 30 years and operation but it is an issue that requires proactive management. In the first quarter of fiscal 2014, Gold Fields filed a water rights claim beforefor the General Water Bureau for a nearby reservoir that could potentially yield 166 litres per second, which would be sufficient for future operations.project were both granted in December 2016.
Salares Norte is also developing the environmental and social baseline to support the project schedule as part of its EIA. The remote locationenvironmental work comprises biological andbio-diversity studies, including the protection of the site means there will likely be minimal community impacts. Indigenous Colla presence has not being identifiedendangered short-tailed chinchilla in the project area. The closest community is located about 100km fromBiological consultants are currently in the project, alongprocess of gathering data on the access road.
Collectively, these qualities mean Salares Norte offers significant potential in terms of future cash generation. As such,chinchilla to determine their movement and behavior. Once the decisionresearch has been made to retain it within Gold Fields’ growth portfolio and to explore its potential further. An exploration budget of US$23 million has been made available for further drilling work in the first half of 2015 with a potential pre-feasibility study to commencecompleted, which is expected in the fourth quarter of fiscal 2015.
Chucapaca
On August 19, 2014, Gold Fields reached an agreement2017, Salares Norte will present the Chile’s Ministry of Environment with options on how to sell its 51% stake in Canteras del Hallazgo S.A.C, or CDH,protect the company that manages the Chucapaca project in southern Peru, to its joint venture partner in the project, Compañía de Minas Buenaventura S.A.A., or Buenaventura, for U.S.$81 million in cash and a 1.5% net smelter royalty on future sales of gold, copper and silver produced in the current Chucapaca concession. Buenaventura is Peru’s largest publicly traded precious metals mining company and previously owned 49% of CDH.
Woodjam Project
In central British Columbia, Canada, Gold Fields holds a 51% interest in the Woodjam project for copper-gold porphyry deposits. The project comprises two separate joint venture agreements with Consolidated Woodjam Copper Corp. Gold Fields has the right to earn upchinchilla, including possible relocation to a 70% interest in the joint venture. The properties comprise 56,800 hectares covering several known porphyry copper and gold targets. Additional prospective third party concessions totaling 2,150 hectaresprotected area within the project area were optioned during 2011concession. The research work undertaken at Salares Norte will also be used to inform a nationwide study on the conservation and have been incorporated into the joint venture. In July 2011, Gold Fields also signed a joint venture agreement to earn up to a 70% interestmanagement of the nearby 8,902 hectare Redgold copper-gold property which is owned by two private individuals. species.
The Redgold agreement was terminatedsocial baseline at Salares Norte has been expanded. While there are no indigenous claims or presence on the concession or the dedicated access routes, Salares Norte has embarked on an extensive engagement program with impacted communities, including investments in July 2014.
Gold Fields completed a conceptual mining study for the Woodjam project and the maiden copper-gold resource for the South East zone as first reported in February 2012, which was further updated in 2013 following completion of additional infill and extensional drilling programs during 2012. Following the dissolution of the Group’s GIP division in late fiscal 2013, the Woodjam project was earmarked for disposal due to the current market environment. Pending the sale, Gold Fields has reduced the Woodjam project’s holding costs.community projects.
Insurance
Gold Fields’Fields has insurance policies provideto protect against catastrophic events which could have significant adverse effects on its operations and profitability, subject to the availability and cost of such insurance. Gold Fields maintains its philosophy of placing coverage forwith secure underwriters that offer programs to suit Gold Fields’ specific needs.
Gold Fields has global insurance policies covering general liability, accidental loss or material damage to its property, business interruption in the form of fixed operating costs or standing charges material damage and other losses. While the bulk of these are insured through a captive insurance company domiciled in Gibraltar, not all potential losses are covered. Gold Fields does not insure all potential losses associated with its operations as some insurance premiums are considered to be too high,prohibitively expensive, some risks are considered too remote to insure and some types of insurance cover are not available. For example, Gold Fields insurance policies do not cover loss of profits. Should an event occur for which there is no or limited insurance cover, this could affect Gold Fields’ cash flows and profitability.
Management believes that the scope and amount of insurance coverage is adequate, taking into account the probability and potential severity of each identified risk. Gold Fields’ insurance coverage is consistent with customary practice for a gold mining company of its size with multinational operations. See “Risk Factors—Gold Fields’ insurance coverage may not adequately satisfy all potential claims in the future”.
The Gold Mining Industry
Background
Gold is a dense, relatively soft and rare precious metal which occurs in natural form as nuggets or grains in ore, underground veins and alluvial deposits. Gold mining operations include both underground and open pit operations with gold currently able to be commercially extracted from ore grades in amounts as low as
0.5 grams/metric tonne (open pit). The majority of gold production is used for jewelry production and for investment purposes, in the latter case because some investors view it as a store of value against inflation. In addition, certain physical properties of gold, including its malleability, ductility, electric conductivity, resistance to corrosion and reflectivity, make it the metal of choice in a number of industrial applications.
Global Markets
Demand
The two main categories of demand for gold are fabrication (primarily jewelry) and investment (private and governmental). The demand for gold in 2014 was 3,924 tonnes or U.S.$160 billion in value terms (not reflecting over-the-counter, or OTC, investments and stock flows), comprising jeweler fabrication (55%); investments (23%); technological applications (10%); and net central bank purchases (12%), according to the WGC. Gold demand over the last few years has been mainly driven by China and India, which accounted for 53%60% of the total global demand in 2014,2016, 2015 and 2014. The price of gold has fallen by around 19% between 2011 and 2016. Since 2015, it has recovered somewhat and at April 3, 2017 the price of gold was U.S.$1,247 per ounce. More than any other variable, the gold price is the key dynamic informing Gold Fields’ business strategy and the volatility of the price over the past few years has been one of the key reasons for the strategic restructuring undertaken by the Company.
Much of the traditional investor case for gold as a safe haven has come under pressure over the past four years. In 2012, investor demand eased as it became apparent that many of the feared economic worst-case scenarios were unlikely to materialize. The gold price subsequently fell, as the equity and real estate markets started to offer stronger returns. As a result, many investors sold their physical gold holdings in 2013 and 2012. Prior2014, resulting in a sharp drop in the gold price.
Nevertheless, the gold price continues to 2013, significant private investment demanddefy most analysts’ projections. Amid Brexit and the outcome of the US presidential election, to name just two events that contributed to political and economic uncertainty in 2016, the gold price should have been significantly higher than it is today. This has not been the case. Furthermore, equity markets, particularly in the U.S., are at record high-levels amid rising U.S. interest rates and expected tax reductions, detracting investors from gold. Gold Field expects that the performance of gold in 2017 is likely to be undermined by continued inflows into equity markets and further US interest rate hikes. Gold Fields is thus planning its business for 2017 on the assumption of a U.S.$1,100 per ounce gold was generated by gold ETFs and similar products. However, following the fall inprice.
Our longer-term outlook, however, is more optimistic. While gold prices atin the beginningshort term will be largely dictated by macro events, in the longer-term supply and demand fundamentals cannot be ignored. On the supply side, research we have undertaken indicates that primary gold supply is close to a peak and likely to decline in the years to come. This is largely due to the cut in exploration spending as well as the dearth of 2013,new mines being built. This is exacerbated by declines in grades and increasing depth and complexity of ore bodies being mined.
The gold ETFs experienced significant outflowsprice recovered in 2016 by 8.3% from 2015year-on-year amid fears of 880.8 tonnes during 2013. This slowed considerably to 159 tonnes in 2014. Demand for official gold purchases is driven by central banks, government bodies, supranational organizations and other investors. In 2013, net purchases by central banks was 409 tonnes. In 2014, these purchases rose by 17% to 477 tonnes. Gold is typically used as a “natural hedge” against inflation, a fact that mitigated against gold demand during 2013 as broader macro-economic conditionsan interest rate hike in the United States improved. Technological applicationsand increased global political uncertainty. On balance, the negative supply and demand is mainly generatedtrends have seen the average gold price received by automotive electronics, industrial electronicsGold Fields decline to U.S.$1,241 per ounce in 2016 from a high of U.S.$1,656 per ounce in 2012.
While much of the gold price’s short-term movements are the result of market sentiment, the longer-term movements remain underpinned by supply and wireless equipment.demand fundamentals. Based on these fundamentals, management believes that the gold price will improve over the next few years though it will undoubtedly experience more short-term volatility.
According to the WGC, gold demand was little changed from last year, increasing from 4,216 tonnes in 2015 to 4,309 tonnes in 2016.
Demand in India and China, while significantly down on its highs over the last five years, should remain strong given economic growth in these countries, rising urbanization and traditional affinity towards gold in those countries. Central banks continue to buy and it appears that most of the central banks who were looking to sell gold have already done so.
In the longer term, management believes that key demand fundamentals will assert themselves due to:
A continuedbuild-up of gold reserves by the world’s central banks (or, at least, maintaining their current holdings) amid economic and political uncertainty and reserve diversification away from the U.S. dollar.
Net purchases by central banks and other official institutions totaled 384 tonnes in 2016, a pronounced decline from the purchases of around 600 tonnes per annum for each of the preceding three years; and |
The continued need for a safe haven asset in times of economic and political uncertainty. Though this may not have been as prevalent a factor over the past five years as previously used to be the case, the gold price’s more recent recovery to levels of around U.S.$1,250 per ounce has been driven amid investor uncertainty in global stock markets.
These factors bode well for the future of gold and Gold Fields expects to see a strong gold price in the next five years. While some have questioned the continued safe-haven status of gold in times of political and economic uncertainty, we believe that the longer-term effects of the currentgeo-political turmoil will eventually work their way through to a firmer gold price. Investors will continue to diversify some of their risk into gold, both as a hedge against inflation and flat currencies.
Supply
Supply of gold consists of new production from mining, the recycling of gold scrap and releases from existing stocks of bullion. Mine production represents the most important source of supply. Management believes that long-term gold supply and decreasedissues will act to 3,050.7 tonnes in 2014. Mine production was down by 2% during 2014 and is expected to plateausupport a recovery in the next couple of years as lower grades, lack of investment duringgold price. According to the current period of low gold prices and significantly reduced exploration budgets since 1995 which affected gold production profiles. The annual supply of recycled gold increased to 1,262.0 tonnes. InWGC, total gold supply declined by 11% in 2014 totaled 4,274the fourth quarter of 2016, due to an estimated 4.6% drop in global mine output, the largest quarterly reduction since 2008. Total mine production for 2016 at 3,236 tonnes (outwas flat compared to 2015 production, its slowest annual increase since 2008.
This trend is set to continue. The Gold Fields Mineral Services Ltd. consultancy predicts a further drop in mine production in 2016, due to lower production at more mature mines, a decline in average grades at most gold operations and a lack of whichnew mines coming on stream. Many analysts believe peak mine production was 71%),reached in 2015, coinciding with a 0.1% decrease from 2013, according tohigh in gold discoveries in the WGC.mid-1990s and assuming an average20-year development cycle. Goldman Sachs has stated that there may be only 20 years of known mineable reserves of gold left.
Price
The market for gold is relatively liquid compared to other commodity markets, with London being the world’s largest gold trading market. Gold is also actively traded via futures and forward contracts. The price of gold has historically been significantly affected by macroeconomic factors, such as inflation, exchange rates, reserves policy and by global political and economic events, rather than simple supply/demand dynamics. Gold is often purchased as a store of value in periods of price inflation and weakening currency. The price of gold has historically been less volatile than that of most other commodities. However, after almost a decade of steady increases in the gold price due to rising investment demand against a backdrop of relatively flat supply,In 2015, the price of gold fell sharplyby 10% but recovered by 8.5% in 2013 and continued to trade at lower levels in 2014, amid increased economic volatility in the United States.2016. The closing gold price on December 31, 20142016 was U.S.$1,1851,130 per ounce. In 2014,2016, the spot gold price was as high as U.S.$1,3831,365 and as low as U.S.$1,141.1,060.
Top Producers
Based on fiscal 20142016 production, the first, second, third and thirdfourth largest gold producers in the world were Barrick, Gold, Newmont, Mining and AngloGold Ashanti and Goldcorp, respectively. According to research,publicly available sources, at March 16, 2015,December 31, 2016, Barrick
Gold had 1613 operations in eighteleven countries, Newmont Mining had eight15 operations in fourfive countries, AngloGold Ashanti had 17 operations in nine countries and AngloGoldGoldcorp had 2012 operations in 10six countries. In fiscal 2014,2016, Gold Fields was the seventh largest gold producer in the world.
Performance and Outlook
During the past year Gold Fields undertook an analysis of the performance of the top gold producers in the Industry over the past four years. On the whole the industry has responded well to the reduction in the gold price since 2012 and has brought back the focus to profitability and cash flow. As a consequence, margins have improved and balance sheets have beende-risked.
However, we need to be careful to declare a complete victory as external factors, like lower exchange rates against the US dollar and lower oil prices, have helped significantly. Also there is a suspicion that sustaining capital may have been cut, the effects of which will be realized later. Much the same happened in the early 2000’s after the gold price recovered from U.S.$250/oz.
Furthermore, many companies will have some concerns about their future production profiles given the largecut-backs in both exploration and project expenditures, and will be looking to fill these potential gaps over the next year or two. Mergers and acquisitions have as a result become more competitive and are the reason why high premiums are being paid for good assets in production.
Gold companies have done as well as they can be expected to in terms of reducing their costs, and there is a greater probability of costs rising from here onwards. This could be exacerbated if there is an overall mining recovery and we revert back to annual mining cost inflation of between8-10%, as it was a few years back. Should that happen, further rationalization in the industry, with all the concurrent job losses, would then be inevitable. It is thus imperative that we learn the lessons from the past and be cautious about expanding by taking on more debt as we did previously. Debt has a role, but capital allocation must be disciplined if debt is taken on board. The industry’s work is not yet done.
Guidance for 2017
Gold Fields’ strategic review for fiscal 2017 takes into account a largely unchanged gold price and our budgets have been built around an anticipated average price of U.S.$1,100/oz – the same we used during fiscal 2016. The investment in our business is a priority for fiscal 2017, which includes U.S.$20 million for South Deep, U.S.$120 million for Damang, U.S.$112 million for Gruyere and U.S.$64 million for Salares Norte. As a result, our AIC cost guidance for fiscal 2017 is U.S.$1,170/oz – U.S.$1,190/oz compared to U.S.$1,006/oz in fiscal 2016. The guidance for AISC is U.S.$1,010/oz – U.S.$1,030/oz compared to U.S.$980/oz in fiscal 2016.
Capital expenditure for the year is forecast to rise to U.S.$869 million (fiscal 2016: U.S.$650 million) as a result of our significant investment in Salares Norte, Gruyere, Damang and South Deep. Our production guidance for the year is 2.10 – 2.15 million attributable ounces, compared with the 2.15 million attributable ounces achieved in fiscal 2016. Notable contributions for fiscal 2017 are:
Further rise in production at South Deep from 290,000 oz in fiscal 2016 to 315,000 oz;
A decline in Damang’s production to 120,000 oz from 148,000 oz in fiscal 2016;
Stable production profiles at Tarkwa and our remaining three Australian mines; and
A rise in gold-equivalent production at Cerro Corona from 270,000 oz in fiscal 2016 to 290,000 oz in fiscal 2017 due to expectations of higher copper prices.
Environmental and Regulatory Matters
South Africa
Environmental
Gold Fields’ South African operations are subject to various laws relevant to its activities that relate to the protection of the environment. South Africa’s Constitution grants the people of South Africa the right to an environment that is not harmful to human health or well beingwellbeing and to the protection of that environment for the benefit of present and future generations through reasonable legislative and other measures. The South African Constitution and the National Environmental Management Act, No. 107 of 1998, or NEMA, as well as various other related pieces of legislation enacted, grant legal standing to a wide range of interest groups to bring legal proceedings to enforce their environmental rights, which are enforceable against private entities as well as the South African government.
South African environmental legislation commonly requires businesses whose operations may have an impact on the environment to obtain permits, authorizations and other approvals for those operations. The applicable environmental legislation also imposes general compliance requirements and incorporates the “polluter pays” principle. On September 2, 2014, a number of amendments to the environmental laws were published. Such amendments were aimed at, amongstamong other things, resolving the problem of fragmented regulation of the mining industry, by creating what is known as the “One Environmental System”. Although the amendments were published on September 2, 2014, some of them only became effective on December 8, December 2014. Prior to these amendments, there was debate as to whether an environmental authorization was required for mining operations if a mining entity had an environmental management plan/programme,program, or EMP, approved by the competent officials of the DMR. This debate was settled by the amendments to the environmental laws, which have made it clear that in terms of the “One Environmental System”, as of December 8, 2014, environmental authorizations are required for prospecting/mining operations and related activities, in addition to an EMP. Prescribed officials withinThe DMR is now the DMR are now competent authority to grant suchenvironmental authorizations under NEMANEMA. However, the competent officials at the Department of Environmental Affairs, or DEA remain the appeallateappellate authority. Directors may be held liable under provisions of the NEMA for any environmental degradation and/or the remediation thereof.
The Minerals and Petroleum Resources Development Amendment Bill was published on December 27, 2012 for public comment. A second version of this Bill was published in June 2013 and although the Parliamentaryparliamentary process is complete, the Bill has yet to be published as an Amendment Act as the President has referred it back to Parliamentparliament because in his view, certain of its provisions arewere not in accordance with the Constitution of South Africa. See “—Mineral Rights”. This Bill contains further proposed amendments to allow for a smooth transition to the “One Environmental System”. Another proposed amendment to the MPRDA is for the holder of a mining right, previous holder of an old order right, or previous owner of works that has ceased to exist to remain liable for any latent or residual environmental liability, pollution, ecological degradation, the pumping and treatment of extraneous water which may become known in the future, notwithstanding the issuance of a closure certificate in terms of the MPRDA. The NEMA has been amended to provide that every holder, holder of an old order right or owner of works will remain responsible for any environmental liability, pollution or ecological degradation, the pumping and treatment of polluted or extraneous water and the management and sustainable closure thereof, notwithstanding the issuing of a closure certificate.
South African mining companies are required by law to undertake rehabilitation work as part of their ongoing operations in accordance with an approved EMP, which supports a mine closure plan. Gold Fields funds these environmental rehabilitation costs as part of its capital expenditure,operating cash flows, and its long-term closure costs are funded by making cash contributions into an environmental trust fund with the difference between the closure provision made to date and the final closure cost estimate funded through insurance guarantees. Gold FieldsThese costs are collectively referred to as the “financial provision”. During fiscal 2016, South Deep also conducted an independent compliance audit with the EMP and the associated audit report was submitted to the DMR on April 25, 2016. Regulations Pertaining to the Financial Provision for Prospecting, Exploration, Mining or Production Operations, which were published in terms of NEMA on November 20, 2015, or the Financial Provision Regulations, were debated by the Chamber and the respective government departments during fiscal 2016 and negotiations were ongoing in early fiscal 2017. These regulations apply to holders of converted old order mining rights and require such holders to “review and align” their approved financial provision by undertaking a review of the provisioning in accordance with the Financial Provision Regulations by February 2019. A key challenge the regulations pose in their current form (to the industry as a whole) is
currently the potential for duplicate funding in that mining companies will continue to fund on-going rehabilitation activities through operating costs but will also provide for on-going concurrent rehabilitation and environmental management costs in the processfinancial provision fund. Further, permit holders, after November 20, 2015, will no longer use “trust funds” as vehicles for financial provision for annual rehabilitation, final rehabilitation, decommissioning and closure. Holders who made use of amending its EMPsa trust fund as a financial provision vehicle to obtain environmental authorization would need, in the next annual review and has also submittedadjustment, to amend any trust fund and update as required by the regulations to get a performance assessment reportmining or prospecting right. Also, given the wording of the existing and draft trust deed, it might not be possible to withdraw the excess funds from the trust to be used for financial guarantees. These regulations provide for an interim period to comply which expires in respect of its rehabilitation work in South Africa.February 2019.
In line with the achievement of the “One Environmental System”, the National Water Act, No. 36 of 1998, or the NWA, was also amended. Due to the past delays surrounding the processing of water use licenses, the NWA now requires the Minister of Water and Sanitation to align and integrate the process for consideration of a water use license with the timeframes and processes appurtenantadditional to applications for prospecting and mining rights under the MPRDA, as well as environmental authorizations of the NEMA. Another amendment to the NWA is the insertion of a provision to the effect that a person aggrieved in regard to a decision made on an application for a water use licencelicense (particularly for prospecting or mining) can appeal directly to the Minister of Water and Sanitation.
Further, under the National Water Act, No. 36 of 1998, or the National Water Act,NWA, all water in the hydrological cycle is under the custodianship of the South African government held in trust for the people of South Africa and water users have been required tore-register their water uses under the National Water Act.NWA. In addition, the National Water ActNWA governs waste and waste water discharges whichthat may affect a water resource. The South African government uses various policy instruments and mechanisms, such as the water use license regime and the waterproposed waste discharge charge system, to ensure compliance with prescribed standards and water management practices according to the user pays and polluter pays principles, and to shift some of the treatment andclean-up cost back to dischargers.the polluters. Gold Fields continues to use all reasonable and practical measures to remove underground water to permit the routine safe functioning of South Deep. South Deep was issued with a water use license in November 2011.2011 by the DWS. Certain conditions and other aspects of the approved license were identified as requiring modification and an application to address these was submitted to the DWASDWS in February 2012. A further amended water use license application was submitted to the DWASDWS in November 2013, primarily to reflect the results of are-assessment of expected water use requirements and a changing water balance. No response was received from the DWASDWS in relation to the 2013 amendment. In November 2014, an agreement was reached with the DWASDWS to withdraw the 2013 amendment and to submit an updated amendment during the second quarter of fiscalapplication in May 2015. The newMay 2015 amendment will reflectapplication reflects the proposed changes to the approved 2011 water use license conditions. In addition, the updated amendment reflects a variety of water management projects and initiatives that were implemented during fiscal 2014 and that are planned for implementation induring fiscal 2015 and 2016.beyond. A presentation was provided to the DWASDWS in March 2015 to appraise them of the proposed structure and content of the new amendment, prior to the planned re-submission in April or May 2015. Gold Fields continued to make representations to the DWS during fiscal 2016 and is currently waiting to receive an approved amended license. The existing approved license will remain in place while the application is processed by the DWS.
Under the National Environmental Management Air Quality Act, No. 39 of 2004, or Air Quality Act, the South African government has established minimum emission standards for certain activities which result in air emissions and for which atmospheric emissions licenses, or AELs, must be held. The Amended Minimum Emissions Standards related to the list of activities resulting in atmospheric emissions, or Listed Activities, were released by the Minister of Water and Environmental Affairs and came into operation on November 22, 2013. Existing plants arewere required to comply with the Minimum Emissions Standards by April 1, 2015. Newly granted AELs under the Air Quality Act will incorporate the Minimum Emissions Standards as conditions.Non-compliance with the Minimum Emissions Standards is an offense under the Air Quality Act. South Deep mine undertakes activities which result in atmospheric emissions, as provided for by the Air Quality Act, and holds a registration certificate authorizing such activities under previous legislation. South Deep has submitted the necessary application for a new license under the Air Quality Act in respect of some of the emitting activities undertaken at South Deep. South Deep submitted an application for an AEL in March 2013. A meeting was held in March 2014 with the West Rand District Municipality to discuss the AEL application. The outcome of this meeting required South Deep’s application to be amended to include Listed Activities. Gold Fields resubmitted an amended AEL application to the West Rand District Municipality, following which a provisional AEL for South Deep was granted pursuant to section 40(1)(a) of the Air Quality Act in respect of South Deep’s three listed activities. The provisional AEL iswas valid for a period of one year of operation from November 13, 2014 after which South Deep may then applyand an extension was granted in November 2015. The application for the final AEL. The application for a final AEL needswas filed in November 2015. An air quality license was issued in December 2016 by the Rand West City Local Municipality, authorizing South Deep to be submitted together with supporting reports demonstrating full compliance with all conditions or requirements ofundertake smelting activities under the provisional AEL within six months from the date of issue of the provisional AEL.National Environmental Air Quality Act. Gold Fields is drafting a plandeveloped an Air Quality Plan Management Plan in 2015 in an effort to ensure it is in compliancecomplies with the applicable requirements of the Air Quality Act, including the new Minimum Emissions Standards.minimum emissions standards.
The Ministerintroduction of Finance, in his 2015 budget speech, has indicated that the Treasury is considering introducing drafta carbon tax legislation for public consultation during the first half of 2015 with a view to implement the tax by mid-2016.has been pending since 2011. The carbon tax design requires the calculation of liability to be based on the volume of fossil fuel input which results in Scope 1 greenhouse gas emissions, and for such liability to commence at a marginal rate of R120 per tonne of CO2-e,CO2e, increasing by 10% per annum. The design also anticipates a tax free threshold oftax-free exemptions ranging between 60% and 95%, with various allowances that would permit a tax liable entity to further mitigate its liability. Accordingly, the effective tax rate will vary between R6 and R48 per tonne of CO2e. Such allowances include an increased tax free threshold for trade exposed sectors, recognition of emission reduction efforts, additional allowance for participating in the national carbon budgeting system and the use of carbon offsets against a carbon tax liability. If South Deep is liable to pay carbon tax, thisit is expected to qualify for at least 80% of the allowances. As such, its exposure is expected to be initially calculated (in the first year of carbon tax exposure) on 40%20% of the mine’s Scope 1 emissions which have been estimated to be 6,985.928,640 tonnes of CO2-eCO2e in 2015.fiscal 2016. Based on these emissions, the potential tax liability in 20162018 is estimated at approximately $30,000,U.S.$14,800.
The South African Minister of Finance reiterated in his February 2017 budget speech that the tax would be promulgated, though he did not give a starting date. He repeated an earlier undertaking that the tax will have no net impact on the electricity price before the application of the abovementioned allowances that might permit a reduction in the exposure. However, and notwithstanding some five years in development of the design, the precise implications of the carbon tax to South Deep are currently still unknown, and it is anticipated that greater certainty will be forthcoming during the course of 2015.2020.
The National Environmental Management Waste Act, No. 59 of 2008, or the Waste Act, commenced on July 1, 2009, with the exception of certain sections relating to contaminated land which came into force on May 2, 2014. Responsible waste management has become a priority for the Department of Environmental Affairs, or the DEA. Gold Fields is currently working with the DEADMR in order to ensure it is in compliance with the Waste Act. South Deep has one waste disposal facility which is currently dormant. The site consists of different waste streams, including waste that has radiation levels that are slightly above background levels, being the naturally occurring levels in geology. There is now a duty to rehabilitate this dormant site. South Deep must ensure that it has the appropriate waste management licenses and environmental authorizations for the closure and rehabilitation of all its waste sites. To this end, South Deep applied on 13 January 2015 for twoa waste licenseslicense in respect of itstwo facilities: a waste disposal facilitiestransfer station and a salvage yard. On June 2, 2014, amendments to the Waste Act were published, which had the effect that as of December 8, 2014, residue deposits and residue stockpiles would be brought within the Waste Act’s scope of operation. Accordingly, as of December 8, 2014, in terms of the “One Environmental System”, residue stockpiles and residue deposits are now subject to regulation under the Waste Act and waste management licenses for activities relating to their establishment and reclamation will need to be obtained, subject to the transitional provisions in the amendments which were published in July 24, 2015. Such licenses will need to be obtained from the relevant officials atDMR, which is the DMR, who become competent authorities under the Waste Actauthority to issue such licenses for mining operations. The Regulations regarding the Planning and Management of Residue Stockpiles and Residue Deposits which were published on July 24, 2015 are also likely to have a financial impact on the management of these facilities, since they impose various classifications and associated liner requirements for new residue stockpiles and deposits. This is a fundamental shift in regulation as the Waste Act previously excluded residue deposits and residue stockpiles from its ambit. The 2013 Amendment Bill to the MPRDA also proposes the amendment of the definition of residue stockpiles to include historic mines and dumps created before the implementation of the MPRDA.
Gold Fields undertakes activities which are regulated by the National Nuclear Regulator Act, No. 47 of 1999, or the NNR Act. The NNR Act requires Gold Fields to obtain authorization from the National Nuclear Regulator, or NNR, and undertake activities in accordance with the conditions of such authorizations. Prior to theSpin-off, Gold Fields’ South African mining operations possessed and maintained Certificates of Registration issued by the NNR. After theSpin-off, South Deep continues to possess and maintain its Certificate of Registration, or CoR, as required under the NNR Act.
Although South Africa has a comprehensive environmental regulatory framework, enforcement of environmental law has traditionally been poor. The DEA and the DWASDWS have indicated that enforcement will improve and that Environmental Management Inspectors will be provided with greater resources going forward. As of December 8, 2014, under the “One Environmental System”, separate Environmental Management Inspectors will bewere appointed under the DMR to regulate environmental compliance of the mining industry.
Although the DMR is still in the process of growing its inspectorate, related departments such as the DWS have generally shown an increased willingness to enforce the provisions of the NWA through the issue ofpre-directives under the NWA.
Health and Safety
The principal objective of the South African Mine Health and Safety Act No. 29 of 1996, or the Mine Health and Safety Act, is to protectprovide for the protection of the health and safety of employees and other persons at mines. The Mine Health and Safety Act requires that employers and others to ensure their operating andnon-operating mines provide a safe and healthy
working environment, determinesas far as reasonably practicable. The Mine Health and Safety Act provides for penalties and a system of administrative fines fornon-compliance and gives with the Minister of Mineral Resources the right to restrict or stop work at any mine and require an employer to take steps to minimize health and safety risks at any mine.provisions thereof. The Mine Health and Safety Act further provides for employee participation through the establishment of health and safety committees and by requiring the appointment of health and safety representatives. It also gives employees theprovides for an employee’s right to refuse dangerous work. Finally, it describes the powers and functions of the Mine Health and Safety Inspectorate, or MHSI (which inspectorate is part of the DMR and the process of enforcement). The Mine Health and Safety Act authorizes the MHSI to restrict or stop work at any mine and require an employer to take steps to minimize health and safety risks at any mine. Under the Mine Health and Safety Act, an employer is obliged, among other things, to ensure, as far as reasonably practicable, that its mines are designed, constructed and equipped to provide conditions for safe operation and a healthy working environment and theenvironment. The employer is also required to ensure, as far as reasonably practicable, that its mines are commissioned, operated, maintained and decommissioned in such a way that employees can perform their work without endangering their health and safety or that of any other person. Every employer must ensure, as far as reasonably practicable, that persons who are not employees, but who may be directly affected by the activities at a mine, are not exposed to any hazards to their health and safety.
A failureAny person, which may include an employer, who fails to comply with a provision of the Mine Health and Safety Act is a criminalcommits an offense for which an employer, or any responsible person,and may be charged and, if successfully prosecuted, be fined or imprisoned, or both. In addition, inspectors from the MHSI have the right to halt any part, or all, of the operations of a mine in the event of any circumstances, which are unsafe in the opinioninspector has reason to believe endangers the health and safety of that inspector.any person at the mine. The MHSI also has the power to impose administrative fines upon an employer in the event of a breach of the Mine Health and Safety Act. The maximum administrative fine that may be imposed is R1 million per offense.
The principal health risks associated with Gold Fields’ mining operations in South Africa arise from occupational exposure and community environmental exposure to silica dust, noise, heat and certain hazardous substances, including toxic gases, water, soil or air contamination and radioactive particulates. The most significant occupational diseases affecting Gold Fields’ workforce include lung diseases (such as silicosis, tuberculosis, a combination of the two and COAD) as well as NIHL. The Occupational Diseases in Mines and Works Act, No. 78 of 1973 (South Africa), or the ODMWA, governs the payment of compensation and medical costs related to certain illnesses, such as silicosis, contracted by persons employed in mines or at sites where activities ancillary to mining are conducted. See “Risk Factors—Gold Fields’ operations are subject to environmental and health and safety regulations, which could impose additional costs and compliance requirements and Gold Fields may face claims and liability for breaches, or alleged breaches, of such regulations and other applicable laws”. This increased cost, should it transpire, is currently indeterminate.
Until recently, the mining industry believed, as previous cases had indicated, that a provision in the Compensation for Occupational Injuries and Diseases Act No. 130 of 1993, or the COIDA, precluded an employee from recovering any damages from the employer for an occupational injury or disease resulting in his disablement or death. The ODMWA governs the payment of compensation and medical costs for certain illnesses, such as silicosis, contracted by those employed in mines or at sites where activities ancillary to mining are conducted. Recently,In 2011, the South African Constitutional Court ruled that a claim for compensation under ODMWA does not prevent the employee from seeking to recover damages from the employer concerned inas a civil action under common law. While issues, such as negligence and causation, need to be proved by the claimant on a case by casecase-by-case basis, it is nevertheless possible that such a ruling could expose Gold Fields to claims related to occupational hazards and diseases (including silicosis or other ailments alleged to arise due to exposure to hazardous materials and substances), which may be in the form of an individual claim, a class action or similar group claim. Although risks associated with alleged
occupational exposure are likely to be greater, such actions may also arise in connection with the alleged incidence of such diseases in communities proximate to Gold Fields’ mines. A consolidated application has been brought against several South African mining companies, including Gold Fields, for certificationscertification of a class action on behalf of current andor former mineworkers (and their dependants)dependents) who have allegedly contracted silicosis and/or tuberculosis while working for one or more of the above mining companies.companies listed in the application On May 13, 2016, the South Gauteng High Court ordered, amongst other things the certification of the two separate classes for silicosis and tuberculosis. Subsequently the mining companies listed in the application were granted leave to appeal against all aspects of the class certification judgment. See “—Legal Proceedings and Investigations”.
If a significant number of such claims were suitably established against it, the payment of compensation for the claims could have a material adverse effect on Gold Fields’ business, reputation, results of operations and financial condition. In addition, Gold Fields may incur significant additional costs arising out of these issues, including costs relating to the payment of fees, increased levies or other contributions in respect of compensatory or other funds established (if any) and expenditures arising out of its efforts to remediate these matters or to resolve any outstanding claims or other potential action.
Mineral Rights
The MPRDA
The MPRDA came into effect on May 1, 2004. It can be said thatSee “Risk Factors—Gold Fields’ mineral rights are subject to legislation, which could impose significant costs and burdens and which impose certain ownership requirements, the MPRDA consistsinterpretation of two parts, the first being mineral prospecting and mining and the second being petroleum exploration and production. Attached to the Act itselfwhich are the Transitional Provisions contained in Schedule IIsubject of the Act. In terms of the MPRDA, the mineral and petroleum resources of South Africa belong to the nation and the state (as custodian of the nation’s resources), which is entitled to grant prospecting and mining rights. The objective of the MPRDA is, among other things, to promote equitable access to the nation’s mineral resources by South Africans, expand opportunities for historically disadvantaged persons who wish to participate in the South African mining industry, advance social and economic development, and create an internationally competitive and efficient administrative and regulatory regime, based on the universally accepted principle, and consistent with common international practice, that mineral resources are part of a nation’s patrimony. Mining companies are required to apply for the right to mine and/or prospect.
Under the MPRDA, prospecting rights may be granted for an initial maximum period of five years and can be renewed once upon application for a further period not exceeding three years. Mining rights are valid for a maximum period of 30 years, and can be renewed upon application for further periods, each of which may not exceed 30 years. A wide range of factors and principles, including proposals relating to black economic empowerment and social responsibility, will be considered by the Minister of Mineral Resources when exercising his discretion whether to grant these applications. A prospecting or mining right can be suspended or canceled if the holder conducts mining operations in breach of the MPRDA, a term or condition of the right or an environmental management plan, or if the holder of the right submits false, incorrect or misleading information to the DMR. The MPRDA sets out a process which must be followed before the Minister of Mineral Resources is entitled to suspend or cancel the prospecting or mining right. In May 2010, the DMR approved the conversion of the South Deep old order mining right into a new-order mining right. Included in this approval was an additional portion of ground known as Uncle Harry’s, which is contiguous to South Deep. The durations of the South Deep mining right and the Uncle Harry’s mining right are both 30 years.
The MPRDA empowered the Minister of Mineral Resources to develop the Mining Charter, which is a set of guidelines that lays out the framework, targets and timetable for effecting entry of HDSAs into the mining industry and to allow such South Africans to benefit from the exploitation of South Africa’s mineral resources.
Among other things, the Mining Charter envisages the transfer of 26% of the ownership of South African mining industry assets to HDSAs within 10 years (i.e. by the end of 2014)dispute”. Ownership can comprise active involvement, through HDSA-controlled companies (where HDSAs own at least 50% plus one share of the company and have management control), strategic joint ventures or partnerships (where HDSAs own at least 25% plus one vote of the joint venture or partnership interest and there is joint management and control) or collective investment vehicles, the majority ownership of which is HDSA based, or passive involvement, particularly through broad-based vehicles such as employee stock option plans. The Mining Charter also required mining companies to submit annual, audited reports on progress toward their commitments, as part of an ongoing review process. In addition to this process, the South African government has also announced that it intends to conduct a review of the Mining Charter in fiscal 2015.
Following a review of the mining industry’s compliance with the 2009 targets set in the original Mining Charter, or the 2009 Review, the DMR released the Amended Mining Charter on September 13, 2010. Amendments to the original Mining Charter in the Amended Mining Charter include, among other things, guidelines that require mining companies to: (i) facilitate local beneficiation of mineral commodities; (ii) procure a minimum of 40% of capital goods, 70% of services and 50% of consumable goods from HDSA suppliers (i.e. suppliers in which a minimum of 25% plus one vote of their share capital must be owned by HDSAs) by 2014 (exclusive of non-discretionary procurement expenditure); (iii) ensure that multinational suppliers of capital goods contribute a minimum of 0.5% of their annual income generated from South African mining companies into a social development fund from 2010 towards the socio-economic development of South African communities; (iv) achieve a minimum of 40% HDSA demographic representation by 2014 at top management (board) level, senior management (executive committee) level, middle management level, junior management level and core and critical skills; (v) invest up to 5% of annual payroll in essential skills development activities; and (vi) implement measures to improve the standards of housing and living conditions for mineworkers by converting or upgrading mineworkers’ hostels into family units, attaining an occupancy rate of one person per room and facilitating home ownership options for all mineworkers in consultation with organized labor, all of which must be achieved by 2014. In addition, mining companies are required to monitor and evaluate their compliance to the Amended Mining Charter and must submit annual compliance reports to the DMR. The Scorecard for the Broad-Based Socio-Economic Empowerment Charter for the South African Mining Industry attached to the Amended Mining Charter, or the Scorecard, makes provision for a phased-in approach for compliance with the above targets over the five year period ending in 2014. For measurement purposes, the Scorecard allocates various weightings to the different elements of the Amended Mining Charter. According to the text of the Amended Mining Charter, failure to comply with its provisions will amount to a breach of the MPRDA and may result in the cancelation or suspension of a mining company’s existing mining rights. This is in conflict with the provisions of the MPRDA.
In accordance with the MPRDA, on April 29, 2009 the DMR published the Code relating to the socio-economic transformation of the mining industry, or the Mining Code. The current industry position is that the DMR does not apply the Codes and mining companies are subject only to the provisions of the MPRDA.
In the same vein as the 2009 Review, during the course of fiscal 2014, the DMR appointed a private entity to conduct Amended Mining Charter compliance audits on its behalf, in respect of a number of mining companies. Mining companies were required to complete questionnaires and templates as a means of reporting on their compliance with fiscal 2014 targets as set in the Amended Mining Charter. However, it is generally understood that the DMR disregarded or abandoned this audit process. It is therefore unclear what the status of the process is and what the outcomes were. It is also unclear whether or not the information provided during this audit process will be considered or used by the DMR for any purpose in the future. It appears that the information gathering mechanism has been substituted by the DMR’s own formal request for information and data on Amended Mining Charter compliance in terms of section 29 of the MPRDA. The DMR directed mining companies to populate an electronic reporting template, but this template has raised a number of concerns due to its inflexible approach towards the assessment of compliance with the Amended Mining Charter. The template applies a mechanical process in that it asks specific questions and requires the completion of certain information, without making provision for the detailing of complex facts or historical transactions entered into in pursuance of meeting the Mining Charter HDSA ownership element.
With the 2014 HDSA ownership target date contemplated in the Amended Mining Charter having passed, the DMR’s application of the Amended Mining Charter and its assessment of compliance therewith in respect of the ownership element is concerning. There are concerns in the mining industry that the approach followed by the DMR poses a risk of government action against many mining entities, which will threaten security of tenure, in that government may order the suspension or cancelation of mining rights in instances of deemednon-compliance with the requirements of the Amended Mining Charter. The mining industry, represented by the Chamber of Mines, is considering what preparatory steps (including appropriate legal relief) are to be taken to mitigate that risk.
Specifically, on March 31, 2015, the Chamber of Mines reported that the DMR believes that empowerment transactions by mining companies concluded after 2004 where the HDSA ownership level has fallen due to HDSA disposal of assets or for other reasons, should not be included in the calculation of HDSA ownership for the purposes of, among other things, the 26% HDSA ownership guideline under the Mining Charter. The position of Gold Fields is consistent with that of the Chamber of Mines, and is that such empowerment transactions should be included in the calculation of HDSA ownership. The DMR and the Chamber have jointly agreed to approach the South African courts to seek a declaratory order which will provide a ruling on the relevant legislation and the status of the Mining Charter.
If the DMR were to prevail in court, mining companies, including Gold Fields, may be required to undertake further transactions in order to increase their HDSA ownership which would result in the dilution of existing shareholders. In such a case, mining companies may be required to maintain a minimum HDSA ownership level indefinitely. If the Chamber of Mines were to prevail in court, the DMR may enact new regulations to, among other things, increase HDSA ownership requirements for mining companies which would result in the dilution of existing shareholders. The position taken by the DMR also poses a risk that government may order the suspension or cancellation of mining rights for mining companies deemed not to be in compliance with the guidelines of the Amended Mining Charter. It is doubtful that they may lawfully do so in view of the Mining Charter’s questionable legal status and enforceability, among other things.
The Mineral and Petroleum Resources Development Amendment Act, 2008, or the MPRDAA, was assented to by the President on April 19, 2009 and was to come into effect on a date to be proclaimed by the President. From April 19, 2009 to May 31, 2013, the fate of the MPRDAA was unclear and it was thought that the government would not proceed with the MPRDAA. On May 31, 2013, it was published in the government gazette that the MPRDAA would come into effect on June 7, 2013. This proclamation was amended such that only certain sections of the MPRDAA took effect as of June 7, 2013. Because Gold Fields is already the holder of the South Deep mining right, the amendments introduced by the MPRDAA have limited impact on the current regulation of the South Deep mine.
In December 2012, the Mineral and Petroleum Resources Development Amendment Bill, or the MPRDB, was published for comment. While the stated purpose of the MPRDB is, among other things, to remove ambiguities and enhance sanctions, the MPRDB has been criticized by stakeholders in the mining industry. Comments on the MPRDB were submitted and the Mineral and Petroleum Resources Development Amendment Bill B15-2013, or MPRDB 2013, was published on May 31, 2013. A further revised version of the MPRDB 2013, the Mineral and Petroleum Resources Development Amendment Bill B15B-2013, or the Revised MPRDB 2013, was approved by the National Assembly of Parliament on March 12, 2014 and by the National Council of Provinces on March 27, 2014. The President has not assented to the Revised MPRDB 2013 as he has found that in its current form, it not in accord with the Constitution of South Africa. In January 2015, the President therefore referred the Revised MPRDB 2013 back to Parliament for reconsideration. The first issue highlighted by the Presidency pertains to the elevation of the Mining Code and the Amended Mining Charter to the status of national legislation. The second issue highlighted by the Presidency is the fact that certain provisions of the Revised MPRDB 2013 leave South Africa vulnerable to attack in international fora. The President is of the view that these provisions seem to be inconsistent with South Africa’s obligations under the General Agreement on Trade and Tariffs, or GATT, and the Trade, Development and Cooperation Agreement, or TDCA, to the extent that they appear to impose quantitative restrictions on exports in contravention of GATT and TDCA. The third and fourth issues highlighted by the President are the fact that there was insufficient public participation conducted and that the relevant traditional authorities were not consulted in regard to the possible impacts on customary law or the customs of traditional communities.
Once the President assents to the Revised MPRDB 2013, it will become an Act of Parliament and will come into effect on a date to be proclaimed by the President.
There is a large degree of uncertainty regarding the changes that will be brought about should the Revised MPRDB 2013 be made an Act of Parliament. The Revised MPRDB 2013 sought to introduce a requirement that the consent of the Minister of Mineral Resources would be required for the transfer of any interest in an unlisted company (previously required only for the transfer of a controlling interest) or any controlling interest in a listed
company (previously not required), in respect of which companies hold a prospecting right or mining right. There has been much concern in this regard, as this amendment does not take into account the practicalities involved in the trading of shares of listed entities or that the proposed amendments may impede general corporate actions. There are also uncertainties in respect of the proposed introduction of provisions pertaining to the compulsory beneficiation of minerals within South Africa. The concern in this respect is that the Minister of Mineral Resources will have broad discretionary powers to prescribe the levels required for beneficiation in promoting the beneficiation of minerals. Further uncertainty also exists in respect of the introduction of provisions authorizing the Minister of Mineral Resources to declare certain minerals as “strategic” minerals, having regard to the national interest, the strategic nature of the mineral in question and the need to promote the sustainable development of the nation’s mineral resources. Concern in this regard goes to the fact that the declaration of specific minerals as “strategic” minerals will result in restrictions on the export thereof and that the proposed discretionary powers of the Minister of Mineral Resources in this regard are broad and unchecked. The manner and extent to which all of these issues will be dealt with following a further revision of the Revised MPRDB 2013 remains to be seen.
The Chamber of Mines has emphasized the need for certainty with regard to the proposed amendments to the MPRDA to enable mining companies to plan and raise finance. The Chamber of Mines also believes that previous agreements reached with regard to certain sections of the Revised MPRDB must remain unchanged. There can, however, be no guarantee that such previously agreed sections will remain unchanged.
The BBBEE Act and the BBBEE Amendment Act
The BBBEE Act established a national policy on broad-based black economic empowerment with the objective of increasing the participation of HDSAs in the economy. The BBBEE Act provides for various measures to promote black economic empowerment, including empowering the Minister of Trade and Industry to issue the BBBEE Codes with which organs of state and public entities and parties interacting with them or obtaining rights and licenses from them would be required to comply. There has been some debate as to whether or to what extent the mining industry was subject to the BBBEE Act and the policies and codes provided for thereunder. On October 24, 2014, the BBBEE Amendment Act No. 46 of 2013 was brought into operation. The BBBEE Amendment Act inserts a new provision in the BBBEE Act, whereby the BBBEE Act would trump the provisions of any other law in South Africa which conflicts with the provisions of the BBBEE Act, provided such conflicting law was in force immediately prior to the effective date of the BBBEE Amendment Act. The BBBEE Amendment Act also stipulates that this provision would only be effective one year after the BBBEE Amendment Act is brought into effect. This provision came into effect on October 24, 2015 and on October 27, 2015, the Minister for Trade and Industry published a government gazette notice declaring an exemption in favor of the DMR from applying the requirements contained in section 10(1) of the BBBEE Act for a period of 12 months, ending October 27, 2016. The Minister of Trade and Industry has not published any further notices since this date to provide clarity on his position but the exemption and its expiry can be read as confirmation that the South African Department of Trade and Industry sees the BBBEE codes as “applicable” to the Mining Industry. In any event, it is not clear whether the DMR is likely to continue implementing the Mining Charter in its current form or whether it will apply the BBBEE Act or whether it would follow the BBBEE Codes.
This raises the question of whether the BBBEE Act and the BEEBBBEE Codes may overrule the Mining Charter in the future. There is no clarity on this point at this stage. The revised Broad-Based Black Economic Empowerment Codes of Good Practice, or the Revised BEE Codes, became available for voluntary use on October 11, 2013 but are still under consideration and are not yet in force. Entities may elect to be measured under the Revised BEE Codes immediately.became effective on May 1, 2015. Both the BBBEE Amendment Act and the Revised BEE Codes expressly stipulate that, where an economic sector in South Africa has a sector code, or Sector Code, in place for BEE purposes, companies in that sector must comply with the Sector Code. For purposes of the BBBEE Act, the Mining Charter is not a Sector Code. It is not clear at this stage howOn February 17, 2016, the Minister of Trade and Industry published a gazette notice which repealed or confirmed the validity of a number of Sector Codes. The omission
of the Mining Charter and Code relate to each other. The government may designatefrom the notice can be interpreted as confirmation that the Mining Charter is not contemplated as a Sector Code, in which caseCode. This supports the interpretation that the BBBEE Act did not intend to trump the Mining Charter. While it remains to be seen how this will be under the auspices ofinterpreted, it appears that the BBBEE Act. OnAct and the other hand,BBBEE Codes will not overrule the Mining Charter may remainin the future. Although the Mining Charter is not a stand-alone document underSector Code, Gold Fields regularly reviews its status against the auspicesprovisions and obligations of the MPRDA and mayRevised BEE Code, or Codes, to internally measure what its compliance would be if it were subject to the trumping provision discussed above. This uncertainty mayCodes. To date, we believe we would be resolved through either government clarificationcompliant with the Codes; however there is no certainty as to whether the current obligations would supersede the Mining Charter or judicial attention.whether there would be a revision of the current Mining Charter.
The current version of the New Draft Mining Charter does not align the Mining Charter with the BBBEE Act, 2003, or BBBEE Act, and the BBBEE Codes, which apply generally to other industries in South Africa. Accordingly, if brought into effect in its current form, the New Draft Mining Charter could potentially create further uncertainty. See “Risk Factors—Gold Fields’ mineral rights are subject to legislation, which could impose significant costs and burdens and which impose certain ownership requirements, the interpretation of which are the subject of dispute”.
The Royalty Act
The Mineral and Petroleum Resources Royalty Act, No. 28 of 2008, or the Royalty Act, imposes a royalty on refined and unrefined minerals payable to the South African government.
The royalty in respect of refined minerals (which include gold and platinum) is calculated by dividing earnings before interest and taxes, or EBIT, by the product of 12.5 times gross revenue calculated as a percentage, plus an additional 0.5%. EBIT refers to taxable mining income (with certain exceptions such as no
deduction for interest payable and foreign exchange losses) before assessed losses but after capital expenditure. A maximum royalty of 5% of revenue has been introduced for refined minerals. Gold Fields currently pays a royalty based on the refined minerals royalty calculation as applied to its gross revenue.
The PresidentMinister of Finance has appointed the Davis Tax Review Committee to look into and review the current mining tax regime. The Committee’s First Interim Report on Mining, which was released for public comment on August 13, 2015, proposed no changes to the royalty regime but recommended the discontinuation of the upfront capital expenditurewrite-off regime in favor of an accelerated capital expenditure depreciation regime. In addition, the report recommended retaining the so called “gold formula” for existing gold mines only, as new gold mines would be unlikely to be established in circumstances where profits are marginal or where gold mines would conduct mining of the type intended to be encouraged by the formula. An alternative recommendation was to phase out the gold formula for all mines over a reasonable period of time. The Committee also recommended to phase out the additional capital allowances available to gold mines in order to bring the gold mining corporate income tax regime in line with the tax system applicable to all taxpayers.
Exchange Controls
South African law provides for Exchange Control Regulations which, among other things, restrict the outward flow of capital from the CMA. The Exchange Control Regulations, which are administered by the Financial Surveillance Department of the SARB, are applied throughout the CMA and regulate international transactions involving South African residents, including companies. The South African government has committed itself to gradually relaxing exchange controls and various relaxations have occurred in recent years.
SARB approval is required for Gold Fields and its South African subsidiaries to receive and/or repay loans tonon-residents of the CMA.
Funds raised outside of the CMA by Gold Fields’non-South African resident subsidiaries (whether through debt or equity) can be used for overseas expansion, subject to any conditions imposed by the SARB. Gold Fields and its South African subsidiaries would, however, require SARB approval in order to provide guarantees for the obligations of any of Gold Fields’ subsidiaries with regard to funds obtained fromnon-residents of the CMA. Debt raised outside the CMA by Gold Fields’non-South African subsidiaries must be repaid or serviced by those
foreign subsidiaries. Absent SARB approval, income earned in South Africa by Gold Fields and its South African subsidiaries cannot be used to repay or service such foreign debts. Unless specific SARB approval has been obtained, income earned by one of Gold Fields’ foreign subsidiaries cannot be used to finance the operations of another foreign subsidiary.
Transfers of funds from South Africa for the purchase of shares in offshore entities or for the creation or expansion of business ventures offshore require exchange control approval. However, if the investment is a new outward foreign direct investment where the total cost does not exceed R1 billion per company per calendar year, the investment application may, without specific SARB approval, be processed by an authorized dealer, subject to all existing criteria and reporting obligations.
Gold Fields must obtain approval from the SARB regarding any capital raising involving a currency other than the Rand. In connection with its approval, it is possible that the SARB may impose conditions on Gold Fields’ use of the proceeds of any such capital raising, such as limits on Gold Fields’ ability to retain the proceeds of the capital raising outside South Africa or requirements that Gold Fields seeks further SARB approval prior to applying any such funds to a specific use.
Ghana
Environmental
The laws and regulations relating to the environment in Ghana have their roots in the 1992 Constitution which charges both the state and individualsothers with a duty to take appropriate measures to protect and safeguard the natural environment. Mining companies are required, under the Minerals and Mining Act, Environmental Assessment Regulations 1999 (LI 1652) and Water Use Regulations 2001 (LI 1692), to obtain all necessary approvals from the Environmental Protection Agency, or Ghanaian EPA, a body set up under the Environmental Protection Agency Act 1994 (Act 490), and, where applicable, the Water Resources Commission and/or the Minerals Commission before undertaking mining operations. There are further requirements under the Minerals and Mining (Health, Safety and Technical) Regulations, 2012 L.I 2182 to obtain the necessary permits from the Inspectorate Division of the Minerals Commission for the operation of mines. The Minerals and Mining Act also requires that mining operations in Ghana comply with all laws for the protection of the environment.Non-compliance with the provisions of these laws could result in the imposition of fines and in some cases a term of imprisonment.
Under the relevant environmental laws and regulations, mining operations are required to undergo an environmental impact assessmentEIA process and obtain approval for an environmental permit prior to commencing operations. Environmental management plans, or EMPs are first submitted to the Ghanaian EPA 18 months after the initial issuance of the permit and then every three years andthereafter. The plan must include details of the likely impacts of the operation on the environment and local communities, as well as a comprehensive plan and timetable for actions to lessen and remediate adverse impacts. Approval of the management plan results in the issuance of an environmental certificate.
The laws also require mining operations to rehabilitate land disturbed as a result of mining operations pursuant to an environmental reclamation plan agreed with the Ghanaian regulatory authorities. The reclamation plan includes two cost estimates, namely the cost of rehabilitating the mining area for the life of the mine as well as the cost of rehabilitating the mine as at the date of the reclamation plan. These estimates are reviewed annually and updated every two years. The Environmental Assessment Regulations, 1999 (LI 1652) requires each mining company to post a reclamation bond. The terms of each reclamation bond isare determined by a Reclamation Security Agreement between that company and the Ghanaian EPA. Mining companies are typically required to secure a percentage (typically between 50% and 100%) of the current estimated rehabilitation costs by posting reclamation bonds underwritten by banks and restricted cash. Gold Fields Ghana and Abosso maintain reclamation bonds underwritten by banks and restricted cash in order to secure a percentage of their total mine closure liability.
In the third quarter of fiscal 2016, Gold Fields submitted an application for a revised Environmental Impact Statement for the Amoanda—Juno Growth Corridor Project located in the Damang mine with the Ghanaian EPA.
The Tarkwa and Damang mines have existing approvals to operate tailings storage facilities at Tarkwa and Damang, respectively. Gold Fields GhanaSee “License to Operate—Environmental approvals” and Abosso periodically apply“License to the Ghanaian EPA for approval to raise the walls at their existing tailings storage facilities,Operate—Waste and also submit Environmental Plans to the Ghanaian EPA for the issuance of their environmental certificates. As long as the necessary filings have been made, mining companies are usually permitted to continue operations while their applications are being considered. Gold Fields Ghana has applied for a permit for a new tailings storage facility at Tarkwa, and the review and approval process by the EPA is currently ongoing.tailings”.
Health and Safety
A mining company is statutorily obligated to, among other things, take steps to ensure that the mine is managed in accordance with applicable legislation, including the Minerals and Mining (Health, Safety and Technical) Regulations, 2012 (L.I 2173), to ensure the safety and wellbeing of its employees. Additionally, both the Tarkwa and Damang mines are required, under the terms of their respective mining leases, to comply with the reasonable instructions of the Chief Inspector of Mines regarding health and safety at the mines. A violation of the provisions of the health and safety regulations or failure to comply with the reasonable instructions of the Chief Inspector of Mines could lead to, among other things, a shutdown of all or a portion of the mine or the imposition of more stringent compliance procedures. The Tarkwa and Damang mines have potential liability arising from injuries to, or deaths of, workers, including, in some cases, workers employed by their contractors. Although Ghanaian law provides statutory workers’ compensation for injuries or fatalities to workers, it is not the exclusive means by which workers or their personal representatives may claim compensation. Both companies’ allotted insurance for health and safety claims and the relevant workers’ compensation may not fully cover them in respect of all liability arising from any future health and safety claims, since employees may still resort to other claims through the Ghanaian courts and/or legal system.
Mineral Rights
Gold Fields Ghana has two major mining leases in respect of its mining operations, namely the Tarkwa property lease and the Teberebie property lease. There are three mining leases under the Tarkwa property lease, all of which were granted in 1997 and will expire in 2027, and two mining leases under the Teberebie property lease, which were granted between 1988 and 1992, and expire in 2018. Under the provisions of the Minerals and Mining Law, 1986 (PNDCL 153), or the Minerals and Mining Law, and the terms of the mining leases, all of the mining leases under the Tarkwa and Teberebie properties are renewable by agreement between Gold Fields Ghana and the Governmentgovernment of Ghana. The Minerals Commission has approved Gold Fields Ghana’s application for an extension of the Teberebie leases to 2036 and has made recommendations to the Minister responsible for Lands and Natural Resources to grant the extension. Gold Fields Ghana has fully paid for the fees associated with the extension.
Abosso holds the mining lease in respect of the Damang mine which was granted in 1995 and expires in 2025, as well as the mining lease in respect of the Lima South mine that was granted in 2006 and expires in 2017. As with the Tarkwa and Teberebie mining leases, these leases are renewable under their terms and the provisions of the Minerals and Mining Law by agreement between Abosso and the government of Ghana. Gold Fields expects to submitsubmitted an application for renewal of Lima South in the last quarter of 2016.
The Minerals and Mining Act, 2006 (Act 703), or the Minerals and Mining Act, came into force on March 31, 2006. Although the Minerals and Mining Act repealed the Minerals and Mining Law, and the amendments to it, the Minerals and Mining Act provides that leases, permits and licenses granted or issued under the repealed laws will continue under those laws unless the Minister responsible for minerals provides otherwise by regulation. It also provides that the Minister responsible for minerals shall grant the extension of the term of a lease on conditions specified in writing as long as the holder of mineral rights has materially complied with its obligations under the Act. Management believes that all of Gold Fields’ operations in Ghana are materially compliant with the relevant legislative requirements. Therefore, unless and until any new regulations are passed in respect of Gold Fields’ mineral rights, the Minerals and Mining Law will continue to apply to Gold Fields’ current operations in Ghana.
The major provisions of the Minerals and Mining Act include:
the government of Ghana’s right to a free carried interest in mineral operations of 10% and the right to a special share (discussed below); and
mining companies which have invested or intend to invest at least U.S.$500 million (as Gold Fields has) may benefit from stability and development agreements, relating to both existing and new operations, which will serve to protect holders of current and future mining leases for a period not exceeding 15 years against changes in laws and regulations generally and, in particular, relating to customs and other duties, levels of payment of taxes, royalties and exchange control provisions, transfer of capital and dividend remittances. A development agreement may contain further provisions relating to the mineral operations and environmental issues. Each stability and development agreement is subject to the ratification of parliament.
In 2010, the Minerals and Mining Act was amended to provide for a fixed royalty rate of 5% of the total revenue earned from minerals obtained, with effect from March 17, 2010. Although payment of the royalty rate became effective in March 2010, Gold Fields did not begin submitting the required payment until April 1, 2011 due to a moratorium on the tax burden for mining leases in place prior to commencement of the Mineral and Mining Act, which ended on March 31, 2011.
The Ghanaian parliament passed an Actact that, effective March 9, 2012, increased taxes on mining companies. These changes included introducing a separate tax category for companies engaged in mining, which raised the applicable corporate tax rate from 25% to 35% and reduced the capital allowance regime from 80% for the first year with reductions to a uniform regime of 20% over five years. Under a new Income Tax Act enacted in 2015 (Act 896), unutilized capital allowance cannot be deferred if not used in the tax year. Further, a draft bill was presented to the Ghanaian parliamentproposed which sought to impose a windfall profit tax of 10% of the cash balance of a company engaged in mining activities. The bill also sought to allowplanned windfall tax has, however, been on hold indefinitely since January 2014.
On March 17, 2016, the Commissioner-General, in determining the cash balanceparliament of a company, to disregard or re-characterize a transaction or any other transaction if the Commissioner-General believed that the transaction was carried out for the purpose of reducing the cash balance with respect to calculation of the windfall profit tax. The bill could not be laid before parliament for consideration in the most recent session. In his budget speech on November 19, 2013, the Minister of Finance announced that a mining review committee was reviewing the windfall profit taxGhana ratified development agreements between Gold Fields Ghana, Abosso and the government would re-introduce the billof Ghana. Parliamentary proceedings leading to the new parliamentratification were officially published on parliament’s website on March 21, 2016. The development agreements provide for, among other things, a fixed corporate tax rate of 32.5%, beginning on March 17, 2016, and exemption from certain import duties. In addition, Gold Fields is to pay royalties on a sliding scale, replacing the current fixed rate, with effect from January 1, 2017. Additionally, under the development agreements, Gold Fields agreed to forgo the previous exemptions from withholding tax under the deed of warranty between Abosso and the government of Ghana and the project development agreement between Gold Fields Ghana and the government of Ghana. Under the old Abosso deed of warranty, there was no withholding tax applicable on payments from the external account in connection with interest and other borrowing costs/fees, payments to suppliers, consultants and contractors of goods or services and dividends to external shareholders. With respect to the Tarkwa project development agreement, there was no withholding tax on dividends and capital repayments tonon-resident shareholders, interest, commitment or other fee or capital redemption payment in foreign currency fromnon-Ghana resident lenders.
Under the development agreements, Gold Fields committed to pay compensation for assets used at Tarkwa since the divestiture of the Ghanaian State Gold Mining Company and, in years where a dividend is not declared and paid, to make a payment of 5% of profits after consultation with all stakeholders. In January 2014,tax in the Minister of Finance announced thatrelevant year to the planned windfall profit tax had been put on hold indefinitely.government (which will be offset against the eventual dividend payment).
Land Claims
An action was instituted during fiscal 2013 by a local chief against Abosso for an injunction to restrain Abosso from continuing with the construction of its Far East Tailings Storage Facility. The parties have reached a settlement and executed an agreement to that effect.
Government Option to Acquire Shares of Mining Companies
Under Ghanaian law, the government is entitled to a 10% interest in any Ghanaian company which holds a mining lease in Ghana, without the payment of consideration for the shares therein. The government of Ghana has already received this 10% interest in each of Gold Fields Ghana and Abosso. The government also has the
option, under the Minerals and Mining Law, of acquiring an additional 20% interest in the share capital of mining companies whose rights were granted under the Minerals and Mining Law at a price agreed upon by the parties, at the fair market value at the time the option is exercised, or as may be determined by international arbitration. The government of Ghana exercised this option in respect of Gold Fields Ghana and subsequently transferred the interest. The government of Ghana retains this option to purchase an additional 20% of the share capital of Abosso. As far as management is aware, the government of Ghana has not exercised this option for any other gold mining company in the past, other than Gold Fields Ghana.
Under the Minerals and Mining Law, which continues to apply to Gold Fields Ghana’s operations, and under the Minerals and Mining Act, the government has a further option to acquire a “special share” in a mining company for no consideration or in exchange for such consideration as the government and that company shall agree. This interest, when acquired, constitutes a special share which gives the government the right to attend and speak at any general meeting of shareholders, but does not entitle the government to any voting rights. The special share does not entitle the government to distributions of profits of the company which issues it to the government. The written consent of the government is required to make any amendment to a company’s regulations relating to the government’s option to acquire a special share. Although the government of Ghana has agreed not to exercise this option in respect of Gold Fields Ghana, it has retained this option for Abosso.
Exchange Controls
Under Ghana’s mining laws, the Bank of Ghana or the Minister for Finance may permit the holder of a mining lease to retain a percentage of its foreign exchange earnings for certain expenses in bank accounts in Ghana. Under a foreign exchange retention account agreement with the government of Ghana, and in line with the Development Agreement, Gold Fields Ghana is& Abosso are required to repatriate 20%30% of its revenues derived from the Tarkwa mine to Ghana and use the repatriated revenues in Ghana or maintain them in a Ghanaian bank account. Management believes that Gold Fields Ghana is entitled to rely on the provisions of the foreign exchange retention account agreement for the duration of the Tarkwa mining leases. Abosso is currently obligated to repatriate 25% of its revenue to Ghana, although the level of repatriation under the deed of warranty between Abosso and the government of Ghana is subject to renegotiation every two years. The most recent negotiations were concluded in February 2003. Since then, there have been no requests for negotiations by either side; until Abosso’s repatriation level is renegotiated, it will remain the same. While management has no reason to believe that the repatriation level will increase as a result of the next set of negotiations, there is no agreed ceiling on the repatriation level, and it could be increased.
The Bank of Ghana issued notices on February 4, 2014 and June 13, 2014 that imposed further restrictions on the operation of Foreign Exchange Accounts and Foreign Currency Accounts. However, on August 8, 2014, it reversed virtually all the restrictions that it had imposed through these notices.
Increased Electricity Costs
On December 11, 2015, the Public Utilities Regulatory Commission increased the average electricity tariffs for the GRIDCo by approximately 59.2%, increasing the tariff paid by Tarkwa only from U.S.$0.01539/kWh to U.S.$0.024252/kWh. In addition, the new Energy Sector Levies Act enacted in 2015 (Act 899) imposed a levy of 9% per kilowatt hour of electricity, on both public lighting and national electrification, applicable to all consumers (resulting in an increased charge to Tarkwa from the VRA of 1.2 c/kWh). While in his budget speech on March 2, 2017, the Minister of Finance announced that the levy of 9% on public lighting and national electrification will be reduced to 2% and 3% respectively there can be no guarantee that this reduction will be enacted. During fiscal 2016, new gas power plants, operated by an independent power producer, were commissioned at the Tarkwa and Damang mines. These power plants are expected to have the capability to supply 100% of the power required by Tarkwa and Damang by the end of fiscal 2017. These power plants have significantly reduced the mines’ dependence on grid electricity.
Australia
Environmental
Gold Fields’ gold operations in Australia are primarily subject to the environmental laws and regulations of the State of Western Australia which require, among other things, that Gold Fields obtains necessary environmental approvals, environmental licenses, works approvals and mining approvals to implement and carry out its mining operations. However,In addition, under theEnvironment Protection and Biodiversity Conservation Act 1999 (Cth), or the EPBC Act, it may be necessary to obtain separate approval from the federal government if any new
project (including some expansions of existing facilities) has, will have or is deemed to be a “controlled action” having, or likely to have, anya significant impact on “matters of national environmental significance” under that Act.
At the state level, Gold Fields is subject to theEnvironmental Protection Act 1986 (WA), or EP Act, under which it is obliged to prevent and abate pollution and environmental harm. The EP Act also prescribes sanctions and penalties for a range of environmental offenses, including orders which may effectively suspend certain operations or activities.
Under Part IV of the EP Act, a proposal that is likely to have a significant effect on the environment must be referred to the Western Australian Environmental Protection Authority, or the Western Australian EPA, which undertakes the environmental impact assessment, or EIA of the proposal. An EIA is a systematic and orderly evaluation of a new proposal (including an expansion of an existing development) and its impact on the environment. The assessment includes considering ways in which the proposal, if implemented, could avoid or reduce any impact on the environment. There are two levelsAfter completing its assessment of assessment—Public Environmental Review and Assessment on Proponent Information. Thea proposal, the Western Australian EPA prepares a report for the Western Australian Minister for the Environment who must decide whether or not to approve the proposal and, if approved, what conditions are appropriate to regulate the implementation of the proposal.
In addition to this approval, under Part V of the EP Act, a works approval and environmental license must be obtained from the Department of Environment Regulation, or DER, for the construction and operation of facilities with significant potential to cause pollution, such as the ore processing facility, tailings storage facility, landfill and waste water treatment plant.
Gold Fields is also required to obtain a water license from the Western Australian Department of Water to abstractextract water for its mining activities.
Prior to the commencement or expansion of any mining operations, Gold Fields is also required to prepare a mining proposal in accordance with published guidance material and submit the mining proposal to the Western Australian Department of Mines and Petroleum, or DMP for approval under the Mining Act 1978 (WA), or Mining Act. Once approved by the DMP, the requirement to comply with the mining proposal becomes a condition of the mining tenement.
Gold Fields is required to prepare and submit an Annual Environmental Report to the DER and DMP under the conditions attached to its environmental approvals, licenses and mining tenements.
During the operational life of its mines, Gold Fields is required by law to prepare a Mine Closure Plan which is to make provisions for the ongoing rehabilitation of its mines and to provide for the cost of post-closure rehabilitation and monitoring once mining operations cease. Under the Mining Act, Gold Fields has previously been required to guarantee its environmental obligations by providing the Western Australian government with unconditional bank-guaranteed performance bonds. From July 1, 2014, Gold Fields has been required to pay an annual levy into a mining rehabilitation fund administered by the DMP instead of providing performance bonds. The annual levy payable by Gold Fields is 1% of an estimate of the cost per hectare to rehabilitate the disturbed land.
The Clean Energy Actfunds held by the DMP in the mining rehabilitation fund are used to rehabilitate abandoned mines, and associated legislation established a national carbon pricing scheme,are not refundable or Scheme, which was in effect from July 1, 2012 until June 30, 2014 when it was repealed.reimbursable to the contributing entities for their own rehabilitation liabilities.
Under the Scheme, entities that hadNational Greenhouse and Energy Reporting scheme, Gold Fields Australia has operational control over facilities (i.e. activities)the four Australian operations which have combined emissions exceeding 125kt CO2e each fiscal year. Accordingly, Gold Field Australia is required to report as the registered “controlling corporation” for the purposes of the scheme.
In December 2014, the Emissions Reduction Fund, or the ERF, came into effect. The ERF is a voluntary scheme that emitted more than 25,000 tonnes of CO2-e per annum inaims to provide financial incentives for emitters to reduce, abate or sequester greenhouse gas emissions covered by the Scheme were directly regulated, and were required to acquire and surrender carbon units to cover those emissions. Darlot was required to register its carbon emissions as a result of the amount of gas used for self-generation, andGold Fields registered the required account on September 10, 2014. The transactionGranny Smith Gas Power Station Project with the ERF for carbon abatement in May 2015 under the required 25,199 carbon units was initiated on December 17, 2014,Industrial Fuel and the funds for the carbon units were transferred toEnergy Efficiency Method. Gold Fields entered a reverse
auction with the Clean Energy Regulator in April 2016 under the Emissions Reduction Fund in order to sell the project’s carbon abatement to the Australian government. This bid was successful and on January 19, 2015, ahead of the February 2, 2015 deadline.May 5, 2016, Gold Fields was also impacted byentered into a contract with the Scheme through a reduction inEmissions Reduction Fund for the diesel rebate at somesale of its operations. The reduction in the diesel rebate was universal and therefore applied to all mines. The rebate was calculated to be directly proportional to the price per ton of carbon.
The Scheme ceased to apply to Gold Fields’ operations in Australia from July 1, 2014. However, Gold Fields remains liable for the acquisition and surrender of carbon units for the period prior to July 1, 2014, and for the ongoing reporting of its greenhouse gas emissions.
The Australian government is replacing the Scheme with its direct action plan on climate change, or the Direct Action Plan. Legislation has been passed to implement a voluntary emissions reduction fund which will provide financial incentives for polluters to reduce emissions. The full legislative package required to implement the Direction Action Plan is yet to be put in place. Gold Fields does not expect the Direct Action Plan to result in any liability for its operations in Australia in fiscal 2014 or 2015.abatement credits.
Health and Safety
The Mines Safety and Inspection Act 1994 (WA), or the Safety and Inspection Act, and theMines Safety and Inspection Regulations 1995 (WA) together regulate the duties of employers and employees in the mining industry with regard to occupational health and safety and outline offenses and penalties for breach. Resources Safety, a division of the DMP, administers this legislation. Under the approach utilized by Resources Safety, it is the responsibility of each employer to manage safety (i.e. a general duty of care exists in mines located in Western Australia). A violation of the safety laws or failure to comply with the instructions of the relevant health and safety authorities is a criminal offense that could lead to, among other things, a temporary shutdown of all or a portion of the mine, a loss of the right to mine, or the imposition of costly compliance procedures and/or financial penalties.
TheWork Health and Safety Bill 2014 (WA), or the WHS Bill (which is based on the federalModel Work Health and Safety Act), has been drafted in respect of general industry and was open for public consultation until January 2015. It is anticipated thatFurther modifications were required as a result of the consultation process, and the WHS Bill willis yet to be considered byfinalized. Inmid-2015, the Western Australian Parliament in fiscal 2015. The Western Australian State Government is currentlyDMP released a “mock up” of the view that mining activities will not be covered bya harmonizedWork Health and Safety (Resources and Major Hazards) Bill 2015 (WA), or the WHS Resources Bill, butto consolidate the safety provisions of existing mining, petroleum and major hazard facilities legislation into one statute that will be covered by proposed new legislation basedsupplement the WHS Bill. While drafting commenced on the WHS Resources Bill which incorporates specific arrangements forin 2016, all work health and safety in mining activities, and which wouldon the legislation was suspended pending the outcome of the March 2017 state election. If introduced, the WHS Resources Bill will replace the Safety and Inspection Act. At this time,current mines safety legislation referred to above. However, it is not known whenclear if the new mining-specific legislation will be introduced.proceed in its current form under a new state government.
Mineral Rights
In Australia, the ownership of land is separate from the ownership of most minerals (including gold), which are the property of the states and are thus regulated by the state governments. The Mining Act is the principal piece of legislation governing exploration and mining on land in Western Australia. Licenses and leases for, among other things, prospecting, exploration and mining must be obtained pursuant to the requirements of the Mining Act before the relevant activity can begin.
Prospecting licenses, exploration licenses and mining leases are subject to prescribed minimum annual expenditure commitments. Royalties are payable to the state based on the amount of ore produced or obtained from a mining tenement. A quarterly production report must be filed and royalties are calculated ad valorem at a fixed rate of 2.5% of royalty value in respect of gold, and at other rates (depending on the relevant mineral) in respect of ore produced or obtained from a mining tenement. Following reports suggesting that gold royalty rates might be increased, the government of Western Australia clarified on March 25, 2015 that no changes to the royalty rate would be made at this time. The royalty value of gold is the amount of gold produced during each month in a relevant quarter multiplied by the average gold spot price for that month. Despite the discussion above, no royalty is payable in respect of the first 2,500 ounces of gold metal produced during a financial year from gold-bearing material produced or obtained from the same gold royalty project.
Land Claims
In 1992, the High Court of Australia recognized a form of native title which protects the rights of indigenous people in relation to land and water in certain circumstances. As a result of this decision, theNative Title Act 1993 (Cth), or Native Title Act, was enacted to recognize and protect existing native title by providing a
mechanism for the determination of native title claims and a statutory right for Aboriginal groups or persons to negotiate, object, and/or be consulted when, among other things, there is an expansion of, or change to, the rights and interests in the land which affect native title and which constitute a “future act” under the Native Title Act.
The existence of these claims does not necessarily prevent continued mining under existing tenements. Tenements granted prior to January 1, 1994 are not “future acts” and do not need to comply with the aforementioned consultation or negotiation procedures.
As a general rule, tenements granted (or in some casesre-granted) after January 1, 1994 need to comply with this process. However, in Western Australia, some tenements were granted without complying with this consultation or negotiation process on the basis of then prevailing Western Australian legislation. This legislation was subsequently found to be invalid as it conflicted with the Native Title Act which is Commonwealth legislation. Subsequent legislation was passed (Titles Validation Amendment Act 1999 (WA)) validating the grant of tenements between January 1, 1994 and December 23, 1996, provided certain conditions were met under the Native Title Act.
Certain of Gold Fields’ tenements are currently subject to native title claims and a determination of native title. However, most of Gold Fields’ tenements were granted prior to January 1, 1994. Where tenements were granted between January 1, 1994 and December 23, 1996, Gold Fields believes it has complied with the conditions set out by the Native Title Act for those tenements to be validly granted. On those tenements granted after December 23, 1996, Gold Fields has either entered into agreements with the claimant parties which provide the Company with security of tenure, or utilized a valid exemption from the consultation and negotiation process under the Native Title Act. Therefore, any existing or future grant of native title over any of these tenements will not have a material effect on Gold Fields’ tenure during the operation of these agreements. See “—Legal Proceedings and Investigations”.
Peru
Regulatory
The regulatory framework governing the development of mining activities in Peru mainly consists of the General Mining Act (Ley General de Minería), or the LGM, and regulations relating to mining procedures, health and safety, environmental protection, and mining investment and guarantees. Mining activities as defined by the LGM include surveying, prospecting, exploration, exploitation, general workings, beneficiation, trading and transportation of ore.
In addition to general taxation, mining companies are also subject to a special tax regime established in 2011 through the amendment of the Mining Royalty Law and enactment of the Special Mining Tax Law and the Special Mining Charge Law.
Regulatory and Supervisory Entities
In general terms, the principal regulator of mining activities in Peru is the Ministry of Energy and Mines, or MEM, through its General Bureau of Mining (Dirección General de Minería), or DGM, and its General Bureau of Mining and Environmental Affairs (Dirección General de Asuntos Ambientales Mineros).
Additionally, onsince December 20, 2012,28, 2015, the National Environmental Certification Service for Sustainable Investment, or SENACE, was created. SENACE is a specialized technical organization that will take overhas been authorized to review and approve the responsibility of reviewing and approving the Environmental Impact AssessmentEIA studies of projects that have a national andor multi-regional significance,influence, and that couldmay generate significant environmental impacts. The transfer of this responsibility to SENACE will begin in the second quarter of fiscal 2015.
Other relevant regulatory institutions include the INGEMMET, the OSINERGMIN, the OEFA, the National Water Regulator,Authority, the Ministry of Culture and the National Superintendence of Labor Inspection, or SUNAFIL.
Concessions
In accordance with the LGM, mining activities (except surveying, prospecting and trading) must be performed exclusively under the concession system. A concession confers upon its holder the exclusive right to develop a specific mining activity within a defined area. The LGM establishes four types of concessions:
Mining Concessions
A mining concession is a real property interest independent and separate from surface land located within the coordinates of the concession. Holders of mining concessions or of any pending claims for mining concessions must comply with payment of an annual mining good standing fee, or Mining Good Standing Fee, of U.S.$3.00 per year per hectare in order to maintain the concessions in good standing. The payment starts from the year in which the claim was filed and must be paid for as long as the concessions are held. Holders of mining concessions are also required to meet minimum annual production targets prescribed by law, which will have to be demonstrated in the Annual Consolidated Statement filed with the MEM. Titleholders are entitled to group multiple concessions into Administrative Economic Units to comply with the minimum production requirement, provided certain conditions are met. In the case of mining concessions obtained prior to October 2008, the minimum annual production target for concessions to mine metals is equivalent to U.S.$100.00 per hectare per year.
In the case of mining concessions obtained starting in October 2008, the minimum annual production target for metallic concessions is equivalent to one Fiscal Payment Unit, or UIT, per hectare per year. The UIT is fixed on a yearly basis and is set to equal S/.3,850,.4,050, or approximately U.S.$1,283.00,1,227, in 2015. Gold Fields2017. La Cima owns mining concessions acquired before and after October 2008 and therefore is subject to both production target requirements. Gold Fields La Cima is currently in compliance with both requirements.
Beneficiation Concessions
Beneficiation or process concessions confer the right to extract or concentrate the valuable substances of an aggregate of minerals and/or to smelt, purify or refine metals through a set of physical, chemical and/or physicochemical processes. As with mining concessions, holders of beneficiation concessions are required to pay the Mining Good Standing Fee, which is calculated on the basis of the production capacity of the processing plant. Gold Fields La Cima haswas granted a permit for a processing plant with ana capacity of 22,320 tonnes per day by the Ministry of Energy and Mines. The current installed capacity of 18,600the processing plant is 19,680 tonnes per day. In fiscal 2014, Gold Fields2016, La Cima paid a S/. 32,034.00,.39,176.10, or approximately U.S.$11,046.21,11,872, Mining Good Standing Fee in connection with its beneficiation concessions.
General Working Concessions
General workings concessions confer the right to render ancillary services to two or more mining concession holders. The following are considered ancillary services: ventilation, drainage, hoisting or extraction in favor of two or more concessions of different concessionaires.
Ore Transportation Concessions
Ore transportation concessions confer the right to install and operate a system for the continuous massive transportation of mineral products between one or more mining centers and a port or beneficiation plant, or a refinery, or along one or more stretches of these routes. The ore transportation system must benon-conventional, such as conveyor belts, pipelines or cable cars, among others. Conventional transportation systems are authorized by the Ministry of Transport and Communications.
Mining Royalty and Other Special Mining Taxes and Charges
In addition to general taxation, mining companies are subject to a special tax regime established, in its current form, in September 2011. With respect to the general taxation regime, relevant changes have been introduced with effect from January 1, 20152017 to corporate and dividends income tax rates. For fiscal 2015 and 2016,2017, the corporate tax rate has been reducedincreased from 30%28% to 28%29.5%. In turn, the dividends tax rate applicable tonon-resident shareholders of Peruvian companies has increasedreduced from 4.1%6.8% to 6.8% for such years. These reductions are not applicable to Gold Fields La Cima and Gold Fields Corona (BVI) as they have executed Legal Stability Agreements with PROINVERSION which have stabilized the income tax rates in force on the date of their execution. Gold Fields La Cima and Gold Fields Corona (BVI) may decide to waive the stability provided by the Legal Stability Agreements and submit to the general taxation regime if deemed convenient.5%.
For 2017 and 2018, the corporate tax rate will be 27% and the dividends tax rate will be increased to 8%. These new rates will apply to Gold Fields La Cima and Gold Fields Corona (BVI) since their Stability Agreements expire on FY 2017. From 2019 onwards, the applicable corporate tax rate will be 26% and the dividends tax rate will be 9.3%.
The special tax regime is structured around the Mining Royalty Law, the Special Mining Tax Law and the Special Mining Charge Law. The Mining Royalty Law established payment of a mining royalty by owners of mining concessions for the exploitation of metallic andnon-metallic resources. This mining royalty was originally calculated on the basis of revenues obtained from the sales of minerals. However, in September 2011, an amendment to the Mining Royalty Law was approved establishing that, as of October 2011, the mining royalty will be determined by applying a sliding scale rate (ranging from 1% to 12%, previously 1% to 3% of sales) based on the quarterly operating profits of mining companies. Mining royalties are deductible for income tax purposes.
Also, in September 2011, the Special Mining Tax Law and the Special Mining Charge Law were enacted. The Special Mining Tax is payable by mining companies that have not executed a Mining Tax Stability Agreement with the Ministry of Energy and Mines, or MEM. The Special Mining Tax is calculated by applying a sliding scale of rates (ranging from 2% to 8.4%) based on the quarterly operating profits of the mining company and is deductible for income tax purposes. This Special Mining Tax applies to Gold Fields La Cima as the company has not executed a Mining Tax Stability Agreement with the MEM. While the Company has not executed a Mining Tax Stability Agreement, it does maintain a LegalGold Fields concluded an Investor Stability Agreement, executedor ISA, with PROINVERSION.the Private Investment Promotion Agency, or PROINVERSION, which is valid for 10 years and expires in October 2017.
The Special Mining Charge is similar to the Special Mining Tax but applies to mining companies that have executed a Mining Tax Stability Agreement with the MEM and the sliding scale of rates range from 4% to 13.12% based on the quarterly operating profits of mining companies. The Special Mining Charge does not apply to Gold Fields La Cima.
In addition to the above, beginning with their annual income in calendar 2012, mining companies must contribute an amount equivalent to 0.5% of their annual income before taxes to fund the Complementary Retirement Fund for Mining, Metal and Iron and Steel. Gold Fields La Cima disputes the applicability of this provision. Accordingly, it initiated an arbitration against the Peruvian Governmentgovernment in fiscal 2014, under the arbitration clause of its Legal Stability Agreement. The arbitration panel has been formeddeclared its legality and applicability to La Cima, so the proceedings are still in their initial phase.Company is currently paying this contribution.
Also, since July 2012, mining companies are required to pay an annual supervisory contribution to the OSINERGMIN and OEFA which is set by Supreme Decree. The sum of both contributions may not exceed an amount equivalent to 1% of the total value of annual invoicing for concentrate sales, after deducting VAT. For 2015,2016, contributions to the OSINERGMIN and OEFA are equivalent to 0.19% and 0.15% of annual invoicing respectively. In fiscal 2014, Gold Fields2016, La Cima paid a total of approximately U.S.$ 1.307 million950,000 in such contributions. Gold Fields La Cima has paid these contributions under protest and has filed two constitutional actions before OEFA and OSINERGMIN disputing these contributions as unconstitutional and illegal. These actions are still in progress.
Environmental
As of November 2014, theThe environmental impact of mining activities in Peru is regulated by the Regulations on Environmental Protection and Management for Mining Exploitation, Beneficiation, General Labor, Transportation and Storage Activities, which was approved by Supreme Decree 040-2014-EM.entered into force on March 14, 2015 with the publication of the relevant terms of reference.
According to thesethe above regulations, which will become effective once the reference terms are approved, the following environmental instruments are required to be produced in order to perform mining activities:
Environmental Impact Declaration, or DIA, and Semi-Detailed Environmental Impact Assessment, orSD-EIA: DIAs andSD-EIAs are required for mining exploration projects, according to the magnitude and impact that the activities intended to be carried out may have on the environment. DIAs andSD-EIAs contain detailed environmental and social information on the area where exploration activities will be carried out, on the project and works to be performed, and on the measures that will be taken to control and mitigate any environmental impacts caused. Recent legislation has been enacted establishing that the initiation of exploration activities needs to have been previously authorized by the DGM. ASD-EIA or DIA is required for such authorization to be obtained.
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Environmental Impact Assessment, or EIA: EIAs are required for new projects, expansions of existing operations and projects moving from the exploration stage to development. EIAs must evaluate the physical, biological, socio-economic and cultural impacts on the environment resulting from the operation of mining projects.
According to Ministerial Resolution N°120-2014-MEM/DM modifications of mining projects which entailnon-significant environmental impacts are required to submit to the authority a Supporting Technical Report, or STRs, which is a simplified EIA. The period for evaluation and approval of STRs by the authority is considerably shorter than an EIA. The number of STRs is restricted to three per mining unit but only for those STRs related to the main mining components (pits, tailings storage facilities, waste rock storage facilities, concentrator plant, among others).
A law regulating mine closures requires mining companies to ensure the availability of the resources necessary for the execution of an adequate mine closure plan, including a mine closure cost estimate, in order to prevent, minimize and control the risks to and negative effects on health, personal safety and the environment that may be generated or may continue after the cessation of mining operations. Furthermore, the law obligates holders of mining concessions to furnish guarantees in favor of the MEM to ensure that they will carry out their mine closure plans in accordance with the environmental protection regulations and to ensure that the MEM has the necessary funds to execute the mine closure plan in the event ofnon-compliance by the holder of the mining concession. Mine concession holders may satisfy these requirements by providing to the MEMstand-by letters of credit (bank guarantees) to cover the amount of any mine closure plan. Gold Fields La Cima’s mine closure plan for Cerro Corona was approved in 2008 and subsequently amended in 2010, 2011, 2013, 2014 and 2014.2017. This mine closure plan is guaranteed by a bond letter of approximately U.S.$25.637.8 million, issued by Credit Bank Peru.
Water Quality Standards
The governmentIn December 2015, the Ministry of Peru has issued new water quality standards forEnvironment passed Supreme Decree N°15-2015-MINAM, or the discharge of mine water to receiving bodies,Supreme Decree, which modified the Environmental Quality Standards, or the ECA, whichapplicable to water courses. The Supreme Decree is binding from the date of its publication. This regulation established less stringent new parameters in physical and chemical, inorganic, organic, microbiological and parasitological compounds, compared to the previously approved ECA. Under the Supreme Decree, holders of mining activities that are conducting environmental studies had to be introduced in December 2015. Thereport to the MEM by February 17, 2016 on whether such instruments complied with the amended ECA, has set conservative sulfate and calcium limits of 300 ppm and 200 ppm, respectively.or if they required an adjustment.
In line with this requirement, Gold Fields La Cima, is currently evaluatingor GFLC, reported that its environmental study needed to be adjusted to the amended ECA; and submitted a response plan to the MWM on March 14, 2017. The plan will be evaluated by the MEM and the approved plan must be implemented by GFLC to comply with the ECA within three years of approval. In the response plan, GFLC proposed management activities to be conducted during the remaining operational period of Cerro Corona, as no specific comments can be made relating to the post closure water treatment systemplans due to the uncertainties discussed below. In the specific case of GFLC, the response plan relates to the mine’s operational stage only and neither considers nor proposes actions for the tailings storage facilityclosure and post-closure phases. Detailed mine closure activities, including post closure water treatment plans, have to be submitted two years before mine closure, as required by Peruvian legislation. Based on the current life of mine for GFLC, the detailed mine closure plan will be submitted in 2021.
Management has been unable to reliably estimate the post closure water liability at Cerro Corona. This process has involved considerationCorona due to the fact that there are still elements with inherent uncertainty at this point in time, primarily due to the final pit lake elevation not being defined yet, given that the geotechnical and hydrogeological models are still under development. Anin-pit drilling campaign will be completed to capture additional data to develop more detailed geotechnical and hydrogeological models to better understand:
The annual water pumping rate to contain the pit lake to avoid potential seepages from the pit;
The volumes of new technologies availablewater to be collected from the seeps and springs;
The quantity of lime or other additives required to prepare the water collected in the pit for further treatment;
The technology to be used for water treatment including a reverse osmosis plant, ettringite (a form of hydrous calcium aluminium sulfate mineral), high density sludge, evaporatorssince piloting, modelling and ionic interchange. As partother tests need to be done to select the best option and properly cost it; and
The nature and volumes of the evaluationremoved contaminants (sludge or solids, which form the wastes resulting from the water treatment).
Besides the aforementioned uncertainties, management will also consider other alternatives for post-closure water management, including:
Treatment of technologies. Gold Fieldsthe pit walls to prevent acid rock drainage generation and reduce the metal load in the water outflows, to avoidin-perpetuity water treatment;
Partial backfilling of the pit to construct a lined pond in the pit where runoff and other poor quality water can be separated from groundwater, to reduce significantly the volume of water to be treated;
Measures to mitigate individual springs potentially impacted by stockpiles that might be relocated; and
Alternative treatment methods that may require less energy/reagents at lower cost.
Once all of the aforementioned activities have been completed, management will have sufficient information to quantify a reliable estimate of the post closure water liability and the associated provision required and will include in the detailed mine closure plan to be submitted in fiscal 2021.
Other permits and Regulations
Another issue at Cerro Corona, though unrelated to the pit lake issue described above, is that on May 23, 2014, La Cima conducted a pilot program, involving a reverse osmosis system that included ultrafiltrationreceived formal authorization from the Manuel Vasquez Association to relocate the Tomas Spring and brine treatment. The results ofto start the pilot program were favorable in terms of sulfate removal but not for brine treatment. Gold Fieldspermit application process regarding the relocation. On March 6, 2015, La Cima invested U.S. $0.6 million in the pilot program during fiscal 2013, with a further expenditure of around U.S. $1 million in fiscal 2014.
The Peruvian government is currently evaluating a modification of the new ECA for water, which would include a higher threshold of sulfate and would not include calcium. Among other modifications being considered is an extension of the deadline for new ECA applications. Currently, it is not known when this modification of the ECA regulation will be approved and come into force.
Gold Fields La Cima is also in the process of seekingobtained authorization to relocate the water source of the Tomas Spring, which is located inside the final footprint of the tailings storage facility for Cerro Corona, to a higher elevation above the final footprint, in order to continue with the planned expansion of the facility. On May 23rd, 2014, Gold Fields La Cima received formal authorization fromThe construction program and mitigation measures have been implemented. The Tomas Spring was sealed and its water catchment relocated to a higher elevation calledTCB-25. The remaining flow of Las Tomas Spring under the Manuel Vasquez Association, or MVA, to moveseal has been diverted outside the spring and to start the permit application process with the Water Regulator to move Tomas spring. As part of this process, Gold Fields La Cima has had meetings with the Water Regulator. Following these meetings, the Water Regulator has decided that the permit application will first require Manuel Vasquez Association to obtain a license for water use, after which the Water Regulator will grant approval for the managementfootprint of the remaining water flow at the original location of the Tomas Spring.
Gold FieldsTSF to La Cima provided support to the MVA with respect to preparation of the technical application to obtain a license for water use from the Water Regulator. However, there are still some pending documents to
be sent by the MVA in order to complete the application. Technical documentation for the permit related to the management of the remaining water flow of the Tomas Spring has already been submitted to the Water Regulator. In the meantime, Gold Fields La Cima has temporarily covered the Tomas Spring pending formal authorization from the Water Authority.Hierba creek.
Other matters subject to regulation include, but are not limited to, transportation of ore or hazardous substances, water use and discharges, power use and generation, use and storage of explosives, housing and other facilities for workers, reclamation, labor standards and mine safety and occupational health.
Soil Quality Standards
In April 2013, the government of Peru approved soil quality standards for all industries, including extractive industries. These standards establishestablished that all companies that generate an impact on soil impact as a consequence of their activities must submit a report identifying areas of soil pollution to the MEM by April 2015 with the characterization of soil quality in their areas of influence and, if applicable, a remediation plan within two years from the date of approval of such report.
Gold Fields On April 10, 2015, La Cima is currently in the process of preparing a report identifying contaminated areas in its operations, to be submitted to the MEM the report with the results of soil sampling in Cerro Corona and nearby areas. La Cima is awaiting a response from the MEM to continue with the next steps established by April 2015, aspects of its operations which generatethe soil pollution.quality standards regulation.
Environmental Sanctioning Regime
In fiscalJuly 2014, Law 30230 was enacted to promote investment. Among the measures introduced by Law 30230 included the establishment of a three-yearthree year moratorium on the imposition of environmental fines by OEFA. OEFA, which will be in force until July 13, 2017. It is not expected that this moratorium will be extended.
During this moratorium, OEFA will prioritize the imposition of corrective measures and will only be entitled to impose environmental sanctions in the following exceptional cases: (i) very serious offenses that generate a real and severe damage to human life and health; (ii) activities carried out without a proper environmental instrument, or without the required licenses, or in prohibited areas; (iii) commission of the same infringement within a period of six months.
Social Matters
According to the Environmental Act, every individual is entitled to take part in a responsible manner in decision-making processes related to, and in the establishment and application of, environmental policies and measures, including those related to environmental components, adopted at each government level.
| • | Citizen Participation: The mining industry in Peru is governed by citizen participation regulations that provide for the responsible participation of individuals in the definition and application of measures, actions and decisions made by competent authorities |
| • | Right to Prior Consultation: On August 31, 2011, the Peruvian government approved the Law of Prior Consultation to Indigenous or Tribal Populations recognized in Convention 169 of the International Labor Organization. This law establishes that the Peruvian government must consult in advance with indigenous or tribal populations on legislative or administrative measures (including pending claims for mining concessions) that may directly affect the collective rights related to their physical existence, cultural identity, quality of life or development. This duty of consultation is owed by the Peruvian government, not Gold Fields or investors. |
While the final decision to move forward with legislative or administrative measures on which consultation is sought rests with the Peruvian government, even in the absence of agreement, the Peruvian government has an obligation to take all necessary measures to ensure that the collective rights of indigenous or tribal populations are protected.
Sustainable DevelopmentLicense to Operate
OverviewIntroduction
The potential environmental risks associatedThis section deals with industrial mining are obvious, both for the environment and for local stakeholders. Furthermore, environmental incidents can materiallyareas of the business that impact Gold Fields’ reputation,ability to receive or renew its regulatory licenses to operate as well as societal acceptance of its abilityoperations—Gold Fields’ “social license to comply with its contractualoperate.”
Regulatory licenses are issued by governments at all levels, including national, regional and regulatory obligations. As such,local, and require first and foremost good corporate citizenship from Gold Fields remains committedin terms of adherence to all relevant legislation, including the payment of taxes and other levies.
In Gold Fields’ 2016 Group Performance Scorecard, the Company focuses on the following material “license to operate” issues to the continual improvementbusiness:
Environmental stewardship, comprising Energy and Climate Change management (under Business Optimization), Water, Tailings and Waste and Mine Closure; and
Societal acceptance, comprising Stakeholder engagement, Community relations and Shared Value and Human rights.
Gold Fields generates and shares significant value for the societies in which it operates. Gold Fields’ total value distribution details the economic value we create at the Group level as well as in Gold Fields’ four countries of its environmental performance. Key areasoperation. During fiscal 2016, Gold Fields’ total value distribution to our stakeholders, as measured by WGC standards, was U.S.$2.5 billion, in the form of focus include waterpayments to governments, capital providers, business suppliers and employees.
Environmental stewardship acid mine drainage management, a proactive approach to mine closure, tailings facility management, materials and waste management; the reduction of carbon emissions and energy consumption, energy security and climate change.
Overview
Gold Fields’ approach to environmental management is defineddetermined by relevant local legislation and regulations; itsregulations, our sustainable development framework, as well as the ISO 14001 international environmental management standards;system standard, the ten principles of the International Council on Mining and Metals, or ICMM;ICMM and the United NationsUN Global Compact, or UNGC (in particular the UNGC 10 Principles). Following the successful certification of Granny Smith and the inclusion of Lawlers in the Agnew certification process in fiscal 2014, allCompact. Additional local priorities are identified through stakeholder consultation. Each of the Group’s operations are nowis certified to ISO 14001 certified. 14001.
Internally, Gold Fields has implemented policy statements and four Group-level guidelines, which reflect its environmental priorities. These concern energy and carbon management, water management, tailings management and mine closure. A summary of the Group guidelines can be found on the Gold Fields’ website. These guidelines set out the systems and processes necessary to ensure the application of consistently good environmental management practices across the Group while allowing a degree of adaptation to local circumstances.
To ensure Group-wide conformity with the guidelines, each operation conducts self-assessments to ascertain the levels of conformance with the guidelines. Action plans have been put in place to address any gaps and these will be assessed during fiscal 2017.
During fiscal 2014,2016, the Group spent U.S.$2710 million on environmental management compared to(fiscal 2015: U.S.$32 million in fiscal 2013. The Group’s total35 million). Total gross mine closure liabilities in fiscal 20142016 were estimated at U.S.$391381 million compared(fiscal 2015: U.S.$353 million).
Environmental incidents
Gold Fields reports environmental incidents using a Level 1 (most minor) to U.S.$355 million5 (most severe) scale. Gold Fields has not recorded any Level 4 or 5 environmental incidents in the past six years, thereby achieving its target of zero Level 4 and 5 incidents. During fiscal 2013.
2016, Gold Fields did, however, experience 131 Level 2 environmental incidents (fiscal 2015: 67) and three Level 3 environmental incidents (fiscal 2015: five). The funding methods used by each region to make provision for the required portiondetails of the mine closure cost liabilities areLevel 3 incidents, which all occurred at Gold Fields’ Ghanaian operations in in the first quarter of fiscal 2016 and required notification to the Ghanaian EPA, were as follows:
Reclamation bonds underwritten by banksTarkwa, January 13, 2016: A truck reversed into another service truck, damaging the fuel pumping unit, causing around 10,500 liters of fuel to be spilled. About 8,000 liters were collected for filtration and restricted cash in Ghana;reuse;
Contributions into environmental trust fundsTarkwa, March 12, 2016: During working operations a rock hit an excavator’s hydraulic hose, which burst and guarantees in South Africa;
Payment by companiesspilled about 2,900 liters of a levy tooil, the state based on the total mine closure liability, following legislative changes in Western Australia that took effect in July 2014. This levy is 1%bulk of the total liability per mine, and is paid annually. The levy goes into a state administered fund known as the Mine Rehabilitation Fund and will be used to rehabilitate legacy sites or sites that have prematurely closed or been abandoned;which was cleaned up; and
Bank guaranteesDamang, March 27, 2016: After heavy rainfall about 20,000 liters of tailings slurry and supernatant water spilled into a nearby event pond, causing fish in Peru.the pond to die. Most of the overflow slurry was returned to the tailings dam. To prevent a recurrence, a return pump was installed to empty the perimeter drain at all times. Additionally, the base wall for the dam perimeter was raised to increase the dam’s capacity.
Amendments
Environmental approvals
Environmental approvals from the relevant regulator are a prerequisite for construction, operations and mine closure as well as new projects or expansions of existing operations. Large projects require EIAs as part of the decision-making process and to South Africa’s National Environmental Management Act in fiscal 2014 further broadened the scope ofidentify, mitigate and manage environmental impacts. Gold Fields’ potential liability exposure, by stipulating that directors could potentially be personally liablemines have for the negativemost part developed sound working relationships with environmental impactsauthorities, which ensure that new projects and mine developments adhere to leading environmental standards.
During fiscal 2016, extensive engagement with environmental regulators ensured that we received approval for a number of their companies’ operations.key projects at our operations, including:
In fiscal 2014,December 2016, St. Ives received approval from the Western Australian EPA to mine five new areas on Lake Lefroy, the salt lake on the mine’s tenement. Projects approved include the future underground operation at Invincible and the Neptune Invincible South, Incredible and Pistol Club open pits;
St. Ives has also submitted extended expansion plans for the mine entitled “Beyond 2018” which would impact a further 7,000ha on the tenement. The EPA has ruled that a full public environmental review process is required for these plans. This process includes environmental impact assessments and heritage surveys;
The Western Australian EPA also approved the Gruyere Gold Project, which is a joint venture between Gold Fields implemented several new and Gold Road;
A mine closure plan has been submitted for the St. Ives mine and Cerro Corona is preparing to submit its eighth update of the mine’s EIA, which includes seeking permission for pit extensions as well as drilling downstream of the current tailings dam;
The Chilean General Water Directorate granted water rights for our Salares Norte project in December 2016, after an engagement process of almost two years;
The Salares Norte land (easement) application for almost 1,900ha was granted for a duration of 30 years following a process lasting more than two years;
South Deep finalized and submitted the consolidation of its approved EMP reports to the DMR for approval;
The Ghanaian EPA has issued the environmental certificate for the Tarkwa mine, valid from November 2015 to November 2018. The certificate excludes the construction and operation of the Tailings Storage Facility 5, which is still at permitting stage;
Tarkwa is awaiting approval from the Ghanaian EPA for the decommissioning and reclamation of its heap leach facilities; and
At Damang, the Ghana Minerals Commission approved the raising of the ETSF.
Group guidelines to ensure the effective and coherent management of key environmental issues acrossEnvironmental Performance
The table below depicts the Group whilst allowingenvironmental performance for a degree of local flexibility. These issues include water management, mine closure management, energy and carbon management and community relations and stakeholder engagement.the periods indicated.
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | Fiscal 2013 | |||||||||||||
Environmental incidents (Level 3)(1) | 3 | 5 | 4 | 3 | ||||||||||||
Water withdrawal (Ml)(2) | 30,321 | 35,247 | 30,207 | 30,302 | ||||||||||||
Water recycled/used (Ml) | 44,274 | 43,120 | 42,409 | 33,453 | ||||||||||||
Water discharge (Ml) | 15,102 | 18,492 | 11,620 | 2,526 | ||||||||||||
Gross closure costs (provisions) (U.S.$ millions) | 381 | 353 | 391 | 355 | ||||||||||||
CO2 emissions (scope 1 and 2) (‘000 tonnes)(3)(4) | 1,964 | 1,323 | 1,258 | 1,235 | ||||||||||||
CO2 emissions (scope 3) (‘000 tonnes)(3)(4) | 450 | 431 | 436 | 496 | ||||||||||||
Electricity (MWh)(2) | 1,400,422 | 1,322,353 | 1,338,074 | 1,382,105 | ||||||||||||
Diesel (TJ)(2) | 6,609 | 6,930 | 6,066 | 5,509 | ||||||||||||
Carbon emission intensity (tonnes CO2-e/oz) | 0.69 | 0.59 | 0.55 | 0.61 | ||||||||||||
NOx, SOx and other emissions (tonnes) | 21,450 | 21,073 | 20,084 | 17,942 | ||||||||||||
Cyanide consumption (tonnes) | 7,061 | 7,820 | 10,660 | 13,660 | ||||||||||||
Mining waste (‘000 tonnes) | 187,036 | 167,357 | 138,522 | 190,007 | ||||||||||||
Materials (‘000 tonnes) | 162 | 145 | 144 | 176 | ||||||||||||
Notes:
| (1) | Levels 1 and 2 involve minor incidents ornon-conformances, with negligible or short-term limited impact. A Level 3 incident results in limitednon-conformance ornon-compliance that result in ongoing but limited environmental impact. Level 4 and 5 incidents include majornon-conformances ornon-compliances, which could result in long-term environmental harm, with company or operation-threatening implications. |
| (2) | The numbers disclosed only include our operations, as regional and the corporate head offices are not considered to be material. |
| (3) | The CO2 emissions numbers include head offices. |
| (4) | Scope 1 emissions are those arising directly from sources managed by the company. Scope 2 emissions are indirect emissions generated in the production of electricity used by the Company. Scope 3 emissions arise as a consequence of the activities of the Company. |
Water management
Water management is a critical long-term issue for the mining industry asfor a whole. In part, this is because:number of reasons:
Mining can require large volumes of water and may take place in locations that are already water-scarce;
Poor water management can have significant social and political consequences. Local communities are affected by water scarcity and insufficient water infrastructure among other issues; and
Water is an important vectorconduit for the potential spread of pollution (whether as a result of an immediate incident or the gradualbuild-up and movement of contaminants over time), making it a keycritical compliance issue;issue.
Mining can require large volumes of water, and often takes place in locations that are already water-stressed; and
Poor water management can have significant social and political consequences, where local communities are affected by, among other issues, water scarcity, high levels of agricultural activity and a lack of effective water infrastructure.
In this context, Gold Fields remains committed to responsible water stewardship, both for the benefit of host communities and for its own operations. In practice, this means:This means delivering enhanced operational security through innovative technologies with optimal water conservation and demand management practices.
This involves:
Measuring and reporting on water management performance;
Integrating water management into mine planning;
Complying with regulatory requirements and, where feasible, going beyond compliance requirements; and
Leaving an enduring, positive legacy.legacy that extends beyond mine closure.
Reflecting these commitments, eachEach operation implements an environmental management systemEnvironmental Management System, or EMS, through which it, among others, assesses, manages, monitors and reports on water use and the quality of its discharges (where these occur).
Inany discharges. During fiscal 2014,2016, Gold Fields spent a total of U.S.$16 million on water management and projects. Water withdrawal across the Group fell marginallydecreased to 30.2 million liters (2013: 30.3 million liters)30,321Mℓ (fiscal 2015: 35,247Mℓ), and, amid stable Group gold production, water withdrawal per ounce produced was down from 15.77Kℓ in fiscal 2015 to 13.67kℓ in fiscal 2016. Total water recycled or reused remained steady at 44,274 Mℓ (fiscal 2015: 43,120 Mℓ). Despite
The main reasons for the integrationchange in water withdrawal were:
A change in the internal definition of water withdrawal to align with the Yilgarn South Assets, this decrease wasMinerals Council of Australia’s water accounting framework;
Significantly reduced water withdrawal at Cerra Corona, largely due to a significant decrease at St. Ives in pit dewatering during fiscal 2014; the sending by Tarkwa of rainfall on the heap leaches directly to reverse osmosis plants for discharge, rather than allowing the water to enter the mine circuit; and the installation of reverse osmosis plants at South Deep to reduce Rand Water Board consumption.
Effective water management requires a full understanding of the inflow into and outflow from each operational area. This involves quantifying water inflows, including rainfall; operational water requirements; onsite water storage capacity; and water use and discharges.
Whether mines are water-positive, water-balanced or water-negative depends on a number of dynamic variables. These include climatic variables such as seasonal rainfall and evaporation rates, the volume of water entering underground workings or open-pits (e.g. via aquifers and surface run-off respectively) and the type of processing employed (e.g. heap leach or carbon-in-leach processing).
Gold Fields applies the following measures to manage the water balance at its mines and to promote water stewardship:
Regional application of the new Corporate Water Management Guideline, including the development and implementation of Water Management Actions Plans;drought conditions;
Implementation of physical measures to manage stormDuring 2015, St. Ives had high water run-off, and separation of clean water and mine water;
Maintenance of water containment capacity (including the containment of inflow surges);
Water treatment, including reverse osmosis;
Water reuse and recycling;withdrawals from opening up three new pits. This was not repeated in 2016; and
DynamicIncreased water withdrawal at South Deep due to the refilling of South Deep’s water storage dams and increased production demand.
Gold Fields also benchmarks its water usage by participating in the CDP water disclosure program. For fiscal 2016, Gold Fields achieved anA- in the CDP water assessment, which is an improvement from last year’s score of B. The CDP’s water score is an indicator of a company’s commitment to transparency around its water risks, and the sufficiency of its response to them.
As a member of the ICMM, Gold Fields subscribes to the ICMM’s new commitments on water stewardship, which were released in January 2017. The ICMM’s position statement is binding on all members within two years and requires them to apply strong and transparent water governance; manage water at operations effectively; and collaborate to achieve responsible and sustainable water use.
The graphs below set out the Group’s water withdrawal, water recycled/reused and water withdrawal per ounce of gold produced for the periods indicated.
Regions
During fiscal 2016, predictive and dynamic water balances were developed at all operations, except Damang, using hydrology software systems. Damang will install its system during fiscal 2017. These enable the mines to account for the water inputs to and outputs from their operations and for the flows within the system. Post-closure water management plans were also put into place or are currently being developed at the mines as part of their mine closure plans.
Americas
Water Balance
Water is a critical issue for communities in Peru and a large part of the active resistance by communities to mining is over perceived or actual water pollution by mines. Cerro Corona has proactive engagements with community organizations and local governments in terms of which it is a large supplier of potable water to the communities. During fiscal 2016, Cerro Corona invested over U.S.$3 million in developing and upgrading water systems for nearby communities.
Updates to Cerro Corona’s geochemical and hydrogeological models will be completed during fiscal 2017 and will serve as input to the mine’s post-closure water management plan.
Salares Norte
Water rights at this project were granted by the regulator in December 2016. The water rights total 114ℓ per second from a nearby reservoir with sufficient supplies. The granting of the rights is a critical step in developing the project, which is situated in the Atacama Desert in northern Chile.
Australia
Water Balance
Water balances with links to appropriate water management plans have been developed for all four mines in the portfolio. Granny Smith’s water balance is the most advanced, being both dynamic and predictive, and the lessons learnt have been applied to the other operations’ water modellingbalances.
Post-closure water management is integrated into each mine’s closure plans. St. Ives has progressed furthest, having submitted its closure plan to the regulator at the end of fiscal 2016. Agnew and Darlot are on track to submit in fiscal 2017 and Granny Smith in fiscal 2018.
Water Security
Water security poses a significant challenge for the region’s mines, all of which are based in arid areas of Western Australia. St. Ives and Granny Smith have water agreements with outside providers. St. Ives’ water agreement was renewed early in fiscal 2015. Granny Smith’s agreement with a neighboring company for the provision of potable water was revised and signed off in late fiscal 2016.
At Agnew/Lawlers, a hydrological study on the Fairyland borefield suggests that the facility can be expanded to provide more water than the current design allows. This will supplement the existing water supply at the mine.
Darlot, which Gold Fields has put up for sale, is in the process of entering into an agreement with the nearby Murrin Murrin mine. Murrin Murrin is sourcing water from the same aquifer as Darlot, but will now be provided with supplementary water from their nearby Grey Mare borefield. This supplementary water supply will allow supply from the Darlot borefield to be reduced and the aquifer to be recharged.
South Africa
Water Balance
New water balance software was implemented at South Deep with links to appropriate water management plans. Extension of the system to underground operations is being considered for fiscal 2017. During fiscal 2016, South Deep completed Phase 1 of its post-closure water management plan, which assessed risks for mines that are hydraulically connected to South Deep, including Sibanye Gold’s adjacent Ezulwini mine, which has applied to the regulator for closure permission. Phase 2 of the plan will be initiated in fiscal 2017 and will consider any potential legacy groundwater contamination.
In July 2016, South Deep became the first facility outside the United States to pilot a new automated water quality monitoring technology. Funded by the US Department of Energy and developed by a private US firm, the tool detects heavy metals in water and signals an immediate warning if levels are too high. It enables unattended operations for up to 30 days, while measuring water samples every two minutes and at low concentration levels. In early fiscal 2017, Gold Fields decided not to carry out a full trial as the technology requires refinements based on the outcomes of the pilot.
Recycling and Conservation
South Africa currently finds itself in a drought cycle that is one of the worst in 40 years, though good rains have fallen in early 2017. The implementation of water recycling and conservation practices is therefore critical at South Deep mine. Water awareness initiatives have been introduced to encourage a reduction in water consumption. In addition, no water is discharged from the mine, other than treated sewage effluent, in accordance with the requirements of the DWS.
The drought meant that the three reverse osmosis, or RO, plants that were installed at South Deep over the past two years to treat process water and reduce the intake of municipal water, could not be operated for much of the year. Currently, only one of the three RO plants is operational. Three RO plants have been installed underground to supply drinking water.
Water Security
Due to the drought conditions experienced at South Deep, as well as an increase in water use by the mine, the mine experienced water supply shortages during fiscal 2015 and fiscal 2016. South Deep submitted an application to amend its 2011 water use license in May 2015, which is still being reviewed by the DWS. In 2015, South Deep concluded a water supply agreement with Sibanye Gold to supply water from Sibanye’s Ezulwini mine, via the Leeuspruit stream. The plan to secure water to support South Deep during productionramp-up could also be negatively impacted by Sibanye’s announcement on August 31, 2016 that it will be closing the managementEzulwini (Cooke 4) mine. South Deep is currently assessing the implications of short-, medium- and long-term water-related risks and opportunities.
Acid mine drainagethe closure if such application were granted.
Furthermore, a Sibanye Gold and Gold Fields joint working group was established early in fiscal 2016 to identify and remedy potential contamination of the Leeuspruit river caused by decades of mining in the area. A large amount of data has already been collected by both Sibanye Gold and South Deep over the years and during fiscal 2017 new data relating to surface- and ground water, aquaticbio-monitoring and radiation will be collated and interpreted. This data will assist in determining the necessary remedial action, if any. The project is expected to be completed during fiscal 2017.
Acid Rock Drainage
South Deep implements a range of measures to prevent or contain AMD at its operations,ARD and takes effective remedial action where incidents are identified. Therethere were no material cases of AMDARD reported in fiscal 2014.
Nonetheless,2016.Pro-active measures include removal of the old South Deep has, inShaft waste rock dump and revegetation of the contextmine’s environmental footprint, which was a potential source of broader historical legacy issues in the Gauteng area, taken a proactive approach to long-term AMD management through its comprehensive water management plan. This involvesARD and other contamination, and ongoing water monitoring, containment of any AMDARD generation on the old tailings facilities and water-treatment solutions that purify surplus fissure and process water to a potable standard. In fiscal 2015, additional technical studies have been planned to develop a solution for managing AMD generation in the underground workings at mine closure. Underground AMDARD generation is well managed during the operational phase by ongoing pumping to the surface of the underground water.
Cerro Corona’s tailings and waste rock facilities were designed to avoid and mitigate the risks of AMD. In addition, the mines closure plan contains various strategies, which are updatedOther key water management initiatives undertaken at least every two years as new technical information becomes available.
Although Gold Fields has commissioned various technical studies to identify the steps required to prevent or mitigate the potentially material AMD impacts at its Cerro Corona and South Deep operations, none of these studies has allowed Gold Fields to generate a reliable estimateduring fiscal 2016 include:
Studying plume mitigation measures at the Doornpoort TSF and the old TSFs with implementation scheduled for fiscal 2017; and
Maintaining vegetation of the total potential impact onmine’s two historic TSFs, which has reduced the Company.
Immaterial levelsgeneration of AMD have been indentified atwind-blown dust to well below the Tarkwa, Damanglegislated airborne dust level limits.
Waste and St. Ives mines.tailing
Materials and waste managementOperational Waste
The most significant outputwaste materials usedproduced by Gold FieldsFields’ operations are tailings, waste rock, chemical waste and hydrocarbon waste, all of which are managed.waste. Gold mining requires large volumes of blasting agents, including hydrochloric acid, lime,
cyanide, cement and caustic soda (sodium hydroxide), all of which are used on an ongoing basis. Of these, cyanide represents the most potentially hazardous substance. All of Gold Fields’ operations, are certified as compliant with the requirements of the International Cyanide Management Code.except Cerro Corona, which does not use cyanide, have International Cyanide Management Code, certification also extends to Gold Fields’ transport providers.or ICMC, certifications, which are renewable every three years. The St. Ives mine is currently in the process ofre-certification following an initial negative finding by the ICMI. The external auditors have recommended re-certification and the ICMI is currently evaluating their findings.
All of Gold Fields’ operations have life-of-mine tailings management plans in place, including closure and post-closure management plans. In total, these operations have 27 TSFs of which 16 are active. All tailings storage facilities andTSFs, as well as associated pipeline and pumping infrastructure, are subject to ISO 14001 certification, external tailings audits,a Group audit every three years (or more frequently where required by local circumstances or regulations) as well as regular inspection and formal annual reporting. Gold Fields’ last Group-wide TSF audit was conducted in fiscal 2014, the next one will take place during fiscal 2017 or early fiscal 2018, once an internal review of our facilities has been completed.
Gold Fields has set a target to maintain the general landfill waste quantity at fiscal 2015 levels, by ensuring a reduction in the waste that reaches landfill through greater use of recycling andon-site waste separation.
ICMM Tailings storage facilities are also subjectReview
In response to inspection for technical integrity by independent expertshigh-profile tailings failures at least once every three years, or more frequently where required by local circumstances or regulations.
A Group-wide tailings facility audit,both Mount Polley (Canada, August 2014) and Samarco (Brazil, November 2015), the ICMM, of which included all 15 operational and 10 dormant tailings storage facilities, was undertaken during the second half of fiscal 2014. Ordinarily, these audits are conducted onGold Fields is a three-yearly basis. However,member, together with 22 other leading global mining companies, globally increased their commitmentannounced in December 2015 its intention to ensuring the safetyimplement a global review of their tailings facilities following a major breach of Imperial Metals’ copper and gold tailings pond at Mount Polley in British Colombia in August 2014. Gold Fields, therefore, initiated its Group-wide audit earlier than usual. The audit, which was conducted by Golder Associates, reviewed all key aspects of tailings facility management, with a focus on stability, compliance and environmental management. All tailings storage facilities were found to be well-managed and are either already aligned with global leading practice, or have concrete plans in place for alignment. In general the Gold Fields tailings storage facilities are within the top quartile of industry leading practice in terms of design, operation, and management.
Specific measures to minimize the risks posed by tailings storage facilities to the environment include:
Pollution containment facilities to capture run-off water from tailings storage facility surfaces, togetherstandards and critical controls across member companies. The resultant working group is chaired by Gold Fields. A position statement, comprising a commitment to implement a new ICMM governance framework was released in December 2016.
Gold Fields supports the position of the ICMM and the Group has committed to review its tailings management guidelines in early fiscal 2017 to ensure compliance with solution trenchesthe new framework. As outlined above, internal and external Group-wide tailings audits will be conducted during fiscal 2017 to capture shallow groundwater seepage;
Recycling systems to allowensure Gold Fields meets the reuse of tailings water in metallurgical processes;
Monitoring of groundwater plume quality and migration (where applicable) and implementing measures to contain the plume where pollution is detected; and
Planting vegetation, installing netting and applying chemical suppressants on exposed surfaces to control dust and erosion.
A proportion of tailings is also recycled as paste fill (in combination with cement) for use as backfill in underground operations. A group wide tailings facility audit, which included all 15 operationalICMM’s new framework as well as 10 dormant TSF’shaving critical controls in place to manage potential risks.
Regions
In fiscal 2016, the group was undertaken duringGroup took the following steps towards managing waste in a safe and responsible manner:
Australia
At Agnew/Lawlers, Gold Fields installed monitoring bores and conducted a hydrological review of the area in the third quarter of fiscal 20142016. These projects were implemented in anticipation of using the Songvang pit for tailings disposal.
Gold Fields also began preparing for the rehabilitation of the old TSF that serviced the Lawlers processing plant. The plan was approved by the regulators, and completedrehabilitation of the facility by a contractor will commencemid-fiscal 2017 when climatic conditions are favorable.
At Granny Smith, we continued to experience groundwater mounding around the tailings storage facility as a result of seepage. Groundwater mounding is a common issue in Western Australia and regulators usually require that the groundwater levels be kept at depths greater than 4m to safeguard surrounding vegetation. To address this concern, a management plan was adopted which included the installation of additional bores to recover water. The bores have the added advantage of providing an important source of water for the processing plant.
At the St. Ives mine, the Leviathanin-pit tailings facility started receiving tailings depositions after final regulatory approval was granted in fiscal 2015. The facility is set to save the mine around A$50 million (U.S.$38 million) in TSF construction and closure liabilities over LoM.
During the year, the FSE joint venture in the fourthPhilippines engaged independent experts to undertake a technical audit of the TD5A tailings storage facility, which is owned by Lepanto Mining, our JV partner at FSE. The audit report concluded that the facility was well managed and laid out further recommendations for enhancements, which are being implemented.
South Africa
At South Deep, an integrated waste management plan was initiated, which is designed to compile a waste inventory, develop a management strategy and propose viable recycling initiatives for various waste streams. The plan will be fully implemented during fiscal 2017. As part of this plan the waste transfer station at South Deep will be upgraded to incorporate a general waste recycling initiative that generates employment for community members.
Reprocessing of tailings from the two old TSFs at South Deep continued for use in the backfill plant, though this was slowed down amid the water shortages experienced in South Africa during fiscal 2016.
West Africa
As part of the ongoing production and long-term growth at Tarkwa and Damang new TSF capacity is required. The regional management has been working on a multi-pronged approach for a number of TSFs. Progress at the Tarkwa TSFs during fiscal 2016 was as follows:
TSF 2: The wall raise was completed during fiscal 2016 and the Minerals Commission has given approval for the deposition of tailings;
TSF 3: The National Tailings Dam Committee reviewed the wall raise design document and work commenced after approval from the Minerals Commission. The mine is awaiting review comments from the Ghanaian EPA; and
TSF 5: Basin preparation for this new TSF has been completed and lining has started with general work set to be completed bymid-fiscal 2017. Written approval for the work was received from the Minerals Commission and payment of permit fees was made to the Ghanaian EPA.
The Ghanaian EPA is also currently reviewing Tarkwa’s final plan for the decommissioning and reclamation of the mine’s heap leach facilities. In the meantime, the mine has planted cover grass on the facilities to reduce wash outs.
The Damang Reinvestment Plan has necessitated accelerating the construction of the FETSF as the existing ETSF is approaching full capacity. An interim 2.5m raise was started at the ETSF during fiscal 2016 and should be completed during the first quarter of fiscal 2014. The audit reviewed2017, providing an additional 3.6Mt tailings capacity. Stage 1 of the FETSF is planned for completion by the end of fiscal 2017 and will provide 20Mt capacity. Further future lifts of the FETSF will cater for all key aspectstailings for the new eight-year LoM at Damang.
Waste Rock
Both underground andopen-pit operations produce substantial volumes of tailings facilitywaste rock. This is kept in managed waste rock dumps, which are subject to comprehensive rehabilitation through the application of cover material, usually topsoil and vegetation, once they are no longer in use. Total waste volumes for the Group increased by 14% to 148m tonnes during fiscal 2016.
During fiscal 2016, two major projects to enhance waste management with a focus on tailingsat Cerro Corona were completed: the expansion of the waste rock storage facility stability, compliance and environmental management. The group tailings storage facility audit is usually undertaken every three years. However,there-design andre-location of a topsoil stockpile to allow for optimized usage.
South Deep completed the latest auditremoval of the old South Shaft waste rock dump in fiscal 2016.
Group-wide waste rock volumes are set to rise in fiscal 2017 as the Damang mine in Ghana commences its Damang Reinvestment Plan with major cutbacks at the Damang Pit, which involves 265m ofpre-strip to a total depth of 341m to access the base of the existing pit.
Mine closure
Sustainable and integrated mine closure remains one of Gold Fields’ five key sustainability focus areas. In 2016, we continued to increase our efforts aimed at improving mine closure planning, management and financial provisioning processes. This was initiated earlier than planned duenecessitated by changing legal requirements in South Africa and Australia, updated business plans as well as growing societal expectations.
Gold Fields’ 2013 Group Mine Closure Guideline was reviewed in fiscal 2016, with the aim of commencing the roll out of the revised guideline from fiscal 2017. This review was largely necessitated by the need to move towards more integrated mine closure planning and processes. Key changes to the major breachguideline include:
Care and maintenance planning;
Broadening closure planning aspects to include long-term business planning and community socio-economic requirements, in addition to the environmental aspects; and
Aligning closure risks with Group risk processes and mitigation plans.
Our 2020 objective is to implement fully integrated mine closure management that in the long-term will reduce the Group’s closure liabilities.
Mine Closure Liabilities
The total gross mine closure liability for Gold Fields has increased by 8% from U.S.$353 million in fiscal 2015 to U.S.$381 million in fiscal 2016. This can be mostly attributed to:
A significant increase in the net area disturbed at the Damang mine in Ghana;
An increase of Imperial Metals’ copperover a third for the waste storage and gold tailings pondTSF areas at Mount PolleyCerro Corona in British ColumbiaPeru; and
A change in August 2014.how the TSF plume pumping costs are calculated and updated survey data compiled at South Deep mine in South Africa.
The funding methods used in each region to make provision for the mine closure cost estimates are:
Ghana—reclamation bonds underwritten by banks and restricted cash;
South Africa—contributions into environmental trust funds and guarantees;
Australia—existing cash resources; and
Peru—bank guarantees.
The event ledpercentage contribution to the total closure liability per region as well as the percentage secured through the above-listed mechanisms for fiscal 2016 are:
Region | % of Group | Fiscal 2016 Total | Fiscal 2015 Total | % Secured | ||||||||||||
| (%) | (U.S.$) | (%) | ||||||||||||||
Australia | 48 | 181,822,430 | 186,007,171 | 0 | (1) | |||||||||||
South Africa | 10 | 37,071,145 | 28,959,039 | 100 | ||||||||||||
West Africa | 28 | 105,271,633 | 91,519,303 | 77 | ||||||||||||
Americas | 15 | 56,593,886 | 46,663,873 | 56 | ||||||||||||
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| |||||||||||||
Totals | 100 | 380,759,094 | 353,149,387 | 40 | ||||||||||||
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Note:
| (1) | Due to legislative changes in Western Australia that came into effect in in July 2014, there is no longer a legal obligation to have unconditional performance bonds in place for mine closure liabilities. Companies are now required to pay a levy to the state based on the total mine closure liability. This levy is 1% of the total liability per mine, paid annually. This levy goes into a state administered fund known as the Mine Rehabilitation Fund and is similar to the U.S. Superfund where monies and interest from the fund will be used to rehabilitate legacy sites or sites that have prematurely closed or been abandoned. Company specific liabilities for active mines are therefore unfunded. |
Government relations
As the issuers of mining licenses, developers of policy and enforcers of regulations, host governments are among Gold Fields’ most important stakeholders. Engagement with national governments typically takes place on a collective basis through local chambers of mines. Gold Fields also regularly engages with regional regulatory authorities and local government in its host communities.
Gold Fields fully complies with the fiscal and taxation regulations and laws of the countries in which it operates, understanding that these fiscal contributions are critical to fund governments, its employees and public sector infrastructure and projects. Gold Fields does not provide financial contributions to political parties and lobby groups unless explicitly approved by the Board.
During fiscal 2016, national elections were held in three of the countries in which we operate: Australia, Ghana and Peru. In Ghana and Peru new political parties came to power and formed the national government. We are committed to working with the new governments, as we were with the outgoing ones, in establishing sound working relationships that benefit the countries and host communities.
Ghana
In March 2016, Gold Fields Ghana entered into a Development Agreement with the government of Ghana for both the Tarkwa and Damang mines. The agreement was ratified by the country’s parliament on March 17, 2016. Prior to this, the playing field in Ghana’s mining industry had been uneven, given that some of Gold Fields’ peers had been operating under the protection of similar agreements. The negotiations for this agreement commenced in 2011.
The highlights of the agreement include:
A reduction in the corporate tax rate from 35.0% to 32.5%, effective March 17, 2016;
A change in the royalty rate from a flat 5% of revenue to a sliding scale royalty based on the gold price (as per table below), with effect from January 1, 2017;
The table below sets out the sliding scale royalty based on the gold price, which came in effect from January 1, 2017.
Royalty rate | Gold price | |||
| (U.S.$/oz) | ||||
3.0% | 0 - 1,299.99 | |||
3.5% | 1,300 - 1,449.99 | |||
4.0% | 1,450- 2,299.99 | |||
5.0% | 2,300 - unlimited | |||
The term of the agreement, effective from March 17, 2016, will be for a period of 11 years for Tarkwa and nine years for Damang, each renewable for an increased commitmentadditional five years; and
Tarkwa and Damang commit to investments of U.S.$500 million each for the period of the agreement. The Development Agreement could be extended by a further five years each should additional investments of U.S.$300 million be made.
Gold Fields Ghana also made a number of other commitments in terms of the Development Agreement:
Funding the construction of the 29km road between Tarkwa and Damang, estimated at a cost of U.S.$17 million;
Tarkwa to pay the SGMC compensation for assets that have been used by the mine since the divestiture of SGMC; and
In a year where dividends are not declared and paid, Tarkwa and Damang will make an advance payment of 5% of profits after tax that year to the state, which will be offset against an eventual dividend payment.
As a result of the Development Agreement, Gold Fields Ghana committed to a U.S.$341 million reinvestment in Damang, an investment that extends the life of the mine by eight years and has significant socio-economic benefits for communities around Damang. The Development Agreement will also lead to significant cost and cash flow benefits for the Tarkwa mine, enabling it to invest in future expansion when required.
Ghana is a key region for Gold Fields and this Development Agreement cements our status as one of the largest contributors to the country’s fiscus. In fiscal 2016, Gold Fields paid over U.S.$86 million in direct taxes, royalties and dividends to the government of Ghana. This made Gold Fields Ghana the highest taxpayer in Ghana in fiscal 2016, as confirmed by the Ghana Revenue Authority.
Australia
In fiscal 2016, Gold Fields joined with its peers in Western Australia to form the Gold Industry Group to continue highlighting the industry’s contribution to the Western Australian economy and to job creation. This follows on the successful cooperation by miners to campaign against a review of the royalties charged on mining in fiscal 2015. Gold Fields plays a prominent role in the leadership of the industry group.
South Africa
From a regulatory perspective, Gold Fields’ operation in South Africa is guided primarily by the MPRDA. In 2013, critical amendments to the MPRDA were tabled by the government in the MPRDB, but the bill was sent back to parliament for consideration. Amid differing policy priorities by various government departments and jurisdictions, the bill has still not been ratified.
One of the key requirements of the MPRDA is to facilitate meaningful and substantial participation of HDSAs in the mining industry. To provide guidance on this open-ended requirement, the Mining Charter, as revised in 2010, was published providing for a range of empowerment actions and a corollary time frame. All
mining rights holders (including South Deep as the mining rights holder) are required to submit an annual compliance assessment to the DMR on progress made against meeting the annual targets in the Charter. Gold Fields continues to comply with this process.
On March 31, 2015, the Chamber reported that the DMR believes that empowerment transactions by mining companies concluded after 2004 where the HDSA ownership level has fallen due to ensuringHDSA disposal of assets or for other reasons, should not be included in the integritycalculation of their tailings facilities.HDSA ownership for the purposes of, among other things, the 26% HDSA ownership guideline under the Mining Charter. The Group audit was conducted by Golder Associates. When measured against the primary benchmarksposition of Gold Fields is consistent with that of the review, namely stability, freeboardChamber, and water management, allit is that such empowerment transactions should be included in the calculation of HDSA ownership. The DMR and the Chamber agreed to approach the South African courts jointly to seek a declaratory order that will provide a ruling on the relevant legislation and the status of the Group’s tailings storage facilitiesMining Charter, including clarity on the status of previous empowerment transactions concluded by mining companies. The court is yet to hear the Main Application, which has not been enrolled pending an attempt to settle the Main Application outside of court.
On April 15, 2016, the DMR published the New Draft Mining Charter. The New Draft Mining Charter was open for public comment and various submissions on the New Draft Mining Charter were foundmade as part of the public commentary process. During the latter part of 2016, the Chamber and the DMR initiated consultation in relation to the New Draft Mining Charter, which is continuing. The Minister of Mineral Resources announced on February 6, 2017, that a revised version of the New Draft Mining Charter would be published in the government gazette in March, 2017. A revised version of the New Draft Mining Charter is yet to be well managedpublished in the government gazette.
Throughout fiscal 2015 and early fiscal 2016, the Chamber engaged with government directly on the long term sustainability of the industry and a number of other issues confronting the sector. A tripartite forum, called Project Phakisa, comprising industry, government and organized labor, was established, followed by extensive engagement programs to map out future growth and empowerment of the South African mining industry. As at March 2017, no meaningful government strategies or policies had yet emanated from this engagement process.
Mining Charter Scorecard (L3)
All mining rights holders (including South Deep as the mining rights holder) are required to submit an annual compliance assessment to the DMR on progress made against meeting the annual targets in the Mining Charter.
An updated Mining Charter was set to be presented in fiscal 2016 but had not been released by March 2017. Amid the absence of new criteria and targets, Gold Fields has updated its Mining Charter performance and compliance in line with an online scorecard created by the DMR in early fiscal 2015 for the reporting of 2014 performance. The 2014 criteria and targets have remained unchanged and are either aligned with global leading practice, or have plansapplicable for fiscal 2015 and fiscal 2016. The fiscal 2016 scorecard is below.
MINING CHARTER SCORECARD
Element
| Description
| Measure
|
2014 Mining | Progress Against | ||||||||||||
Reporting | Report on the level of compliance with the Revised Charter for the calendar year.
| Documentary proof of reciept from the DMR | Annually | Target met (Annual Submission) | ||||||||||||
Ownership | Minimum target for effective HDSA ownership.
| Meaningful economic participation. | 26% | 35% | ||||||||||||
| Housing and living conditions | Conversion and upgrading hostels to attain the occupancy rate of one person per room.
| Percentage reduction of occupancy rate towards 2014 target. | Occupancy rate of one person per room | 0.93 person per room ratio | ||||||||||||
Conversion and upgrading hostels into family units.
| Percentage conversion of hostels into family units. | Family units established | 100% | |||||||||||||
Procurement and enterprise development | Procurement spent on BEE entity | Capital goods
| 40% | 89% | ||||||||||||
Services
| 70% | 81% | ||||||||||||||
Consumable goods
| 50% | 83% | ||||||||||||||
Multi-national suppliers’ contribution to the social fund.
| Annual spend on procurement from multi-national suppliers. | 0.5% of procurement value | 0.77% | |||||||||||||
Employment equity | Diversification of the workplace to reflect the country’s demographics to attain competitiveness. | Top management (Board)
| 40% | 50% | ||||||||||||
Senior management
| 40% | 60% | ||||||||||||||
Middle management
| 40% | 60% | ||||||||||||||
Junior management
| 40% | 54% | ||||||||||||||
Core and critical skills
| 40% | 71% | ||||||||||||||
| Human resources development | Developing requisite skills, including support for South Africa-based research and development initiatives intended to develop solutions in exploration, mining, processing, technology, mining, beneficiation as well as environmental conservation.
| Human resources development expenditure as a percentage of total annual payroll (excluding mandatory skills development levy). | 5% | 9.65% (R 180.6 million) |
Element Description Measure 2014 Mining Progress Against 83% project implementation (not assured). R55.6 million was spend on SED (including Community Trusts). 100% An EMP performance assessment was undertaken in the first quarter of fiscal 2016. The assessment was conducted by ECO Partners consulting in terms of Regulation 55 of the MPRDA. The results of the assessment were submitted to the DMR in April 2016. South Deep is also ISO 14001 certified, which assists tracking the implementation of the EMP commitments. In addition, the mine commissions annual reviews of the mine closure cost estimates, using independent experts. Improvement of the industry’s mine health and safety performance Utilization of South Africa-based research facilities for analysis of samples across the mining value
Charter
Compliance
Target
Targets as at
December 31, 2016Mine community development Conduct ethnographic community consultative and collaborative processes to delineate community needs analysis. Implement approved community projects. Up-to-date project implementation
20%of the SED spend (R11.3 million), was spent on implementation of community projects, approved in the SLP.Sustainable development and growth Improvement of the industry’s environmental management Implementation of approved environmental management programs (EMP’s) 100% Implementation of tripartite action plan on health and safety 100% 86% Percentage of samples in South African facilities 100% 100%
Element | Description | Measure | 2014 Mining | Progress Against | ||||||||||||
Beneficiation | Contribution towards beneficiation | Added production volume contribution to local value addition beyond the baseline | Section 26 of MPRDA (% of above baseline) | Current regulations and guidelines are not clear in relation to the baseline levels and targets. However, Gold Fields has made a capital intensive investment in our smelting facility at South Deep, which adds significant value to the gold being mined as well as creating jobs. Gold Fields also owns 2.76% of Rand Refinery, which has established the “Gold Zone”. The aim is for the Gold Zone to become a major hub for precious metals fabrication in South Africa for global export, while at the same time assisting local communities with skills development (including beneficiation). |
Technology and Innovation
Gold Fields established a new T&I division during fiscal 2016, led by Richard J. Butcher (EVP: Technical), who joined the Group in placeFebruary 2016. This division has technical oversight throughout the Group and has developed a new T&I strategy by determining the best ways to improve safety, increase production and reduce operating costs.
The long-term transformational goals for such alignment. In general,the company are defined by the T&I strategy. The thrust of the strategy is to modernize, integrate and optimize existing systems and processes before moving into mine automation.
The strategy envisages three distinct phases, namely:
Horizon 1 (1 - 2 years): Foundational phase;
Horizon 2 (3 - 7 years): Transformational to the Gold Fields tailings facilities were found to be withinMine of the top quartile of industry leading practices in terms of design, operationFuture; and management.
More broadly,
Horizon 3 (7 years +): The Gold Fields Mine of the Future.
The ultimate goal of the strategy is taking proactive steps to anticipate constraints relatingwork towards the “Gold Fields Mine of the Future”, which will be premised on automation, an integrated digital data platform, remote machine operation, virtual reality and reduced mining waste.
Recent advances in digitization, automation and mechanization highlight the importance of having strategies in place to implement new technologies. In addition, partnerships with IT companies and OEMs that are leaders in the field will be integral to a successful T&I strategy.
As part of Horizon 1 Gold Fields has identified opportunities to boost efficiencies within Gold Fields’ current regional portfolios, which span the exploration, mining and processing areas of the mining value chain:
The key focus for the Australia region is streamlining exploration time through real time data management and the use of leading practice technologies. This work is being led by a centralized team which will focus on geochemistry, geophysics and analysis of existing geological data;
In Ghana, the focus will be on data analysis to achieveend-to-end business optimization. A key part of this program is to complete fleet automation studies and trials, which could eventually serve as a business case for other open pit automation throughout the Group;
The South Deep mine will upgrade its underground wireless connectivity and radio-communications systems, which will enable it to use technologies such as online maintenance and dispatch systems and remote operating equipment more effectively;
The Cerro Corona mine will be using upgraded operating software and a new dispatch system that will focus on porphyry ore blending to reduce variation of stock feed, thereby optimizing plant recoveries; and
One of our Australian operations will investigate the potential for a fully-automated underground trial mine.
Energy and Climate Change
Mining and processing of gold is an energy intensive process, exacerbated by changing ore geology, declining grades, longer hauling distances and increasing mine depths. The management of energy use and adapting to the developmentadverse impacts of future tailings storage facilitiesclimate change are material for virtually every country and company across the replacementworld. As such, sustainable energy use and climate change mitigation and adaptation have been identified as one of existing ones. Production activitiesGold Fields’ top five sustainability priorities until fiscal 2020.
With energy spend accounting for a significant portion of Gold Fields’ operating costs (fiscal 2016: 19%, fiscal 2015: 22%, fiscal 2014: 21%), energy efficiency and cost savings initiatives are dependent on a mine having sufficient tailings storage facility capacity. Securing new tailings storage facility capacity can involve lengthy permitting processes with local environmental agencies, and can also require negotiations with local communities.critical components of Group-wide cost saving initiatives.
Energy and carbon management
Total Group energy cost increased to U.S.$361 million in fiscal 2014 from U.S.$305 million in fiscal 2013, comprising 21% of Group operating costs in fiscal 2014 compared to 18% in fiscal 2013. This proportion is likely to rise in a global context of increasing energy demand and constraints on supply. As such, energy management remains a top priority, both in terms of controlling both costs and carbon emissions as well as in terms of ensuring security of supply.
Integrated Energy and Carbon Management Strategy
Through its integrated energy and carbon management strategy, Gold Fields integrates energy and carbon management into all aspects of its business through its Integrated Energy and Carbon Management Strategy. This strategy seeks to ensure energy security; decreasesecurity, improved management of energy costs, improved energy efficiencies and sustainable reduction of its carbon emissions; explore immediate and long-term energy efficiency opportunities; and investigate viable sourcesfootprint. Full details of alternative energy.
Gold Fields remains committed to renewable energy solutions at both its operations as well as at its new mine developments. In respect of the latter, the Group has set a target of an average of 20% renewable energy generation for all new mine developments.
Energy and carbon performance were integrated into the balanced scorecards of senior and line management in fiscal 2014, while energy security, including the evaluation of renewable energy, is included in the Group’s scorecard for fiscal 2015.
During fiscal 2014, each of Gold Fields’ regional operations was required to establish energy and carbon baselines; set targets for reducingoperational energy consumption and carbon emissions until 2016 and develop strategies to achieve those targets; and integrate their key performance indicators baseddata is contained on our website. Some of the salient features of Gold Fields energy and carbon performance in fiscal 2016 were:
Group energy spend declined from U.S.$312 million (U.S.$139/oz) in fiscal 2015 to U.S.$289 million (U.S.$130/oz) in fiscal 2016;
Total energy consumption increased by 4% to 11,696,446GJ from 11,240,369GJ in fiscal 2015. Of total energy consumption during fiscal 2016, 57% comprised diesel (6,607,770GJ) and 43% electricity (5,041,518GJ) similar to the split in fiscal 2015;
Group electricity consumption was 1,400,422MWh, a 6% increase on fiscal 2015. This reflected higher gold production (up by 47%) at South Deep, increased tonnes mined throughout the Group, the addition of ventilation shafts at our Australian operations and increased dewatering due to heavy rains at the Australian and Ghanaian mines;
Diesel consumption reduced by 4.7% from 192,518kℓ in fiscal 2015 to 183,498kℓ due to the commissioning of the gas plant at Granny Smith, reduced usage of diesel power generators at Damang, optimized mining operations and fuel management initiatives implemented at our mines. Diesel consumption increased at the Tarkwa and St. Ives mines;
Diesel spending reduced by 13% to U.S.$129 million (fiscal 2015: U.S.$149 million) amid a stagnant oil price and reduced diesel usage at the operations; with a 1.2% modest decline in our electricity spend to U.S.$160 million (fiscal 2015: U.S.$162 million);
Commissioning ofgas-powered power generation technologies at Granny Smith, Tarkwa and Damang as part of our ongoing switch tolow-carbon, alternate and renewable energy sources;
Continued commitment to using 20% renewable energy on all new projects over the LoM of these projects. Salares Norte in Chile is currently undergoing an evaluation; and
| • | Total carbon emissions increased by 12% to 1,963,758t CO2-eq from 1,753,163t CO2-eq emissions in fiscal 2015. Our scope 1 emissions rose due to higher diesel consumption, while our scope 2 increased due to country-specific emissions factors. |
In fiscal 2016, low global oil prices and a stagnant gold price made some of our fuel-switching energy initiatives not economically viable. Despite the difficult economic and tough physical conditions of gold mining, Gold Fields still managed to achieve some energy savings and carbon emissions reductions in fiscal 2016. These included:
Energy savings of 323TJ - 3% of our fiscal 2016 energy budget;
Financial savings of U.S.$11 million from energy initiatives - our target was U.S.$21 million; and
| • | Avoidance of carbon emissions totaling 56,005t CO2-eq as a result of the energy and carbon reduction initiatives. |
Group energy budgets, energy savings and carbon reduction target estimates are determined at the beginning of each year, against the annual production plan. Thus, changes in the production will directly affect ability to reach the target estimates.
Most critically though is that our average energy spend per ounce of gold produced declined by 6.3% to U.S.$130/oz in fiscal 2016 (fiscal 2015: U.S.$139/oz, fiscal 2014: U.S.$158/oz). Energy efficiency initiatives reduced energy spend by an equivalent U.S.$5/oz. This is despite the fact that the actual energy usage per ounce of gold produced increased by 5.0% to 5.27GJ/oz in fiscal 2016. Reflecting slightly lower grades throughout our operations, the tonnage mined by Gold Fields during fiscal 2016 was up by 12%, however, mining energy intensity improved to 0.06GJ/t mined (fiscal 2015: 0.07GJ/t).
Energy optimization savings initiatives take time to make an impact - we calculate that the effect of various energy efficiency and business optimization initiatives introduced across Gold Fields over the past five years have resulted in cumulative energy savings of 1,098TJ between fiscal 2012 and fiscal 2016. This has led to U.S.$41 million in cumulative cost savings and avoidance of 165,005t CO2-eq in emissions.
In fiscal 2016, Gold Fields updated its Group Energy and Carbon Management Guideline to align with ISO 50001, the global energy management standard. The guideline entrenches a systematic approach to our energy management as a business optimization continual improvement program and shifts our focus from individual energy efficiency initiatives.
Regional Energy and Carbon Emission Performance
In fiscal 2015, Gold Fields developed and started implementation of regional five-year energy security plans, taking into the balanced scorecards of management. In lineaccount localized energy supply risks and opportunities, with these requirements, newa specific focus on West Africa and South African operations. From fiscal 2017 short-term operational targets for energy use, cost and carbon emissions will be set against annual energy and production plans. They will be set in absolute GJ, energy costs (U.S.$) and absolute carbon emission baselines were, as well as associated(tonnes CO2-eq) avoided, based on planned and feasible initiatives. Initiatives will still be recognized for three years from date of implementation. Through this process, we are able to develop Group medium-term (fiscal 2020) energy and carbon reduction targets (with defined strategiestargets.
Most of the regions have seen a decline in energy spending per ounce as seen in the graph below, owing to achieve them), were finalizeda number of external and internal drivers, such as exchange rates, varying levels of increases in regional electricity and diesel unit prices and energy efficiency initiatives. Some of the successful energy spend curtailment initiatives are outlined below.
Americas
Peru electricity market has experienced an oversupply situation due to planned large mining projects that have not yet been implemented and the regulated electricity charges continue to increase. Thus, at Cerro Corona
we renegotiated electricity tariffs with an independent power provider for a power purchase agreement extending to fiscal 2027. Efficiency initiatives saved the mine 29,430GJ, equivalent to U.S.$0.55 million in fiscal 2014.2016 (fiscal 2015: U.S.$3 million) and avoided 2,363t CO2-eq in carbon emissions.
A trial application of a diesel additive product over a25-day period saw fuel savings of 4.8% from selected haulage trucks. Moreover, observed carbon monoxide and nitrogen monoxide emission reductions were as low as 22% and 23%, respectively. Based on this trial’s success, we expect to save U.S.$280,000 per year in fuel when applied over Cerro Corona’s hauling fleet. The roll out for this initiative is planned for fiscal 2017.
Apre-feasibility study under way at Chile’s Salares Norte mine includes the development of a plan exploring renewable energy supply options, over the LoM.
RegionalAustralia
Due to their remote locations, Gold Fields’ Australian operations have limited, but stable, power supply. As such, the focus for fiscal 2016 has been to implement a fuel switch strategy, while reassessing energy security and monitoring energy efficiency initiatives.
In fiscal 2016 we commissioned a 24MWgas-powered plant at the Granny Smith mine, our portion of the total costs was A$4.5 million (U.S.$3.3 million). Savings of around A$5.4 million (U.S.$3.9 million) a year at current oil prices are expected. All operations in Australia are now powered by gas instead of diesel.
After registering the Granny Smith gas plant with the ERF, we have been able to successfully auction carbon emission credits to the Australian government as the plant switches from a heavy carbon (diesel) to a low carbon (gas) power source. The ERF is expected to abate 85,000t CO2-eq emissions potentially over seven years.
Following annual energy security risk assessments, we have developed a load management action plan for Agnew/Lawlers mine, which faces heavy penalties should its contracted maximum demand of electricity be exceeded for a sustained period of time. Mitigating actions, such as running the cooling plant on diesel power, are currently being implemented, while a long-term energy security solution is explored.
South Africa
GivenIn response to the relatively energy-intensive nature of mining and processing, it is essentialrolling load shedding that each of Gold Fields’ mines benefits from a stable and affordable supply of power. This is explicitly recognized in Gold Fields’ Integrated Energy and Carbon Management Strategy. Energy security is a particular challenge in more remote locations, where operations compete with other commercial and domestic users for finite supplies or where the Group’s operations face increasing power costs. For example, it has been reported that Eskom intends to request permission to raise the power tariff in South Africa by 25%, instead of 12.69%,experienced in order to make up a cashflow shortfall. NERSA has given permission for Eskom to raise rates further but it is unclear what the actual rate increase will be. See “Risk Factors—Power costfiscal 2015 and uncertainties regarding electricity price increases, may adversely affect Gold Fields’ business, operating results and financial condition.”
Each of the Group’s regional operations has been tasked with submitting aSouth Deep’s five-year energy security plan incorporates a range of energy efficiency improvements and alternative energy sources.
An essential component of the plan is the use of solar power at the mine.
An independent power producer was appointed in October 2016 to develop, build, own and operate a 40MW photovoltaic plant located at South Deep. The facility will be made up of approximately 150,000 solar panels. The plant is expected to generate 100GWh per year, equivalent to 20% of the mine’s annual 500GWh electricity consumption, and avoiding carbon emissions estimated at 100,000t CO2-eq per annum. We expect the initial power purchase agreement price to be on par with state utility Eskom tariffs, and set to fall below Eskom tariffs in due time. The expected commercial operation date of the project is the fourth quarter of fiscal 2018.
Other initiatives completed at South Deep mine in fiscal 2016 include:
| • | Continuing to retrofit 75kW fans with 10 energy efficient 55kW fans, resulting in an annual saving of 2,190MWh (equivalent to U.S.$100,000 in cost savings) and avoiding 2,256t CO2-eq carbon emissions; and |
| • | Installing 22 new jet fans in the destress mining area, which will see an annual saving of 500MWh (equivalent to U.S.$30,000) and avoiding 513t CO2-eq carbon emissions. |
Roof top solar panels installed at Gold Fields’ Johannesburg corporate office in December 2015 led to significant savings in grid electricity usage and costs during fiscal 2015.2016. The potential128kWp (peak output), 823m2 polycrystalline solar PV array on the roof of the corporate office provides for renewable energyapproximately 50% of the building’s electrical load and contributes to reduction of our carbon footprint.
West Africa
During fiscal 2016, the electricity consumption curtailment was eased from 30% in fiscal 2015 to 25%. Supply disruptions from the state-owned VRA, due to gas shortages and low dam levels, remained an operational constraint. Energy prices also rose due to infrastructure levy increases. With electricity demand in Ghana expected to surpass generation at each operation will again be reviewedcapacity until fiscal 2020, Tarkwa and Damang initiated a number of actions during fiscal 2016 as part of their five-year energy security plans.
The most significant of these plans,was the construction of two Genser-owned gas turbine power plants to supply a total of 40MW of electricity to both mines under a purchasing power agreement. The total capacity of the Tarkwa plant (three 11MW units) and the Damang plant (five 5.5MW units) are beyond our current power requirements and will ensure a reliable supply to both operations. They were commissioned in December 2016 and will result in significant electricity cost savings. Tarkwa’s electricity supply costs are expected to drop by about 14%, and Damang’s costs by about 30%.
The key features of the Genser agreement are:
It is a20-year power purchase agreement for an initial 40MW of which 20MW is provided from dual-fuel turbines at both Tarkwa and Damang; an additional 20MW is planned for installation at Tarkwa by January 2018;
The power plants will have sufficienton-site gas storage capacity to meet each mine’s total load (36MW at Tarkwa and 17MW at Damang) thereby mitigating any gas supply disruptions; and
By January 2018, Genser should be in a position to provide 100% of the power supply needs at these operations and surplus power produced by Genser could be wheeled to other consumers.
Tarkwa introduced a number of other energy efficiency initiatives during fiscal 2016:
Implementation of a dedicatedeco-driver training system at Tarkwa, which is compulsory for both new and current vehicle operators. Trials during fiscal 2016 indicate that once the system is rolled out energy savings of 72,469GJ can be achieved leading to annual cost savings of around U.S.$2 million;
| • | A new study on a fuel additive at Tarkwa indicates a possible 4,881kℓ fuel saving per annum, equating to an anticipated 13,023t CO2-eq reduction. The estimated annual monetary saving from the initiative is U.S.$2.4 million. A test trial is being developed; and |
Several process optimization initiatives such as renewablereducing tramming time and excavators’ diesel use were also implemented.
An energy is becoming more cost-effectiveefficiency study of the Accra regional office showed potential energy savings of 18,922GJ (translating to a monetary saving estimate of U.S.$1.3 million) through installations of LED illumination, solar geysers and an increasingly competitive alternativeenergy efficient air conditioners. The feasibility of rooftop solar power to conventionalminimize grid power sources. The use of renewable energydependency is also considered to be a key aspect of reducing the Group’s carbon emissions.being assessed.
Climate Change and Carbon emissionsEmissions
Carbon emission reduction and climate change
Carbon emissions mitigation and climate changeadaptation represent a material issue for Gold Fields. This isFields due to:
The long-term risks posed by climate change both to its ownthe Group’s operations, host communities and to wider society;society as a whole;
Growing effortsA commitment to regulateconforming to carbon emissionsemission regulations being introduced in a range of jurisdictions; and
TheRising costs associated with taxes increasingly attached by governments tonon-renewable energy consumption.
Historically,Gold Fields’ total scope 1 - 3 CO2-eq emissions during fiscal 2016 amounted to 1,963,759t (fiscal 2015: 1,753,163t), leading to a commensurate increase in our emissions intensity from 0.59t CO2-eq/oz in fiscal 2015 to 0.69t CO2-eq/ oz in fiscal 2016. Emission intensity varies by region, ranging from 0.31t CO2-eq/oz in Peru, which relies mainly on gas and hydro generated electricity, to 1.92t CO2/oz in South Africa, which relies almost exclusively on coal generated electricity.
Gold Fields Climate Change Policy
Following the climate change risk assessments carried out in fiscal 2016, a Group climate change policy was published, replacing the Group carbon management policy that has been in place since fiscal 2013 and focused mainly on addressing these effects through energy management.
Thus, the policy advances and communicates a balanced mitigation and adaptation approach to achieving our climate change objectives. The policy contains a set of commitments that include:
Conducting climate change vulnerability assessments utilizing Group risk guidelines and ICMM tools and guidelines;
Annually reporting and disclosure via a number of reporting frameworks including the CDP and the Dow Jones Sustainability Index;
Mitigating the effects of climate change by increasingly investing in renewable energy andlow-carbon energy sources, energy efficiency initiatives and water use optimization initiatives;
Supporting research, development and innovation to assist our operations in coping with climate change;
Factoring in a regional carbon price for both costing and as potential revenue streams; and
Participating in industrial forums, including the ICMM climate change and energy working group, stakeholder and NGO engagements.
Climate Change Vulnerability Assessments
During fiscal 2016, we worked with the ICMM to pilot a climate-data viewer tool that gives insight into physical changes in precipitation, temperature, wind and water stress levels from fiscal 2025 to fiscal 2045 based on 15 global climate models. This tool enables ICMM members to assess their operations’ vulnerability to climate change using a common tool. The risk assessments covered the entire mine life cycle, including post-closure.
Gold Fields applied this tool in all its operations and followed that with detailed risk assessments for Peru, South Africa and Australia, with West Africa assessments scheduled for early fiscal 2017. Results from the tool indicate that our operations will to varied degrees experience higher temperatures, decreases in annual rainfalls, and an increase in the intensity of storm events, all of which may have financial andnon-financial impacts both for the mines and surrounding communities. Specific implications for each operation will vary depending on the operational life cycle. Some of the key findings are listed below.
Operational adaptation plans are being developed to ensure operational resilience. A critical part of this work isco-operating with NGOs and adjacent communities in addressing climate change risks around these communities. At our Cerro Corona mine in Peru, we are working with the U.S. Agency for International Development, or USAID, and the Lutheran World Relief, or LWR, on climate change adaptation and management of water resources for communities in the Hualgayoc district adjacent to the mine. Among the measures introduced are the establishment of watershed committees, the development of eight localized water systems to improve irrigation efficiencies and training in sustainable water harvesting.
Region | Risk Description | |
Americas | Intense storms leading to our water pumping and treatment capacity being exceeded | |
| Interruptions to the transport network leading to bottlenecks at the concentrate storage facility | ||
| Higher sea undulations could lead to disruptions in the port operations and the need to increase capacity in the concentrate storage warehouse | ||
| Water availability constraints could lead to reduced agricultural productivity | ||
Australia | Increases in flooding events could lead to pressure being placed on operation’s flood management capabilities and restrictions on personnel and suppliers’ access to site | |
| Declining availability of suitable quality processing water due to lower rainfall | ||
| Legislative changes imposing restrictions on water use and punitively limiting emissions | ||
South Africa | Increases in temperatures—potentially exposing our surface operations to heat exhaustions, in the long term, underground cooling demand will increase | |
| Increases in variability and intensity of rainfall—exposing South Deep to periods of drought and increased water stress, as well as floods as storm intensity increases | ||
Community Relations and Creating Shared Value
Social license to operate
Recognizing the importance of solid community relations to its social license to operate, Gold Fields is committed to minimizing, managing or avoiding, where possible, the negative impacts of its operations on communities, while also maximizing the positive benefits. Through active stakeholder engagement and its shared value development approach, the Company’s focus goes beyond just spending to the positive social and business impacts that its social investments can deliver.
Gold Fields’ community relations approach is informed by an understanding of its operating contexts, garnered through ongoing risk assessments and stakeholder engagements. In fiscal 2016, plans to address material social risks were developed and implemented in each region. These risks were often linked to the local and national elections, which were held in all our operating regions. The operations were sensitized to this challenge through their community relations risk assessments undertaken in fiscal 2015 and fiscal 2016.
Building relationships
Gold Fields actively identifies and regularly engages with the representatives of the following groups in a formal and informal manner:
Central, regional and local government and their agencies;
Community-based organizations;
Traditional authorities;
NGOs;
Civil society;
Organized labor; and
Organized Business and companies.
In fiscal 2016, all operations prepared community relations and stakeholder engagement strategies and three-year plans focused on maintaining their social license to operate. These were informed by the Company’s community relations and stakeholder engagement guideline.
As required by the Company, all operations have established mechanisms through which communities can share their grievances about Gold Fields, its actions or the behavior of its employees on social, environmental and human rights issues. These mechanisms allow for issues to be addressed and resolved. During fiscal 2016, the regions dealt with 92 grievances by their communities, of which 82 were resolved and ten are still being dealt with. Operations in Peru, South Africa and West Africa also regularly distribute communication materials to stakeholders, keeping them informed about the Company’s community relations activities and initiatives.
Subsequent to community relationship assessments in Peru, South Africa and West Africa between fiscal 2014 and fiscal 2015, action plans have been implemented during fiscal 2015 and fiscal 2016 to address any gaps and further strengthen community relations. A second round of assessments commenced in late fiscal 2016 in Peru and South Africa. The ICMM “Understanding company-community relationship toolkit” is being piloted for these assessments at our South African and Ghanaian mines.
Social investment
As not all of the value created through royalties and taxes benefits host communities, Gold Fields focuses on socio-economic development, or SED, initiatives and Shared Value projects. Aligned to the Company’s business objectives, these sustainable development projects create positive socio-economic impacts for host communities by targeting their priority needs of employment, skills and enterprise development, and environmental rehabilitation and access to water.
Gold Fields’ spending of U.S.$16 million in fiscal 2016 (fiscal 2015: U.S.$14 million) on SED and Shared Value programs reflects the Group’s direct social investment spend in host communities. The investments were made in the following areas:
Local environment;
Infrastructure;
Education and training;
Health and wellbeing; and
Economic diversification.
A significant proportion of the salaries and wages paid to employees also finds its way back into our host communities.
Shared Value projects
Shared Value is created when companies take a proactive role in simultaneously addressing business and social needs. A key component of this approach is to ensure that the value created is shared by the business and the community. Shared Value is an imperative for Gold Fields as a key component of maintaining and strengthening its social license to operate.
Gold Fields’ Shared Value approach is based on four key pillars:
Strategic interventions, to proactively address socio-economic challenges that can drive community tensions, NGO activism or more restrictive regulations;
Integration to proactively address socio-economic challenges;
Participation in collaborative action with other stakeholders; and
Transparency regarding Gold Fields’ economic contributions to its host societies in line with WGC guidelines.
Gold Fields’ regions currently have six Shared Value projects either already running or at implementation stage. These include road rehabilitation and quarry projects at the Ghanaian operations, local supplier development and water access projects at Cerro Corona and host community procurement and education and skills development projects at South AfricanDeep.
Host community employment
Gold Fields aims to employ host community members at its operations, accounted forwhere feasible. This enables alignment between the bulkinterests of its carbon emissions. This washost communities and the mines, expanding of local value generation and growth of local available skills. As the Company’s ability to recruit such workers may be limited due to the Group’s previous ownershipavailable skills in host communities, it is committed to local education and skills development.
The focus of the power-intensive, deep-level underground BeatrixCreating and KDC mines,Sustaining Shared Value objective for fiscal 2016 was the development of three-year local procurement and employment plans for Peru, South Africa and West Africa.
The number of host community members, including both employees and contractors, working at each of Gold Fields’ regions is set out on the table below. In fiscal 2016, all operations set targets for host community employment and these were met or exceeded, except at South Deep where the definition of “host communities” was adjusted from residential address to place of origin, which was in line with the legal definition required under the mine’s SLP.
Region | % Host community workforce(1) employed from total workforce | |||||||||||
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | ||||||||||
| (%) | (%) | (%) | ||||||||||
Peru | 23 | 29 | 24 | |||||||||
Ghana | 72 | 67 | 66 | |||||||||
Australia(2) | 95 | 90 | 94 | |||||||||
South Africa(3) | 13 | 14 | 12 | |||||||||
Group(3) | 48 | 47 | 47 | |||||||||
Notes:
| (1) | Workforce includes the total number of employees and contractors. |
| (2) | For our Australian operations, Western Australia is classified as a host community due to the extremely remote nature of this region and the fact that many employees fly into the operations from Perth. Hence the high host community employment percentages relative to the other regions. |
| (3) | Change in definition of workforce applied at South Deep in fiscal 2016. Fiscal 2015 fiscal and 2014 figures restated accordingly. |
Host community procurement
Where possible, Gold Fields procures goods and services in the countries in which it operates, and, where feasible, its host communities. This contributes to enhancing the national and local supplier base, which is especially important because of some mines’ remote locations, and creating local employment.
Of the total fiscal 2016 procurement spend, U.S.$1.36 billion or 83% was spent on businesses based in countries where Gold Fields has operations (fiscal 2015: U.S.$1.27 billion or 75%). Within this figure, U.S.$558 million or 41% was spent on suppliers and contractors from the mines’ host communities (fiscal 2015: U.S.$514 million or 35%).
Building on the work done in fiscal 2016, the operations are working towards meeting their host community employment targets developed as part of the three-year host procurement and employment plans. South Deep’s Host Community Procurement Project exceeded its target of R330 million in fiscal 2016. The project’s vision is to have 25% of total procurement spend (or R500 million, whichever is greater) redirected to the host community
by fiscal 2018 and 500 new jobs created by the end of fiscal 2020. The actual total procurement spend for fiscal 2016 was R2.6 billion (fiscal 2015: R2.0 billion) and the host community procurement spend was R356 million (fiscal 2015: R192 million), which was 14% of total spend (fiscal 2015: 10%). The number of host community suppliers to South Deep increased to 83 during fiscal 2016 (fiscal 2015: 76).
The table below sets out the local and host community procurement for the periods indicated.
Region | Local (In Country) Procurement | Host community procurement | ||||||||||||||||||||||||||||||
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | Fiscal 2013(1) | Fiscal 2016(1) | Fiscal 2015 | Fiscal 2014 | Fiscal 2013(1) | |||||||||||||||||||||||||
| (%) | ||||||||||||||||||||||||||||||||
Peru | 89 | 87 | 88 | 91 | 8 | 7 | 5 | 6 | ||||||||||||||||||||||||
Ghana | 79 | 64 | 72 | 68 | 7 | 9 | 6 | 6 | ||||||||||||||||||||||||
Australia | 99 | 97 | 99 | 99 | 71 | 66 | 69 | 72 | ||||||||||||||||||||||||
South Deep | 100 | 100 | 100 | 100 | 14 | 10 | 9 | 4 | ||||||||||||||||||||||||
Group | 92 | 85 | 91 | 86 | 38 | 35 | 39 | 31 | ||||||||||||||||||||||||
Note:
| (1) | Excludes Yilgarn South Assets. |
In fiscal 2017, the Company plans to pilot a social and economic impact assessment and evaluation of its social investments at South Deep and develop an approach that will be rolled out in Gold Fields’ other regions thereafter.
Human Rights
Gold Fields applies a formal human rights policy statement, both in dealing with its communities as well as Eskom’s relianceits employees. The policy statement is aligned to the relevant ICMM principles on carbon-intensive coal generation.human rights and the United Nations’ “Protect, Respect and Remedy” framework.
FollowingUnder the Spin-off,policy statement, Gold Fields commits to:
Not interfering with or curtailing other’s enjoyment of human rights;
Defending (where possible) employees and third-party individuals and groups (as defined in our community policy) against human rights abuses; and
Taking positive action to facilitate the entrenchment and enjoyment of human rights.
Given the nature of Gold Fields’ footprint, activities and relationships, the human rights policy places specific emphasis on:
Community engagement;
Indigenous rights;
Resettlement; and
Security and human rights.
Internally, we uphold the highest standards of human rights within our workforce, including freedom from child labor, compulsory labor and discrimination as well as the acquisitionright to collective bargaining.
We carry out human rights due diligence on our own activities. Gold Fields’ business relies on multiple contractors and suppliers to carry out mining, development, construction and other forms of work on its operations. All contractors are included in Gold Fields’ own health and safety management systems, to help ensure that contractor employees benefit from safe and healthy working conditions.
All contractor employees wishing to report human rights violations are able to make use of Gold Fields’ confidential, third-party whistle-blowing hotline. Where such complaints are made, Gold Fields will pursue the Yilgarn South Assets,matter appropriately. Gold Fields does not currently carry out human rights due diligence on its suppliers. Nonetheless, the Group has a lower, more balanced carbon profile. is utilizing an external party screening solution to establish risk profiles of external suppliers and contractors. Among other criteria, the tool screens new and existing contractors and suppliers for human rights and related violations and/or transgressions.
Gold Fields is undertaking a numberFields’ protection services team works with both private and public security providers for the effective and responsible protection of carbonworkers and climate change management and reporting initiatives, in addition to its broader efforts to reduce its overall energy consumption and carbon emissions.assets. All private security contractors receive human rights training during induction.
Carbon disclosure and renewable energy
Gold Fields responds on an annual basis to the international Carbon Disclosure Project’s, or CDP’s, climate change and water questionnaires. This information, along with that of other organizations, is aggregated to produce the Carbon Disclosure Leadership Index (CDLI)10 and Carbon Performance Leadership Index, or CPLI.
In fiscal 2014, Gold Fields achieved a disclosure score of 96% in the CDLI, placing it in the top rank of international carbon and climate change reporters. In addition, the company obtained a ‘B’ rating in the CPLI. The rating represents a decline from previous years, including an ‘A-’ rating in fiscal 2013. This performance appears to be due to:
The fiscal 2014 rebasing of energy and carbon management targets due to Group restructuring in fiscal 2013, as well as temporary delays to associated energy efficiency projects;
The loss of the Beatrix methane project and the biomass-to-energy project at KDC due to the Spin-off in fiscal 2013; and
The discontinuation of a planned 30MW biomass power plant project at Tarkwa for economic reasons.
Gold Fields is continuingcommitted to examine potential renewable energy opportunities,responsible materials stewardship. In this context, we support global efforts to tackle the use of newly mined gold to finance conflict. We have voluntarily adopted the “Conflict-Free Gold Standard” of the WGC. This has led to the standard being applied at all relevant locations through full assurance audits. Although we withdrew our WGC membership in light of:
Challenges posed by remote, off-grid growth projects, such as Salares Norte in Chile;
Improving renewable energy economics, which are being driven by technological advances, as well as growing economies of scale within2014, we have and will continue to apply both the sector;
The ability of a diversified energy mix to enhance operational energy security;
The potential for offsetting future carbon taxes and/or generating carbon credits;WGC standard and
The ability of renewable energy projects to offer positive legacies to local communities and create shared value.
Carbon taxes
Governments around the world are considering the benefits of increased carbon regulation and taxation, as demonstrated in Australia and South Africa. See “Risk Factors—Regulation of greenhouse gas emissions and
climate change issues may materially adversely affect Gold Fields’ operations” and “Information on the Company—Environmental and Regulatory Matters” for more information.
Community and stakeholder engagement
Community and stakeholder engagement are among Gold Fields’ main strategic initiatives for fiscal 2014. For more information on these initiatives, see “Information on the Company—Strategy—Collaborative value creation at the national and community level”, “Information on the Company—Strategy—An integrated approach to growth—Earning and maintaining a social license to operate” and “Information on the Company—Strategy—Community Relations”. guidelines.
Property
Gold Fields’ operations asAs of December 31, 2014 comprised2016, Gold Fields held rights over the following:following mining and exploration areas/tenements, including those held as joint ventures:
Gold Fields’ operative mining areas as of December 31, 20142016
Operation | Size (hectares) | |||
South Africa | ||||
South Deep | 4,268 | |||
Ghana | ||||
Tarkwa | 20,825 | |||
Damang | ||||
Australia(1) | ||||
St. Ives | ||||
Agnew/Lawlers | ||||
Granny Smith | ||||
Darlot | ||||
Peru | ||||
Cerro Corona | ||||
Note:
| (1) | Tenement areas include: prospecting, exploration, mining, miscellaneous andnon-managed or JV. |
Gold Fields leases its corporate headquarters in Sandton.
The MPRDA vests the right to prospect and mine in the Republic of South Africa with administration by the government of South Africa. During May 2010, the DMR approved the conversion of the South Deep old order mining rights into a new order mining right. Included in this approval was an additional portion of ground known as Uncle Harry’s, which is contiguous to South Deep. Gold Fields also owns most of the surface rights with respect to its South African mining properties. Where Gold Fields conducts surface operations on land the surface rights of which it does not own, it does so in accordance with applicable mining and property laws. In addition, Gold Fields owns prospecting and surface rights contiguous to its operations in South Africa. As required under the MPRDA, Gold Fields has registered its surface rights utilized for mining purposes. Gold Fields has received prospecting rights on properties which it has identified as being able to contribute, now or in the future, to its
business and will apply to convert those prospecting rights to mining rights under the MPRDA, when appropriate. These rights, historically known as the Fochville East, Kalbasfontein, WA4 and Wildebeestkuil prospecting rights, are in the process of being consolidated and known as the South Deep Contiguous Areas. See “—Environmental and Regulatory Matters—South Africa—Mineral Rights”.
Gold Fields’ West Africa operations comprise two legally registered entities, namely Gold Fields Ghana and Abosso. Gold Fields Ghana obtained the mining rights for the Tarkwa property from the government of Ghana in 1993. In August 2000, with the consent of the government of Ghana, Gold Fields Ghana was assigned the mining rights for the northern portion of the Teberebie property. The Tarkwa rights expire in 2027, while the Teberebie rights expire in 2018. The Minerals Commission has approved Gold Fields Ghana’s application for an extension
of the Teberebie rights to 2036, and has recommended that the Minister responsible for Natural Resources should grant the extension. Gold Fields Ghana has fully paid for the fees associated with the extension. Abosso holds the right to mine at the Damang property under a mining lease from the government of Ghana whichthat expires in 2025. Gold Fields may exploit all surface and underground gold at all three sites until the rights expire, provided that Gold Fields pays the government of Ghana a quarterly royalty. See “—Environmental and Regulatory Matters—Ghana—Mineral Rights”.
In Western Australia, land that is the subject of mining rights is leased from the state. West Australian mining leases have an initial term of 21 years with one automatic21-year renewal period and thereafter an indefinite number of21-year renewals with government approval. In relation to gold produced from the mining leases at St. Ives, Agnew,Agnew/Lawlers, Granny Smith and Darlot, Gold Fields pays an annual royalty to the state of 2.5% of revenue.
In Peru, exploration and extraction activities can only be performed in duly authorized areas. Authorization is granted by the Peruvian government when a mining concession is issued. Mining concessions expire if the titleholder does not exploit the concessions for a period of 15 years, unless the titleholder demonstrates to the authorities that this was through no fault of its own, in which case the authorities may allow the titleholder to begin to exploit the concession within the next 5 years that follow. The titleholder must comply with specific obligations, such as paying annual fees of U.S.$3.00 per hectare, meeting minimum investment requirements, paying a monthly royalty according to the value of the produced concentrates and other requirements. The mining concessions owned by Cerro Corona cover an area of 4,379.34,365 hectares, while the surface rights cover 1,2441,291 hectares. See “—Environmental and Regulatory Matters—Peru—Mining Concessions”.
The maps presented below show the location of Gold Fields’ operations.
South Africa Operation
General location of the material assets—South Deep Gold Mine
West Africa Operations
 |  |
Australia OperationsGeneral location of the material assets—Tarkwa Gold Mine
General location of the material assets—Damang Gold Mine
|  |
General location of the material assets—St. Ives Gold Mine
General location of the material assets—Agnew/Lawlers Gold Mine
General location of the material assets—Granny Smith Gold Mine
General location of the material assets—Darlot Gold Mine
Americas Operation
General location of the material assets—Cerro Corona Gold Mine
Legal Proceedings and Investigations
Randgold and Exploration Summons
On August 21, 2008, GFO, formerly known as Western Areas Limited, or WAL, a subsidiary of Gold Fields, received a summons from Randgold and Exploration Company Limited, or R&E, and African Strategic Investment Holdings Limited. The summons claims that during the period that WAL was under the control of Brett Kebble, Roger Kebble and others, WAL assisted in the unlawful disposal of shares owned by R&E in Randgold Resources Limited, or Resources, and Afrikander Lease Limited, now known as Uranium One. The claims have been computed in various ways. The highest claims have been computed on the basis of the highest
prices of Resources and Uranium One shares between the dates of the alleged thefts and March 2008 (between R11 billion and R12 billion, or approximately between U.S.$1 billion)700 million to U.S.$800 million). The quantifiable alternative claims have been computed on the basis of the actual amounts allegedly received by WALGFO to fund its operations (approximately R521R519 million, or U.S.$4534 million).
Simultaneously with delivering its plea, GFO joined certain third parties to the action (namely JCI Limited, J C Lamprecht, R A R Kebble and the deceased and insolvent estate of B K Kebble), in order to enable it to claim compensation against such third parties in the event that the plaintiffs are successful in one or more of their claims. In addition, notices in terms of section 2(2)(b) of the Apportionment of Damages Act, 1956 were served on various parties by GFO, in order to enable it to make a claim for a contribution against such parties in terms of the Apportionment of Damages Act, should the plaintiffs be successful in one or more of its claims.
The claims lie only against GFO, whose only interest is a 50% stake in the South Deep mine. This alleged liability is historic and relates to a period of time prior to the purchase of the company by the Group. GFO’s assessment remains that it has sustainable defenses to these claims and accordingly, GFO’s attorneys have beenwere instructed to vigorously defend the claims. Accordingly, no adjustment for any effects on the Company that may result from the outcome of the summons, if any, has been made in the condensed consolidated financial statements.
Silicosis
During 2012 and 2013,2014, two court applications were served on Gold Fields and its subsidiaries (as well as other mining companies) by various applicants purporting to represent classes of mine workers (and where deceased, their dependants)dependents) who were previously employed by or who are employees of, amongstamong others, Gold Fields or any of its subsidiaries and who allegedly contracted silicosis and/or tuberculosis.
These are applications in terms of which the court is asked to certify a class action to be instituted by the applicants on behalf of the classes of affected people. According to the applicants, these are the first and preliminary steps in a process, where if the court were to certify the class action, the applicants may,will in athe second stage bring an action wherein they will attempt to hold Gold Fields and other mining companies liable for silicosis and/or tuberculosis and the resultant consequences. The applicants contemplate dealing in the second stage with what the applicants describe as common legal and factual issues regarding the claims arising for the whole of the classes. If the applicants are successful in the second stage, they envisage that individual members of the classes could later submit individual claims for damages against Gold Fields and the other mining companies. These applications do not identify the number of claims that could be instituted against Gold Fields and the other mining companies or the quantum of damages the applicants may seek.
Gold Fields has delivered notices of intention to opposeopposed the applications and has instructed its attorneys to defend the claims.applications.
The two class applicationsactions were consolidated into one application on October 17, 2013 and the parties agreed a court-sanctioned process for the delivery2014. In terms of answering and replying affidavits and for the consolidated application, the court was asked to allow the class actions to be heard duringcertified.
On May 13, 2016, the weeksHigh Court ordered, among other things: (1) the certification of October 12two classes: (a) a silicosis class comprising current and 19, 2015. former mine workers who have contracted silicosis and the dependents of mine workers who have died of silicosis; and (b) a tuberculosis class comprising current and former mine workers who have worked on the mines for a period of not less than two years and who have contracted pulmonary tuberculosis and the dependents of deceased mine workers who died of pulmonary tuberculosis; and (2) that the common law be developed to provide that, where a claimant commences suing for general damages and subsequently dies before close of pleadings, the claim for general damages will transmit to the estate of the deceased claimant.
The consolidated applicationprogression of the classes certified will be precededdone in two phases: (i) a determination of common issues, on an opt out basis, and (ii) the hearing and determination of individualized issues, on an opt in basis. In addition, costs were awarded in favor of the claimants.
The High Court ruling did not represent a ruling on the merits of the cases brought by various legal technical applicationsthe Claimants. The amount of damages has not yet been quantified for any of the claimants in the Consolidated Class Application or for any other members of the classes.
Gold Fields and the other respondents believed that the judgment addressed a number of highly complex and important issues, including a far reaching amendment of the common law, that have not previously been considered by other courts in South Africa. The High Court itself found that the scope and magnitude of the proposed claims is unprecedented in South Africa and that the class action would address novel and complex issues of fact and law. The respondents applied for leave to appeal against the judgement because they believed that the court’s ruling on some of these issues is incorrect and that another court processes.may come to a different decision.
On June 24, 2016, the High Court granted the mining companies leave to appeal against the finding amending the common law in respect of the transmissibility of general damages claims. It refused leave to appeal on the certification of silicosis and tuberculosis classes.
On July 15, 2016, Gold Fields and the other respondents each filed petitions to the Supreme Court of Appeal for leave to appeal against the certification of the two separate classes for silicosis and tuberculosis. In an attempt to shorten any delay due to an appeal process, it is permissible to request that the appeals be dealt with on an expedited basis. On September 21, 2016, the Supreme Court of Appeal granted the respondents leave to appeal against all aspects of the class certification judgment of the South Gauteng High Court delivered in May 2016. On February 28, 2017, Gold Fields filed heads of argument with the Supreme Court of Appeal in respect of its appeal against the class certification judgment of the South Gauteng High Court delivered in May.
In addition to the consolidated action,application, an individual action has been instituted against Gold Fields and one other mining groupcompany in terms of which the plaintiff claims R25.0 million (US$2.2(U.S.$2 million) in damages (and interest on that amount at 15.5% from May 20132014 to the date of payment and costs) arising from his alleged contraction of silicosis which he claims was caused by the defendants. Gold Fields has defendedentered an appearance to defend the individual action and has pleaded to the claim. In January 2014, the plaintiff delivered an application to join three other mining companies (including the owners of Gold Fields’ South Deep operation) to the action. The joinder was effected and Gold Fields delivered a revised plea on behalf of the joined Gold Fields defendants. The plaintiff has since applied to amend his particulars of claim which amendment was successfully opposed by Gold Fields. While the plaintiff enrolled the trial for hearing on May 23, 2016, the matter has been removed from the trial roll. Gold Fields is proceeding with trial preparation in the normal course.
The ultimate outcome of these matters cannot presently be determined and, accordingly, no adjustment for any effects on the Company that may result from these actions, if any, has been made in the consolidated financial statements.
Occupational lung disease
Gold Fields, Anglo American South Africa, AngloGold Ashanti, Harmony Gold and Sibanye Gold announcedThe Occupational Lung Disease Working Group, or the Working Group, was formed in Novemberfiscal 2014 that they had formed an industry working group to address issues relating to compensation and medical care for occupational lung disease in the South African gold mining industry. The companies have begun to engage allindustry, had extensive engagements with a wide range of stakeholders on these matters,in fiscal 2016, including government, organized labour,labor, other mining companies and legal representatives of claimants who have filed legal suits against the companies.
The Working Group, made up of African Rainbow Minerals, Anglo American SA, AngloGold Ashanti, Gold Fields, Harmony, and Sibanye Gold, remains of the view that achieving a comprehensive settlement which is both fair to past, present and future employees and sustainable for the sector, is preferable to protracted litigation.
The members of Working Group are among respondent companies in a number of lawsuits related to occupational lung disease, including the class action referred to above. These legal proceedingscompanies do not believe that they are being defended.liable in respect of the claims brought, and they are defending these. The companies do, however, believe that they should work together to seek a solution to this South African mining industry legacy issue. The Working
Essentially,Group will continue with its efforts—which have been ongoing for more than two years—to find common ground with all stakeholders, including government, labor and the companies are seeking a comprehensive solution which deals both with legacy compensation issues and futureclaimants’ legal frameworks which are fair to employees, while also ensuring the future sustainability of companies in the industry.
Regulatory Investigations
Gold Fields was informed in September 2013 that it is the subject of a regulatory investigation in the United States by the SEC relating to the BEE transaction associated with the granting of the mining license for its South Deep operation. In South Africa, the Directorate for Priority Crime Investigation, or the Hawks, has informed the Company that it has started a preliminary investigation into the BEE transaction to determine whether or not to proceed to a formal investigation, following a complaint by the Democratic Alliance, a political party in South Africa. At this stage, it is not possible to determine what effect the ultimate outcome of these investigations, any regulatory findings and any related developments may have on the Company. Accordingly, no adjustment for any effects on the Company that may result from the outcome of this investigation, if any, has been made in the consolidated financial statements.representatives.
Ngadju Native Title Claim
Gold Fields’ subsidiary, St Ives Gold Mining Company Pty Ltd, or St. Ives Global, which ownsOn March 29, 2016, the St Ives Gold Mine in Western Australia, had been joined as a respondent, alongside the State of Western Australia, or the State, and another mining company, in proceedings commenced in the FederalFull Court of Australia by the Ngadju People, seeking determination of its claim for native title over a parcel of land in the Goldfields region of Western Australia.
“Native title” refers to the rights and interests held by Aboriginal people in Australia under traditional laws and customs, in relation to land and water to which those Aboriginal people have a connection, that are recognised under the common law of Australia.
In the course of these proceedings, the Ngadju People alleged that a number of mining tenements held by St. Ives (being tenements that were originally granted to WMC Resources by the State under the terms of a State Agreement, and subsequently acquired in 2001 by St. Ives) are invalid to the extent that they affect the Ngadju People’s native title rights. The process for obtaining the re-grant of those tenements (in 2014) under the provisions of the Mining Act 1978 (WA) was carefully considered and followed by Gold Fields at the time, acting in conjunction with the State.
In a decision handed down by a single judge of the Federal Court of Australia onoverturned a July 3, 2014 the court accepted the submissions of the Ngadju PeopleFederal Court decision that there-grant of thesecertain tenements to Gold Fields Australia’s St. Ives mine in 2004 by the State was not compliant with the correct processes in the Native Title Act 1993 (Cth), and as such, the re-granted tenements are invalid to the extent that they affect native title. This means that to the extent that there is inconsistency between the rights of St. Ives as tenement holder and the Ngadju People’s native title rights (such as the right to conduct ceremonies or to hunt), the rights of the Ngadju People will prevail. This decision was confirmed by a Determination of native title made by the Federal Court in November 2014.
Act. The practical effect of such a finding has never been tested under Australian law. However, it may mean the Ngadju People could seek to prevent the further exercise of rights by St. Ives on the tenements in a manner that is inconsistent with the free exercise of their native title rights and/or seek damages for historical interference with their native title rights. The fact that the Ngadju People have only non-exclusive native title rights (and not the higher category of exclusive possession rights) may reduce the extent to which the two sets of rights are found to be inconsistent.
Importantly, the decision does not affect the grant of mining tenure to St. Ives under the Mining Act 1978 (WA). St. Ives still validly holds all of the tenements which underpin its mining operations at St. Ives, and as these proceedings are not an action against St. Ives for failure to take certain steps, the court has no ability to impose any sort of penalty against St. Ives.
Gold Fields remains strongly of the view that it has at all times complied with its obligations under the Native Title Act 1993 (Cth) in respect of its dealings with these tenements. Gold Fields, together with another major resources company, filed an appeal in respect of aspects of the Federal Court’s decision. The appeal (before the Full Court of the Federal Court of Australia (three Judges)) has been listedconfirmed that St. Ives’re-granted tenements are valid for the purpose of the Native Title Act, and that while St. Ives’ rights as tenement holder and the Ngadju people’s native title rights shall coexist, St. Ives’ rights shall prevail should there be any inconsistencies. Following the decision of the Full Federal Court in favor of St. Ives, the Ngadju group applied for permission to take place in May 2015. Gold Fields retains the ability to seek leave to further appeal that decision to the High Court of Australia, if necessary. Gold Fields will also take all steps necessary to ensureAustralia. On October 14, 2016, that request was declined by the High Court, leaving no other opportunity for review or appeal. St. Ives operations are unaffected whilst this matter is resolved throughcontinues to engage with the relevant court processes.
Accordingly, no adjustment for any effects on the Company that may result from the proceedings, if any, has been madeNgadju group in the consolidated financial statements.relation to routine heritage surveys and other matters.
South Deep tax dispute
During the fiscal quarter ended September 2014 quarter, the South African Revenue Service, or SARS,SARS. issued a Finalization of Audit Letter, or the Audit Letter, stating that SARS hadhas restated aGFIJVH’s additional capital allowance balance attributable to GFIJVH in respect of its joint ownership and operation of the South Deep mine, as reflected on its 2011 tax return forfrom R2,292.0 million (U.S.$151.8 million) to nil. The tax effect of this amount is R687.6 million (U.S.$49.0 million), that being referred to above as the year ended December 31, 2011, from U.S.$1,108.8 million to nil, which represents an“additional capital allowance”.
The additional capital allowance was claimed by GFIJVH pursuant toin terms of section 36(11)(c) of the South African Income Tax Act. ThisAct, 1962. The additional capital allowance only applies to unredeemed capital expenditure, and provides an incentive for new mining development by allowingand only applies to unredeemed capital expenditure. The additional capital allowance allows a 12% capital allowance over and above actual capital expenditure incurred on developing a deep level gold mine, as well as a further annual 12% allowance on the mine’s unredeemed capital expenditure balance brought forward, until the year that the mine starts earning mining taxable income (i.e., when all tax losses and unredeemed capital expenditure have been fully utilized).
In order to qualify for the additional capital allowance, South Deep must qualify as a “post-1990 gold mine,” which ismine” as defined in the South African Income Tax Act, 1962. A “post-1990 gold mine”, according to the South African Income Tax Act, 1962, is defined as “a gold mine which, in the opinion of the Director-General: Mineral and Energy Affairs, is an independent workable proposition and in respect of which a mining authorization for gold mining was issued for the first time after 14 March 1990”.
During 1999, the Director General:Director-General: Minerals and Energy Affairs, or DME, and SARS confirmed, in writing, that GFIJVH is a “post-1990 gold mine” as defined, and therefore qualified for the additional capital allowance. Relying on these representations, GFIJVH subsequently filed its tax returns on this basis, as was confirmed by the DME and SARS. However, in
In the Audit Letter, SARS stated that both the DME and SARS had erred in issuing their previousthe confirmations as mentioned above and that GFIJVH does not qualify as a “post-1990 gold mine” and therefore does not qualify for the additional capital allowance.
The GroupAt December 31, 2016, South Deep’s gross deductible temporary differences amounted to U.S.$1,585.3 million (R22,242.2 million), resulting in a deferred tax asset balance of U.S.$475.6 million (R6,672.7 million). This amount is included in the consolidated deferred tax asset of U.S.$48.7 million on Gold Fields’ statement of financial position. South Deep’s gross deductible temporary differences comprises unredeemed capital expenditure balances of U.S.$633.2 million (R8,884.0 million) (tax effect: U.S.$190.0 million (R2,665.2 million)) at GFIJVH and U.S.$606.4 million (R8,508.0 million) (tax effect: U.S.$181.9 million (R2,552.4 million)) at GFO, a capital allowance balance (additional capital allowance) of
U.S.$163.4 million (R2,292.0 million) (tax effect: U.S.$49.0 million (R687.6 million)) at GFIJVH and an assessed loss balance of U.S.$182.3 million (R2,558.2 million) (tax effect: U.S.$54.7 million (R767.5 million)) at GFO.
Gold Fields has taken legal advice on the matter and believeswas advised by external Senior Counsel that SARS should not be allowed to disallow the claiming of the additional capital allowance. GFIJVH has in the meantime not only formally lodged an objection toappealed against the SARS’ disallowance,position taken by SARS, but also filed an application in the High Court and will vigorously defend its position. A trial date in the Tax Court has been set for October 2017.
Other than the proceedings and investigations described above, Gold Fields is not a party to any material legal or arbitration proceedings, nor is any of its property the subject of pending material legal proceedings.
Regulatory investigation
See note 35 to the consolidated financial statements included elsewhere in this annual report.
Glossary of Mining Terms
The following explanations are not intended as technical definitions, but rather are intended to assist the reader in understanding some of the terms used in this annual report.
“Adjusted EBITDA” means net operating profit before depreciation and amortization, adjusted for exploration expenses and certain other costs. The definition of adjusted EBITDA is as defined in the U.S.$ 1,290 million term loan and revolving credit facilities agreement. Refer note 39 to the consolidated financial statements for the calculation of adjusted EBITDA.
“All-in costs” meansall-in sustaining costs plus additional costs relating to growth, includingnon-sustaining capital expenditure and exploration, evaluation and feasibility costs not associated with current operations.
“All-in sustaining costs” means operating costs excluding amortization and depreciation, plus all costs not included therein relating to sustaining current production including sustaining capital expenditure.
“Backfill” means material, generally sourced from tailings or waste rock, used to refillmined-out areas to increaseimprove and maintain ground stability, minimize waste dilution and maximize extraction of the long-term stability of mines and mitigateore body, as well as typically mitigating the effects of seismicity.
“Brownfield” means exploration conducted in areas where mineral deposits have already previously been discovered and is also termed near mine.
“Carbon in leach”, or “CIL” means a process similar to CIP (described below) except that the ore slurries are not leached with cyanide prior to carbon loading. Instead, thecyanide leaching and precious metals adsorption onto the activated carbon loading occur simultaneously.
“Carbon in pulp”, or “CIP” means a common process used to extract gold from cyanide leach slurries. The process consists of carbon granules suspended in the slurry and flowing counter-current to the process slurry in multiple-staged agitated tanks. The process slurry, which has been leached with cyanide prior to the CIP process, contains soluble gold. The soluble gold is absorbed onto the carbon granules which arethat is subsequently separated from the slurry by screening. The gold is then recovered from the carbon by electrowinning onto steel wool cathodes or by a similar process.
“Cleaning” means the process of removing broken rock from a mine.
“Comminution” means the breaking, crushing or grinding of ore by mechanical means.
“Cut-off grade” means the lowest grade whichof mineralized material considered economic and is used in the calculation of the ore reserves in a given deposit; it distinguishes the material within the ore body that is to be extracted, treated and treatedsold from the remainder.remaining material.
“Decline” or “incline” means a sloping underground opening or ramp for machine access from the surface to an underground mine or from level to level in aan underground mine. Declines and inclines are often driven in a spiral to access different elevations in the mine.
“Depletion” means the decrease in quantity of ore in a deposit or property resulting from extraction or production.
“Development” means activities (including shaft sinking andon-reef andoff-reef tunneling) required to preparegain access to and to establish infrastructure in preparation for mining activities and to maintain a planned production level and those costs incurred to enable the conversion of mineralization to reserves.level.
“Dilution” means the mixing of waste rock, and potentially mineralized material below thecut-off grade, with the ore, resulting in a decrease in the overall grade.
“Dissolution” means the process whereby a metal is dissolved and becomes amenable to separation from the gangue material.
“EBITDA” means operating profit before interest, royalties, taxes, depreciation and amortization.
“Electrowinning” means the process of removing goldmineral from solution by the action of electric currents.currents, known as electrolysis.
“Elution” means removal of the gold from the activated carbon.carbon by washing with a solvent.
“Exploration” means activities associated with ascertaining the existence, location, extent or quality of mineralization, including economic and technical evaluations of mineralization.
“Flotation” means the process whereby certain chemicals are added to the material fed to the leach circuit in order to float the desired minerals to produce a concentrate of the mineral to be processed. This process can be carried out in column flotation cells.
“Free cash flow margin,, or FCF MarginMargin” means revenue less cash outflow divided by revenue expressed as a percentage. It is calculated as follows:
Revenue (gold only = revenue as per the income statement lessby-product revenue as per AIC) | ||||
Less: Cash outflow | ( | ) | ||
| ( | ) | ||
Adjusted for | ||||
Share-based payments (asnon-cash) | ||||
Long-term employee benefits | XX | |||
Exploration, feasibility and evaluation costs outside of existing operations | ||||
| ||||
| ( | ) | ||
Free cash flow | ||||
|
| |||
Free cash flow margin | % | |||
|
| |||
Gold sold |
“Gangue” means commercially valueless or waste material remaining after ore extraction from rock.
“Gold reserves” means the gold contained within proven and probable reserves on the basis of recoverable material (reported as mill delivered tonnes and head grade).
“Grade” means the quantity of metal per unit mass of ore expressed as a percentage or, for gold, as grams of gold per tonne of ore.
“Greenfield” means a potential mining or exploration site where mineral deposits are not already known to exist, and are of unknown quality.quantity and quality, typically located outside of current mining areas.
“Grinding” means reducing rock to the consistency of fine sand by crushing and abrading in a rotating steel grinding mill.
“Head grade” means the grade of the ore as delivered to the metallurgical plant.
“Heap leaching” means a relativelylow-cost technique for extracting metals from ore by percolating leaching solutions through heaps of crushed ore placed on impervious pads. Generally used onlow-grade ores.
“Hypogene” means ore or mineral deposits formed by ascending fluids withinoccurring deep below the earth.earth’s surface, which tend to form deposits of primary minerals, as opposed to supergene processes that occur at or near the surface, and tend to form secondary minerals.
“In situ” means within unbroken rock or still in the ground.
“Kriging” means ana geostatistical estimation technique used in the evaluation of ore reserves.
“Leaching” means dissolution of gold from the crushed and milled material, including reclaimed slime, for absorption and concentration onto the activated carbon.
“Level” means the workings orhorizontal tunnels of an underground mine which are onused to access the same horizontal plane.workings or ore body.
“Life of mine”, or “LoM” means the expected remaining years of production, based on production ratesschedules and ore reserves.
“London afternoon fixing price” means the afternoon session open fixing ofby the goldnew electronic London Bullion Market Association, or LBMA price-discovery process. The price which takes placecontinues to be set twice daily, inat 10:30 and 15:00 London and is set by a board comprising five financial institutions.time.
“Mark-to-market” means the current fair value of a derivative based on current market prices, or to calculate the current fair value of a derivative based on current market prices, as the case may be.
“Measures” means conversion factors from metric units to U.S. units are provided below.
Metric unit | U.S. equivalent | |||
1 tonne (1 t) | ||||
1 gram (1 g) | ||||
1 gram per tonne (1 g/t) | ||||
1 kilogram per tonne (1 kg/t) | ||||
1 kilometer (1 km) | ||||
1 meter (1 m) | ||||
1 centimeter (1 cm) | ||||
1 millimeter (1 mm) | ||||
1 hectare (1 ha) |
“Metallurgical plant” means a processing plant used to treat ore and extract the contained gold.minerals.
“Metallurgical recovery factor” means the proportion of metal in the ore delivered to the mill, that is recovered by the metallurgical process or processes.
“Metallurgy” means, in the context of this document, the science of extracting metals from ores and preparing them for sale.
“Mill delivered tonnes” means a quantity, expressed in tonnes, of ore delivered to the metallurgical plant.
“Milling”, or “mill” means the comminution of the ore, although the term has come to cover the broad range of machinery inside the treatment plant where the goldmineral is separated from the ore.
“Mine call factor” means the ratio, expressed as a percentage, of the specific product recoveredaccounted for at the mill (plus(including residue) to the specific product contained in an ore body calculated based on an operation’s measuring and valuation methods.
“Mineralization” means the presence of a target mineral in a mass of host rock.
“MPa” means a unit measurement of stress or pressure within the earth’s crust used to profile tectonic stress, which can impact ground stability and ground support requirements in underground mining.
“mSVNet cash flow” meansis defined as net cash flow from operations less the South Deep dividend, net capital expenditure (additions to property, plant and equipment less proceeds on disposal of property, plant and equipment), and environmental trust fund and rehabilitation payments, as per the consolidated statements of cash flows which is a unit measurementnon-IFRS measure. An investor should not consider this item in isolation or as an alternative to cash flow from operating activities, cash and cash equivalents or any other measure presented in accordance with IFRS. The definition for the calculation of ionizing radiation dose, usednet cash flow may vary significantly between companies, and by itself does not necessarily provide a basis for comparison with other companies. The following table sets out a reconciliation of Gold Fields’ “net cash flow from operations” in accordance with IFRS (refer to measure the health effectconsolidated statement of low levels of ionizing radiation on the human body.cash flows) to “net cash flows”.
Net cash flow from operations(1) | xx | |||
Less: | ||||
South Deep dividend(1) | xx | |||
Additions to property, plant and equipment(1) | xx | |||
Proceeds on disposal of property, plant and equipment(1) | xx | |||
Environmental and rehabilitation payments(1) | xx | |||
Net cash flow | xx | |||
Note:
| (1) | As per the consolidated statements of cash flows. |
“Net debt” means total borrowingborrowings less cash and cash equivalents both as calculated in accordance with IFRS.(refer note 39 to the consolidated financial statements).
“Net operating costs” means operating costs including gold inventory change but excluding amortization and depreciation (refer note 2 to the consolidated financial statements).
“Net smelter return”, or “NSR” means the volume of refined goldmineral sold during the relevant period multiplied by the average spot goldmineral price and the average exchange rate for the period, less refining, transport and insurance costs.
“Normalized earnings"” means net earnings,profit for the year, excluding foreign exchange gains and losses, financial instruments gains and losses andnon-recurring items (impairment of investments and assets, impairment of stockpiles and consumables, restructuring costs and profit and loss on disposal of assets), net of tax, all as calculated in accordance with IFRS.tax.
“Open pit” means mining in which the ore is extracted from a surface pit. The geometry of the pit may vary with the characteristics of the ore body.
“Operating costs excluding amortization and depreciation” means Gold Fields’ operating costs excluding amortization and depreciation, as calculated in accordance with IFRS (as included in the geographical and segment information included in Note 26 to the consolidated financial statements).
“Ore” means a mixture of material containing minerals from which at least one of the minerals can be mined and processed at an economic profit.
“Ore body” means a well defined mass of material of sufficient mineral content to make extraction economically viable.
“Ore grade” means the average amount of goldmineral contained in a tonne of gold-bearingmineral-bearing ore expressed in grams per tonne, or percent per tonne.
“Ore reserves”, or “reserves” means that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination.
“Ounce” means one troy ounce, which equals 31.1035 grams.
“Overburden” means the soil and rock that must be removed in order to expose an ore deposit.body.
“Paste filling” means a technique whereby cemented paste fill is placed in mined out voids to improve and maintain ground stability, minimize waste dilution and maximize extraction of the ore.
“Porphyry” means an igneous rock of any composition that contains larger, well-formed mineral grains in a finer-grained groundmass.
“Probable reserves” means reserves for which quantity and grade and/or quality are computed from information similar to that used for provenProven reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for provenProven reserves, is high enough to assume continuity between points of observation.
“Production stockpile” means the selective accumulation of low grade materialunprocessed ore which is actively managed as part of the current mining and processing operations.
“Prospect” means to investigate a site with insufficient data available on mineralization to determine if minerals are economically recoverable.
“Prospecting right” means permission to explore an area for minerals.
“Proven reserves” means reserves for which: (1) quantity is computed from dimensions revealed in outcrops, trenches, workings or boreholes; (2) grade and/or quality are computed from the results of detailed sampling; and (3) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established.
“Reef” means a gold-bearing sedimentary horizon, normally a conglomerate band, that may contain economic levels of gold.
“Refining” means the final stage of metal production in which final impurities are removed from the molten metal by introducing air and fluxes. The impurities are removed as gases or slag.
“Rehabilitation” means the process of restoring mined land to a condition approximating its original state.
“Rock dump” means the historical accumulation of waste or low grade material derived in the course of mining which iscould be processed in order to take advantage of spare processing capacity.
“Run of Mine”, or “RoM” meanswhen used with regard to grade is a loose term to describe the average grade of the ore of average grade.mined.
“Sampling” means taking small pieces of rock at intervals along exposed mineralization for assay (to determine the mineral content).
“Seismicity” means a sudden movement within a given volume of rock that radiates detectable seismic waves. The amplitude and frequency of seismic waves radiated from such a source depend, in general, on the strength and state of stress of the rock, the size of the source of seismic radiation, and the magnitude and the rate at which the rock moves during the fracturing process.
“Semi-autogenous grinding”, or “SAG mill”, means a piece of machinery used to crush and grind ore which uses a mixture of steel balls and the ore itself to achieve comminution. The mill is shaped like a cylinder causing the grinding media and the ore itself to impact upon the ore.
“Shaft” means a shaftvertical underground opening providing principal access to the underground workings for transporting personnel, equipment, supplies, ore and waste. A shaft is also used for ventilation and as an auxiliary exit. It may be equipped with a surface hoist system that lowers and raises conveyances for men, materials and ore in the shaft. A shaft generally has more than one conveyancing compartment.
“Slimes” means the finer fraction ofor tailings discharged from a processing plant after the valuable minerals have been recovered.
“Slurry” means a fluid comprising fine solids suspended in a solution (generally water containing additives).
“Smelting” means thermal processing whereby molten metalmineral is liberated from molten beneficiated ore or concentrate with impurities separating as lighter slag.
“Spot price” means the current price of a metal for immediate delivery.
“Stockpile” means a store of unprocessed ore.
“Stope” means the underground excavation within the ore body where the main goldmineral production takes place.
“Stratigraphic” means the study of rock layers (strata) and layering (stratification) and is primarily used in the study of sedimentary and layered volcanic rocks. Stratigraphic modeling is often important in profiling the regional and local geology that has played a controlling role in gold mineralization and ore body generation.
“Stripping” means the process of removing overburden to mine ore.expose the ore for mining.
“Sulfide” means a mineral characterized by the linkages of sulfur with a metal or semi-metal, such as pyrite (iron sulfide). Also a zone in which sulfide minerals occur.
“Supergene” means ores or ore minerals formed where descending surface water oxidizes the primary (hypogene) mineralized rock and redistributes the ore minerals, often concentrating them in zones. Supergene enrichment occurs at the base of the oxidized portion of the ore deposit.
“Tailings” means finely ground rock from which the bulk of valuable minerals have been extracted by milling.
“Tailings damstorage facility” or “TSF” means damsa typically earth-fill embankment dam used to storeby-products or dumps createdtailing from tailings or slimes.mining operations after separating the ore from the gangue.
“Tonne” means one tonne is equal to 1,000 kilograms (also known as a “metric” tonne).
“Tonnage” means quantities where the tonne is an appropriate unit of measure. Typically used to measure reserves of gold-bearingmineral-bearing material in situ or quantities of ore and waste material mined, transported or milled.
“Waste” means rock mined with an insufficient goldmineral content to justify processing.
“Yield” means the actual grade of ore realized after the mining and treatment process.
ITEM 4A: UNRESOLVED STAFF COMMENTS
Not applicable.
ITEM 5: OPERATING AND FINANCIAL REVIEW AND PROSPECTS
You should read the following discussion and analysis together with Gold Fields’ consolidated financial statements, including the notes, appearing elsewhere in this annual report. Certain information contained in the discussion and analysis set forth below and elsewhere in this annual report includes forward-looking statements that involve risks and uncertainties. See “Forward-looking Statements” and “Risk Factors” for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in this annual report.
Management’s Discussion And Analysis Of The Financial Statements
The following management’s discussion and analysis of the financial statements should be read together with the Gold Fields’ consolidated financial statements, including the notes accompanying these financial statements.
Overview
Gold Fields is a significant producer of gold and a major holder of gold reserves and resources in South Africa, Ghana, Australia and Peru. In Peru, Gold Fields also produces copper. Gold Fields is primarily involved in underground and surface gold and surface copper mining and related activities, including exploration, extraction, processing and smelting. Gold Fields also has an interest in a platinum group metal (and associated by-product metals) exploration project in Finland.
On the Spin-off date, Gold Fields completed the Spin-off. See “—The Spin-off” below.
Prior to the Spin-off, approximately half of Gold Fields’ operations, based on gold production, were located in South Africa. Following the Spin-off, inIn fiscal 2014,2016, the South African, West African, AustralasianGhanaian, Peruvian and AmericanAustralian operations produced 9%13%, 32%, 45%12% and 14%43% of its total gold production, respectively.
Gold Fields’ remaining South African operation is South Deep. Gold Fields also owns the St. Ives, Agnew/Lawlers, Granny Smith and Darlot gold mining operations in Australia and has a 90.0% interest in each of the Tarkwa gold mine and the Damang gold mine in Ghana. Gold Fields also owns a 99.5% interest in the Cerro Corona mine in Peru. During February 2017, Gold Fields announced its intention to dispose of the Darlot operation.
On October 1, 2013,December 13, 2016, Gold Fields purchased 50% of the Gruyere Gold Project and entered into a 50:50 unincorporated joint venture with Gold Road for the development and operation of the Gruyere Gold Project in Western Australia, which comprises the Gruyere gold deposit as well as additional resources including Central Bore and Attila/Alaric (Gruyere). Gold Fields acquired 50% interest in the Yilgarn South Assets from BarrickGruyere Gold Corporation, or Barrick. See “InformationProject for a total purchase consideration of A$350 million (U.S.$259 million) payable in cash and a 1.5% royalty on Gold Fields’ share of production after total mine production exceeds two million ounces. The cash consideration was split with A$250 million (U.S.$185 million) payable on the Company—Gold Fields’ Mining Operations—Australasia Operations”. In addition, Gold Fields has goldeffective date and other precious metal exploration activities and interests in Africa, Eurasia, Australasia and the Americas.A$100 million (U.S.$74 million) payable according to an agreed construction cash call schedule. Transaction costs of A$19 million (U.S.$13 million) were incurred.
As of December 31, 2014,2016, Gold Fields reported attributable proven and probable gold and copper reserves of approximately 48.1 million ounces of gold and 620454 million pounds of copper, as compared to the 48.646.1 million ounces of gold and 708532 million pounds of copper, reported as of December 31, 2013.2015.
Total gold production was 2.2942.219 million ounces of gold equivalents in fiscal 2014, 2.2192016, 2.146 million ounces of which were attributable to Gold Fields with the remainder attributable to non-controlling shareholders in Gold Fields Ghana Abosso and La Cima, relating to the Tarkwa, Damang and Cerro Corona mining operations, respectively.Peru. Total gold production was 2.1042.236 million ounces of gold equivalents in fiscal 2013, 2.0222015, 2.159 million ounces of which were attributable to Gold Fields with the remainder attributable tonon-controlling shareholders in Gold Fields Ghana Abosso and La Cima.Peru.
InAt South Deep in South Africa, production increased by 47% from 6,160 kilograms (198,000 ounces) in fiscal 2014,2015 to 9,032 kilograms (290,400 ounces) in fiscal 2016 due to increased volumes and grades.
At the Ghanaian operations, gold production decreased by 5% from the South African operation753,900 ounces in fiscal 2015 to 715,800 ounces in fiscal 2016. At Tarkwa, gold production decreased 34%by 3% from 586,100 ounces to 568,100 ounces mainly due to Section 54 work stoppage orders related to three fatalities which occurred in May and July 2014, as well as self-imposed safety stoppages to remediate ground support in the main mining areas across the mine.
Production at the international operations increased by 16%. In the West African region, Tarkwa’slower yield. At Damang, gold production decreased by 12% from 167,800 ounces to 147,700 ounces mainly due to cessation of crushing operationslower yield.
Gold equivalent production at the heap leach facilities. Damang’s production was 16% higher due to higher head grade mined and higher mill throughput. In Australasia, St. Ives’ productionCerro Corona decreased by 10%9% from 295,600 ounces in fiscal 2015 to 270,200 ounces in fiscal 2016 mainly due to the lower copper to gold price ratio as well as lower gold head grades treated and lower gold recovery.
At the Australian operations, gold production decreased by 5% from 988,000 ounces in fiscal 2015 to 942,400 ounces in fiscal 2016. At St. Ives, gold production decreased by 2% from 371,900 ounces to 362,900 ounces due to lower grade of ore milled following the closure of Argothe Cave Rocks and lowerAthena underground head grade.mines and transition to a predominantly open pit operation. At Agnew/Lawlers, gold production was 26% higherdecreased by 3% from 236,600 ounces to 229,300 ounces mainly due to the inclusion of Lawlers for the full yeara reduction in 2014 as opposedore processed. At Darlot, gold production decreased by 15% from 78,400 ounces to only one quarter in 2013.66,400 ounces due to lower grades mined. At Granny Smith, gold production increaseddecreased by 425% in 2014 and, at Darlot, production
increased by 300% in 2014, both, Granny Smith and Darlot,6% from 301,100 ounces to 283,800 ounces due to being included for the full year in 2014 as opposed to only one quarter in 2013. In Peru, Cerro Corona’s production increased 3% mainly due tolower grades mined and an increase in stockpiled ore processed and higher copper grades.
Disposal of Chucapaca
On August 19, 2014, Gold Fields sold its 51% stake in Canteras del Hallazgo S.A.C (CDH), the company that manages the Chucapaca exploration project in southern Peru, to Compañías a de Minas Buenaventura S.A.A. (Buenaventura). Buenaventura is Peru’s largest publicly traded, precious metals mining company and previously owned 49% in CDH. The consideration received was US$81.0 million in cash and a 1.5% net smelter royalty on future sales of gold, copper and silver produced in the current Chucapaca concession. No value was attributed to the 1.5% net smelter royalty in calculating the sales price due to the uncertainty associated with realizing any future royalties given that the Chucapaca project is still in the exploration phase. This sale resulted in a profit of US$72.8 million being recognized in profit on disposal of investments and subsidiaries on the consolidated statement of operations.
Disposal of Yanfolila
On July 2, 2014, Gold Fields sold its 85% interest in the Yanfolila exploration project in Mali to London-listed Hummingbird for US$21.1 million in the form of 21,258,503 Hummingbird shares (representing a 25.1% holding), resulting in Hummingbird being accounted for as an equity accounted investee. This sale resulted in a profit of US$5.1 million being recognized in profit on disposal of investments and subsidiaries on the consolidated statement of operations.
Yilgarn South assets acquisition
On October 1, 2013, Gold Fields completed the acquisitionconsequence of the Yilgarn South assets from Barrick. Gold Fields acquired the assets for a total net considerationtiming of U.S.$262.0 million after adjustments for working capital and employee entitlements. In accordance with the sale and purchase agreement, Gold Fields elected to satisfy the consideration by delivering 28.7 million of its common shares (which was based on the five-day volume weighted average price, or VWAP, for the ADR’s trading on the NYSE prior to closing). The balance of U.S.$135.0 million was paid from cash resources held by Gold Fields in Australia.December milling campaign.
The Spin-off
On the Spin-off date, being February 18, 2013, Gold Fields completed the Spin-off. The Spin-off was achieved by way of Gold Fields making a distribution on a pro rata basis of one Sibanye Gold ordinary share for every one Gold Fields share (whether held in the form of shares, ADRs or international depositary receipts) to Gold Fields shareholders, registered as such in Gold Fields’ register at close of business on February 15, 2013 in terms of section 46 of the South African Companies Act and section 46 of the South African Income Tax Act. The Board of Gold Fields passed the resolution necessary to implement the Spin-off on December 12, 2012. Sibanye Gold shares listed on the JSE and on the NYSE on February 11, 2013.
Prior to the Spin-off, Gold Fields provided purchasing, corporate communications, human resources and benefits management, treasury and finance, investor relations, internal audit, legal and tax advice, compliance regarding internal controls and information technology functions to Sibanye Gold.
Following the Spin-off, Gold Fields continued to provide some of these services to Sibanye Gold and Sibanye Gold continued to provide some services to Gold Fields on a transitional basis for a period of up to one year, which ended in February 2014, pursuant to the Transitional Services Agreement.
The financial results of Sibanye Gold, which include the KDC and Beatrix mines, were presented as discontinued operations in the consolidated financial statements for fiscal years 2013 and 2012. The discussion of financial results of Gold Fields in this Operating and Financial Review and Prospects relates to continuing operations only unless otherwise stated.
Revenues
Substantially all of Gold Fields’ revenues are derived from the sale of gold and copper. As a result, Gold Fields’ revenues are directly related to the prices of gold and copper. Historically, the prices of gold and copper have fluctuated widely. The gold and copper prices are affected by numerous factors over which Gold Fields does not have control. See “Risk Factors—Changes in the market price for gold, and to a lesser extent copper, which in the past have fluctuated widely, affect the profitability of Gold Fields’ operations and the cash flows generated by those operations.” The volatility of gold and copper prices is illustrated in the following tables, which show the annual high, low and average of the London afternoon fixing price of gold and the London Metal ExchangeLME cash settlement price for copper in U.S. dollars for the past 12 calendar years and to date in calendar year 2015:(2005 – 2016):
| Price per ounce(1) | Price per ounce(1) | |||||||||||||||||||||||
| Gold | High | Low | Average | High | Low | Average | ||||||||||||||||||
| ($/oz) | (U.S.$/oz) | |||||||||||||||||||||||
2003 | 416 | 320 | 363 | |||||||||||||||||||||
2004 | 454 | 375 | 409 | |||||||||||||||||||||
2005 | 537 | 411 | 445 | 537 | 411 | 445 | ||||||||||||||||||
2006 | 725 | 525 | 604 | 725 | 525 | 604 | ||||||||||||||||||
2007 | 834 | 607 | 687 | 834 | 607 | 687 | ||||||||||||||||||
2008 | 1,011 | 713 | 872 | 1,011 | 713 | 872 | ||||||||||||||||||
2009 | 1,213 | 810 | 972 | 1,213 | 810 | 972 | ||||||||||||||||||
2010 | 1,421 | 1,058 | 1,224 | 1,421 | 1,058 | 1,224 | ||||||||||||||||||
2011 | 1,895 | 1,319 | 1,571 | 1,895 | 1,319 | 1,571 | ||||||||||||||||||
2012 | 1,792 | 1,540 | 1,669 | 1,792 | 1,540 | 1,669 | ||||||||||||||||||
2013 | 1,694 | 1,192 | 1,409 | 1,694 | 1,192 | 1,409 | ||||||||||||||||||
2014 | 1,385 | 1,142 | 1,266 | 1,385 | 1,142 | 1,266 | ||||||||||||||||||
2015 (through April 7, 2015) | 1,296 | 1,147 | 1,218 | |||||||||||||||||||||
2015 | 1,296 | 1,060 | 1,167 | |||||||||||||||||||||
2016 | 1,355 | 1,077 | 1,250 | |||||||||||||||||||||
Source:I-Net
Note:
| (1) | Rounded to the nearest U.S. dollar. |
On April 3, 2017, the London afternoon fixing price of gold was U.S.$1,247.
| Price per tonne(1) | ||||||||||||
Copper | High | Low | Average | |||||||||
| (U.S.$/t) | ||||||||||||
2005 | 4,650 | 3,072 | 3,687 | |||||||||
2006 | 8,788 | 4,537 | 6,728 | |||||||||
2007 | 8,301 | 5,226 | 7,128 | |||||||||
2008 | 8,985 | 2,770 | 6,952 | |||||||||
2009 | 7,346 | 3,051 | 5,164 | |||||||||
2010 | 9,740 | 6,091 | 7,539 | |||||||||
2011 | 9,986 | 7,062 | 8,836 | |||||||||
2012 | 8,658 | 7,252 | 7,951 | |||||||||
2013 | 8,243 | 6,638 | 7,324 | |||||||||
2014 | 7,440 | 6,306 | 6,861 | |||||||||
2015 | 6,401 | 4,347 | 5,376 | |||||||||
2016 | 5,936 | 4,311 | 4,863 | |||||||||
Source:I-Net
Note:
| (1) | Rounded to the nearest U.S. dollar. |
On April 7, 2015, the London afternoon fixing price of gold was U.S.$1,211 per ounce.
| Price per tonne(1) | ||||||||||||
| Copper | High | Low | Average | |||||||||
| ($/t) | ||||||||||||
2003 | 2,321 | 1,545 | 1,780 | |||||||||
2004 | 3,287 | 2,337 | 2,867 | |||||||||
2005 | 4,650 | 3,072 | 3,687 | |||||||||
2006 | 8,788 | 4,537 | 6,728 | |||||||||
2007 | 8,301 | 5,226 | 7,128 | |||||||||
2008 | 8,985 | 2,770 | 6,952 | |||||||||
2009 | 7,346 | 3,051 | 5,164 | |||||||||
2010 | 9,740 | 6,091 | 7,539 | |||||||||
2011 | 9,986 | 7,062 | 8,836 | |||||||||
2012 | 8,658 | 7,252 | 7,951 | |||||||||
2013 | 8,243 | 6,638 | 7,324 | |||||||||
2014 | 7,440 | 6,306 | 6,861 | |||||||||
2015 (through April 7, 2015) | 6,309 | 5,391 | 5,827 | |||||||||
Source: I-Net
Note:
On April 7, 2015,3, 2017, the LME cash settlement price for copper was U.S.$6,041 per 5,783/tonne.
As a general rule, Gold Fields sells the gold it produces at market prices to obtain the maximum benefit from prevailing gold prices and does not enter into hedging arrangements such as forward sales or derivatives
which establish a price in advance for the sale of its future gold production. Hedges can be undertaken in one or more of the following circumstances: to protect cash flows at times of significant capital expenditures;expenditures, for specific debt servicing requirements;requirements and to safeguard the viability of higher cost operations. AtDuring 2016 and at December 31, 2014,2016, Gold Fields had no outstanding hedges. See “Quantitative and Qualitative Disclosures About Market Risk—Commodity Price Sensitivity”.commodity hedging arrangements in place. Significant changes in the prices of gold and copper over a sustained period of time may lead Gold Fields to increase or decrease its production in the near-term, which could have a material impact on Gold Fields’ revenues.
Sales of copper concentrate are “provisionally priced”—that is, the selling price is subject to final adjustment at the end of a period normally ranging from 30 to 90 days after delivery to the customer, based on market prices at the relevant quotation points stipulated in the contract.
Revenue on provisionally priced copper concentrate sales is recorded on the date of shipment, net of refining and treatment charges, using the forward London Metal ExchangeLME price to the estimated final pricing date, adjusted for the specific terms of the agreements. Variations between the price used to recognize revenue and the actual final price received can be caused by changes in prevailing copper and gold prices and result in an embedded derivative. The host contract is the receivable from the sale of copper concentrate at the forward London Metal ExchangeLME price at the time of sale. The embedded derivative, which does not qualify for hedge accounting, ismarked-to-market each period until final settlement occurs, with changes in fair value classified as provisional price adjustments and included as a component of revenue while the contract itself is recorded in accounts receivable.
Gold Fields’ Realized Gold and Copper Prices
The following table sets out the average, the high and the low London afternoon fixing price per ounce of gold and Gold Fields’ average U.S. dollar realized gold price during the past three fiscal years. Gold Fields’ average realized gold price per equivalent ounce is calculated using the actual price per ounce of gold received on gold sold and the actual amount of revenue received on sales of copper, expressed in terms of the price per gold equivalent ounce. For a description of how gold equivalent ounces are determined, see “Defined Terms and Conventions.”
| Fiscal | ||||||||||||||||||||||||
| Realized Gold Price(1) | 2012 | 2013 | 2014 | 2016 | 2015 | 2014 | ||||||||||||||||||
| (U.S.$) | ||||||||||||||||||||||||
Average | 1,669 | 1,409 | 1,266 | 1,250 | 1,167 | 1,266 | ||||||||||||||||||
High | 1,792 | 1,694 | 1,385 | 1,355 | 1,296 | 1,385 | ||||||||||||||||||
Low | 1,540 | 1,192 | 1,142 | 1,077 | 1,060 | 1,142 | ||||||||||||||||||
Gold Fields’ average realized gold price(2) | 1,656 | (3) | 1,386 | 1,249 | 1,241 | 1,140 | 1,249 | |||||||||||||||||
Notes:
| (1) | Prices stated per ounce. |
| (2) | Gold Fields’ average realized gold price may differ from the average gold price due to the timing of its sales of gold within each year. |
The following table sets out the average, the high and the low London Metal ExchangeLME cash settlement price per tonne for copper and Gold Fields’ average U.S. dollar realized copper price for fiscal 2012, 20132016, fiscal 2015 and fiscal 2014.
| Fiscal | ||||||||||||
| Realized Copper Price(1) | 2012 | 2013 | 2014 | |||||||||
Average | 7,951 | 7,324 | 6,861 | |||||||||
High | 8,658 | 8,243 | 7,440 | |||||||||
Low | 7,252 | 6,638 | 6,306 | |||||||||
Gold Fields’ average realized copper price(2) | 7,322 | 6,575 | 6,827 | |||||||||
Realized Copper Price(1) Average High Low Gold Fields’ average realized copper price(2) 2016 2015 2014 (U.S.$) 4,863 5,376 6,861 5,936 6,401 7,440 4,311 4,347 6,306 4,913 4,787 6,827
Notes:
| (1) | Prices stated per |
| (2) | Gold Fields’ average realized copper price may differ from the average copper price due to the timing of its sales of copper within each year and is net of treatment and refining charges. |
Production
Gold Fields’ revenues are primarily driven by its production levels and the price it realizes on the sale of gold. Production levels are affected by a number of factors.factors, some of which are described below. Total managed production at Gold Fields’ continuing operations increaseddecreased from 2.102.24 million ounces in fiscal 20132015 to 2.292.22 million ounces in fiscal 2014, having decreased from 2.12 million ounces in fiscal 2012 to 2.10 million ounces in fiscal 2013. The increase in production between fiscal 2013 and fiscal 2014 was mainly due to the inclusion of a full year’s production from the Yilgarn South Assets in 2014 compared with only one quarter in 2013.2016.
Labor Impact
In recent years, Gold Fields has experienced greater union activity in some of the countries in which it operates, including the entry of rival unions, which has resulted in more frequent industrial disputes, including violent protests, intra-union violence and clashes with police authorities, and has impacted labor relations. In particular, in South Africa during the second half of fiscal 2012, a number of unions in the mining industry threatened to or went on strike for various reasons, including the renegotiation of wage agreements. These strikes impacted each of Gold Fields’ South African operations and caused work stoppages and significant production losses. In the third quarter of fiscal 2013, South Deep was affected by a three day wage related industrial action. The risk of widespread industrial action at South Deep is significantly diminished when compared with KDC and Beatrix (both spun-off as part of the Spin-off). South Deep has a relatively well educated labor force which is highlywith a component of skilled and receivessemi-skilled employees who receive remuneration packages that are competitive and highly incentivized. There is also no evidence to date that the Association of Mineworkers and Construction Union,AMCU, which has been responsible for extensive strike action at South Africa’s gold and platinum mines, has established a material presence at the South Deep mine. The NUM is the dominant union, providing relatively stable relations.
Further, on April 3, 2013, employees at Gold Fields’ Ghanaian operations engaged in a work stoppage that led to a halt in production, which resulted in a loss of approximately 21,700 ounces. On April 8, 2013, the strike ended and production resumed after management and the GMWU reached a settlement regarding the process for resolving certain issues raised by union petitions. There were no work stoppages as a result of strikes during fiscal 2014. See “Risk Factors—2016, 2015 and 2014 at all the Gold Fields’ operations and profits have been and may be adversely affected by union activity and new and existing labor laws”.Fields operations.
Health and Safety Impact
Gold Fields’ operations are also subject to various health and safety laws and regulations that impose various duties on Gold Fields’ mines while granting the authorities broad powers to, among other things, close or suspend operations at unsafe mines and order corrective action relating to health and safety matters. Additionally, it is Gold Fields’ policy to halt production at its operations when serious accidents occur in order to rectify dangerous situations and, if necessary, retrain workers. During fiscal 2014,2016, Gold Fields operations suffered two16 work safety related stoppages, onetwo related to the fatality in September and 14 related to unsafe conditions. During 2015, Gold Fields operations suffered three work safety related stoppages, two related to the fatalities in March and May and the secondthird one related to a safety-related ground support remediation. During fiscal 2013, Gold Fields operations suffered two safety stoppages.serious accident in April. In South Africa, Gold Fields has actively engaged with the DMR on the protocols applied to safety-related mine closures. Gold Fields conducted a tri-partite Health and Safety Summit in February 2012 along with government and labor organizations to promote health and safety in South Africa as part of a comprehensive effort to improve mine safety. See “Risk Factors—Gold Fields’ operations are subject to environmental and health and safety regulations, which could impose additional costs and compliance requirements and Gold Fields may face claims and liability for breaches, or alleged breaches, of such regulations and other applicable laws”.
Gold Fields expects that each of these factors will continue to impact production levels in the future.
Costs
Over the last three fiscal years, Gold Fields’ production costs consisted primarily of labor and contractor costs, power, water and consumable stores, which include explosives, timber, diesel fuel, other petroleum products and other consumables. Gold Fields expects that its total costs, particularly the input costs noted above, are likely to continue to increase in the near future driven by general economic trends, market dynamics and other regulatory changes.
In order to counter the effect of increasing costs in the mining industry, the Group rationalized and prioritized capital expenditure without undermining the sustainability of its operations and continued prioritization of cash generation over production volumes. The Group also undertook further reductions in labor costs. One of Gold Fields’ strategic priorities relates to the proactive management of costs with a view of achieving a 15% free cash flow marginFCF Margin at a U.S.$1,300 per ounce gold price.
In addition, in order to enable Gold Fields to increase its focus on providing shareholders with increased returns against the gold price, a portfolio review was concluded in fiscal 2013. It focused on cash flow growth (not just growth in ounces), and rigorous prioritization of capital expenditure and exploration spend based on expected risk-adjusted return on investment. The portfolio review resulted in, among other things, a reduction in unprofitable production at a number of mines including St. Ives, Damang and Tarkwa, as well as the planned or actual disposal of a number of the Group’s growth projects. See “Information on the Company—Planned Disposals”.
The discussions below concerns itself with continuing operations only.
The Gold Fields’ South African operation is labor intensive due to the use of deep level underground mining methods. As a result, over the last three fiscal years labor has represented on average approximately 41%34% of total production costsAIC at the South African operation. In fiscal 2016, labor represented 36% of AIC at the South African operation.
Negotiations withAt the South African mining unions in the year ended December 31, 2011 resulted in above-inflation wage increases of between 8.0% and 10.0%, depending upon the category of employee. Such negotiations historically have occurred every two years. However, the labor unrest in 2012 resulted in South African mining industry participants undergoing negotiations with workers and labor unions outside this period. These ad-hoc negotiations resulted in a settlement proposal made by a number of gold mining companies in South Africa, including Gold Fields. Through the Chamber of Mines, Gold Fields agreed with the trade unions to an earlier implementation of a number of provisions of the wage agreement reached in 2011 that were agreed to by all parties, culminating in an adjustment to wages in the relevant bargaining units of around 2.5% per annum, relating to changes to job grades and entry-level wages. In addition, gold mining companies, trade unions and government set up a working group for a wide-ranging review of working practices, productivity improvements and socio-economic conditions in the gold mining industry, which fed into the 2013 round of wage negotiations. See “Directors, Senior Management and Employees—Employees—Labor Relations—Wage Agreements—2011-2013 Agreement.” Despite the fact that returning employees will receive the benefit of this settlement, Gold Fields’ employees may continue to take industrial action to protest and seek redress in connection with a variety of issues, including pay and working conditions.
At thelatest wage talks with organized labor which commenced on March 19, 2015, Gold Fields offered anall-inclusive package which included a scarce skills allowance and a housing allowance. On April 10, 2015, the Group signed a three-year wage and other conditions of employment agreement with the NUM and UASA, the registered trade unions at South Deep. The agreement will resultresulted in average annual wage increases of 10% over the three-year period of the deal. The first increase took effect on April 1, 2015. See “Directors, Senior Management and Employees—Employees—Labor Relations—South Africa—Wage Agreements”.
At the South African operation, power and water made up on average approximately 10%9% of production costsAIC over the last three fiscal years. In fiscal 2014,2016, power and water costs made up 12%8% of the costs of productionAIC at the South African operation. Eskom applied to the NERSA for a 16% average tariff increase on each of April 1, 2013, 2014, 2015, 2016 and 2017, and NERSA granted Eskom an average increase of 8% for each of the years. Theyears, except for the actual legislated increase applicable to the South African mining industry effective April 1, 2014 was 8%. However, the increase on April 1, 2015 will bewhich was 12.69%, being 8% plus 4.69% due to the clawing back by Eskom of prudent costs fromthrough the “Regulatory Clearing Account”“regulatory clearing account” in respect of the three-year period from April 2010 to March 2013.2013 and an increase of 9.4% effective April 1, 2016. Effective April 1, 2017, NERSA approved a 2.2% electricity increase. It has also been reported that Eskom intends to request permission to raiseis not clear what increases will be granted in the power tariff by 25%, instead of 12.69%, in order to make up a cash shortfall. NERSA has given permission for Eskom to raise rates further but it is unclear what the actual rate increase will be.future.
Both Gold Fields GhanaTarkwa and AbossoDamang concluded tariff negotiations for fiscal 2014 and fiscal 2015 with their respective power suppliers (the state electricity supplier, the VRA, supplies power to Gold Fields GhanaTarkwa and the ECG provides power to Abosso)Damang). The ECG’s ratetariff for the period January 1, 2012 to December 31, 2013 was US$0.1809/kWh. ECG’s tariffs from January 1, 2014 to December 31, 2014 were $0.216/was U.S.$0.22/kWh, and from January 1, 2015 to December 31, 2015 is US$was U.S.$0.23/kWh and January 1, 2016 to December 31, 2016 was U.S.$0.23/kWh. Gold Fields GhanaFollowing negotiations with management, ECG agreed to decrease its tariffs to U.S.$0.20/kWh
from August 1, 2015 to January 31, 2016. Tarkwa has agreed tariffs with VRA with a base tariff of US$0.1674/U.S.$0.17/kWh with effect from January 1, 2015 using a tariff model which inputs actual variables (including the generation mix and input prices) of the previous quarter to determine the tariff for the current quarter. The average VRA tariff for 2014fiscal 2016 was US$0.1560/U.S.$0.16/kWh.
Although Gold Fields Ghana has concluded tariff negotiations with the VRA, there has been a delay in finalizing the draft PSPA with the VRA, mainly because of a delay in the implementation of the Energy Commission’s proposed WEM, which would impact provisions of the PSPA. The implementation of the WEM is presently on hold due to load shedding exercises being carried out in Ghana.
The VRA is now proposing an interim PSPA, subject to regulatory changes made by the Energy Commission when the WEM is fully rolled out. Gold Fields Ghana intends to discuss the interim PSPA with the VRA in April 2015.
In order to reduce their reliance on power supplied by VRA and ECG, Gold Fields GhanaTarkwa and Abosso haveDamang entered into a ten year PPA15 and eight-year power purchase agreement with independent power producer Genser. Under the power purchase agreement, Genser has agreed to commission a ‘clean coal’gas’ power generation facility at Tarkwa. The delivery of power up to 7MW is expected to begin in April 2015 from an alternative Genser plant while the new facility is being completed.Tarkwa and Damang. This power supply is expected to eventually replace all or a significant proportion of Tarkwa and Damang’s current supply from the VRA and ECG. Over the ten-year contract, the PPA could potentially save around 47% on the cost of power currently supplied by the VRAGenser has installed three 11MW turbines at Tarkwa and ECG. The PPA will, however, increase the company’s carbon emissions, by replacing electricity currently generated mainly through hydropowerfive 5.5MW turbines at Damang. These plants were commissioned in December 2016. An additional 11MW is planned to be installed at Tarkwa to meet full demand, with coal-generated electricity. See “Risk Factors—Power cost increases may adversely affect Gold Fields’ business, operating results and financial condition”.commissioning set for January 2018.
Contractor costs represented on average 10%6% of production costsAIC at Tarkwa over the last three fiscal years, and 9%6% of production costsAIC during fiscal 2014.2016. Over the last three fiscal years, contractor costs represented on average 14%17% of production costsAIC at Damang with 16%21% in fiscal 2014.2016. Following the restructuring concluded in the first half of 2016 in Damang, the direct labor cost has decreased as all mining and development will be performed by outside contractors. Direct labor costs represent on average a further 13%14% of production costsAIC at Tarkwa over the last three fiscal years and 17%15% in fiscal 2014.2016. Over the last three fiscal years, direct labor costs represented on average 14%15% at Damang and 20%12% in fiscal 2014.
At Cerro Corona, contractor cost represented on average 41% of production costs over the last three fiscal years and 37% of production costs during fiscal 2014. Direct labor costs represent on average a further 27% of production costs over the last three fiscal years and 26% in fiscal 2014.
At the Australasian operations, mining operations were conducted by outside contractors. However, at Agnew, owner mining at the underground operations commenced in May 2010, while development is still conducted by outside contractors. At St. Ives, owner mining commenced in July 2011 at the underground
operations and in July 2012 at the surface operations, but development is still conducted by contractors. Over the last three fiscal years, total contractor costs represented on average 34% at St. Ives and 36% at Agnew of production costs and direct labor costs represented on average a further 21% at St. Ives and 22% at Agnew of production costs. In fiscal 2014, contractors and direct labor cost represented 32% and 23% at St. Ives and 41% and 22% at Agnew/Lawlers, respectively. At the Yilgarn South Assets, mining operations and development are conducted through owner mining. Over the last two fiscal years, contractors and direct labor cost represented, on average, 25% and 34% at Granny Smith and 18% and 42% at Darlot. In fiscal 2014, contractors and direct labor cost represented 24% and 34% at Granny Smith and 18% and 42% at Darlot, respectively.2016.
Gold Fields’ operations in Ghana consume large quantities of diesel fuel for the running of their mining fleet. The cost of diesel fuel is directly related to the oil price and any movement in the oil price will have an impact on the cost of diesel fuel and therefore the cost of running the mining fleet. Over the last three fiscal years, fuel costs have represented approximately 15%11% of productionAIC at the Ghana operations. In fiscal 2016, fuel costs represented 10% of AIC at the Ghana operations. Fuel use is proportionately higher at the Ghana operations than at other operations because open pit mining in general requires more fuel usage than underground mining and because of the configuration of the Ghana operations, including the scale of certain of the pits and the distances between the pits and the plants.
At Cerro Corona, contractor cost represented on average 25% of AIC over the last three years and 25% of AIC during 2016. Direct labor costs represent on average a further 17% of AIC over the last three years and 20% in fiscal 2016. Power and water made up on average a further 5% of AIC over the last three years and 6% in fiscal 2016.
At the Australian operations, mining operations were historically conducted by outside contractors. However, at Agnew/Lawlers, owner mining at the underground operations commenced in May 2010, while development is still conducted by outside contractors. At St. Ives, owner mining commenced in July 2011 at the underground operations and in July 2012 at the surface operations, but development is still conducted by contractors. Over the last three years, total contractor costs represented on average 22% at St. Ives and 35% at Agnew/Lawlers of AIC and direct labor costs represented on average a further 16% at St. Ives and 16% at Agnew/Lawlers of AIC. In fiscal 2016, contractors and direct labor cost represented 24% and 16% at St. Ives and 41% and 18% at Agnew/Lawlers, respectively. Power and water made up, on average, a further 9% and 7% of AIC over the last three years and 9% and 6% of AIC in fiscal 2016 at St. Ives and Agnew/Lawlers, respectively. At the Granny Smith and Darlot operations, mining operations and development are conducted through owner mining. Over the last three years, contractors and direct labor cost represented, on average, 16% and 25% at Granny Smith and 16% and 35% at Darlot, respectively. In fiscal 2016, contractors and direct labor cost represented 16% and 26% at Granny Smith and 16% and 35% at Darlot, respectively. Power and water made up, on average, a further 9% and 8% of AIC over the last three years and 8% and 9% of AIC in fiscal 2016 at Granny Smith and Darlot, respectively.
The remainder of Gold Fields’ total costs consists primarily of amortization and depreciation, exploration costs and selling, administration and general and corporate charges.
All-in Sustaining andAll-in Cost
The World Gold CouncilWGC has worked closely with its member companies to develop definitions for “all-in sustaining costs”AISC and “all-in costs”.AIC. The World Gold CouncilWGC is not a regulatory industry organization and does not have the authority to develop accounting standards or disclosure requirements. Gold Fields ceased being a member of the World Gold CouncilWGC in fiscal 2014. “All-in sustaining costs”AISC and “All-in costs”AIC are non-GAAPnon-IFRS measures. These non-GAAPnon-IFRS measures are intended to provide further transparency into the costs associated with producing and selling an ounce of gold. The new standard was released by the World Gold CouncilWGC on June 27, 2013. It is expected that these new metrics will be helpful to investors, governments, local communities and other stakeholders in understanding the economics of gold mining. The “all-in sustaining costs”AISC incorporates costs related to sustaining current production. The “all-in costs” includeAIC includes additional costs which relate to the growth of the Group. All-in sustaining costs,AISC, as defined by the World Gold Council,WGC, are operating costs excluding amortization and depreciation as calculated in accordance with IFRS (as included in the geographical and segment information included in Note 26 to the consolidated financial statements), plus all costs not already included therein relating to sustaining current production, including sustaining capital expenditure. The value ofby-product revenues such as silver and copper is deducted from operating costs excluding amortization and depreciation costs as it effectively reduces the cost of gold production. All-in costsAIC starts with all-in sustaining costsAISC and adds additional costs which relate to the growth of the Group, includingnon-sustaining capital expenditure and exploration, evaluation and feasibility costs not associated with current operations.
Gold Fields voluntarily adoptedAISC and implemented these metrics as from the second quarter of fiscal 2013. All-in sustaining costs (AISC) and all-in cost (AIC)AIC are reported on a per ounce of gold basis, net ofby-product revenues (as per the World Gold CouncilWGC definition) as well as on a per ounce of gold equivalent basis, gross ofby-product revenues.
As from fiscal 2014, Gold Fields exclusively reports its costs in accordance with the new World Gold Council definition for AISC and AIC and no longer reports total cash cost and notional cash expenditure.
An investor should not consider AISC andor AIC or operating costs excluding amortization and depreciation in isolation or as alternatives to productionoperating costs, cash flows from operating activities or any other measure of financial performance presented in accordance with U.S. GAAP.IFRS. AISC and AIC as presented in this annual report may not be comparable to other similarly titled measures of performance of other companies.
The Company prepares its financial records in accordance with IFRS and such IFRS information for the Group and by segment is what the Company’s chief operating decision maker reviews in allocating resources and making investment decisions. Therefore, the calculation of AISC and AIC that follows uses IFRS information (operating costs excluding amortization and depreciation) as a starting point which agrees to the geographical and segment information included in Note 26 to the consolidated financial statements.
The following tables set out a reconciliation of Gold Fields’ operating costs, excluding amortization and depreciation, as calculated in accordance with IFRS (refer note 2 to the consolidated financial statements), to its AISC and AIC net ofby-product revenues per ounce of gold sold for fiscal 2014, 20132016, 2015 and 2012.2014. The following tables also set out AISC and AIC gross ofby-product revenue on a gold equivalent ounce basis for fiscal 2014, 20132016, 2015 and 2012.2014.
| AISC and AIC, net of by-product revenue per ounce of gold | ||||||||||||||||||||||||||||||||||||||||
| For the year ended December 31, 2014 | ||||||||||||||||||||||||||||||||||||||||
| South Deep | Tarkwa | Damang | St. Ives | Agnew/ Lawlers | Darlot | Granny Smith | Cerro Corona | Corporate Group(1) | ||||||||||||||||||||||||||||||||
| (in $ million except as otherwise stated) | ||||||||||||||||||||||||||||||||||||||||
Operating costs (excluding amortization and depreciation) | 245.5 | 373.9 | 177.6 | 292.3 | 173.0 | 81.9 | 182.6 | 158.2 | — | 1,684.9 | ||||||||||||||||||||||||||||||
Add: | ||||||||||||||||||||||||||||||||||||||||
Gold inventory change | — | (2.3 | ) | 2.1 | (9.9 | ) | (0.3 | ) | 1.7 | — | 1.5 | — | (7.2 | ) | ||||||||||||||||||||||||||
Royalties | 1.3 | 35.3 | 11.2 | 11.6 | 8.3 | 2.7 | 10.0 | 5.8 | — | 86.1 | ||||||||||||||||||||||||||||||
Realized gains and losses on commodity cost hedges | — | — | — | 0.1 | (0.1 | ) | — | 0.3 | — | — | 0.3 | |||||||||||||||||||||||||||||
Community/social responsibility costs | 3.9 | 1.2 | 0.2 | — | — | — | — | 7.0 | — | 12.3 | ||||||||||||||||||||||||||||||
Non-cash remuneration (share-based payments) | 2.8 | 4.2 | 0.6 | 2.7 | 1.3 | 0.5 | 1.0 | 2.6 | 10.2 | 26.0 | ||||||||||||||||||||||||||||||
Cash remuneration (long-term employee benefits) | 0.6 | 1.5 | 0.2 | 1.2 | 0.7 | 0.4 | 0.7 | 1.2 | 2.1 | 8.7 | ||||||||||||||||||||||||||||||
Other | — | — | — | — | — | — | — | — | 10.6 | 10.6 | ||||||||||||||||||||||||||||||
By-product revenue(2) | (0.5 | ) | (0.5 | ) | (0.1 | ) | (0.5 | ) | (0.3 | ) | (0.3 | ) | (0.1 | ) | (182.1 | ) | — | (184.5 | ) | |||||||||||||||||||||
Rehabilitation amortization and interest | 1.8 | 9.0 | 1.1 | 6.1 | 2.0 | 0.5 | 1.7 | 3.3 | — | 25.5 | ||||||||||||||||||||||||||||||
Sustaining capital expenditure(3) | 54.9 | 174.1 | 16.0 | 117.5 | 83.4 | 14.7 | 58.9 | 51.0 | — | 570.4 | ||||||||||||||||||||||||||||||
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All-in sustaining costs(1) | 310.3 | 596.5 | 208.9 | 421.0 | 267.9 | 102.2 | 255.1 | 48.5 | 22.9 | 2,232.9 | ||||||||||||||||||||||||||||||
Exploration, feasibility and evaluation costs(4) | — | — | — | — | — | — | — | — | 34.6 | 34.6 | ||||||||||||||||||||||||||||||
Non-sustaining capital expenditure(3) | 37.0 | — | — | — | — | — | — | — | 1.5 | 38.5 | ||||||||||||||||||||||||||||||
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All-in costs(1) | 347.2 | 596.5 | 208.9 | 421.0 | 267.9 | 102.2 | 255.1 | 48.5 | 59.0 | 2,306.0 | ||||||||||||||||||||||||||||||
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Gold only ounces sold (‘000oz) | 200.5 | 558.3 | 177.8 | 361.7 | 270.7 | 83.6 | 315.2 | 153.6 | — | 2,121.4 | ||||||||||||||||||||||||||||||
All-in sustaining cost | 310.3 | 596.5 | 208.9 | 421.0 | 267.9 | 102.2 | 255.1 | 48.5 | 22.9 | 2,232.9 | ||||||||||||||||||||||||||||||
All-in sustaining cost net of by-product revenue per ounce of gold sold ($/oz) | 1,548 | 1,068 | 1,175 | 1,164 | 990 | 1,222 | 809 | 316 | — | 1,053 | ||||||||||||||||||||||||||||||
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All-in costs | 347.2 | 596.5 | 208.9 | 421.0 | 267.9 | 102.2 | 255.1 | 48.5 | 59.0 | 2,306.0 | ||||||||||||||||||||||||||||||
All-in costs net of by-product revenue per ounce of gold | 1,732 | 1,068 | 1,175 | 1,164 | 990 | 1,222 | 809 | 316 | — | 1,087 | ||||||||||||||||||||||||||||||
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All in sustaining costs (per table above) add back by-product revenue(2) All-in sustaining costs gross of by-product revenue All-in costs (per table above) add back by-product revenue(2) All-in costs gross of by-product revenue Gold equivalent ounces sold All-in sustaining costs gross of by-product revenue ($/equivalent oz) All-in costs gross of by-product revenue ($/equivalent oz) Operating costs Gold inventory change Royalties Realized gains and losses on commodity cost hedges Community/social responsibility costs Non-cash remuneration (share-based payments Cash remuneration (long-term employee benefits Other By-product revenue(2) Rehabilitation amortization and interest Sustaining capital expenditure(3) All-in sustaining costs(1) Exploration, feasibility and evaluation costs(4) Non-sustaining capital expenditure(3) All-in costs(1) Gold only ounces sold (‘000oz) All-in sustaining cost All-in sustaining cost net ofby-product revenue per ounce of gold sold (U.S.$/oz) All-in costs All-in costs net ofby-product revenue per ounce of gold sold (U.S.$) AISC and AIC, gross of by-product revenue per ounce of gold For the year ended December 31, 2014 South
Deep Tarkwa Damang St. Ives Agnew/
Lawlers Darlot Granny
Smith Cerro
Corona Corporate Group(1) (in $ million except as otherwise stated) 310.3 596.5 208.9 421.0 267.9 102.2 255.1 48.5 22.9 2,232.9 0.5 0.5 0.1 0.5 0.3 0.3 0.1 182.1 — 184.5 310.8 597.0 209.0 421.5 268.3 102.5 255.2 230.6 22.9 2,417.4 347.2 596.5 208.9 421.0 267.9 102.2 255.1 48.5 59.0 2,306.0 0.5 0.5 0.1 0.5 0.3 0.3 0.1 182.1 — 184.5 347.7 597.0 209.0 421.5 268.3 102.5 255.2 230.6 59.0 2,490.5 200.5 558.3 177.8 361.7 270.7 83.6 315.2 328.6 — 2,296.2 1,550 1,069 1,175 1,165 991 1,225 810 702 — 1,053 1,734 1,069 1,175 1,165 991 1,225 810 702 — 1,086 AISC and AIC, net of by-product revenue per ounce of gold For the year ended December 31, 2016 South
Deep Tarkwa Damang St. Ives Agnew/
Lawlers Darlot Granny
Smith Cerro
Corona Corporate
and other Group(1) (in U.S.$ million except as otherwise stated) 272.3 344.7 136.4 192.8 145.7 57.3 141.1 143.7 (1.1 ) 1,433.0 (0.7 ) (17.5 ) (0.4 ) (11.0 ) (5.1 ) 0.4 (7.4 ) (3.8 ) — (45.5 ) 1.8 35.4 9.2 11.5 7.1 2.0 8.8 4.6 — 80.4 — — — 0.6 0.2 0.1 0.7 — — 1.6 1.2 5.1 0.3 — — — — 8.7 — 15.3 2.3 2.5 0.3 1.5 0.8 0.4 0.9 2.0 3.6 14.4 2.4 3.0 0.8 0.9 0.9 0.6 1.0 1.8 (0.5 ) 11.0 — — — — — — — 0.9 11.9 12.8 (0.5 ) (1.5 ) (0.1 ) (0.8 ) (0.2 ) (0.3 ) (0.1 ) (130.6 ) — (134.1 ) 0.4 4.8 0.7 8.9 3.2 0.2 1.4 3.9 — 23.5 70.1 168.4 37.9 140.0 70.0 21.4 90.3 42.8 — 640.8 349.3 545.0 185.2 344.3 222.5 82.3 236.7 74.4 13.9 2,053.6 — — — — — — — — 47.1 47.1 7.8 — — — — — — — 1.3 9.1 357.1 545.0 185.2 344.3 222.5 82.3 236.7 74.4 62.0 2,109.4 289.4 568.1 147.7 362.9 229.3 66.4 283.8 149.1 — 2,096.8 349.3 545.0 185.2 344.3 222.5 82.3 236.7 74.0 13.9 2,053.6 1,207 959 1,254 949 971 1,238 834 499 — 980 357.1 545.0 185.2 344.3 222.5 82.3 236.7 74.0 62.0 2,109.4 1,234 959 1,254 949 971 1,238 834 499 — 1,006
Notes:
| (1) | This total may not reflect the sum of the line items due to rounding. |
| (2) | By-product revenue at Cerro Corona relates to copper. For all the other operations, by-product revenue relates to silver. |
| (3) | Sustaining capital expenditure represents the majority of capital expenditures at existing operations, including underground mine development costs, ongoing replacement of mine equipment and other capital facilities and other capital expenditures at existing operations and is calculated as total capital expenditure |
| (4) | Includes exploration, feasibility and evaluation and share of equity accounted losses of |
Operating costs(excluding amortization and depreciation) Add: Gold inventory change Inventory write-off Royalties Realized gains and losses on commodity cost hedges Community/social responsibility costs Non-cash remuneration (share-based payments) By-product revenue(2) Rehabilitation amortization and interest Sustaining capital expenditure(3) All-in sustaining costs(1) Exploration, feasibility and evaluation costs(4) Non sustaining capital expenditure(3) All-in costs(1) Gold only ounces sold (‘000oz) All-in sustaining cost All-in sustaining cost net of by-product revenue per ounce of gold sold ($/oz) All-in costs All-in costs net of by-product revenue per ounce of gold All-in sustaining costs (per table above) Add backby-product revenue(2) All-in sustaining costs gross ofby-product revenue All-in costs (per table above) Add backby-product revenue(2) All-in costs gross ofby-product revenue Gold equivalent ounces sold All-in sustaining costs gross ofby-product revenue (U.S.$/equivalent oz) All-in costs gross ofby-product revenue (U.S.$/equivalent oz) AISC and AIC, net of by-product revenue per ounce of gold For the year ended December 31, 2013 South
Deep Tarkwa Damang St. Ives Agnew/
Lawlers Darlot Granny
Smith Cerro
Corona Corporate Group(1) (in $ million except as otherwise stated) 321.8 473.7 171.1 345.5 135.0 21.6 48.8 161.3 — 1,678.7 — 30.8 (11.1 ) (8.8 ) 1.2 (1.3 ) (3.7 ) (18.8 ) — (11.8 ) — 42.8 16.1 — — — — — — 58.9 2.1 44.7 10.8 13.9 7.6 0.6 2.1 8.9 — 90.5 — — — (0.2 ) — — — — — (0.2 ) 2.2 9.1 0.2 — — — — 7.6 — 19.1 4.4 5.4 1.3 3.8 1.6 — 0.1 3.7 20.1 40.5 (0.8 ) (0.7 ) (0.1 ) (0.8 ) (0.5 ) — — (188.2 ) — (191.1 ) 0.4 3.4 0.2 4.6 0.8 — 0.2 1.7 — 11.3 135.4 207.0 50.1 132.3 52.3 1.5 7.8 56.3 — 642.6 465.6 816.1 238.6 490.3 198.0 22.3 55.2 32.4 20.1 2,338.6 — — — — — — — — 122.4 122.4 67.0 — — — — — — — 22.7 89.7 532.6 816.1 238.6 490.3 198.0 22.3 55.2 32.4 165.2 2,550.8 302.1 632.2 153.1 402.7 215.6 19.7 62.2 157.3 — 1,944.9 465.6 816.1 238.6 490.3 198.0 22.3 55.2 32.4 20.1 2,338.6 1,541 1,291 1,558 1,218 919 1,132 888 206 — 1,202 532.6 816.1 238.6 490.3 198.0 22.3 55.2 32.4 165.2 2,550.8
sold ($) 1,763 1,291 1,558 1,218 919 1,132 888 206 — 1,312 AISC and AIC, gross of by-product revenue per ounce of gold For the year ended December 31, 2016 South
Deep
Tarkwa Damang St. Ives Agnew/
Lawlers
Darlot Granny
Smith
Cerro
Corona
Corporate
and other
Group(1) (in U.S.$ million except as otherwise stated) 349.3 545.0 185.2 344.3 222.5 82.3 236.7 74.4 13.9 2,053.6 0.5 1.5 0.1 0.8 0.2 0.3 0.1 130.6 — 134.1 349.8 546.5 185.2 345.1 222.8 82.5 236.8 205.0 13.9 2,187.7 357.1 545.0 185.2 344.3 222.5 82.3 236.7 74.4 61.5 2,109.5 0.5 1.5 0.1 0.8 0.2 0.3 0.1 130.6 — 134.1 357.6 546.5 185.2 345.1 222.8 82.5 236.8 205.0 61.5 2,243.6 289.4 568.1 147.7 362.9 229.3 66.4 283.8 268.9 — 2,216.4 1,209 962 1,254 951 972 1,243 834 762 — 987 1,236 962 1,254 951 972 1,243 834 762 — 1,012
All in sustaining costs (per table above) add back by-product revenue(2) All-in sustaining costs gross of by-product revenue All-in costs (per table above) add back by-product revenue(2) All-in costs gross of by-product revenue Gold equivalent ounces sold All-in sustaining costs gross of by-product revenue All-in costs gross of by-product revenue ($/equivalent oz) AISC and AIC, gross of by-product revenue per ounce of gold For the year ended December 31, 2013 South
Deep Tarkwa Damang St. Ives Agnew/
Lawlers Darlot Granny
Smith Cerro
Corona Corporate Group(1) (in $ million except as otherwise stated) 465.6 816.1 238.6 490.3 198.0 22.3 55.2 32.4 20.1 2,338.6 0.8 0.7 0.1 0.8 0.5 — — 188.2 — 191.1 466.4 816.8 238.7 491.1 198.5 22.3 55.2 220.6 20.1 2,529.7 532.6 816.1 238.6 490.3 198.0 22.3 55.2 32.4 165.2 2,550.8 0.8 0.7 0.1 0.8 0.5 — — 188.2 — 191.1 533.4 816.8 238.7 491.1 198.5 22.3 55.2 220.6 165.2 2,741.9 302.1 632.2 153.1 402.7 215.6 19.7 62.2 309.4 — 2,097.1
($/equivalent oz) 1,544 1,292 1,559 1,220 921 1,132 888 713 — 1,206 1,766 1,292 1,559 1,220 921 1,132 888 713 — 1,307
| (1) | This total may not reflect the sum of the line items due to rounding. |
| (2) | By-product revenue at Cerro Corona relates to copper. For all the other operations,by-product revenue relates to silver. |
AISC net of by-product revenues decreased by 3% from U.S.$1,007 per ounce of gold in fiscal 2015 to U.S.$980 per ounce of gold in fiscal 2016, mainly due to lower operating costs (including gold inventory change), lower losses on commodity cost hedges, higher by-product credits, partially offset by higher non-cash and cash remuneration and higher sustaining capital expenditure. AISC in fiscal 2015 included U.S.$8 million of inventory written off at Damang. AIC net of by-product revenues decreased by 2% from U.S.$1,026 per ounce of gold in fiscal 2015 to U.S.$1,006 per ounce of gold in fiscal 2016, for the same reasons as AISC, as well as lower non-sustaining capital expenditure, partially offset by higher exploration, feasibility and evaluation costs.
AISC gross of by-product revenues decreased by 1% from U.S.$1,000 per equivalent ounce of gold in fiscal 2015 to U.S.$987 per equivalent ounce of gold in fiscal 2016 mainly due to lower operating costs (including gold inventory change) and lower losses on commodity cost hedges, partially offset by higher non-cash and cash remuneration and higher sustaining capital expenditure. AIC gross of by-product revenues decreased by 1% from U.S.$1,018 per equivalent ounce of gold in fiscal 2015 to U.S.$1,012 per equivalent ounce of gold in fiscal 2016, for the same reasons as AISC gross of product revenue, as well as lower non-sustaining capital expenditure, partially offset by higher exploration, feasibility and evaluation costs.
Operating costs Gold inventory change Inventorywrite-off Royalties Realized gains and losses on commodity cost hedges Community/social responsibility costs Non-cash remuneration (share-based payments) Cash remuneration (long-term employee benefits) Other By-product revenue(2) Rehabilitation amortization and interest Sustaining capital expenditure(3) All-in sustaining costs(1) Exploration, feasibility and evaluation costs(4) Non-sustaining capital expenditure(3) All-in costs(1) Gold only ounces sold (‘000oz) All-in sustaining cost All-in sustaining cost net ofby-product revenue per ounce of gold sold (U.S.$/oz) All-in costs All-in costs net ofby-product revenue per ounce of gold sold (U.S.$) AISC and AIC, net of by-product revenue per ounce of gold For the year ended December 31, 2015 South
Deep Tarkwa Damang St. Ives Agnew/
Lawlers Darlot Granny
Smith Cerro
Corona Corporate
and other Group(1) (in U.S.$ million except as otherwise stated) 236.6 334.2 184.3 195.0 142.6 59.8 135.9 143.8 (0.8 ) 1,431.3 — (7.3 ) 2.1 25.3 (1.1 ) (0.6 ) 5.4 1.0 — 24.9 — — 8.0 — — — — — — 8.0 1.2 34.0 9.7 10.7 6.6 2.1 8.7 3.1 — 76.0 — — — 5.0 1.5 0.5 5.2 — — 12.1 1.7 2.1 0.2 — — — — 8.3 — 12.2 1.0 1.5 0.3 1.2 0.7 0.2 0.4 1.2 4.4 10.9 1.0 1.4 0.4 0.2 0.5 0.2 0.3 0.8 0.6 5.3 — — — — — — — — 8.5 8.5 (0.4 ) (5.5 ) — (0.5 ) (0.3 ) (0.2 ) (0.1 ) (113.8 ) — (120.7 ) 0.8 3.7 0.6 8.9 3.4 0.8 1.8 4.9 — 25.0 53.2 204.2 16.9 114.5 73.0 20.0 72.4 64.8 — 619.9 295.1 568.2 222.5 360.2 226.8 82.9 230.0 114.0 12.7 2,113.3 — — — — — — — — 26.0 26.0 13.7 — — — — — — — 0.5 14.2 308.8 568.2 222.5 360.2 226.8 82.9 230.0 114.0 39.2 2,153.5 198.0 586.1 167.8 371.9 236.6 78.4 301.1 158.8 — 2,098.8 295.1 568.2 222.5 360.2 226.8 82.9 230.0 114.0 12.7 2,113.3 1,490 970 1,326 969 959 1,057 764 718 — 1,007 308.8 568.2 222.5 360.2 226.8 82.9 230.0 114.0 39.2 2,153.5 1,559 970 1,326 969 959 1,057 764 718 — 1,026
Notes:
| (1) | This total may not reflect the sum of the line items due to rounding. |
| (2) | By-product revenue at Cerro Corona relates to copper. For all the other operations, by-product revenue relates to silver. |
| (3) | Sustaining capital expenditure represents the majority of capital expenditures at existing operations, including underground mine development costs, ongoing replacement of mine equipment and other capital facilities and other capital expenditures at existing operations and is calculated as total capital expenditure |
| (4) | Includes exploration, feasibility and evaluation and share of equity accounted losses of |
All-in sustaining costs (per table above) Add backby-product revenue(2) All-in sustaining costs gross ofby-product revenue All-in costs (per table above) Add backby-product revenue(2) All-in costs gross ofby-product revenue Gold equivalent ounces sold All-in sustaining costs gross ofby-product revenue (U.S.$/equivalent oz) All-in costs gross ofby-product revenue (U.S.$/equivalent oz) AISC and AIC, gross of by-product revenue per ounce of gold For the year ended December 31, 2015 South
Deep Tarkwa Damang St. Ives Agnew/
Lawlers Darlot Granny
Smith Cerro
Corona Corporate
and other Group(1) (in U.S.$ million except as otherwise stated) 295.1 568.2 222.5 360.2 226.8 82.9 230.0 114.0 12.7 2,113.3 0.4 5.5 — 0.5 0.3 0.2 0.1 113.8 — 120.7 295.5 573.7 222.5 360.7 227.1 83.1 230.1 227.8 12.7 2,234.0 308.8 568.2 222.5 360.2 226.8 82.9 230.0 114.0 39.2 2,153.5 0.4 5.5 — 0.5 0.3 0.2 0.1 113.8 — 120.7 309.2 573.7 222.5 360.7 227.1 83.1 230.1 227.8 39.2 2,274.2 198.0 586.1 167.8 371.9 236.6 78.4 301.1 293.3 — 2,233.3 1,492 979 1,326 970 960 1,059 764 777 — 1,000 1,561 979 1,326 970 960 1,059 764 777 — 1,018
Notes:
| (1) | This total may not reflect the |
| (2) | By-product revenue at Cerro Corona relates to copper. For all the other operations,by-product revenue relates to silver. |
AISC net of by-product revenues decreased by 4% from U.S.$1,053 per ounce of gold in fiscal 2014 to U.S.$1,007 per ounce of gold in fiscal 2015, mainly due to lower operating costs, the weaker average R/US dollar and A$/US dollar gold price, partially offset by lower by-product credits and higher capital expenditure. AISC net of by-product revenues decreased by 6% from U.S.$1,087 per ounce of gold in fiscal 2014 to U.S.$1,026 per ounce of gold in fiscal 2015, due to the lower exploration, feasibility and evaluation costs and lower non-sustaining capital expenditure.
Operating costs(excluding amortization and depreciation) Add: Gold inventory change Inventory write-off Royalties Realized gains and losses on commodity cost hedges Community/social responsibility costs Non-cash remuneration (share-based payments) By-product revenue(2) Rehabilitation amortization and interest Sustaining capital expenditure(3) All-in sustaining costs(1) Exploration, feasibility and evaluation costs(4) Non sustaining capital expenditure(3) All-in costs(1) Gold only ounces sold (‘000oz) All-in sustaining cost All-in sustaining cost net of by-product revenue per ounce of gold sold ($/oz) All-in costs All-in costs net of by-product revenue per ounce of gold sold ($) AISC and AIC, net of by-product revenue per ounce of gold For the year ended December 31, 2012 South
Deep Tarkwa Damang St. Ives Agnew Cerro
Corona Corporate Group(1) (in $ million except as otherwise stated) 302.9 494.4 179.1 378.0 148.1 171.4 — 1,673.9 — (24.8 ) (3.6 ) 14.7 2.7 (11.0 ) — (22.0 ) — — — 19.2 — — — 19.2 2.3 59.9 13.9 18.7 7.3 14.7 — 116.8 — — — (0.4 ) — — — (0.4 ) 0.9 4.4 0.8 — — 9.4 — 15.5 4.4 5.5 1.8 3.4 1.6 5.2 23.5 45.5 (1.0 ) — (0.1 ) (1.4 ) (1.0 ) (272.7 ) — (276.3 ) 0.4 3.7 0.1 6.3 0.5 1.8 — 12.8 158.7 259.9 92.1 308.4 62.3 95.4 — 976.7 468.5 803.0 284.1 746.9 221.5 14.2 23.5 2,561.6 — — — — — — 204.0 204.0 155.8 — 7.6 — — — 76.0 239.4 624.2 803.0 291.7 746.9 221.5 14.2 303.5 3,005.2 270.4 718.8 166.4 449.8 176.6 173.4 — 1,955.5 468.5 803.0 284.1 746.9 221.5 14.2 23.5 2,561.6 1,732 1,117 1,707 1,659 1,253 82 — 1,310 624.2 803.0 291.7 746.9 221.5 14.2 303.5 3,005.2 2,308 1,117 1,753 1,659 1,253 82 — 1,537
AISC gross of by-product revenues decreased by 5% from U.S.$1,053 per equivalent ounce of gold in fiscal 2014 to U.S.$1,000 per equivalent ounce of gold in fiscal 2015, mainly due to lower operating costs, the weaker average R/US dollar and A$/US dollar gold price, partially offset by higher capital expenditure. AIC gross ofby-product revenues decreased by 6% from U.S.$1,086 per equivalent ounce of gold in fiscal 2014 to U.S.$1,018 per equivalent ounce of gold in fiscal 2015, due to lower exploration, feasibility and evaluation costs and lower non-sustaining capital expenditure.
| AISC and AIC, gross of by-product revenue per equivalent ounce of gold | ||||||||||||||||||||||||||||||||
| For the year ended December 31, 2012 | ||||||||||||||||||||||||||||||||
| South Deep | Tarkwa | Damang | St. Ives | Agnew | Cerro Corona | Corporate | Group(1) | |||||||||||||||||||||||||
| (in $ million except as otherwise stated) | ||||||||||||||||||||||||||||||||
All in sustaining costs (per table above) | 468.5 | 803.0 | 284.1 | 746.9 | 221.5 | 14.2 | 23.5 | 2,561.6 | ||||||||||||||||||||||||
add back by-product revenue(2) | 1.0 | — | 0.1 | 1.4 | 1.0 | 272.7 | — | 276.3 | ||||||||||||||||||||||||
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All-in sustaining costs gross of by-product revenue | 469.5 | 803.0 | 284.2 | 748.3 | 222.5 | 286.9 | 23.5 | 2,837.9 | ||||||||||||||||||||||||
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All-in costs (per table above) | 624.2 | 803.0 | 291.7 | 746.9 | 221.5 | 14.2 | 303.5 | 3,005.2 | ||||||||||||||||||||||||
add back by-product revenue(2) | 1.0 | — | 0.1 | 1.4 | 1.0 | 272.7 | — | 276.3 | ||||||||||||||||||||||||
All-in costs gross of by-product revenue | 625.2 | 803.0 | 291.8 | 748.3 | 222.5 | 286.9 | 303.5 | 3,281.5 | ||||||||||||||||||||||||
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Gold equivalent ounces sold | 270.4 | 718.8 | 166.4 | 449.8 | 176.6 | 350.4 | — | 2,132.5 | ||||||||||||||||||||||||
All-in sustaining costs gross of by-product revenue ($/equivalent oz) | 1,736 | 1,117 | 1,707 | 1,664 | 1,260 | 819 | — | 1,331 | ||||||||||||||||||||||||
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All-in costs gross of by-product revenue ($/equivalent oz) | 2,312 | 1,117 | 1,753 | 1,664 | 1,260 | 819 | — | 1,539 | ||||||||||||||||||||||||
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Operating costs Gold inventory change Royalties Realized gains and losses on commodity cost hedges Community/social responsibility costs Non-cash remuneration (share-based payments) Cash remuneration (long-term employee benefits Other By-product revenue(2) Rehabilitation amortization and interest Sustaining capital expenditure(3) All-in sustaining costs(1) Exploration, feasibility and evaluation costs(4) Non-sustaining capital expenditure(3) All-in costs(1) Gold only ounces sold (‘000oz) All-in sustaining cost All-in sustaining cost net ofby-product revenue per ounce of gold sold (U.S.$/oz) All-in costs All-in costs net ofby-product revenue per ounce of gold sold (U.S.$) AISC and AIC, net of by-product revenue per ounce of gold For the year ended December 31, 2014 South
Deep Tarkwa Damang St. Ives Agnew/
Lawlers Darlot Granny
Smith Cerro
Corona Corporate
and other Group(1) (in U.S.$ million except as otherwise stated) 245.5 373.9 177.6 292.3 173.0 81.9 182.6 158.2 — 1,684.9 — (2.3 ) 2.1 (9.9 ) (0.3 ) 1.7 — 1.5 — (7.2 ) 1.3 35.3 11.2 11.6 8.3 2.7 10.0 5.8 — 86.1 — — — 0.1 (0.1 ) — 0.3 — — 0.3 3.9 1.2 0.2 — — — — 7.0 — 12.3 2.8 4.2 0.6 2.7 1.3 0.5 1.0 2.6 10.2 26.0 0.6 1.5 0.2 1.2 0.7 0.4 0.7 1.2 2.1 8.7 — — — — — — — — 10.6 10.6 (0.5 ) (0.5 ) (0.1 ) (0.5 ) (0.3 ) (0.3 ) (0.1 ) (182.1 ) — (184.5 ) 1.8 9.0 1.1 6.1 2.0 0.5 1.7 3.3 — 25.5 54.9 174.1 16.0 117.5 83.4 14.7 58.9 51.0 — 570.4 310.3 596.5 208.9 421.0 267.9 102.2 255.1 48.5 22.9 2,232.9 — — — — — — — — 34.6 34.6 37.0 — — — — — — — 1.5 38.5 347.2 596.5 208.9 421.0 267.9 102.2 255.1 48.5 59.0 2,306.0 200.5 558.3 177.8 361.7 270.7 83.6 315.2 153.6 — 2,121.4 310.3 596.5 208.9 421.0 267.9 102.2 255.1 48.5 22.9 2,232.9 1,548 1,068 1,175 1,164 990 1,222 809 316 — 1,053 347.2 596.5 208.9 421.0 267.9 102.2 255.1 48.5 59.0 2,306.0 1,732 1,068 1,175 1,164 990 1,222 809 316 — 1,087
Notes:
| (1) | This total may not reflect the sum of the line items due to rounding. |
| (2) | By-product revenue at Cerro Corona relates to copper. For all the other operations, by-product revenue relates to silver. |
| (3) | Sustaining capital expenditure represents the majority of capital expenditures at existing operations, including underground mine development costs, ongoing replacement of mine equipment and other capital facilities and other capital expenditures at existing operations and is calculated as total capital expenditure |
| (4) | Includes exploration, feasibility and evaluation and share of equity accounted losses of |
All-in sustaining costs (per table above) Add backby-product revenue(2) All-in sustaining costs gross ofby-product revenue All-in costs (per table above Add backby-product revenue(2) All-in costs gross ofby-product revenue Gold equivalent ounces sold All-in sustaining costs gross ofby-product revenue (U.S.$/equivalent oz) All-in costs gross ofby-product revenue (U.S.$/equivalent oz) AISC and AIC, gross of by-product revenue per ounce of gold For the year ended December 31, 2014 South
Deep Tarkwa Damang St. Ives Agnew/
Lawlers Darlot Granny
Smith Cerro
Corona Corporate
and other Group(1) (in U.S.$ million except as otherwise stated) 310.3 596.5 208.9 421.0 267.9 102.2 255.1 48.5 22.9 2,232.9 0.5 0.5 0.1 0.5 0.3 0.3 0.1 182.1 — 184.5 310.8 597.0 209.0 421.5 268.3 102.5 255.2 230.6 22.9 2,417.4 347.2 596.5 208.9 421.0 267.9 102.2 255.1 48.5 59.0 2,306.0 0.5 0.5 0.1 0.5 0.3 0.3 0.1 182.1 — 184.5 347.7 597.0 209.0 421.5 268.3 102.5 255.2 230.6 59.0 2,490.5 200.5 558.3 177.8 361.7 270.7 83.6 315.2 328.6 — 2,296.2 1,550 1,069 1,175 1,165 991 1,225 810 702 — 1,053 1,734 1,069 1,175 1,165 991 1,225 810 702 — 1,086
Notes:
| (1) | This total may not reflect the |
AISC net of by-product revenues decreased from U.S.$1,202 per ounce of gold in fiscal 2013 to U.S.$1,053 per ounce of gold in fiscal 2014, mainly due to no inventory write-offs in 2014 and lower sustaining capital expenditure partially offset by the lower by-product revenue. AIC net of by-product revenues decreased from U.S.$1,312 per ounce of gold in fiscal 2013 to U.S.$1,087 per ounce of gold in fiscal 2014, due to the lower exploration, feasibility and evaluation costs and lower non-sustaining capital expenditure.
AISC gross of by-product revenues decreased from U.S.$1,206 per equivalent ounce of gold in fiscal 2013 to U.S.$1,053 per equivalent ounce of gold in fiscal 2014, mainly due to no inventory write-offs in 2014 and lower sustaining capital expenditure. AIC gross of by-product revenues decreased from U.S.$1,307 per equivalent ounce of gold in fiscal 2013 to U.S.$1,086 per equivalent ounce of gold in fiscal 2014, due to lower exploration, feasibility and evaluation costs and lower non-sustaining capital expenditure.
| (2) | By-product revenue at Cerro Corona relates to copper. For all the other operations,by-product revenue relates to silver. |
Royalties
South Africa
The Royalty Act was promulgated on November 24, 2008 and came into operation on March 1, 2010. The Royalty Act imposes a royalty on refined and unrefined minerals payable to the South African government.
The royalty in respect of refined minerals (which include gold and platinum) is calculated by dividing EBIT by the product of 12.5 times gross revenue calculated as a percentage, plus an additional 0.5%. EBIT refers to taxable mining income (with certain exceptions such as no deduction for interest payable and foreign exchange losses) before assessed losses but after capital expenditure. A maximum royalty of 5% is levied on refined minerals.
The royalty in respect of unrefined minerals (which include uranium) is calculated by dividing EBIT by the product of nine times gross revenue calculated as a percentage, plus an additional 0.5%. A maximum royalty of 7% is levied on unrefined minerals.
Where unrefined mineral resources (such as uranium) constitute less than 10% in value of the total composite mineral resources, the royalty rate in respect of refined mineral resources may be used for all gross
sales and a separate calculation of EBIT for each class of mineral resources is not required. For Gold Fields, this means that currently it will pay a royalty based on the refined minerals royalty calculation as applied to its gross revenue. The rate of royalty tax payable for fiscal 2016, 2015 and 2014 and fiscal 2013 was approximately0.5%, 0.5% and 0.5% of revenue, respectively.
Ghana
Because mineralsMinerals are owned by the Republic of Ghana and held in trust by the President,President. As such, in fiscal 2016 the Tarkwa and Damang operations (Gold Fields Ghana and Abosso, respectively) arewere subject to a gold royalty which is set atof 5% of total revenue earned from minerals obtained. In fiscal 2017, under the terms of the Development Agreement entered into with the government of Ghana, Tarkwa and Damang will be subject to a sliding scale for royalty rates, linked to the prevailing gold price. The royalty sliding scale is as follows:
| Average gold price | ||||||||
| Low value | High value | Royalty rate | ||||||
| (U.S.$) | ||||||||
| — | 1,299.99 | 3.0 | % | |||||
| 1,300.00 | 1,449.99 | 3.5 | % | |||||
| 1,450.00 | 2,299.99 | 4.1 | % | |||||
| 2,300.00 | Unlimited | 5.0 | % | |||||
Australia
Royalties are payable to the state based on the amount of gold produced from a mining tenement. Royalties are payable quarterly at a fixed rate of 2.5% of the royalty value of gold sold. The royalty value of gold is the amount of gold produced during the month multiplied by the average gold spot price for the month.
Peru
In 2011, the Peruvian Congress approved a new mining royalty law which established a mining royalty that owners of mining concessions must pay to the Peruvian government for the exploitation of metallic and non-metallic resources. The royaltiesRoyalties are calculated with reference to the operating margin and ranging from 1% (for operating margins less than 10%) to 12% (for operating margins of more than 80%). Under the new regime, La Cima’s effective royalty rate for fiscal 2016, 2015 and 2014 was 6.4%, 4.0% and 2013 was 1.5% and 2.3%3.3% of revenue,operating profit, respectively.
Under the previous mining royalty law, the previous royalty rates were calculated on gross revenues with a sliding scale from 1% to 3%.
Income andAnd Mining Taxes
South Africa
Generally, South Africa imposes tax on the worldwide income (including capital gains) of all of Gold Fields’ South African incorporated and tax resident entities. Certain classes of passive income such as interest and royalties, and certain capital gains, derived by Controlled Foreign Companies, or CFC, could be subject to South African tax on a notional imputation basis. CFCs generally constitute a foreign company in which Gold Fields owns or controls more than 50% of the shareholding.
Gold Fields pays taxes on its taxable income generated by its mining andnon-mining tax entities. Under South African law, gold mining companies andnon-gold mining companies are taxed at different rates. Companies in the Group not carrying on the direct gold mining operations are taxed at a statutory rate of 28%.
Gold Fields Operations Limited or GFO and GFI Joint Venture Holdings (Proprietary) Limited or GFIJVH jointly own the South Deep Mine and constitute gold mining companies for South African taxation purposes. These companies are subject to the gold formula on their mining income.
The applicable formula takes the form Y | = | |||||
| x |
Where:
Y | = | the tax rate to be determined | ||
x | = | the ratio of taxable income to the total income (expressed as a percentage) | ||
The effective mining tax rate for GFO and GFIJVH, owners of the South Deep mine, has been calculated at 30% (2013:(2015: 30% and 2014: 30%).
During the budget speech in February 2012, the Minister of Finance announced that STC will be abolished resulting in the abolishment of the STC inclusive gold mining formula. The result is that there is only one gold mining formula effective January 1, 2012.
Gold Fields’ gold mining companies are taxed at a rate of 28% on any non-mining income with effect from January 1, 2012, in line with the reduction in the marginal rate applicable to mining income. The repeal of STC with effect from April 1, 2012 onwards and the introduction of the dividend withholding tax therefore results in a net lower effective tax rate paid by Gold Fields’ gold mining operations.
STC differed from a dividend withholding tax in that it was a tax imposed on companies or closed corporations, and not on its shareholders. STC was payable on the amount of dividends declared by the company, less the sum of qualifying dividends received or accrued to the company during a particular time period (referred to as a dividend cycle).
In terms of the STC provisions, certain dividends received by South African resident companies carried STC “credits”, and to the extent that South African resident companies in turn declared these same dividends no additional STC was due.
While STC has now been abolished and replaced with a withholding tax on dividends at 15% with effect from April 1, 2012, there will be a three year transition period ending on March 31, 2015 during which dividends carrying STC “credits” may still be distributed by South African resident companies free of tax. No withholding tax on dividends will be levied on the distribution of such dividends carrying STC “credits” during this three year window period.
Gold Fields Limited and its subsidiaries have utilized all such STC credits at December 31, 2012.
Ghana
Ghanaian resident entities are subject to tax on the basis of income derived from, accruing in, received in, or brought into Ghana. The standard corporate income tax rate applicable to mining companies is currentlywas 35%. Gold Fields signed a Development Agreement with the government of Ghana for both the Tarkwa and Damang mines during 2016. This agreement resulted in a reduction in the corporate tax rate from 35% to 32.5%, effective March 17, 2016.
Under the previous project development agreement (entered into between the Ghanaian government and Gold Fields Ghana) and the deed of warranty (entered into between the Ghanaian government and Abosso)Abosso Goldfields), the government has agreed that no withholding tax shall be payable ondeducted from the payment of any dividend or capital repayment declared by Gold Fields Ghana or Abosso which iswas due and payable to any shareholder not normally resident in Ghana. The new Development Agreement which became effective March 17, 2016, did not cover any withholding tax on dividends and accordingly, future dividends out of Ghana will be subject to 8% withholding tax.
Implementation of Ghana’s Income Tax Act 2015, Act 896 continues, while awaiting issuance of supporting practice and guidance notes by the tax authorities. In 2012, Ghana madeAugust 2016, the following changesIncome Tax Regulations (L.I. 2244) were entered into force. While LI 2244 has clarified a number of uncertainties with regards to the implementation of Act 896 (such as unutilized capital allowances and ring-fencing), the industry continues to dialogue with the government and with the tax system, which remain applicable to Tarkwa and Damang:authorities for even further clarity as gaps still persist.
Increase in corporate income tax from 25% to 35%;
The capital allowance regimeRevenue Administration Act, 2016 (Act 915), or Act 915, was amendedgazetted in August 2016 and enters into force from January 1, 2017. Act 915 consolidates tax administration provisions from the various tax laws (income tax, value added tax, customs) into a single act and introduces a more stringent tax compliance framework. Act 915 now enables taxpayers to offset surpluses and liabilities arising from different tax types. It should be noted that the tax authorities are again expected to release guidance notes to allow qualifying mining equipmenttaxpayers to be eligible for capital allowances at a rate of 20% per annum (straight line). Previously,fully utilize the capital allowances for mine development consisted of an initial allowance of 80% of the cost of assets added in that calendar year, the balance of the brought forward balance was depreciated at the rate of 50% per year on a declining balance basis, as well as a 5% investment allowance based on prior year additions;
Expenses exclusively incurred on one mining area would no longer be offset against profits from another mining area belonging to the same company in determining the chargeable income for income tax purposes. As the amending legislation did not define what constitutes mining areas further, the Ghanaian mining industry has engaged the regulators and lawmakers to seek more clarity as to how this should be interpreted. Discussions are ongoing;
Enactment of Transfer Pricing Regulations, effective September 14, 2012; and
The Ghanaian government also proposed a windfall profit tax of 10% on mining companies. In its 2013 budget speech, the government indicated that it would seek to re-introduce the windfall profit tax bill in parliament after completion of consultations with all stakeholders. In early 2014, however, the government indicated that the windfall profit tax had been postponed indefinitely.
In addition to the above, there have been incremental increases in rates of levies and other payments. These include:
Stool/land rents: amended to Ghanaian Cedi 15.0 or approximately U.S.$4.5 per acre (previously U.S.$15.2 per acre);
Special Petroleum Tax at 17.5%; and
Proposal to extend the special import levy of 1%-2% to 2017.
Australia
Generally, Australia imposes tax on the worldwide income (including capital gains) of all of Gold Fields’ Australian incorporated and tax resident entities. The current income tax rate for companies is 30%. Exploration expenditure is deductible in full as incurred and other capital expenditure is generally deductible over the effective lives of the assets acquired. The Australian Uniform Capital Allowance system allows tax deductions for the decline in value of depreciable assets and certain other capital expenditures.
Gold Fields Australia and its eligible related Australian sister companies, together with all wholly-owned Australian subsidiaries, have elected to be treated as a tax consolidated group for taxation purposes. As a tax consolidated group, a single tax return is lodged for the groupGroup based on the consolidated results of all companies within the group.Group.
Withholding tax is payable on dividends, interest and royalties paid by Australian residents tonon-residents. In the case of dividend payments tonon-residents, withholding tax at a rate of 30% will apply. However, where
the recipient of the dividend is a resident of a country with which Australia has concluded a double taxation agreement, the rate of withholding tax is generally limited to between 5% and 15%, depending on the applicable agreement and percentage shareholding. Where dividends are paid out of profits that have been subject to Australian corporate tax there is no withholding tax, regardless of whether a double taxation agreement is in place.
Peru
PeruPeruvian taxes for resident individuals and domiciled corporations are based on their worldwide income.income, and fornon-resident individuals andnon-domiciled corporations are based on their Peruvian income source. The corporategeneral income tax rate applicable to domiciled corporations is 30%29.5% on taxable income.income and tonon-resident corporations is 30%. The income tax applied to interest paid tonon-residents is 4.99%. The dividends tax rate (to resident andnon-resident) is 5%. Capital gains are also taxed as ordinary income for domiciled corporations.
Tax losses may be carried forward by a domiciled corporation using one of the following methods:
losses may be carried forward and used in full in the subsequent four tax years. The balance of tax losses carried forward and not used during these four tax years is forfeited; or
losses may be carried forward, and up to 50% of the tax loss may be set off against taxable income in a subsequent tax year. The balance of the assessed losses may be carried forward and applied on this basis until the balance is fully used up, with no time limit on the carry forward.
On October 4, 2007, La Cima and its parent company, Gold Fields Corona (BVI) Limited, or Gold Fields Corona, signed Investment Stability Agreements with the relevant governmental authorities in Peru. These agreements, among other things, guarantee the current income tax regime, including a 4.1% withholding tax rate on dividends of non-domiciled corporations and a 30% corporate income tax rate, for a period of 10 years.
Peru’s revised royalty regime introduced in 2011 requires all mining companies to pay royalties on the exploitation of metallic and non-metallic resources. The revised royalty regime distinguishes between a company with formal stability agreements and those without such agreements. The Investor Stability Agreements signed by Gold Fields Corona and La Cima do not constitute a tax stability agreement for purposes of the new fiscal scheme.
Companies without signed Tax Stability agreements, such as La Cima, now pay a new royalty (which effectively replaces the existing royalty regime) calculated with reference to the operating margin and ranging from 1% (for operating margins of less than 10%) to 12% (for operating margins of more than 80%). All companies are also subject to a ‘Special tax on mining”, or IEM, ranging from 2% (for operating margins of less than 10%) to 8.4% (for operating margins of more than 85%). La Cima’s effective IEM rate for fiscal 2013 was 2.2% of revenue.
Companies with signed Tax Stability agreements who did not previously pay royalties are now subject to a Special Levy on Mining, or GEM, ranging from 4% for operating margins of less than 10% to 13.12% for operating margins of more than 85%. This does not apply to La Cima.
On December 31, 2014, tax law 30296 was approved for fiscal periods 2015 and beyond, impacting corporate income tax and withholding tax on dividends as shown below:
Year | Corporate income tax rate | Withholding tax rate on dividends | ||||||
Up to 2014 | 30 | % | 4.10 | % | ||||
2015 to 2016 | 28 | % | 6.80 | % | ||||
2017 to 2018 | 27 | % | 8.00 | % | ||||
From 2019 | 26 | % | 9.30 | % | ||||
Since La Cima is currently protected under the Legal Stability Agreement, the established changes will affect La Cima and Gold Fields Corona starting in fiscal 2017.
For fiscal 2015 and 2016, corporate income tax and withholding tax on dividends will remain unchanged at 30% and 4.1% respectively.
Exchange Rates
Gold Fields’ Australian and South African revenues and costs are very sensitive to the Australian dollar/U.S.US dollar exchange rate and the Rand/U.S. dollar exchange rate, because revenues are generated using a gold price denominated in U.S.US dollars, while the costs of the Australian and South African operations are incurred principally in Australian dollars and Rand, respectively. Depreciation of the Australian dollar and Rand against the U.S.US dollar reduces Gold Fields’ average costs when they are translated into U.S.US dollars, thereby increasing the operating margin of the Australian and South African operations. Conversely, appreciation of the Australian dollar and Rand results in Australian and South African operating costs being translated into U.S.US dollars at a lower Australian dollar/U.S.US dollar exchange rate and Rand/U.S.US dollar exchange rate, resulting in lower operating margins. The impact on profitability of any change in the value of the Australian dollar and Rand against the U.S.US dollar can be substantial. Furthermore, the exchange rates obtained when converting U.S.US dollars to Australian dollar and Rand are set by foreign exchange markets, over which Gold Fields has no control. For more information regarding fluctuations in the value of the Australian dollar and Rand against the U.S. dollar, see “Key Information—Exchange Rates.” In fiscal 2014,2016, movements in the U.S.US dollar/Rand exchange rate had a significant impact on Gold Fields’ results of operations as the Rand weakened 12.7%16% against the U.S.US dollar, from an average of R9.60R12.68 per U.S.$1.00 in fiscal 20132015 to R10.82R14.70 per U.S.$1.00 in fiscal 2014.2016. The Australian dollar weakened 6.7% against the U.S. dollar, fromwas similar at an average of A$0.96841.00 per U.S.$1.00 in fiscal 2013 to $0.9034 per U.S.$1.00 in fiscal 2014.0.75.
With respect to its operations in Ghana and Peru, a substantial portion of Gold Fields’ operating costs (including wages) are either directly incurred in U.S.US dollars or are translated to U.S.US dollars. Accordingly, fluctuations in the Ghanaian Cedi and Peruvian Nuevos Soles do not materially impact operating results for the Ghana and Peru operations.
During fiscal2016, Gold Fields had the following currency forward contract:
On February 25, 2016, South Deep entered into U.S.$/Rand forward exchange contracts for a total delivery of U.S.$69.8 million starting at July 2016 to December 2016. The average forward rate achieved over the six month period was R16.8273. The hedge was delivered into in July and August and the balance closed out in September 2016. The average rate achieved on delivery and close out was R13.8010, resulting in a positive cash flow of U.S.$14 million.
During 2015, Gold Fields had no currency forward contracts.
During 2014, Gold Fields had the following currency forward contract:
On October 1, 2014, South Deep entered into a US$U.S.$/Randzero-cost collar for U.S.$7.5 million per month for a period of six months starting October 2014. A floor of R11.2 and an average cap over the period of R12.0567 was achieved. As at December 31, 2014, the fair value of the collar was nil.
During fiscal 2013, Gold Fields had the following currency forward contract:
U.S.$120 million of expected gold revenue for the September and December 2013 quarters was sold forward on behalf of South Deep mine in May 2013 at an average forward rate of R9.9732, with monthly deliveries of U.S.$20 million starting July 22, 2013 until December 21, 2013.
See “Quantitative and Qualitative Disclosures about Market Risk—Foreign Currency Sensitivity—Foreign Currency Hedging Experience”.
Inflation
A period of significant inflation could adversely affect Gold Fields’ results and financial condition. For example, in fiscal 2014,2016, inflation in South Africa increased towas 6.8% (2015: 4.6% and 2014: 6.2% from 5.8% in fiscal 2013.). Further, over the past several years, production costs, especially wages and electricity costs, have increased considerably. The effect of these increases has adversely affected, and may continue to adversely affect, the profitability of Gold Fields’ South Deep operations.
In fiscal 2014,2016, the Group rationalizedcontinued rationalizing and prioritizedprioritizing capital expenditure without undermining the sustainability of its operations and continued prioritization of cash generation over production volumes. The Ghanaian operations concluded a Development Agreement with the government of Ghana for both the Tarkwa and Damang mines. The highlights of the agreement included reductions in the tax and royalty rates. The Group undertook further reductions in labor costs through a retrenchment process in Damang in preparation for rightsizing for the implementation ofDamang Reinvestment Plan. In addition, the Australian operations implemented a voluntary separation program at South Deep, retrenchmentsmargin improvement project.
In fiscal 2015, the Group undertook reductions in labor costs through completing the retrenchment process in Ghana following the closure of the heap leach facilities at Tarkwa and transition to a two shift system in Damang and rightsizing at the Australian operations following the Yilgarn South acquisition.closure of the Cave Rocks underground mine at St. Ives. In addition, the Group growth portfolio was further rationalized through the sale of Yanfolila and Chucapaca.
In fiscal 2013, the Group eliminated marginal mining by closing down unprofitable production, such as the heap leach operations at St. Ives and Tarkwa and low grade mining at Agnew. Additionsimplemented various business improvement initiatives to property, plant and equipment were rationalized and prioritized and, where appropriate, non-essential expenditure was deferred without compromising the future integrity of ore bodies and operations. In addition, Corporate, regional and operational structures were re-structured and right-sized to be fit-for-purpose and the GIP division was broken up.reduce costs across all regions.
Further, the majority of Gold Fields’ costs at the South African operations are in Rand and revenues from gold sales are in U.S. dollars. Generally, when inflation is high, the Rand potentially devalues thereby increasing Rand revenues and potentially offsetting the increase in costs. However, there can be no guarantee that any cost-saving measures or the effects of any potential devaluation will offset the effects of increased inflation and production costs.
The same applies to the Australian operations with regard to the link between Australian dollars and U.S.US dollars. The Peruvian and Ghanaian operations, on the other hand, are affected by inflation without a potential similar effect on revenue proceeds, thereby increasing the impact of inflation on the operating margins.
Capital Expenditures
Gold Fields will continue to be required to make capital investments in both new and existing infrastructure and opportunities and, therefore, management will be required to continue to balance the demands for capital expenditure in the business and allocate Gold Fields’ resources in a focused manner to achieve its sustainable
growth objectives. Gold Fields expects that its use of available capital resources and allocation of its capital expenditures may shift in future periods as it increases investment in certain of its exploration projects.
Capital expenditure decreasedincreased by U.S.$63.216 million, or 11.6%3%, from U.S.$543.7634 million in fiscal 20132015 to U.S.$480.5650 million in fiscal 2014. This decrease was due to rationalized and prioritized capital expenditure spending without undermining the sustainability of the operations.
The figures above represent U.S. GAAP capital expenditure. However, the Company prepares its financial records in accordance with IFRS and such IFRS information for the Group and by segment is what the Company’s chief operating decision maker reviews in allocating resources and making investment decisions. Therefore, the discussion that follows on capital expenditure focuses on such IFRS information which agrees to the geographical and segment information included in Note 26 to the consolidated financial statements.
On an IFRS basis, capital expenditure decreased by U.S.$130.3 million, or 17.6%, from U.S.$739.2 million in fiscal 2013 to U.S.$608.9 million in fiscal 2014.2016. Set out below are the capital expenditures made by Gold Fields during fiscal 2014.2016. Also, refer to “Cash Flows From Investing Activities”.
South African Operationoperation
Gold Fields spent U.S.R1,145 million (U.S.$92 million78 million) on capital expenditures at the South Deep operation in fiscal 20142016 and expects to spend approximately U.S.$78has budgeted R1,309 million on(U.S.$92.6 million) for capital expenditures at South Deep in fiscal 2015.2017.
Ghanaian Operationsoperations
Gold Fields spent U.S.$174168 million on capital expenditures at the Tarkwa operation in fiscal 20142016 and has budgeted U.S.$197180 million for capital expenditures at Tarkwa for fiscal 2015.2017.
Gold Fields spent U.S.$1638 million on capital expenditures at the Damang mine in fiscal 20142016 and has budgeted U.S.$19140 million of capital expenditures at Damang for fiscal 2015.2017.
Australian OperationsPeruvian operation
Gold Fields spent U.S.$118 million on capital expenditures at St. Ives in fiscal 2014 and has budgeted U.S.$139 million for capital expenditures at St. Ives in fiscal 2015.
Gold Fields spent U.S.$92 million on capital expenditures at Agnew/Lawlers in fiscal 2014 and has budgeted U.S.$74 million for capital expenditures at Agnew for fiscal 2015.
Gold Fields spent U.S.$15 million on capital expenditures at Darlot in fiscal 2014 and has budgeted U.S.$23 million for capital expenditures at Darlot for fiscal 2015.
Gold Fields spent U.S.$59 million on capital expenditures at Granny Smith in fiscal 2014 and has budgeted U.S.$85 million for capital expenditures at Granny Smith for fiscal 2015.
Peruvian Operations
Gold Fields spent U.S.$5143 million on capital expenditures at Cerro Corona in fiscal 20142016 and has budgeted U.S.$7453 million for capital expenditures at Cerro Corona for fiscal 2015.2017.
Australian operations
Gold Fields spent A$188 million (U.S.$140 million) on capital expenditures at St. Ives in fiscal 2016 and has budgeted A$185 million (U.S.$135 million) for capital expenditures at St. Ives in fiscal 2017.
Gold Fields spent A$94 million (U.S.$70 million) on capital expenditures at Agnew/Lawlers in fiscal 2016 and has budgeted A$87 million (U.S.$64 million) for capital expenditures at Agnew/Lawlers for fiscal 2017.
Gold Fields spent A$29 million (U.S.$21 million) on capital expenditures at Darlot in fiscal 2016 and has budgeted A$12 million (U.S.$8 million) for capital expenditures at Darlot for fiscal 2017.
Gold Fields spent A$121 million (U.S.$90 million) on capital expenditures at Granny Smith in fiscal 2016 and has budgeted A$115 million (U.S.$84 million) for capital expenditures at Granny Smith for fiscal 2017.
Gold Fields has budgeted A$153 million (U.S.$112 million) for capital expenditure at the Gruyere Gold Project for fiscal 2017.
The actual expenditures for the future periods noted above may be different from the amounts set out above and the amount of actual capital expenditure will depend on a number of factors, such as production volumes, the price of gold, copper and other minerals mined by Gold Fields and general economic conditions. Some of the factors are outside of the control of Gold Fields. Please see “Risk Factors” and “Information on the Company” for further information.
CriticalSignificant Accounting Policies andJudgements And Estimates
Gold Fields’ significant accounting policies are more fully described in note 2the accounting policies to its consolidated financial statements included elsewhere in this annual report. Some of Gold Fields’ accounting policies require the application of significant judgments and estimates by management that can affect the amounts reported in the consolidated financial statements. By their nature, these judgments are subject to a degree of uncertainty and are based on Gold Fields’ historical experience, terms of existing contracts, management’s view on trends in the gold mining industry, information from outside sources and other assumptions that Gold Fields considers to be reasonable under the circumstances. Actual results could differ from these estimates under different assumptions or conditions.
Gold Fields’ significant Refer to the accounting policies that are subject to significant judgments, estimates and assumptions are summarized below.
Business combinations
Management accounts for its business acquisitions under the acquisition method of accounting. The total value of the consideration paid for acquisitions is allocated to the underlying net assets acquired, based on their respective estimated fair values determined by using internal or external valuations. Management uses a number of valuation methods to determine the fair value of assets and liabilities acquired, including discounted cash flows, external market values, valuations on recent transactions or a combination thereof, and believes that it uses the most appropriate measure or a combination of measures to value each asset or liability.
In addition, management believes that it uses the most appropriate valuation assumptions underlying each of those valuation methods based on current information available, including discount rates, market risk rates, entity risk rates and cash flow assumptions. The accounting policy for valuation of business acquisitions is considered critical because judgments made in determining the estimated fair value and expected useful lives assigned to each class of assets and liabilities acquired can significantly impact the value of the asset or liability, including the impact on deferred taxes, the respective amortization periods and ultimately net profit. Therefore the use of other valuation methods, as well as other assumptions underlying these valuation methods, could significantly impact the determination of financial position and the results of operations.
Depreciation, depletion and amortization of mining assets
Depreciation, depletion and amortization charges are calculated using the units-of-production method and are based on Gold Fields’ current gold production as a percentage of total expected gold production over the lives
of Gold Fields’ mines. An item is considered to be produced at the time it is removed from the mine. The lives of the mines are estimated by Gold Fields’ mineral resources department using interpretations of mineral reserves, as determined in accordance with the SEC’s industry guide number 7.
Depreciation, depletion and amortization at Gold Fields’ remaining South African operation are calculated using above-infrastructure proven and probable reserves only, which, because of its reserve base and long life of 73 years, are less sensitive to changes in reserve assumptions. Accordingly, at this location, it is Gold Fields’ policy to update its depreciation, depletion and amortization calculations only once the new ore reserve declarations have been approved by Gold Fields’ Board. However, if Gold Fields’ management becomes aware of significant changes in its above-infrastructure reserves ahead of the scheduled updates, management would not hesitate to immediately update its depreciation, depletion and amortization calculations and then subsequently notify the Board.
A similar approach is followed at Gold Fields’ operations in Ghana and Peru, due to the longer life of the primary ore body. At Gold Fields’ Australian operations, where mine-life ranges from two to seven years, proven and probable reserves used for the calculation of depreciation, depletion and amortization are more susceptible to changes in reserve estimates. At these locations, Gold Fields’ depreciation, depletion and amortization calculations are updated on a more regular basis (at least quarterly) for all known changes in proven and probable reserves. The nature of the ore body, and the on-going information being gathered in connection with the ore body, facilitates these updates.
The estimates of the total expected future lives of Gold Fields’ mines could be different from the actual amount of gold mined in the future and the actual lives of the mines due to changes in the factors used in determining Gold Fields’ mineral reserves. Changes in management’s estimates of the total expected future lives of Gold Fields’ mines would therefore impact the depreciation, depletion and amortization charge recorded in Gold Fields’ consolidated financial statements. Changes due to acquisitions, sales or closures of shafts expected to have a material impact on Gold Fields’ depreciation, depletion and amortization calculations are incorporated in those calculations as soon as they become known.
Impairment of long-lived assets
Gold Fields reviews and tests the carrying amounts of assets when events or changes in circumstances suggest that the carrying amount may not be recoverable. Assets are grouped at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities.
Under U.S. GAAP, the impairment model for long-lived assets consists of two steps. The impairment analysis first compares the total estimated cash flows on an undiscounted basis to the carrying amount of the asset including goodwill, if any. If the undiscounted cash flows are less than the carrying amount of the asset, a second step is performed. The Group records an impairment as a charge to earnings if discounted expected future cash flows are less than the carrying amount.
The lowest level at which such cash flows are generated are generally at an individual operating mine, even if the individual operating mine is included in a larger mine complex.
If there are indications that an impairment may have occurred, Gold Fields prepares estimates of expected future cash flows for each group of assets. Expected future cash flows reflect:
estimated sales proceeds from the production and sale of recoverable gold and copper contained in proven and probable reserves;
expected future commodity prices and currency exchange rates (considering historical averages, current prices, forward pricing curves and related factors). In impairment assessments conducted in fiscal 2014, the Group used an expected long-term gold price of U.S.$1,300 and A.$1,444 per ounce and R420,000 per kilogram, and expected long-term exchange rates of R10.00 to U.S.$1.00 and
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expected future operating costs and capital expenditures to produce proven and probable gold reserves based on mine plans that assume current plant capacity, but exclude the impact of inflation; and
expected cash flows associated with value beyond proven and probable reserves.
Gold Fields records a reduction of a group of assets to fair value as a charge to earnings if expected future cash flows are less than the carrying amount. The process of determining fair value is subjective as gold mining companies typically trade at a market capitalization that is based on a multiple of net asset value and requires management to make numerous assumptions. Gold Fields estimates fair value by discounting the expected future cash flows using a discount factor that reflects a market-related rate of interest for a term consistent with the period of expected cash flows.
Expected future cash flows are inherently uncertain, and could materially change over time. They are significantly affected by reserve estimates, together with economic factors such as gold prices and currency exchange rates, estimates of costs to produce reserves and future sustaining capital.
Because of the significant capital investment that is required at many mines, if an impairment occurs, it could materially impact earnings. Due to the long-life nature of many mines, the difference between total estimated discounted net cash flows and carrying value can be substantial. An impairment is only recorded when the carrying amount of a long-lived asset exceeds the total estimated discounted net cash flows. Therefore, although the value of a mine may decline gradually over multiple reporting periods, the application of impairment accounting rules could lead to recognition of the full amount of the decline in value in one period. Due to the highly uncertain nature of future cash flows, the determination of when to record an impairment charge can be very subjective. Management makes this determination using available evidence, taking into account current expectations for each mining property.
For acquired exploration-stage properties, the purchase price is capitalized, but post-acquisition exploration expenditures are expensed. The future economic viability of exploration-stage properties largely depends upon the outcome of exploration activity, which can take a number of years to complete for large properties. Management monitors the results of exploration activity over time to assess whether an impairment may have occurred. The measurement of any impairment is made more difficult because there is not an active market for exploration properties, and because it is not possible to use discounted cash flow techniques due to the very limited information that is available to accurately model future cash flows.
In general, if an impairment occurs at an exploration stage property, it would probably have minimal value and most of the acquisition cost may have to be written down.
Gold Fields recorded asset impairments and write-offs (excluding inventories) amounting to U.S.$22.4 million in fiscal 2012, U.S.$154.0 million in fiscal 2013 and U.S.$12.7 million in fiscal 2014.
Impairment of goodwill
Gold Fields acquired the South Deep mine on December 1, 2006. Goodwill related to this acquisition is reflected in the balance sheet in the U.S. dollar reporting currency at U.S.$756.3 million. Gold Fields performs its annual impairment test of goodwill related to the South Deep mine at the end of each fiscal period.
Under U.S. GAAP, the goodwill impairment test consists of two steps. The first step, which compares the reporting unit’s fair value to its carrying amount, is used as a screening process to identify potential goodwill
impairment. If the carrying amount of a reporting unit exceeds the reporting unit’s fair value, the second step of the impairment test must be completed to measure the amount of the reporting unit’s goodwill impairment loss, if any. During this step, the reporting unit’s fair value is assigned to the reporting unit’s assets and liabilities, using the initial acquisition accounting guidance in ACS 805, in order to determine the implied fair value of the reporting unit’s goodwill. The implied fair value of the reporting unit’s goodwill is then compared with the carrying amount of the reporting unit’s goodwill to determine the goodwill impairment loss to be recognized, if any.
The fair value represents a discounted cash flow valuation based on expected future cash flows. The expected future cash flows used to determine the fair value of the reporting unit are inherently uncertain and could materially change over time. They are significantly affected by a number of factors, including, but not limited to, reserves and production estimates, together with economic factors such as the spot gold price and foreign currency exchange rates, estimates of production costs, future capital expenditure and discount rates. Therefore it is possible that outcomes within the next financial year that are materially different from the assumptions used in the impairment testing process could require an adjustment to the carrying values.
Management’s estimates and assumptions to estimate the fair value of the South Deep reporting unit include:
estimated sales proceeds from the production and sale of recoverable ounces of gold contained in proven and probable reserves;
expected future commodity prices and currency exchange rates (considering historical averages, current prices, forward pricing curves and related factors). In impairment assessments conducted in fiscal 2014, the Group used an expected long-term gold price of $1,300 per ounce and R420,000 per kilogram (2013: $1,300 per ounce and R400,000 per kilogram) and expected long-term exchange rates of R10.00 to U.S.$1.00 for life of mine (2013:R9.50 to U.S.$1.00);
expected future operating costs and capital expenditures to produce proven and probable gold reserves based on mine plans that assume current plant capacity, but exclude the impact of inflation;
a nominal discount rate of between 12.9% and 14.1% (2013: 10.9% and 12.3%). A nominal discount rate is used due to the fact that South Deep is not in a tax paying position; and
market value, at U.S.$63.7 per ounce (U.S.$50.0 per ounce) used for resource with infrastructure.
Gold Fields has determined that the fair value of the South Deep mine is in excess of its carrying value of U.S.$2,640.6 million and the goodwill related to the South Deep mine was therefore not considered impaired.
Income Taxes
Management establishes a valuation allowance for deferred tax assets where it is more likely than not that some or all deferred tax assets will not be realized based on projections. These determinations are based on the projected taxable income and realization of tax allowances, tax losses and unredeemed capital expenditure. In the event that these tax assets are not realized, an adjustment to the valuation allowance would be required, which would be charged to income in the period that the determination was made. Likewise, should management determine that Gold Fields would be able to realize tax assets in the future in excess of the recorded amount, an adjustment to reduce the valuation allowance would be recorded generally as a credit to income in the period that the determination is made.
Gold Fields is periodically required to estimate the tax basis of assets and liabilities. Where tax laws and regulations are either unclear or subject to varying interpretations, it is possible that changes in these estimates could occur that materially affect the amounts of deferred income tax assets and liabilities recorded in the
consolidated financial statements. Changes in deferred tax assets and liabilities generally have a direct impact on earnings in the period of changes. See note 7 to the consolidated financial statements which appearincluded elsewhere in this annual report.report for the more significant areas requiring the use of management judgements and estimates.
Gold Fields recognizes the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical meritsRESULTS FOR THE PERIOD
Years ended December 31, 2016 and December 31, 2015
Profit/(loss) attributable to owners of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that hasparent was a greater than 50% likelihood of being realized upon settlement. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.
Derivative financial instruments
The determination of the fair value of derivative financial instruments, when marked-to-market, takes into account estimates such as interest rates, commodity prices and foreign currency exchange rates under prevailing market conditions, depending on the nature of the financial derivatives.
These estimates may differ materially from actual interest rates and foreign currency exchange rates prevailing at the maturity dates of the financial derivatives and, therefore, may materially influence the values assigned to the financial derivatives, which may result in a charge to or an increase in Gold Fields’ earnings through maturity of the financial derivatives.
Environmental rehabilitation costs
Gold Fields makes provision for environmental rehabilitation costs and related liabilities when environmental disturbances occur, based on management’s interpretations of current environmental and regulatory requirements. The provisions are recorded by discounting the expected cash flows associated with the environmental rehabilitation using a discount factor that reflects a credit-adjusted risk-free rate of interest. The principal factors that can cause expected cash flows to change are: the construction of new processing facilities; changes in the quantities of material in reserves and a corresponding change in the life-of-mine plan; changing ore characteristics that ultimately impact the environment; changes in water quality that impact the extent of water treatment required; and changes in laws and regulations governing the protection of the environment. In general, as the end of the mine life becomes nearer, the reliability of expected cash flows increases, but, earlier in the mine life, the estimation of rehabilitation liabilities is inherently more subjective. Significant judgments and estimates are made when estimating the fair value of rehabilitation liabilities. In addition, expected cash flows relating to rehabilitation liabilities could occur over periods up to the planned life of mine at the time the estimate is made and the assessment of the extent of environmental remediation work is highly subjective.
While management believes that the environmental rehabilitation provisions made are adequate and that the interpretations applied are appropriate, the amounts estimated for the future liabilities may, when considering the factors discussed above, differ materially from the costs that will actually be incurred to rehabilitate Gold Fields’ mine sites in the future.
Stockpiles, gold-in-process, heap leach pads and product inventories
Costs that are incurred in or benefit the production process are accumulated as stockpiles, gold-in-process, ore on leach pads and product inventories. Lower of cost or market value tests are performed at least annually and represent the estimated future sales price of the product based on prevailing and long-term metals prices, less estimated costs to complete production and bring the product to sale.
Stockpiles are measured by estimating the number of tonnes added and removed from the stockpile, the number of contained gold ounces based on assay data, and the estimated recovery percentage based on the expected processing method. Stockpile tonnages are verified by periodic surveys.
Although the quantities of recoverable metal are reconciled by comparing the grades of ore to the quantities of gold actually recovered (metallurgical balancing), the nature of the process inherently limits the ability to precisely monitor recoverability levels. As a result, the metallurgical balancing process is constantly monitored and the engineering estimates are refined based on actual results over time.
Concentrate inventories represent concentrate available for shipment. The concentrate inventory is valued at the average cost, including an allocated portion of amortization. Costs are added to and removed from the concentrate inventory based on tonnes of concentrate and are valued at the lower of cost and market value. Management’s determination of the percentage gold and copper content and the total quantity by weight of gold and copper in the concentrate depends on assay and laboratory results for the content and survey for the quantity.
The recovery of gold from certain oxide ores is best achieved through the heap leaching process. Under this method, ore is placed on leach pads where it is permeated with a chemical solution, which dissolves the gold contained in the ore. The resulting “pregnant” solution is further processed in a leach plant where the gold in solution is recovered. For accounting purposes, value is added to leach pads based on current mining costs, including applicable depreciation and amortization relating to mining operations. Value is removed from the leach pad as ounces are recovered in circuit at the leach plant based on the average cost per recoverable ounce of gold on the leach pad.
The engineering estimates of recoverable gold on the heap leach pads are calculated from quantities of ore placed on the pads (measured tonnes added to the leach pads), the grade of ore placed on the leach pads (based on assay data) and a recovery percentage (based on the leach process and the ore type). In general, the leach pad production cycles project recoveries of approximately 50% to 70% of the placed recoverable ounces in the first year of leaching, declining each year thereafter until the leaching process is completed.
Although the quantities of recoverable gold placed on the leach pads are reconciled by comparing the grades of ore placed on the pads to the quantities of gold actually recovered (metallurgical balancing), the nature of the leaching process inherently limits the ability to precisely monitor inventory levels. As a result, the metallurgical balancing process is constantly monitored and engineering estimates are refined based on actual results over time. Variations between actual and estimated quantities resulting from changes in assumptions and estimates that do not result in write-downs to market are accounted for on a prospective basis. The ultimate recovery of gold from the pad will not be known until the leaching process is terminated.
Gold Fields recorded a write-down to market valueprofit of U.S.$19.2163 million (or U.S.$0.20 per share) for fiscal 2016 compared to a loss of U.S.$242 million (or U.S.$0.31 per share) for fiscal 2015. The reasons for this increase are discussed below.
Revenue
Revenue increased by 8% from U.S.$2,545 million in fiscal 2012,2015 to U.S.$61.32,750 million in fiscal 2013 and U.S.$1.3 million in fiscal 2014.
Share-based compensation — equity-settled
U.S. GAAP requires Gold Fields to determine the fair value of shares and share options as of the date of the grant, which is then amortized as share-based compensation expense in the statement of operations over the vesting period of the option grant. Gold Fields determines the grant-date fair value of shares and options using a Black-Scholes or Monte Carlo simulation valuation model, which requires Gold Fields to make assumptions regarding the estimated term of the option, share price volatility, expected forfeiture rates and Gold Fields’ expected dividend yield.
While Gold Fields’ management believes that these assumptions are appropriate, the use of different assumptions could have a material impact on the fair value of the option grant and the related recognition of share-based compensation expense in the consolidated income statement. Gold Fields’ options have characteristics significantly different from those of traded options and therefore fair values may also differ.
Share-based compensation charges are included in production costs, corporate expenditure, exploration expenditure and other costs where compensation costs of the underlying employees are classified.
Share-based compensation — cash-settled
The group operates a long-term incentive plan. The vesting of the awards is based on total shareholder return and free cash flow margin. These are accounted for as follows: a) the total shareholder return portion is treated as a share-based compensation plan. Compensation costs for all share-based payments are based on the fair value estimated in accordance with the provisions of ASC 718, Stock-Based Compensation. b) the free cash flow margin portion is treated as a deferred compensation plan. Compensation costs are accrued over the period of service when management considers the achievement of the performance condition probable in accordance with the provisions of ASC 710, Deferred Compensation.
Reserves for contingencies and litigation
The Group’s current estimated liabilities for loss contingencies arising from claims, assessments, litigation, fines, penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. The actual costs may vary significantly from estimates for a variety of reasons. As additional information becomes available, the Group will assess the potential liability related to loss contingencies and revise our estimates. Such revisions in estimates of the liabilities for loss contingencies could materially impact the results of operation and financial position. See note 22 to the consolidated financial statements for legal proceedings and other contingencies.
Recently adopted accounting pronouncements
Liabilities
During February 2013, the Accounting Standard Codification, or the ASC guidance related to liabilities: obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date was updated. The update requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed as the sum of the amount the entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the entity expects to pay on behalf of its co-obligors. The update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The new standard is to be applied prospectively but retrospective application is permitted. The Company implemented the provisions of ASU 2013-04 as of January 1, 2014. The updated guidance did not impact Gold Fields’ financial statements.
Income Taxes
During July 2013, the ASC guidance related to income taxes: presentation of an unrecognized tax benefit when a net operating loss carry forward, a similar tax loss, or a tax credit carry forward exists was updated. The update requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carry forward, a similar tax loss, or a tax credit carry forward. The update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The new standard is to be applied prospectively but retrospective application is permitted. The Company implemented the provisions of ASU 2013-11 as of January 1, 2014. The updated guidance did not impact Gold Fields’ financial statements.
Recently issued accounting pronouncements not yet adopted
Revenue
During May 2014, the ASC guidance related to revenue from contracts with customers was updated. The update requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should also disclose sufficient quantitative and qualitative information to enable users of
financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is effective for annual reporting periods beginning after December 15, 2016. Gold Fields will implement the provisions of ASU 2014-09 as of January 1, 2017. Gold Fields does not expect that the updated guidance will materially impact its financial statements.
Discontinued operations
During April 2014, the ASC guidance related to reporting discontinued operations and disclosures of disposals of components of an entity was updated. The update changes the requirements for reporting discontinued operations and limits discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have a major effect on an entity’s operations and financial results. The new standard is effective for any disposals of components of a company in annual reporting periods beginning after December 15, 2014. Gold Fields will implement the provisions of ASU 2014-08 as of January 1, 2015. Gold Fields does not expect that the updated guidance will impact its financial statements.
Results of Operations
Years Ended December 31, 2014 and December 31, 2013
Revenues
Product sales decreased by U.S.$37.5 million, or 1.3%, from U.S.$2,906.3 million in fiscal 2013 to U.S.$2,868.8 million in fiscal 2014. The decrease in product sales was primarily due to a decrease in the average realized gold price of 9.9% from U.S.$1,386 per ounce in fiscal 2013 to U.S.$1,249 per ounce in fiscal 2014, partially offset by an increase of 0.199 million equivalent ounces, or 9.5%, in total equivalent gold sold, from 2.097 million ounces in fiscal 2013 to 2.296 million ounces in fiscal 2014 and an increase in the average realized copper pricerevenue of 3.8% from U.S.$6,575 per tonne to U.S.$6,827 per tonne.
In Peru, copper production is converted to equivalent gold ounces on a monthly basis using average copper and gold prices for the month in which the copper205 million was produced.
At South Deep, gold sales decreased by 33.4% from 0.302 million ounces in fiscal 2013 to 0.201 million ounces in fiscal 2014. This was due to decreased underground mining volumes resulting from the extensive ground support remediation program introduced in May 2014. The decrease in the gold sales was due to a 44.6% decrease in reef tonnes broken and a 45.9% decrease in destress production year on year.
At the West African operations, total gold sales decreased by 6.3% from 0.79 million ounces in fiscal 2013 to 0.74 million ounces in fiscal 2014. Tarkwa decreased by 11.1% from 0.63 million ounces in fiscal 2013 to 0.56 million ounces in fiscal 2014 due to cessation of crushing and stacking operations at the heap leach facilities. Damang’s gold sales increased by 16.3% from 0.153 million ounces to 0.178 million ounces due to higher head grade mined in 2014 and higher throughput.
At the Americas operation, total gold equivalent sales increased by 6.5% from 0.31 million gold equivalent ounces in fiscal 2013 to 0.33 million gold equivalent ounces in fiscal 2014, mainly due to an increase of 9% in ore processedthe average US dollar gold price
for the year from U.S.$1,140 per equivalent ounce in fiscal 2015 to U.S.$1,241 per equivalent ounce in fiscal 2016. The rand weakened by 16% to the US dollar from an average of R12.68 in fiscal 2015 to R14.70 in fiscal 2016 and higher copperthe average Australian/US dollar exchange rate was similar at A$1=U.S.$0.75.
Gold sales decreased by 1% from 2,233,300 equivalent ounces in fiscal 2015 to 2,216,400 equivalent ounces in fiscal 2016. Gold sales at the South African operation increased by 46% from 6,160 kilograms (198,000 ounces) to 9,001 kilograms (289,400 ounces). Gold sales at the Ghanaian operations decreased by 5% from 753,900 ounces to 715,800 ounces. Gold equivalent sales at the Peruvian operation (Cerro Corona) decreased by 8% from 293,300 equivalent ounces to 268,900 equivalent ounces. At the Australian operations, gold sales decreased by 5% from 988,000 ounces to 942,400 ounces. As a general rule, Gold Fields sells all the gold it produces in the year of production.
| 2016 | 2015 | |||||||||||||||||||||||
| Revenue | Gold sold | Gold produced | Revenue | Gold sold | Gold produced | |||||||||||||||||||
| (U.S.$ million) | (’000) (Ozs) | (’000) (Ozs) | (U.S.$ million) | (’000) (Ozs) | (’000) (Ozs) | |||||||||||||||||||
South Deep | 358.2 | 289.4 | 290.4 | 232.3 | 198.0 | 198.0 | ||||||||||||||||||
Tarkwa | 708.9 | 568.1 | 568.1 | 680.7 | 586.1 | 586.1 | ||||||||||||||||||
Damang | 183.4 | 147.7 | 147.7 | 194.8 | 167.8 | 167.8 | ||||||||||||||||||
Cerro Corona | 322.3 | 268.9 | 270.2 | 292.2 | 293.3 | 295.6 | ||||||||||||||||||
St. Ives | 452.3 | 362.9 | 362.9 | 431.8 | 371.9 | 371.9 | ||||||||||||||||||
Agnew/Lawlers | 285.4 | 229.3 | 229.3 | 273.9 | 236.6 | 236.6 | ||||||||||||||||||
Darlot | 83.1 | 66.4 | 66.4 | 91.3 | 78.4 | 78.4 | ||||||||||||||||||
Granny Smith | 355.8 | 283.8 | 283.8 | 348.4 | 301.1 | 301.1 | ||||||||||||||||||
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Total | 2,749.5 | 2,216.4 | 2,218.7 | 2,545.4 | 2,233.3 | 2,235.6 | ||||||||||||||||||
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At South Deep in South Africa, gold sales increased by 46% from 6,160 kilograms (198,000 ounces) to 9,001 kilograms (289,400 ounces) mainly due to increased volumes and grades.
At the AustralasianGhanaian operations, total gold sales increasedat Tarkwa decreased by 47.1%3% from 0.70 million586,100 ounces in fiscal 2013 to 1.03 million568,100 ounces in fiscal 2014 mainly due to the inclusion of the Yilgarn South assets for the full year in 2014 as opposed to only one quarter in 2013. At St. Ives,lower yield. Damang’s gold sales decreased by 10.0%12% from 0.40 million167,800 ounces to 0.36 million147,700 ounces mainly due to lower yield.
At Cerro Corona in Peru, copper production increased by 7% from 28,702 tonnes to 30,667 tonnes and gold production decreased by 5% from 158,900 ounces to 150,200 ounces. As a result gold equivalent sales decreased by 8% from 293,300 ounces to 268,900 ounces due to lower copper to gold price ratio as well as lower gold head grades treated and lower gold recovery.
At the Australian operations, production at St. Ives decreased by 2% from 371,900 ounces to 362,900 ounces due to lower grade or ore milled following the closure of Argothe Cave Rocks and lowerAthena underground head grade.mines and transition to a predominantly open pit operation. At Agnew/Lawlers, gold sales increaseddecreased by 25.5%3% from 0.216 million236,600 ounces in fiscal 2013 to 0.271 million229,300 ounces in fiscal 2014mainly due to the inclusion of Lawlers for the full yeara reduction in 2014 as opposedore processed. Gold production at Darlot decreased by 15% from 78,400 ounces to only one quarter in 2013.66,400 ounces due to lower grades mined. At Darlot
and Granny Smith, gold sales increasedproduction decreased by 6% from 0.02 million301,100 ounces to 0.08 million283,800 ounces and from 0.06 million ounces to 0.315 million ounces, respectively, due to being included for the full yearlower grades mined and an increase in 2014stockpiled ore as opposed to only one quarter in 2013.
| Fiscal 2013 | Fiscal 2014 | |||||||
| Gold equivalent ounces sold | Gold equivalent ounces sold | |||||||
| (‘000 oz) | (‘000 oz) | |||||||
South Africa | 302 | 201 | ||||||
South Deep | 302 | 201 | ||||||
Ghana | 785 | 736 | ||||||
Tarkwa(1) | 632 | 558 | ||||||
Damang(2) | 153 | 178 | ||||||
Peru | 309 | 329 | ||||||
Cerro Corona(3) | 309 | 329 | ||||||
Australia | 700 | 1,031 | ||||||
St. Ives | 403 | 362 | ||||||
Agnew/Lawlers | 216 | 271 | ||||||
Darlot | 20 | 83 | ||||||
Granny Smith | 62 | 315 | ||||||
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Total(4)(5) | 2,097 | 2,296 | ||||||
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Notes:
Production costs
Production costs decreased by U.S.$11.8 million, or 0.6%, from U.S.$1,819.9 million in fiscal 2013 to U.S.$1,808.1 million in fiscal 2014.
This decrease was due to cost saving initiatives mainly at the West African operations and South Deep, partially offset by inflationary increases, annual wage increases, increases in electricity tariffs in South Africa and Australia as well as the inclusiona consequence of the Yilgarn South assets for a full year in fiscal 2014 as opposed to only one quarter in fiscal 2013.timing of the December milling campaign.
The figures above represent U.S. GAAP production costs. However, the Company prepares its financial records in accordance with IFRS and such IFRS information for the Group and by segment is what the Company’s chief operating decision maker reviews in allocating resources and making investment decisions. Therefore, the discussion that follows onCost of Sales
Cost of sales, which comprise operating costs, (excluding amortization and depreciation) and gold inventory change focuses on such IFRS information which agrees to the geographical and segment information included in Note 26 to the consolidated financial statements.
Operating costs (excludingamortization and depreciation, and amortization)
Operating costs (excluding depreciation and amortization) increased marginally from U.S.$1,678.72,066 million in fiscal 20132015 to U.S.$1,684.92,067 million in fiscal 2014.2016.
Operating costs
Operating costs increased marginally from U.S.$1,431 million in fiscal 2015 to U.S.$1,433 million in fiscal 2016.
At the South Deep operation in South Africa, operating costs (excluding amortization and depreciation) decreasedincreased by 14.0%33% from R3,089.1R3,000 million (U.S.$321.8237 million) to R2,656.5R4,003 million (U.S.$245.5272 million). This decreaseincrease of R432.6R1,003 million (U.S.$76.3 million) was mainly due to lowerthe 47% increase in production, as well as cost restructuring partially offset by annual wagesalary increases, the electricity increase and normal inflationary increases.an increase in employees and contractors in line with the strategy to sustainably improve all aspects of the operation and to position the mine to achieve the targets set out in the Rebase Plan.
At the GhanaGhanaian operations, operating costs (excluding amortization and depreciation) decreased by 14.5%7% from U.S.$644.8519 million in fiscal 20132015 to U.S.$551.4481 million in fiscal 2014.2016. This decrease of U.S.$93.438 million was mainly at TarkwaDamang due to lower production, good cost control and lower contractormining and consumable costs due toin line with the closure of the heap leach facilities. Thislower production. It was partially offset by increased costs at Damang due to the increased production as well as normal inflationary increases and annual wage increases at both operations.Tarkwa. At Tarkwa, operating costs (excluding amortization and depreciation) decreasedincreased by 21.1%3% from U.S.$473.7334 million to U.S.$373.9345 million and at Damang, operating costs (excluding amortization and depreciation) increaseddecreased by 3.8%26% from U.S.$171.1184 million to U.S.$177.6136 million.
At the Cerro Corona operation in Peru, operating costs (excluding amortization and depreciation) decreased by 1.9% fromof U.S.$161.3144 million in fiscal 20132016 were similar to U.S.$158.2 million in fiscal 2014, mainly due to a decrease in workers statutory participation in profits.2015.
At the Australian operations, operating costs (excluding amortization and depreciation) increased by 42.0%2% from A$569.2709 million (U.S.$550.8533 million) in fiscal 20132015 to A$808.2720 million (U.S.$729.8537 million) in fiscal 2014, mainly due to the inclusion of the Yilgarn South Assets for the full year in fiscal 2014, as opposed to only one quarter in fiscal 2013.2016. At StSt. Ives, operating costs (excluding amortization and depreciation) decreased by 9.4% fromremained similar at A$357.1259 million (U.S.$345.5195 million) to A$323.7 million (U.S.$292.3 million). This decrease of A$33.4 million was mainly due to a decrease in surface operational waste tonnes mined and cost improvements. At Agnew/Lawlers, operating costs (excluding amortization and depreciation) increased by 37.3%3% from A$139.5190 million (U.S.$135.0143 million) to A$191.6195 million (U.S.$173.0146 million). This increase of A$52.1 million was mainly due to the inclusion of Lawlers for the full year in 2014 compared to only one quarter in fiscal 2013. Operating costs (excluding amortization and depreciation) at Darlot increaseddecreased by 306.7%4% from A$22.380 million (U.S.$21.660 million) to A$90.777 million (U.S.$81.957 million) and atdue to cost reduction measures applied to mining activities. At Granny Smith, itoperating costs increased by 301.4%4% from A$50.4181 million (U.S.$48.8136 million) to A$202.3million189 million (U.S.$182.6141 million), both due to the operations being included for the full year in fiscal 2014 compared to only one quarter in fiscal 2013.additional volumes.
Gold inventory change
The gold inventory credit to costs decreased by 39.0% fromof U.S.$11.846 million in fiscal 20132016 compared with a charge to costs of U.S.$7.225 million in fiscal 2014.2015.
At Tarkwa,South Deep, the gold inventory debitcredit of U.S.Rnil (U.S.$30.8 millionnil) in fiscal 20132015 compared with a credit of U.S.R11 million (U.S.$2.3 million1 million) in fiscal 2014. The credit in fiscal 2014 was2016, due to an increase in inventory during the year. The charge in fiscal 2013 was due to a draw-down of inventory.gold produced not sold atyear-end.
At Damang,Tarkwa, the gold inventory credit of U.S.$11.17 million in fiscal 2013 was2015 compared with U.S.$18 million in fiscal 2016, both due to an increaseabuild-up of stockpiles.
At Damang, the gold inventory charge of U.S.$2 million in stockpilesfiscal 2015 compared with a chargecredit to costs of U.S.$2.1 millionnil in fiscal 20142016, due to a draw-downdrawdown of stockpiles.stockpiles and gold in circuit in fiscal 2015 compared to abuild-up of gold in circuit in fiscal 2016.
At Cerro Corona, the gold inventory creditcharge of U.S.$18.81 million in fiscal 20132015 compared with a chargecredit to costs of U.S.$1.54 million in fiscal 2014. The credit2016, due to abuild-up of concentrate inventory in fiscal 2013 was2016 compared with a U.S.$1 million drawdown in fiscal 2015.
At St. Ives, the charge to costs of A$34 million (U.S.$25 million) in fiscal 2015 compared with a credit to costs of A$15 million (U.S.$11 million), due to abuild-up of sulphide on stockpiles while the charge in fiscal 2014 was due to2016 compared with a drawdown of sulphide stockpiles.stockpiles in fiscal 2015.
At St Ives,Agnew/Lawlers, the credit to costs of A$9.12 million (U.S.$8.81 million) in fiscal 2013 compared with2015 increased to A$11.07 million (U.S.$9.95 million) in fiscal 2014. Both credits were as2016, both due to a resultbuild-up of a build-up in run-of-mine stockpiles.
At Agnew, the gold inventory charge of A$1.2 million (U.S.$1.2 million) in fiscal 2013 compared with A$0.3 million (U.S.$0.3 million) in fiscal 2014. The charge in fiscal 2013 was due to processing of the Songvang open pit stockpiles built-up in fiscal 2011, partially offset by the addition of the Lawlers stockpiles.
At Darlot, the credit to costs of A$1.41 million (U.S.$1.31 million) in fiscal 2013 as a result of a build-up in run-of-mine stockpiles2015 compared with a charge to costs of A$1.91 million (U.S.$1.7 million) in fiscal 2014nil) due to a drawdown of gold in run-of-mine stockpiles.circuit in fiscal 2016 compared to abuild-up of gold in circuit in fiscal 2015.
At Granny Smith, the charge of A$7 million (U.S.$5 million) in fiscal 2015 compared to a credit to costs of A$3.810 million (U.S.$3.77 million) due to abuild-up of stockpiles in fiscal 20132016 compared with A$nil (U.S.$nil)to a drawdown of stockpiles in fiscal 2014. The credit in fiscal 2013 was as a result of a build-up in run-of-mine stockpiles.2015.
DepreciationAmortization and amortizationdepreciation
Depreciation and amortization charges increased by U.S.$108.8 million, or 19.1%, from U.S.$568.5 million in fiscal 2013 to U.S.$677.3 million in fiscal 2014. Depreciation and amortization is calculated on theunits-of-production method and is based on current gold production as a percentage of total expected gold production over the lives of the different mines. In South Africa, at South Deep, the decreased amortization was due to the lower production. At the West Africa operations, Tarkwa’s amortization decreased due to lower depreciation of the North Heap Leach assets and a lower asset base. Damang’s amortization decreased due to a lower asset base following the impairment recognized in fiscal 2013. In Australia, at St. Ives, amortization increased due to higher amortization rates at the open pits. At Agnew, amortization increased mainly due to increased production from the inclusion of Lawlers for the full year. At Darlot and Granny Smith amortization increased as a result of higher production due to the operations being included for a full year in 2014 as opposed to only one quarter in 2013. Amortization at Cerro Corona increased due to the change in life of mine reserves, which form the basis of the units of production depreciation calculation.
The figures above represent U.S. GAAP depreciation and amortization. However, the Company prepares its financial records in accordance with IFRS and such IFRS information for the Group and by segment is what the Company’s chief operating decision maker reviews in allocating resources and making investment decisions. Therefore, the table and the discussion that follows on depreciation and amortization focuses on such IFRS information which agrees to the geographical and segment information included in Note 26 to the consolidated financial statements.
The table below depicts the changes from December 31, 20122015 to December 31, 2013 and December 31, 2013 to December 31, 20142016 for proven and probable managed gold and equivalent reserves and for the life of minelife-of-mine for each operation and the resulting impact on the amortization charge in fiscal 2013 and 2014, respectively.2016. The amortization in fiscal 2016 was based on the reserves as at December 31, 2015. Thelife-of-mine information is based on the operations’ strategic plans, adjusted for proven and probable reserve balances. In basic terms, amortization is calculated using the life of minelife-of-mine for each operation, which is based on: (1) the proven and probable reserves for the operation at the start of the relevant year (which are taken to be the same as at the end of the prior fiscal year and using reserves)year); and (2) the amount of gold produced by the operation during the year. The ore reserve statement as at December 31, 20142016 became effective on January 1, 2015.2017.
| Proved and probable reserves as of | Life of mine | Amortization for the year ended | Proved and Probable Mineral Reserves as of | Life of mine | Amortization and depreciation for the year ended | |||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2012 | December 31, 2013 | December 31, 2014 | December 31, 2013 | December 31, 2014 | December 31, 2013 | December 31, 2014 | December 31, 2014 | December 31, 2015 | December 31, 2016 | December 31, 2015 | December 31, 2016 | December 31, 2015 | December 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||
| (‘000 oz) | (years) | ($ million) | (‘000 oz) | (years) | (U.S.$ million) | |||||||||||||||||||||||||||||||||||||||||||||||||||
South Africa region | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South Deep | 39,100 | 38,200 | 38,000 | 74 | 73 | 98.9 | 74.5 | 38,000 | 37,300 | 37,300 | 81 | 79 | 67.9 | 71.5 | ||||||||||||||||||||||||||||||||||||||||||
West African region | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tarkwa(1) | 10,100 | 7,300 | 7,500 | 17 | 17 | 137.6 | 141.6 | 7,500 | 6,700 | 6,100 | 16 | 15 | 162.3 | 184.4 | ||||||||||||||||||||||||||||||||||||||||||
Damang(2) | 4,100 | 1,100 | 1,200 | 6 | 6 | 30.6 | 20.9 | 1,200 | 1,000 | 1,700 | 5 | 8 | 26.4 | 17.8 | ||||||||||||||||||||||||||||||||||||||||||
Americas region | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cerro Corona(3) | 5,200 | 3,700 | 3,200 | 10 | 9 | 48.8 | 79.6 | 3,000 | 2,800 | 2,400 | 8 | 7 | 100.1 | 115.6 | ||||||||||||||||||||||||||||||||||||||||||
Australasian region | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
St. Ives | 2,200 | 2,000 | 1,800 | 6 | 6 | 194.3 | 140.5 | 1,800 | 1,500 | 1,700 | 5 | 5 | 109.9 | 144.8 | ||||||||||||||||||||||||||||||||||||||||||
Agnew/Lawlers | 1,200 | 1,000 | 900 | 4 | 5 | 71.1 | 96.4 | 900 | 700 | 500 | 4 | 3 | 62.0 | 77.1 | ||||||||||||||||||||||||||||||||||||||||||
Darlot | — | 200 | 100 | 2 | 2 | 3.6 | 16.6 | 100 | 30 | 100 | 0.5 | 1 | 25.8 | 14.4 | ||||||||||||||||||||||||||||||||||||||||||
Granny Smith | — | 800 | 900 | 7 | 5 | 21.0 | 84.6 | 900 | 1,300 | 1,700 | 9 | 9 | 54.1 | 45.0 | ||||||||||||||||||||||||||||||||||||||||||
Corporate and other | — | — | — | — | — | 5.0 | 2.0 | — | — | — | — | — | 1.4 | 8.6 | ||||||||||||||||||||||||||||||||||||||||||
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Total reserves(4) | 61,900 | 54,300 | 53,600 | 610.9 | 656.7 | 53,400 | 51,330 | 51,500 | 609.9 | 679.2 | ||||||||||||||||||||||||||||||||||||||||||||||
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Notes:
| (1) | As of December 31, |
| (2) | As of December 31, |
| (3) | As of December 31, |
| (4) | As of December 31, |
DepreciationAmortization and amortizationdepreciation increased by 8%,11% from U.S.$610.9610 million in fiscal 2015 to U.S.$679 million in fiscal 2016.
At South Deep in South Africa, amortization and depreciation increased by 22% from R861 million (U.S.$68 million) in fiscal 2015 to R1,051 million (U.S.$72 million) mainly due to an increase in production.
At the Ghanaian operations, amortization and depreciation increased by 7% from U.S.$189 million in fiscal 2015 to U.S.$202 million in fiscal 2016. Tarkwa increased by 14% from U.S.$162 million to U.S.$656.7184 million mainly due to a reduction in reserves. Damang decreased by 31% from U.S.$26 million to U.S.$18 million mainly due to the asset specific impairment at Damang at the end of 2015 and a decrease in production in fiscal 2016.
At Cerro Corona in Peru, amortization and depreciation increased by 16% from U.S.$100 million in fiscal 2014.
In South Africa, amortization at South Deep decreased by 15.1% from R949.8 million (U.S.$98.9 million) in fiscal 20132015 to R806.2 million (U.S.$74.5 million) in fiscal 2014 mainly due to lower production which is used in the calculation of amortization.
At the West African operations, amortization decreased by 3.4% from U.S.$168.3116 million in fiscal 2013 to U.S.$162.5 million in fiscal 2014. Tarkwa increased by 2.9% from U.S.$137.6 million to U.S.$141.6 million2016. This increase is due to additions to property, plantreduction in gold and equipment. Damang decreased by 31.7% from U.S.$30.6 million to U.S.$20.9 million due to a decrease in the carrying value of property, plant and equipment following the impairment of assets in fiscal 2013.
In South America, amortization at Cerro Corona increased by 63.1% from U.S.$48.8 million in fiscal 2013 to U.S.$79.6 million in fiscal 2014. This significant increase in depreciation from fiscal 2013 to fiscal 2014 was due to the change in the life of mine reserves, which form the basis of the units of production amortization calculation.copper reserves.
At the Australian operations, amortization and depreciation increased by 25.0%13%, from A$299.6335 million (U.S.$290.0252 million) in fiscal 20132015 to A$374.4377 million (U.S.$338.1281 million) in fiscal 20142016. At St. Ives, amortization and depreciation increased by 33% from A$146 million (U.S.$110 million) in fiscal 2015 to A$194 million (U.S.$145 million) due to a decrease in reserves. Agnew/Lawlers increased by 26% from A$82 million (U.S.$62 million) in fiscal 2015 to A$103 million (U.S.$77 million) mainly due to a decrease in reserves. amortization and depreciation at Darlot decreased by 44% from A$34 million (U.S.$26 million) to A$19 million (U.S.$14 million) mainly due to the inclusioncash-generating unit impairment at Darlot at the end of 2015 and lower production in fiscal 2016. At Granny Smith, amortization and depreciation decreased by 15% from A$72 million (U.S.$54 million) to A$61 million (U.S.$45 million) due to lower production.
All-in sustaining and totalall-in cost
The following table sets out for each operation and the Yilgarn South assetsGroup, total gold sales in ounces,all-in sustaining costs and totalall-in cost, net ofby-product revenue, in U.S.$/oz for fiscal 2016 and fiscal 2015:
| 2016 | 2015 | |||||||||||||||||||||||
| Gold only ounces sold | All-in sustaining costs(2) | Total-all in cost(2) | Gold only ounces sold | All-in sustaining costs(2) | Total-all in cost(3) | |||||||||||||||||||
| (Ozs) | (U.S.$/oz) | (U.S.$/oz) | (Ozs) | (U.S.$/oz) | (U.S.$/oz) | |||||||||||||||||||
South Deep | 289.4 | 1,207 | 1,234 | 198.0 | 1,490 | 1,559 | ||||||||||||||||||
South African operation | 289.4 | 1,207 | 1,234 | 198.0 | 1,490 | 1,559 | ||||||||||||||||||
Tarkwa | 568.1 | 959 | 959 | 586.1 | 970 | 970 | ||||||||||||||||||
Damang | 147.7 | 1,254 | 1,254 | 167.8 | 1,326 | 1,326 | ||||||||||||||||||
Ghanaian operations | 715.8 | 1,020 | 1,020 | 753.9 | 1,049 | 1,049 | ||||||||||||||||||
Cerro Corona(1) | 149.1 | 499 | 499 | 158.8 | 718 | 718 | ||||||||||||||||||
Peruvian operation | 149.1 | 499 | 499 | 158.8 | 718 | 718 | ||||||||||||||||||
St. Ives | 362.9 | 949 | 949 | 371.9 | 969 | 969 | ||||||||||||||||||
Agnew/Lawlers | 229.3 | 971 | 971 | 236.6 | 959 | 959 | ||||||||||||||||||
Darlot | 66.4 | 1,238 | 1,238 | 78.4 | 1,057 | 1,057 | ||||||||||||||||||
Granny Smith | 283.8 | 834 | 834 | 301.1 | 764 | 764 | ||||||||||||||||||
Australian operations | 942.4 | 940 | 940 | 988.0 | 912 | 912 | ||||||||||||||||||
GIP and Corporate | — | 7 | 30 | — | 6 | 19 | ||||||||||||||||||
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Total operations | 2,096.8 | 980 | 1,006 | 2,098.8 | 1,007 | 1,026 | ||||||||||||||||||
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Notes:
| (1) | Gold sold at Cerro Corona excludes copper equivalents of 119,800 ounces in fiscal 2016 and 134,500 ounces in fiscal 2015. |
| (2) | Net of by product revenue. |
| (3) | All-in costs are calculated in accordance with the WGC Industry standard. Refer to page 162 for detailed calculations and discussion ofnon-IFRS measures. |
| (4) | Figures above may not add as they are rounded independently. |
The Group AISC decreased by 3% from U.S.$1,007 per ounce in fiscal 2015 to U.S.$980 per ounce in fiscal 2016 mainly due to lower net operating costs, lower losses on commodity cost hedges, higherby-product credits, partially offset by highernon-cash and cash remuneration and higher sustaining capital expenditure. AISC in fiscal 2015 included U.S.$8 million of inventory written off at Damang. AIC decreased by 2% from U.S.$1,026 per ounce in fiscal 2015 to U.S.$1,006 per ounce in fiscal 2016 for the full yearsame reasons as AISC, as well as lowernon-sustaining capital expenditure, partially offset by higher exploration, feasibility and evaluation costs.
At South Deep in South Africa, AISC decreased by 6% from R607,429 per kilogram (U.S.$1,490 per ounce) in fiscal 2014,2015 to R570,303 per kilogram (U.S.$1,207 per ounce) in fiscal 2016 mainly due to increased gold sold, partially offset by higher operating costs and higher sustaining capital expenditure. The AIC decreased by 8% from R635,622 per kilogram (U.S.$1,559 per ounce) to R583,059 per kilogram (U.S.$1,234 per ounce) due to the same reasons as for AISC as well as lowernon-sustaining capital expenditure.
At the Ghanaian operations, AISC and total AIC decreased by 3% from U.S.$1,049 per ounce in fiscal 2015 to U.S.$1,020 per ounce in fiscal 2016 mainly due to lower net operating costs and lower capital expenditure, partially offset by lower gold sold. At Tarkwa, AISC and AIC decreased by 1% from U.S.$970 per ounce in fiscal 2015 to U.S.$959 per ounce in fiscal 2016 due to lower capital expenditure, partially offset by lower gold sold. At Damang, AISC and total AIC decreased by 5% from U.S.$1,326 per ounce in fiscal 2015 to U.S.$1,254 per ounce in fiscal 2016 due to lower net operating costs, partially offset by lower gold sold and higher capital expenditure.
At Cerro Corona in Peru, AISC and AIC decreased by 31% from U.S.$718 per ounce in fiscal 2015 to U.S.$499 per ounce in fiscal 2016 mainly due to lower net operating costs, lower sustaining capital expenditure and higherby-product credits, partially offset by lower gold sold. AISC and total AIC per equivalent ounce decreased by 2% from U.S.$777 per equivalent ounce to U.S.$762 per equivalent ounce mainly due to the same reasons as above.
At the Australian operations, AISC and AIC increased by 4% from A$1,211 per ounce (U.S.$912 per ounce) in fiscal 2015 to A$1,261 per ounce (U.S.$941 per ounce) in fiscal 2016 mainly due to higher capital expenditure and lower gold sold, partially offset by lower net operating costs. At St. Ives, AISC and AIC decreased by 1% from A$1,287 per ounce (U.S.$969 per ounce) in fiscal 2015 to A$1,273 per ounce (U.S.$949 per ounce) in fiscal 2016 due to the significant reduction in net operating costs, partially offset by lower gold sold and higher capital expenditure. At Agnew/Lawlers, AISC and AIC increased by 2% from A$1,276 per ounce (U.S.$959 per ounce) in fiscal 2015 to A$1,301 per ounce (U.S.$971 per ounce) in fiscal 2016 due to lower gold sold, partially offset by lower capital expenditure. At Darlot, AISC and total AIC increased by 18% from A$1,403 per ounce (U.S.$1,057 per ounce) in fiscal 2015 to A$1,662 per ounce (U.S.$1,238 per ounce) in fiscal 2016 due to lower gold sold and higher capital expenditure, partially offset by lower net operating costs. At Granny Smith, AISC and AIC increased by 10% from A$1,017 per ounce (U.S.$764 per ounce) in fiscal 2015 to A$1,119 per ounce (U.S.$834 per ounce) in fiscal 2016 mainly due to lower gold sold and higher capital expenditure, partially offset by the change in estimate in the depreciation calculation at all the Australian operations. At St Ives, amortization decreased by 22.5% from A$200.7 million (U.S.$194.3 million) to A$155.5 million (U.S.$140.5 million) in fiscal 2014 due to the decrease in production. Agnew/Lawlerslower net operating costs.
Net Operating Profit
Net operating profit increased by 45.4% from A$73.4 million (U.S.$71.1 million) to A$106.7 million (U.S.$96.4 million) in fiscal 2014 mainly due to the inclusion of Lawlers for the full year in fiscal 2014 compared to one quarter in fiscal 2013. Amortization at Darlot increased by 397.3% from A$3.7 million (U.S.$3.6 million) to A$18.4 million (U.S.$16.6 million) and Granny Smith increased by 331.3% from A$21.7 million (U.S.$21.0 million) to A$93.6 million (U.S.$84.6 million), both due to being included for the full year in fiscal 2014 compared to one quarter in fiscal 2013.
The discussion that follows focuses on U.S.GAAP figures as disclosed in the consolidated statement of operations.
Corporate expenditure
Corporate expenditure decreased43% from U.S.$39.4 million in fiscal 2013 to U.S.$27.3 million in fiscal 2014, a decrease of 30.7%. The decrease was due to a deliberate cost savings initiative in response to the lower gold price. Corporate expenditure consists primarily of general corporate overhead and corporate service department costs, primarily in the areas of technical services, human resources and finance, which are used by the operations. Corporate expenditure also includes business development costs. In Rand terms, corporate expenditure decreased from R378.2 million in fiscal 2013 to R294.9 million in fiscal 2014 mainly due to deliberate savings in response to the lower gold price.
Employee termination costs
Employee termination costs increased from U.S.$35.5 million in fiscal 2013 to U.S.$42.2 in fiscal 2014, an increase of 18.9%. The termination costs in fiscal 2014 related primarily to restructuring at all the operations. The termination costs in fiscal 2013 related primarily to restructuring at all the operations as well as the closure of the GIP division in response to the lower gold price.
Exploration expenditure
Exploration expenditure decreased from U.S.$77.9 million in fiscal 2013 to U.S.$36.2 million in fiscal 2014, a decrease of 53.5%. This decrease in fiscal 2014 was due to the closure of the GIP division and deliberate reduction in exploration activities from September 2013. The U.S.$36.2 million in fiscal 2014 comprised mainly U.S.$3.0 million on APP in Finland, U.S.$11.0 million on Salares Norte in Chile, U.S.$3.0 million on Chucapaca in Peru and US$15 million was spent on exploration office costs. In addition, U.S.$4.0 million related to brownfields exploration in Australia.
The U.S.$77.9 million in fiscal 2013 comprised mainly U.S.$3.0 million on Yanfolila in Mali, U.S.$11.0 million on APP in Finland, U.S.$23.0 million on Salares Norte in Chile, U.S.$4.0 million on Pedernales in Chile, U.S.$2 million on Woodjam in Canada, U.S.$2.0 million on Taguas in Argentina, U.S.$5.0 million on Talas in Kyrgyzstan and U.S.$5.0 million on Asosa in Ethiopia and U.S.$12.0 million was spent on exploration office costs. In addition, U.S.$10.0 million related to brownfields exploration in Australia.
Subject to continued exploration success, exploration expenditure is expected to be U.S.$41.9479 million in fiscal 2015 comprising near-mine exploration ofto U.S.$13.7 million and projects exploration of U.S.$28.2 million.
Feasibility and evaluation costs
The Group did not incur any expenditure on feasibility and evaluation in fiscal 2014, compared with U.S.$68.0683 million in fiscal 2013,2016.
This is due to the deliberate reduction in feasibility and evaluation activities, resultingreasons discussed earlier.
Investment Income
Income from the closure of the GIP division.
Theinvestments increased by 33% from U.S.$68.06 million in fiscal 2013 comprised2015 to U.S.$15.3 million on Chucapaca in Peru on a 100% basis, U.S.$17.0 million on Yanfolila in Mali, U.S.$5.0 million on the sulphide and oxide plant study costs in Peru and U.S.$30.7 million on corporate development and strategic project costs and general office costs in the various countries the Group operates in.
Loss/(profit) on disposal of property, plant and equipment
Loss/(profit) on disposal of property, plant and equipment was a profit of U.S.$10.28 million in fiscal 2013 compared to a loss of U.S.$1.3 million in fiscal 2014.
2016. The major disposals in fiscal 2014 related to the sale of redundant assets at St. Ives, Darlot, Granny Smith, Tarkwa, Cerro Corona and South Deep, whereas in fiscal 2013, they related to the sale of redundant assets at St. Ives, Agnew, Cerro Corona, Tarkwa and South Deep.
Asset impairments and write-offs
There was U.S.$215.3 million in asset impairments and write-offs in fiscal 2013 compared with U.S.$14.0 million in fiscal 2014.
The asset impairments and write-offs charge of U.S.$14.0 million in fiscal 2014 comprised:
U.S.$12.7 million write-downs of redundant assets at South Deep, St. Ives and Agnew; and
U.S.$1.3 million write-downs of consumables to market value at Lawlers.
There were no impairments of asset groups during fiscal 2014.
The asset impairments and write-offs charge of U.S.$215.3 million in fiscal 2013 comprised:
U.S.$53.0 million impairment at the Damang asset group;
U.S.$63.0 million at Tarkwa due to the cessation of the North Heap Leach operations (this comprised the write-down of inventory to market value amounting to U.S.$42.8 million as well as the write-off of related assets amounting to U.S.$20.2 million);
U.S.$26.8 million at Tarkwa related to long lead items such as the ball mill of U.S.$22.2 million and components of U.S.$4.6 million for TEP 6 (it was decided not to advance the TEP 6 project as a result of inadequate returns and capital rationing);
U.S.$18.5 million write-downs of stockpiles and consumables to market value at Tarkwa and Damang;
U.S.$14.8 million write-off of redundant assets at Tarkwa, Cerro Corona and Agnew;
U.S.$29.7 million at the Yanfolila project which was written down to fair value less cost to sell after a decision was made to dispose of the project; and
U.S.$9.5 million write-off of the Group’s option payment to Bezant Resources Plc, or Bezant, of (due to the Group’s decision not to pursue the Guinaoang deposit).
The impairment calculations for the Damang asset group in fiscal 2013 were based on the following estimates and assumptions:
Long-term gold price of U.S.$1,300 per ounce;
A real discount rate of 8.0%;
Proved and probable reserves as per the most recent life-of-mine plan;
Operating costs and capital expenditure estimates as per the most recent life-of-mine plan; and
Market value, at U.S.$26.0, used for resource valuation.
Royalties
Royalties decreased by 4.9% from U.S.$90.5 million in fiscal 2013 to U.S.$86.1 million in fiscal 2014. Royalties in fiscal 2014 decreased in line with lower revenues and profits in South Africa, Ghana and Peru. The royalty in Australia increased due to the inclusion of the Yilgarn South assets for a year in fiscal 2014.
| Fiscal 2014 | Fiscal 2013 | |||||||
| ($ million) | ||||||||
South Africa | 1.3 | 2.1 | ||||||
West Africa | 46.5 | 55.5 | ||||||
Australia | 32.5 | 24.1 | ||||||
Peru | 5.8 | 8.9 | ||||||
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Total | 86.1 | 90.5 | ||||||
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Accretion expense on provision for environmental rehabilitation
At all of its operations, Gold Fields makes full provision for environmental rehabilitation based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the balance sheet date. The rehabilitation charge increased by U.S.$5.0 million, or 48.1%, from U.S.$10.4 million in fiscal 2013 to U.S.$15.4 million in fiscal 2014.
For its South African and Ghanaian operations, Gold Fields contributes to environmental trust funds it has established to provide for any environmental rehabilitation obligations and expected closure costs relating to its mining operations. The amounts invested in the trust funds are classified as non-current assets and any income earned on these assets is accounted for as interest income. For the Australian and Peruvian operations Gold Fields does not contribute to a trust fund.
Interest and dividends
Interest and dividend income decreased by U.S.$4.3 million, or 50.6%, from U.S.$8.5 million in fiscal 2013 to U.S.$4.2 million in fiscal 2014. The decreaseincrease was mainly due to lower averagehigher cash balances at the international operations in fiscal 2014 compared to fiscal 2013.2016.
The interest and dividends receivedinvestment income in fiscal 20142016 of U.S.$4.28 million comprised U.S.$0.11 million dividends received, U.S.$0.5 millioninterest on monies invested in the South African and Ghanaian environmental rehabilitation trust fundsfund and U.S.$3.67 million interest on other cash and cash equivalent balances.
The interest and dividends receivedinvestment income in fiscal 20132015 of U.S.$8.56 million comprised U.S.$0.5 millionnil interest on monies invested in the South African and Ghanaian environmental rehabilitation trust fundsfund and U.S.$8.06 million interest on other cash and cash equivalent balances.
Interest received on the funds invested inSouth African rehabilitation trust funds remained flat atfund increased marginally from U.S.$0.5 million.nil in fiscal 2015 to U.S.$1 million in fiscal 2016.
Interest on other cash balances decreasedincreased by 17% from U.S.$8.06 million in fiscal 20132015 to U.S.$3.67 million in fiscal 20142016 mainly due to the lower averagehigher cash balances at the international operations in fiscal 2014 compared to fiscal 2013.2016.
Finance expenseExpense
Finance expense increaseddecreased by U.S.$8.4 million, or 11.6%,6% from U.S.$72.483 million in fiscal 20132015 to U.S.$80.878 million in fiscal 2014.2016.
NetThe finance expense of U.S.$78 million in fiscal 2014 consisted2016 comprised U.S.$11 million relating to the accretion of gross interest payments ofthe environmental rehabilitation liability and U.S.$105.082 million (2013: U.S.$90.7 million)on various Group borrowings, partially offset by interestborrowing costs capitalized of U.S.$24.2 million (2013:15 million.
The finance expense of U.S.$18.3 million).
The interest expense in fiscal 2014 and 2013 comprised:
| Fiscal 2014 | Fiscal 2013 | |||||||
| ($ million) | ||||||||
Interest on the U.S.$1 billion 4.875% guaranteed notes due October 7, 2020 | 50.0 | 49.9 | ||||||
Sibanye Gold guarantee fee | 5.0 | 5.0 | ||||||
Interest on R1,500 million Nedbank Revolving Credit Facility, R500 million Rand Merchant Bank Revolving Credit Facility and various uncommitted facilities | 17.6 | 9.2 | ||||||
Interest on the U.S.$200 million Non-Revolving Senior Secured Term Loan | 2.0 | 2.2 | ||||||
Interest on the U.S.$1 billion Syndicated Revolving credit facility | — | 1.4 | ||||||
Interest on the U.S.$1,510 million term loan and revolving credit facilities | 25.5 | 18.1 | ||||||
Interest on the U.S.$70 million Senior Secured Revolving credit facility | 2.9 | 2.2 | ||||||
Other interest charges | 2.0 | 2.7 | ||||||
Interest capitalized | (24.2 | ) | (18.3 | ) | ||||
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Interest expense | 80.8 | 72.4 | ||||||
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Interest on the U.S.$1 billion guaranteed notes remained relatively flat at U.S.$50.083 million in fiscal 2014.
The Sibanye Gold guarantee fee2015 comprised U.S.$12 million relating to the accretion of the environmental rehabilitation liability and U.S.$88 million on various Group borrowings, partially offset by borrowing costs capitalized of U.S.$517 million.
The environmental rehabilitation liability accretion expense decreased from U.S.$12 million became payablein fiscal 2015 to Sibanye GoldU.S.$11 million in 2013 afterfiscal 2016 mainly due to lower present values of theSpin-off rehabilitation liabilities which resulted from the lower discount rates used in the 2015 rehabilitation liabilities calculation.
Below is an analysis of Sibanye Gold in February 2013.the components making up the interest on the various Group borrowings, stated on a comparative basis:
| 2016 | 2015 | |||||||
| (U.S.$ million) | ||||||||
Interest on borrowings to fund capital expenditure and operating costs at the South African operation | 6 | 3 | ||||||
Interest on U.S.$1 billion notes issue | 44 | 50 | ||||||
Sibanye Gold guarantee fee | — | 1 | ||||||
Interest on U.S.$70 million senior secured revolving credit facility | 2 | 2 | ||||||
Interest on U.S.$150 million revolving senior secured credit facility | 3 | 3 | ||||||
Interest on U.S.$1,510 million term loan and revolving credit facilities | 12 | 28 | ||||||
Interest on U.S.$1,290 million term loan and revolving credit facilities | 14 | — | ||||||
Other interest charges | 1 | 1 | ||||||
|
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| |||||
| 82 | 88 | |||||||
|
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| |||||
Interest on borrowings to fund capital expenditure and operating costs at the South African operationsoperation increased from U.S.$9.23 million in fiscal 20132015 to U.S.$17.66 million in fiscal 20142016 due to additionaldrawdowns of South African borrowings as a result of losses sustained at South Deep.
Interest on the U.S.$200 million Non-Revolving Senior Secured Term Loan remained relatively flat at U.S.$2.0 million in fiscal 2014.2016.
Interest on the U.S.$1 billion Syndicated Revolving credit facility wasnotes issue decreased from U.S.$1.450 million in fiscal 2013.2015 to U.S.$44 million in fiscal 2016. The decrease is due to thebuy-back of notes amounting to U.S.$148 million during 2016.
The yearly guarantee fee of U.S.$5 million became payable to Sibanye Gold in fiscal 2013 after the unbundling of Sibanye Gold. On February 15, 2013, this facilityApril 24, 2015, Sibanye Gold was refinanced by drawing down underreleased as guarantor, resulting in apro-rata guarantee fee of U.S.$1 million in fiscal 2015.
Interest on the $1,510U.S.$70 million term loan andsenior secured revolving credit facilities. The facility was also cancelledremained flat at U.S.$2 million.
Interest on February 15, 2013.the U.S.$150 million revolving senior secured credit facility remained flat at U.S.$3 million.
Interest on the U.S.$1,510 million term loan increasedand revolving credit facilities decreased from U.S.$18.128 million in fiscal 20132015 to U.S.$25.512 million in fiscal 20142016. The decrease is due to the fact that interest for only eight months was included in fiscal 2013 compared to 12 months in fiscal 2014.
U.S.$1,510 million term loan and revolving credit facilities being cancelled and refinanced through the U.S.$1,290 million term loan and revolving credit facilities on June 6, 2016. Interest on the U.S.$701,290 million Senior securedterm loan and revolving credit facility increased marginallyfacilities from the date of refinancing was U.S.$2.214 million.
During 2016, U.S.$15 million (2015: U.S.$17 million) of borrowing costs were capitalized in terms of IAS 23Borrowing Cost. IAS 23 requires capitalization of borrowing costs whenever general borrowings are used to finance qualifying projects. The only qualifying project was South Deep’s mine development. An average interest capitalization rate of 4.7% (2015: 4.8%) was applied.
Gain/(Loss) on Financial Instruments
The gain/(loss) on financial instruments was a gain of U.S.$14 million in fiscal 20132016 compared to a loss of U.S.$2.95 million in fiscal 2014.2015.
InterestThe gain on borrowings incurred in respectfinancial instruments of assets requiring a substantial period of time to prepare for their intended use is capitalized to the date on which the assets are substantially completed and ready for their intended use, at which time they will be amortized over the lives of the corresponding assets. During fiscal 2014, U.S.$24.2 million was capitalized in respect of the South Deep’s mine development and ventilation shaft deepening projects compared to U.S.$18.314 million in fiscal 20132016 comprised the profit on the South Deep currency hedge.
On February 25, 2016, South Deep entered into U.S.$/Rand forward exchange contracts for a total delivery of U.S.$69.8 million starting at July 2016 to December 2016. The average forward rate achieved over the six month period was R16.8273. The hedge was delivered into in respectJuly and August and the balance closed out in September 2016. The average rate achieved on delivery and close out was R13.8010, resulting in a positive cash flow and a profit of the same.U.S.$14 million.
Loss on financial instruments
LossThe loss on financial instruments increased fromof U.S.$0.35 million in fiscal 20132015 comprised the loss on the Australian diesel hedges.
On September 10, 2014, GFA entered into a Singapore Gasoil 10ppm cash settled swap transaction contract for a total of 136,500 barrels, effective September 15, 2014 until March 31, 2015 at a fixed price of U.S.$115.00 per barrel. The 136,500 barrels are based on 50% of usage for the seven month period from September 2014 to March 2015. Brent Crude at the time of the transaction was U.S.$11.599.10 per barrel. On November 26, 2014, GFA entered into further contracts. A contract for 63,000 barrels for the period from January to March 2015 was committed at a fixed price of U.S.$94.00 per barrel and a further 283,500 barrels was committed at a price of U.S.$96.00 per barrel for the period from April to December 2015. Brent Crude at the time of the transaction was U.S.$78.50 per barrel. By entering into the above contracts, the Australian region hedged its full diesel requirements for fiscal 2015.
At December 31, 2015, the fair value of these oil derivative contracts was negative U.S.$2 million. At December 31, 2016, there were no derivative contracts outstanding.
Foreign Exchange (Loss)/Gain
The foreign exchange (loss)/gain was a loss of U.S.$6 million in fiscal 2014.2016 compared to a gain of U.S.$10 million in fiscal 2015.
These gains and losses on foreign exchange related to the conversion of offshore cash holdings into their functional currencies. The exchange loss of U.S.$11.56 million was mainly due to the weakening of the Ghanaian Cedi, while the gains of U.S.$10 million in fiscal 2014 comprised:2015 were mainly due to the weakening of the Australian Dollar.
Other Costs, Net
| ||||
| ||||
The loss ofOther costs, net decreased by 19% from U.S.$0.321 million in fiscal 2013 comprised:
| ||||
| ||||
Foreign exchange gains
Gold Fields recognized exchange gains of2015 to U.S.$8.417 million in fiscal 2014 compared to exchange gains of U.S.$7.3 million2016.
The costs in fiscal 2013.
The gains of U.S.$8.4 million in fiscal 2014 comprised:
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The gain of U.S.$7.3 million in fiscal 2013 comprises:
| ||||
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Profit on disposal of investments and subsidiaries
During fiscal 2014 and 2013, Gold Fields liquidated certain non-current investments. The profit on disposal of investments and subsidiaries increased from U.S.$17.8 million in fiscal 2013 to U.S.$78.0 million in fiscal 2014.
The profit of U.S.$78.0 million in fiscal 2014 resulted from the following sales:
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| ||||
| ||||
Note:
The profit of U.S.$17.8 million in fiscal 2013 resulted from the following sales:
| ||||
| ||||
Impairment of investments
The charge in fiscal 2013 decreased from U.S.$10.3 million in fiscal 2013 to U.S.$6.8 million in fiscal 2014.
The charge of U.S.$6.8 million in fiscal 2014 comprised:
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The charge of U.S.$10.3 million in fiscal 2013 relates to:
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Other expenses
Other expenses represent miscellaneous corporate expenditure not allocated to the operations, net of miscellaneous revenue items such as scrap sales and rental income. In fiscal 2013, there were other expenses of U.S.$104.2 million compared with U.S.$44.2 million in fiscal 2014.
The charges in 20142016 are mainly made up of:
Social contributions and sponsorships of US$13.0U.S.$19 million;
Legal fees amounting to US$7.1Facility charges of U.S.$8 million on borrowings;
Offshore structure costs of U.S.$9 million;
Corporate related costs of U.S.$4 million;
GFA margin improvement project of U.S.$5 million;
Profit of U.S.$18 million on thebuy-back of notes; and
Rehabilitation income of U.S.$10 million as a result of the Gold Fields Board examinationchanges in estimates relating to the South Deep Black Economic Empowerment transaction and regulatory investigation of the same issue; and
Information technology conversionprovision for environmental rehabilitation costs at the Yilgarn South assets of US$5.0 million.recognized in profit or loss.
The chargescosts in 2013fiscal 2015 are mainly made up of:
Social contributions and sponsorships of US$11.4U.S.$12 million;
Facility charges amounting to US$23.5of U.S.$2 million on cancellation of the US$1 billion and US$500 million facilities and other costs of US$13.0 million associated with the unbundling of Sibanye Gold;borrowings;
New loan facility charges;Offshore structure costs of U.S.$13 million;
Stamp duty and transactionGlobal compliance costs amounting to US$27.4 million on the acquisition of the Yilgarn South assets;U.S.$4 million; and
Legal fees amounting to US$11.1Rehabilitation income of U.S.$15 million as a result of the Gold Fields Board examination and regulatory investigationchanges in estimates relating to the South Deep Black Economic Empowerment transaction.provision for environmental rehabilitation costs recognized in profit or loss.
Share-Based Payments
Gold Fields recognizes the cost of share options granted (share-based payments) in terms of IFRS 2,IncomeShare-based payment.
Gold Fields has adopted appropriate valuation models (Black-Scholes and mining tax expenseMonte Carlo simulation) to fair value share-based payments. The value of the share options is determined at the grant date of the options and depending on the rules of the plan expensed on a straight-line basis over a three-year vesting period, adjusted for forfeitures as appropriate.
Income and mining tax expenseShare-based payments increased by 27% from U.S.$105.711 million in fiscal 20132015 to U.S.$121.614 million in fiscal 2016. The corresponding entry for the above adjustments was share-based payment reserve within shareholders’ equity.
The increase in share-based payments was due to the adoption of the revised 2012 Share Plan during 2016 to replace the LTIP.
Long-Term Incentive Plan Expense
Gold Fields recognizes the long-term incentive plan expense in terms of IAS 19,Employee benefits.
On March 1, 2014, the Remuneration Committee approved the Long-term Cash Incentive Plan, or LTIP. The plan provides for executive directors, certain officers and employees to receive a cash award conditional on the achievement of specified performance conditions relating to total shareholder return and FCF Margin. The conditions are assessed over the performance cycle which runs over three calendar years. The expected timing of the cash outflows in respect of each grant is at the end of three years after the original award was made.
These awards are measured on the date the award is made andre-measured at each reporting period. The total shareholder return portion of the award is measured using the Monte Carlo simulation valuation model, which requires assumptions regarding the share price volatility and expected dividend yield. The fair value of the free cash flow portion of the award is valued based on the actual and expected achievement of the cash flow targets set out in the plan. The assumptions used in the Monte Carlo model and the expected cash flow targets are reviewed at each reporting date.
No allocations were made under the LTIP in fiscal 2016 following the approval of the revised 2012 Share Plan.
The LTIP expense increased by 120% from U.S.$5 million in fiscal 2015 to U.S.$11 million in fiscal 2016. The increase was due tomarked-to-market adjustments, as well as additional vestings under the plan.
Exploration Expense
For fiscal 2016, U.S.$124 million was spent on exploration, comprising brownfields exploration of U.S.$79 million (Australia U.S.$76 million and Ghana U.S.$3 million) and greenfields exploration comprising Salares Norte in Chile (U.S.$39 million), APP in Finland (U.S.$1 million) and U.S.$5 million was spent on exploration office costs. Of the U.S.$124 million exploration costs incurred, U.S.$92 million was recognized in the consolidated income statement of which U.S.$48 million related to Australia.
For fiscal 2015, U.S.$95 million was spent on exploration, comprising brownfields exploration of U.S.$72 million (Australia U.S.$68 million, Ghana U.S.$3 million and South Africa U.S.$1 million) and greenfields exploration comprising Salares Norte in Chile (U.S.$16 million), APP in Finland (U.S.$1 million) and U.S.$6 million was spent on exploration office costs. Of the U.S.$95 million exploration costs incurred, U.S.$54 million was recognized in the consolidated income statement of which U.S.$31 million related to Australia.
Subject to continued exploration success, U.S.$134 million will be spent on exploration in fiscal 2017, comprising brownfields exploration of U.S.$65 million (Australia U.S.$65 million) and greenfields exploration of U.S.$69 million, primarily at Salares Norte.
Share Of Results Of Equity Accounted Investees After Taxation
Share of results of equity accounted investees after taxation decreased by 67% from a loss of U.S.$6 million in fiscal 2015 to a loss of U.S.$2 million in fiscal 2016.
The decrease relates mainly to the reclassification of Hummingbird Resources PLC, or Hummingbird, and Bezant toavailable-for-sale investments during 2015 and 2016, respectively, when they no longer qualified as equity-accounted investees. During 2016, Gold Fields only equity accounted for FSE.
Restructuring Costs
Restructuring costs increased by 33% from U.S.$9 million in fiscal 2015 to U.S.$12 million in fiscal 2016. The cost in fiscal 2016 relates mainly to separation packages in Damang and Granny Smith and the cost in fiscal 2015 relates mainly to separation packages in Tarkwa and St. Ives.
Impairment Of Investments And Assets
Impairment of investments and assets decreased by 65% from U.S.$221 million in fiscal 2015 to U.S.$77 million in fiscal 2016.
The impairment charge of U.S.$77 million in fiscal 2016 comprises:
U.S.$2 million asset specific impairment at Damang, relating to inoperable mining fleet that is no longer used under the current life of mine plan;
U.S.$8 million write down of assets held for sale. Following the Damangre-investment plan, a decision was taken to sell certain mining fleet assets and related spares. The sale of the assets is expected to be concluded during 2017. As a result, the assets were classified as held for sale and valued at the lower of FVLCOD or carrying value which resulted in an impairment; and
U.S.$66 million cash-generating unit impairment at Cerro Corona. The impairment is due to a reduction in gold and copper reserves due to depletion, a decrease in the gold and copper price assumptions for fiscal 2017 and fiscal 2018, a lower resource price and an increase in the Peru tax rate from fiscal 2017 onwards.
The impairment charge of U.S.$221 million in fiscal 2015 comprises:
U.S.$8 million net realizable write-downs of stockpiles at Damang;
U.S.$7 million impairment of redundant assets at Cerro Corona;
U.S.$14 million cash-generating unit impairment at Darlot;
U.S.$36 million asset specific impairment at Damang, relating to immovable mining assets that would no longer be used under the current life of mine;
U.S.$39 million at the APP. This project is valued at the lower of fair value less cost of disposal or carrying value after a decision was made to dispose of APP and it was reclassified as held for sale in fiscal 2013. The carrying value at December 31, 2014 was U.S.$40 million based on an offer made as part of the ongoing sale process during 2014. This offer was not realized and during 2015, APP was further impaired by U.S.$39 million to its fair value less cost of disposal;
U.S.$101 million impairment of the Group’s investment in FSE to its recoverable amount;
U.S.$8 million impairment of Hummingbird was recognized to adjust the carrying value of the investment to its fair value upon derecognition of the investment as an equity accounted investee; and
U.S.$8 million related to impairment of listed investments (Hummingbird, Bezant and various junior exploration companies) to their fair values.
Profit On Disposal Of Investments
The profit on the disposal of investments was U.S.$2 million in fiscal 2016 compared with U.S.$nil in fiscal 2015.
The profit on disposal of investments of U.S.$2 million in fiscal 2016 related mainly the profit on disposal of shares in Sibanye Gold.
Profit/(Loss) On Disposal Of Assets
Profit on disposal of assets was U.S.$48 million in fiscal 2016 compared to U.S.$nil in fiscal 2015.
Profit on disposal of assets of U.S.$48 million in fiscal 2016 related to the sale of royalties as part of the Maverix transaction.
Royalties
Royalties increased by 5% from U.S.$76 million in fiscal 2015 to U.S.$80 million in fiscal 2016 and are made up as follows:
| 2016 | 2015 | |||||||
| (U.S.$ million) | ||||||||
South Africa | 2 | 1 | ||||||
Ghana | 44 | 44 | ||||||
Peru | 5 | 3 | ||||||
Australia | 29 | 28 | ||||||
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| 80 | 76 | |||||||
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The royalty in South Africa and Australia increased in line with the increase in gold revenues. The royalty in Peru increased due to the higher operating margin of Cerro Corona.
Mining And Income Tax
Mining and income tax charge decreased by 22% from U.S.$247 million in fiscal 2015 to U.S.$192 million in fiscal 2016.
The table below sets forthindicates Gold Fields’ effective tax rate forin fiscal 20142016 and fiscal 2013, including normal and deferred tax.2015:
| Fiscal | ||||||||
| 2014 | 2013 | |||||||
Effective tax rate | 112.4 | % | 65.0 | % | ||||
| 2016 | 2015 | |||||||
Income and mining tax charge—U.S.$ million | (192 | ) | (247 | ) | ||||
Effective tax rate—% | (52.5 | ) | (5,491.1 | ) | ||||
In fiscal 2014,2016, the effective tax expense rate of 112.4%52.5% was higher than the maximum South African mining statutory tax rate of 34% mainly due to the tax effect of the following:
U.S.$38.323 million valuation allowance raised against unredeemed capital expenditureadjustment to reflect the actual realized company tax rates in South Africa and net operating losses;offshore;
U.S.$18.09 million deferred tax release on the reduction of corporate tax rate at the Ghanaian operations, partially offset by the increase in tax rate at Cerro Corona;
U.S.$6 millionnon-taxable profit on thebuy-back of notes; and
U.S.$1 millionnon-taxable profit on disposal of investments.
The above were offset by the followingtax-effected charges:
U.S.$20 millionnon-deductible expenditure charges comprising mainly share-based payments (U.S.$5 million) and exploration expense (U.S.$15 million);
U.S.$1.824 million of impairments, U.S.$2.0 million of legal and consulting fees and U.S.$7.0 million of various Peruvian non-deductible expenses; interest paid;
U.S.$9.61 million non-deductible exploration and feasibility and evaluation costs;deferred tax charge on Peruvian Nuevo Sol devaluation against US Dollar;
U.S.$6.235 million non-deductible share-based compensation;deferred tax assets not recognized at Cerro Corona and Damang;
U.S.$24.410 million of netnon-deductible interest expense; expenditure andnon-taxable income;
U.S.$7.01 million deferredofnon-deductible share of results of associates after taxation; and
U.S.$8 million of various Peruviannon-deductible expenses.
In fiscal 2015, the effective tax raised on unremitted earnings.
The above were primarily offset byrate of 5,491% was higher than the following tax-effected charges:maximum South African mining statutory tax rate of 34% mainly due to the tax effect of the following:
U.S.$1.722 million adjustment to reflect the actual realized company tax rates in South Africa and offshore; and
US$23.4U.S.$5 million non-taxable profitdeferred tax release on disposalthe change of investments and subsidiaries.
In fiscal 2013, the effective tax expense rate of 65.0% was higher than the maximum South African mining statutory tax rate of 34% mainly due toat the tax-effect ofPeruvian operation.
The above were offset by the following:followingtax-effected charges:
U.S.$56.112 millionnon-deductible expenditure charges comprising share-based payments (U.S.$4 million) and exploration expense (U.S.$8 million);
U.S.$53 millionnon-deductible impairment charges of assets relating mainly to listed investment, Hummingbird, APP and FSE;
U.S.$13.327 million of impairments, U.S.$8.0 million of facility charges, U.S.$8.2 million of legal and consulting fees, U.S.$5.1 million of stamp duty on the Yilgarn South assets acquisition and U.S.$9.4 million of various Peruvian non-deductible expenses: interest paid;
U.S.$47.241 million of non-deductible exploration and feasibility and evaluation costs;deferred tax charge on Peruvian Nuevo Sol devaluation against US Dollar;
U.S.$11.5113 million derecognition of non-deductible share-based compensation;deferred tax assets at Cerro Corona and Damang;
U.S.$25.39 million of netnon-deductible interest expense; expenditure andnon-taxable income;
U.S.$29.52 million prior year adjustment relating to Cerro Corona deferred tax. For further detail, refer to note 7ofnon-deductible share of the consolidated financial statements.results of associates after taxation; and
The above were primarily offset by the following tax-effected charge:
U.S.$25.58 million adjustment to reflect the actual realized company tax rates in South Africa and offshore.of various Peruviannon-deductible expenses.
Impairment of investment in equity investee
Impairment of investment in equity investee was nil in fiscal 2013 compared to U.S.$7.4 million in fiscal 2014.
Profit/(Loss) For The impairment in fiscal 2014 related to Bezant Resources Plc, or Bezant, which was impaired by $7.4 million to its fair value, as determined by its quoted market price. This impairment is considered other than temporary as the carrying value was below the fair value for an extended period of time.
Share of equity investees’ losses, net of tax
Share of equity investees’ losses decreased from U.S.$18.4 million in fiscal 2013 to U.S.$4.4 million in fiscal 2014.
Gold Fields equity accounts for three associates: Rusoro Mining Limited, or Rusoro, Bezant, Hummingbird Resources Plc, or Hummingbird, from fiscal 2014 and one joint venture, being Far South East Gold Resources Incorporated, or FSE (fiscal 2013: Rusoro, Bezant, Rand Refinery Limited, or Rand Refinery, up to the date of unbundling of Sibanye Gold, Timpetra Resources Limited, or Timpetra, up to May 2013 and FSE).
The charge of U.S.$4.4 million in fiscal 2014 comprised:
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The charge of U.S.$18.4 million in fiscal 2013 comprised:
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The Group’s 26.4% share of after-tax losses accounted for in Rusoro was U.S.$nil in fiscal 2014 and in fiscal 2013. The carrying value of the investment is U.S.$nil at December 31, 2014, after losses incurred in prior years.
Gold Fields paid U.S.$10.0 million in option fees to Lepanto Consolidated Mining Company during thesix-month period ended December 31, 2010. In addition, Gold Fields paid non-refundable down payments of U.S.$66.0 million during the year ended December 31, 2011 and U.S.$44.0 million during the six month period ended December 31, 2010 to Liberty Express Assets in accordance with the agreement concluded whereby the Group has the option to acquire 60% of FSE. On March 31, 2012, Gold Fields acquired 40% of the issued share capital of FSE by contributing an additional U.S.$110.0 million in accordance with the agreement’s terms. The Group’s share of losses in FSE was U.S.$3.6 million in fiscal 2014 and U.S.$18.4 million in fiscal 2013.
In January 2013, the Group purchased an associate stake in Bezant for U.S.$7.5 million. The Group’s 21.6% share of after-tax profits in Bezant was US$1.2 million in fiscal 2014, compared with U.S.$nil in fiscal 2013.
During fiscal 2014, Gold Fields sold its 85% interest in the Yanfolila project in Mali to London-listed Hummingbird for U.S.$21.1 million which was settled in the form of 21,258,503 Hummingbird shares. The Group’s 25.1% share of after-tax losses in Hummingbird was U.S.$2.0 million in fiscal 2014.
The Group’s 35% share in Rand Refinery up to the spin-off date of Sibanye Gold is made up of 2% for continuing operations and 33% for discontinued operations. The continuing operations share of after-tax profits in Rand Refinery was U.S.$nil during fiscal 2013.
During fiscal 2011, the Group acquired a 21.8% interest in Timpetra as a result of receiving 15 million Timpetra shares valued at U.S.$3.2 million. Timpetra is an Australian listed junior exploration company and the shares were received in exchange for the Central Victoria tenements, an Australian exploration project previously owned by St. Ives. During fiscal 2013, 13.7 million shares of the 15.0 million previously held were disposed of and due to the decrease in shareholding, Timpetra is no longer equity accounted. The remaining investment was reclassified to listed investments. The Group’s share of after-tax losses in Timpetra was U.S.$nil during fiscal 2013.
Loss from continuing operations
As a result of the above, loss from continuing operations decreased from U.S.$286.6 million in fiscal 2013 to U.S.$25.2 million in fiscal 2014.
Income from discontinued operations, net of tax
The income from discontinued operations of U.S.$20.5 million in fiscal 2013 related to Sibanye Gold.
Net lossYear
As a result of the factors discussed above, Gold Fields’ net loss decreased from U.S.$266.1 million in fiscal 2013 to U.S.$25.2 million in fiscal 2014.
Net (income)/loss attributable to noncontrolling interests
Net loss attributable to noncontrolling interests was U.S.$18.2 million in fiscal 2013 compared toFields posted a profit of U.S.$2.0174 million in fiscal 2014. The2016 compared with a loss of U.S.$243 million in fiscal 20132015.
Profit/(Loss) Attributable To Owners Of The Parent
Gold Fields posted a profit attributable to owners of the parent of U.S.$163 million in fiscal 2016 compared to a loss of U.S.$242 million in fiscal 2015.
Profit/(Loss) Attributable ToNon-Controlling Interest Holders
Profit/(loss) attributable tonon-controlling interest was mainly duea profit of U.S.$11 million in fiscal 2016 compared to the impairment charges by the Ghanaian operations as discussed above.a loss of U.S.$1 million in fiscal 2015.
The noncontrolling interests innon-controlling interest consists of Gold Fields Ghana (Tarkwa) and Abosso Goldfields (Damang) remained at 10% during fiscal 2014each at the end of 2016 and at2015 and La Cima (Cerro Corona) noncontrolling interest remained at 0.5% during fiscal 2014.0.47% at the end of 2016 and 2015.
The noncontrolling interest in Canteras del Hallazgo decreased from 49% in fiscal 2013 to nil in fiscal 2014. Canteras del Hallazgo is a subsidiary company that owned the Chucapaca project.
Gold Fields sold its interest in Canteras del Hallazgo for US$81.0 million during fiscal 2014.
The amountsamount making up the noncontrolling interests in fiscal 2014 and 2013 were:non-controlling interest is shown below:
| 2016 Non-controlling interest Effective(1) | 2015 Non-controlling interest Effective(1) | 2016 | 2015 | |||||||||||||||||||||||||||||
| Effective(1) interest | Fiscal 2014 | Effective(1) interest | Fiscal 2013 | (U.S.$ million) | ||||||||||||||||||||||||||||
Gold Fields Ghana Limited—Tarkwa | 10 | % | 2.8 | 10 | % | (2.1 | ) | 10.0 | % | 10.0 | % | 12 | 9 | |||||||||||||||||||
Abosso Goldfields—Damang | 10 | % | 0.3 | 10 | % | (4.9 | ) | 10.0 | % | 10.0 | % | (1 | ) | (9 | ) | |||||||||||||||||
La Cima—Cerro Corona | 0.5 | % | 0.3 | 1.2 | % | 0.3 | ||||||||||||||||||||||||||
Canteras del Hallazgo | 49.0 | % | (1.4 | ) | 49.0 | % | (11.5 | ) | ||||||||||||||||||||||||
Gold Fields La Cima—Cerro Corona | 0.47 | % | 0.47 | % | — | (1 | ) | |||||||||||||||||||||||||
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| 2.0 | (18.2 | ) | 11 | (1 | ) | |||||||||||||||||||||||||||
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Note:
| (1) | Average for the year. |
Net loss attributable to Gold Fields shareholdersEarnings/(Loss) Per Share
As a result of the factorsabove, Gold Fields earnings of U.S.$0.20 per share in fiscal 2016 compared with a loss of U.S.$0.31 per share in fiscal 2015.
RESULTS FOR THE YEAR
Years ended December 31, 2015 and December 31, 2014
(Loss)/profit attributable to owners of the parent was a loss of U.S.$242 million (or U.S.$0.31 per share) for fiscal 2015 compared to a profit of U.S.$13 million (or U.S.$0.02 per share) for fiscal 2014. The reasons for this decrease are discussed above, net lossbelow.
Revenue
Revenue decreased by 11% from U.S.$247.9 million in fiscal 2013 to U.S.$27.22,869 million in fiscal 2014 and comprises net loss from continuing operations attributable to Gold Fields shareholders of U.S.$27.22,545 million in fiscal 2014 (fiscal 2013: U.S.$268.4 million) and net income from discontinued operations attributable to Gold Fields shareholders of U.S.$nil in fiscal 2014 (fiscal 2013: U.S.$20.5 million).
Years Ended December 31, 2013 and December 31, 2012
Revenues
Product sales decreased by U.S.$624.3 million, or 17.7%, from U.S.$3,530.6 million in fiscal 2012 to U.S.$2,906.3 million in fiscal 2013.2015. The decrease in product salesrevenue of U.S.$324 million was primarilymainly due to a decrease of 0.036 million equivalent ounces, or 1.7%,9% in total equivalentthe average US dollar gold sold,price for the year from 2.133 million ouncesU.S.$1,249 per ounce in fiscal 2012
2014 to 2.097 million ouncesU.S.$1,140 per ounce in fiscal 2013 as well as2015, a 30% decrease in the average realized goldUS dollar copper price of 16.3% from U.S.$1,6566,827 per ouncetonne in fiscal 20122014 to U.S.$1,3864,787 per ouncetonne in fiscal 20132015 and a decrease in the average realized copper price of 10.2% from U.S.$7,322 per tonne to U.S.$6,575 per tonne.
At the Americas operation in Peru, copper production is converted to equivalent gold ounces on a monthly basis using average copper and gold prices for the month in which the copper was produced.
At South Deep, gold sales increased by 11.9%of 3% from 0.270 million2,296,200 equivalent ounces to 2,233,300 equivalent ounces in fiscal 20122015. The rand weakened by 17% to 0.302 millionthe US dollar from an average of R10.82 in fiscal 2014 to R12.68 in fiscal 2015 and the average Australian/US dollar exchange rate weakened by 17% from an average of A$1=U.S.$0.90 in fiscal 2014 to A$1=U.S.$0.75 in fiscal 2015.
Gold sales decreased by 3% from 2,296,200 equivalent ounces in fiscal 2013. This was due2014 to 2,233,300 equivalent ounces in fiscal 2015. Gold sales at the South African operation decreased by 1% from 6,237 kilograms (200,500 ounces) to 6,160 kilograms (198,000 ounces). Gold sales at the Ghanaian operations increased underground mining volumes, as South Deep buildsby 2% from 736,000 ounces to full production. The increase in753,900 ounces. Gold equivalent sales at the gold sales is duePeruvian operation decreased by 11% from 328,600 equivalent ounces to a 26.1% increase in reef tonnes broken and a 23.8% increase in destress production year on year.
293,300 equivalent ounces. At the West AfricanAustralian operations, total gold sales decreased by 11.2%4% from 0.89 million1,031,100 ounces to 988,000 ounces. As a general rule, Gold Fields sells all the gold it produces.
| 2015 | 2014 | |||||||||||||||||||||||
| Revenue | ‘000 Gold sold | ‘000 Gold produced | Revenue | ‘000 Gold sold | ‘000 Gold produced | |||||||||||||||||||
| (U.S.$ million) | (Ozs) | (Ozs) | (U.S.$ million) | (Ozs) | (Ozs) | |||||||||||||||||||
South Deep | 232.3 | 198.0 | 198.0 | 254.8 | 200.5 | 200.5 | ||||||||||||||||||
Tarkwa | 680.7 | 586.1 | 586.1 | 706.7 | 558.3 | 558.3 | ||||||||||||||||||
Damang | 194.8 | 167.8 | 167.8 | 224.6 | 177.8 | 177.8 | ||||||||||||||||||
Cerro Corona | 292.2 | 293.3 | 295.6 | 375.5 | 328.6 | 326.6 | ||||||||||||||||||
St. Ives | 431.8 | 371.9 | 371.9 | 458.8 | 361.7 | 361.7 | ||||||||||||||||||
Agnew/Lawlers | 273.9 | 236.6 | 236.6 | 342.5 | 270.7 | 270.7 | ||||||||||||||||||
Darlot | 91.3 | 78.4 | 78.4 | 106.2 | 83.6 | 83.6 | ||||||||||||||||||
Granny Smith | 348.4 | 301.1 | 301.1 | 399.8 | 315.2 | 315.2 | ||||||||||||||||||
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Total | 2,545.4 | 2,233.3 | 2,235.6 | 2,868.8 | 2,296.2 | 2,294.2 | ||||||||||||||||||
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At South Deep in fiscal 2012South Africa, gold sales were lower, decreasing by 1% from 6,237 kilograms (200,500 ounces) to 0.79 million ounces in fiscal 2013. Tarkwa decreased by 12.5% from 0.72 million ounces in fiscal 2012 to 0.63 million ounces in fiscal 20136,160 kilograms (198,000 ounces) mainly due to cessation of crushinglower grades, partially offset by increased volumes.
At the Ghanaian operations, gold sales at the South Heap Leach facility at the end of December 2012, as well as industrial action at the beginning of the June 2013 quarter.Tarkwa increased by 5% from 558,300 ounces to 586,100 ounces mainly due to higher grade. Damang’s gold sales decreased by 11.8%6% from 0.17 million177,800 ounces to 0.15 million167,800 ounces mainly due to lower yield following the premature closure of the original Damang pit, due to safety concerns.grades, partially offset by increased volumes.
At the Americas operation, totalCerro Corona in Peru, copper production decreased by 11% from 32,300 tonnes to 28,700 tonnes and gold production increased by 5% from 150,800 ounces to 158,800 ounces. As a result gold equivalent sales decreased by 11.4%11% from 0.35 million328,600 ounces to 293,300 ounces due to a decrease in gold and copper grades as well as a lower gold equivalent price ratio.
At the Australian operations, production at St. Ives increased by 3% from 361,700 ounces in fiscal 2012 to 0.31 million371,900 ounces mainly due to higher grades mined and processed. At Agnew/Lawlers, gold equivalentsales decreased by 13% from 270,700 ounces in fiscal 2013,to 236,600 ounces mainly due to lower coppertonnes mined and processed as well as lower grade. Gold production at Darlot decreased by 6% from 83,600 ounces to gold price ratio and expected lower gold and copper grades resulting in lower gold78,400 ounces and copper tonnes.
At the Australasian operations, total gold sales increased by 11.1% from 0.63 million ounces in fiscal 2012 to 0.70 million ounces in fiscal 2013 mainly due to the acquisition of the Yilgarn South assets. At St. Ives, gold sales decreased by 11.1% from 0.45 million ounces to 0.40 million ounces due to cessation of crushing and stacking at the heap leach facility and lower grade open pit materialtonnes mined and processed.processed, partially offset by higher grade. At Agnew, gold sales increased by 22.2% from 0.18 million ounces in fiscal 2012 to 0.22 million ounces in fiscal 2013 due to the inclusion of 0.03 million ounces from Lawlers. At Darlot and Granny Smith gold production decreased by 4% from 315,200 ounces to 301,100 ounces mainly due to lower grades and volumes processed.
Cost of Sales
Cost of sales, were 0.02which comprise of operating costs, gold inventory change and amortization and depreciation, decreased by 11% from U.S.$2,334 million ounces and 0.06 million ounces, respectively, in fiscal 2013.2014 to U.S.$2,066 million in fiscal 2015.
| Gold equivalent ounces sold | Gold equivalent ounces sold | |||||||
| (‘000 oz) | (‘000 oz) | |||||||
South Africa | 270 | 302 | ||||||
South Deep | 270 | 302 | ||||||
Ghana | 885 | 785 | ||||||
Tarkwa(1) | 719 | 632 | ||||||
Damang(2) | 166 | 153 | ||||||
Peru | 350 | 309 | ||||||
Cerro Corona(3) | 350 | 309 | ||||||
Australia | 626 | 700 | ||||||
St. Ives | 450 | 403 | ||||||
Agnew/Lawlers | 176 | 216 | ||||||
Darlot | — | 20 | ||||||
Granny Smith | — | 62 | ||||||
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Total(4)(5) | 2,133 | 2,097 | ||||||
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Notes:
ProductionOperating costs
ProductionOperating costs decreased by U.S.$42.7 million, or 2.3%,15% from U.S.$1,862.61,685 million in fiscal 20122014 to U.S.$1,819.91,431 million in fiscal 2013.
This decrease was due to cost saving initiatives across the Group, partially offset by inflationary increases, annual wage increases, increases in electricity tariffs in South Africa and Ghana and increases in fuel prices in Ghana and Australia, as well as the addition of the lower cost Yilgarn South assets.
The figures above represent U.S. GAAP production costs. However, the Company prepares its financial records in accordance with IFRS and such IFRS information for the Group and by segment is what the Company’s chief operating decision maker reviews in allocating resources and making investment decisions. Therefore, the discussion that follows on operating costs (excluding depreciation and amortization) and gold inventory change focuses on such IFRS information which agrees to the geographical and segment information included in Note 26 to the consolidated financial statements.
Operating costs (excluding depreciation and amortization)
Operating costs (excluding depreciation and amortization) increased marginally from U.S.$1,673.8 million in fiscal 2012 to U.S.$1,678.7 million in fiscal 2013.2015.
At the South Deep operation in South Africa, operating costs (excluding amortization and depreciation) increased by 6.2%13% from U.S.$302.9R2,657 million fiscal 2012(U.S.$246 million) to U.S.$321.8R3,000 million in fiscal 2013.(U.S.$237 million). This increase of R343 million was mainly due to the increase in production, additional staff, annual wage increases an increaseand normal inflationary increases.
At the Ghanaian operations, operating costs decreased by 6% from U.S.$551 million in electricity tariffs, an increasefiscal 2014 to U.S.$519 million in de-stress developmentfiscal 2015. This decrease of U.S.$32 million was mainly at Tarkwa due to ongoing business improvement initiatives and an increase in maintenance costs.
the lower oil price. It was partially offset by increased costs at Damang mainly due to the increased tonnes mined. At Tarkwa, operating costs (excluding amortization and depreciation) decreased by 4.2%11% from U.S.$494.4374 million to U.S.$473.7334 million and at Damang, operating costs (excluding amortization and depreciation) decreasedincreased by 4.5%3% from U.S.$179.1178 million to U.S.$171.1184 million. These decreases were
At Cerro Corona in Peru, operating costs decreased by 9% from U.S.$158 million in fiscal 2014 to U.S.$144 million in fiscal 2015, mainly due to decreased power costs and business process re-engineering at both operations partially offset by normal inflationary increases and annual wage increases.lower ore tonnes mined.
At the Australian operations, operating costs (excluding amortization and depreciation) increaseddecreased by 4.7%12% from U.S.A$808 million (U.S.$526.1 million730 million) in fiscal 20122014 to US$550.8A$709 million (U.S.$533 million) in fiscal 2013.2015 mainly due to lower production. At StSt. Ives, operating costs (excluding amortization and depreciation) decreased by 8.6%20% from U.S.$378.0A$324 million (U.S.$292 million) to U.S.A$259 million (U.S.$345.5 million.195 million). This decrease of A$65 million was mainly due to a decrease in open pit tonnes minedrestructuring after Cave Rocks mine moved into care and processed and the cessation of the heap leach operationsmaintenance at the endbeginning of fiscal 2012, partially offset by an increaseMay 2015, reduced tonnage from Athena underground, lower costs at the Lefroy mill since the introduction of campaign milling in underground tonnes mined and processed.March 2015 as well as lower surface cartage costs resulting from shorter tramming distances after the Cave Rocks closure. At Agnew,Agnew/Lawlers, operating costs (excluding amortization and depreciation) decreased by 8.8%1% from U.S.$148.1A$192 million (U.S.$173 million) to U.S.A$190 million (U.S.$135.0 million. This decrease143 million) this was mainly due to cost saving initiatives arising from mining only the Kim ore body (Main Lode was closed during fiscal 2012), partly offset by the inclusion of Lawlers (U.S.$20.0 million).initiatives. Operating costs (excluding amortization and depreciation) at Darlot decreased by 12% from A$91 million (U.S.$82 million) to A$80 million (U.S.$60 million) due to lower mining and processing costs and continued rationalization of costs. At Granny Smith, were U.S.$21.6 million and U.S.$48.8 million in fiscal 2013, respectively, and nil in fiscal 2012 as the operations were acquired in fiscal 2013.
At the Cerro Corona operation in Peru, operating costs (excluding amortization and depreciation) decreased by 5.9%10% from U.S.$171.4A$202 million in fiscal 2012(U.S.$183 million) to U.S.$161.3A$181 million in fiscal 2013, mainly(U.S.$136 million) due to a decrease in workers statutory participation in profits.lower mining and processing costs.
Gold inventory change
The gold inventory credit decreased by 46.4% fromcharge to costs of U.S.$22.025 million in fiscal 20122015 compared with a credit to costs of U.S.$11.87 million in fiscal 2013.2014.
At Tarkwa, the gold inventory credit of U.S.$24.82 million in fiscal 20122014 compared with a debit of U.S.$30.87 million in fiscal 2013. The U.S.$30.8 million charge in fiscal 2013 was2015, both due to a draw-down ofan increase in inventory. The U.S.$24.8 million credit in fiscal 2012 was due to a revaluation of inventory during the year.
At Damang, the gold inventory credit increased fromcharge of U.S.$3.62 million in fiscal 20122015 was similar to 2014, both due to a drawdown of stockpiles.
At Cerro Corona, the gold inventory charge of U.S.$11.12 million in fiscal 2013, both credits due to increases in stockpiles.
At St Ives, the charge of2014 compared with U.S.$14.71 million in fiscal 20122015, both due to a drawdown of sulphide stockpiles.
At St. Ives, the credit to costs of A$11 million (U.S.$10 million) in fiscal 2014 compared with a charge to costs of A$34 million (U.S.$25 million) in fiscal 2015. This was mainly due to a drawdown of Neptune stockpiles of A$34 million (U.S.$25 million) in fiscal 2015 compared with abuild-up of A$11 million (U.S.$10 million) in fiscal 2014.
At Agnew/Lawlers, the gold inventory charge of A$nil (U.S.$nil) in fiscal 2014 compared with a credit to costs of U.S.A$2 million (U.S.$8.8 million1 million) in fiscal 2013.2015. The credit in fiscal 20132015 was due to abuild-up of inventory.
At Darlot, the charge to costs of A$2 million (U.S.$2 million) in fiscal 2014 compared with a credit to costs of A$1 million (U.S.$1 million) in fiscal 2015 as a result of abuild-up in run-of-mine stockpiles. The charge of inventory in fiscal 2012 was as2015 compared with a result of a strategic decision to process stockpiles built-up from the open pitsdrawdown in prior periods while implementing owner mining at the open pits.fiscal 2014.
At Agnew,Granny Smith, the gold inventory charge of U.S.A$7 million (U.S.$2.6 million5 million) in fiscal 2012 compared with U.S.$1.2 million in fiscal 2013, both charges to cost due to processing of the Songvang open pit stockpile that2015 was built-up in 2011. The charge in fiscal 2013 was partially offset by the addition of the Lawlers stockpiles.
Gold inventory credits at Darlot and Granny Smith in fiscal 2013 were U.S.$1.3 million and U.S.$3.7 million in fiscal 2013, respectively, and nil in fiscal 2012 as the operations were acquired in fiscal 2013.
At Cerro Corona, the gold inventory credit increased from U.S.$11.0 million in fiscal 2012 to U.S.$18.8 million in fiscal 2013, both credits due to a build-updrawdown of sulphide inventory during the year.inventory. This compared with a charge of A$nil (U.S.$nil) in fiscal 2014.
DepreciationAmortization and amortizationdepreciation
Depreciation and amortization charges increased by U.S.$142.7 million, or 33.5%, from U.S.$425.8 million in fiscal 2012 to U.S.$568.5 million in fiscal 2013. Depreciation and amortization is calculated on theunits-of-production method and is based on current gold production as a percentage of total expected gold production over the lives of the different mines. In South Africa, at South Deep, the increased amortization was due to additions to property, plant and equipment and the higher production. At the West Africa operations, Tarkwa’s amortization increased due to additional fixed assets and accelerated depreciation of the North Heap Leach assets. Damang’s amortization increased due to additional assets capitalized and increased machine hours of existing assets. In Australia, at St. Ives, amortization increased due to a 20% increase in underground ounces mined and a move from the Leviathan pit, which had been fully amortized in earlier years, to new pits in 2013 with higher amortization charges. At Agnew, amortization increased mainly due to increased production from the Kim underground mine and the inclusion of Lawlers. The inclusion of the Yilgarn South assets also contributed to the increased amortization. Amortization at Cerro Corona decreased due to lower production.
The figures above represent U.S. GAAP depreciation and amortization. However, the Company prepares its financial records in accordance with IFRS and such IFRS information for the Group and by segment is what the Company’s chief operating decision maker reviews in allocating resources and making investment decisions. Therefore, the table and the discussion that follows on depreciation and amortization focuses on such IFRS information which agrees to the geographical and segment information included in Note 26 to the consolidated financial statements.
The table below depicts the changes from December 31, 20112014 to December 31, 2012 and December 31, 2012 to December 31, 20132015 for proven and probable managed gold and equivalent reserves and for the life of minelife-of-mine for each operation and the resulting impact on the amortization charge in fiscal 2012 and 2013, respectively.2015. The amortization in fiscal 2015 was based on the reserves as at December 31, 2014. Thelife-of-mine information is based on the operations’ strategic plans, adjusted for proven and probable reserve balances. In basic terms, amortization is calculated using the life of minelife-of-mine for each operation, which is based on: (1) the proven and probable reserves for the operation at the start of the relevant year (which are taken to be the same as at the end of the prior fiscal year and using reserves)year); and (2) the amount of gold produced by the operation during the year. The ore reserve statement as at December 31, 20132015 became effective on January 1, 2014.2016.
| Proved and probable reserves as of | Life of mine | Amortization for the year ended | Proved and Probable Mineral Reserves as of | Life of mine | Amortization and depreciation for the year ended | |||||||||||||||||||||||||||||||||||||||||||||||||||
| December 31, 2011 | December 31, 2012 | December 31, 2013 | December 31, 2012 | December 31, 2013 | December 31, 2012 | December 31, 2013 | December 31, 2013 | December 31, 2014 | December 31, 2015 | December 31, 2014 | December 31, 2015 | December 31, 2014 | December 31, 2015 | |||||||||||||||||||||||||||||||||||||||||||
| (‘000 oz) | (years) | ($ million) | (‘000 oz) | (years) | (U.S.$ million) | |||||||||||||||||||||||||||||||||||||||||||||||||||
South Africa region | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South African operation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
South Deep | 30,000 | 39,100 | 38,200 | 80 | 74 | 82.4 | 98.9 | 38,200 | 38,000 | 37,300 | 73 | 81 | 74.5 | 67.9 | ||||||||||||||||||||||||||||||||||||||||||
West African region | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ghanaian operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Tarkwa(1) | 10,300 | 10,100 | 7,300 | 24 | 17 | 125.4 | 137.6 | 7,300 | 7,500 | 6,700 | 17 | 16 | 141.6 | 162.3 | ||||||||||||||||||||||||||||||||||||||||||
Damang(2) | 3,400 | 4,100 | 1,100 | 16 | 6 | 22.8 | 30.6 | 1,100 | 1,200 | 1,000 | 6 | 5 | 20.9 | 26.4 | ||||||||||||||||||||||||||||||||||||||||||
Americas region | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Peruvian operation | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cerro Corona(3) | 6,100 | 5,200 | 3,700 | 16 | 10 | 48.8 | 48.8 | 3,700 | 3,000 | 2,800 | 9 | 8 | 79.6 | 100.1 | ||||||||||||||||||||||||||||||||||||||||||
Australasian region | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Australian operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
St. Ives | 2,800 | 2,200 | 2,000 | 6 | 6 | 160.4 | 194.3 | 2,000 | 1,800 | 1,500 | 6 | 5 | 140.5 | 109.9 | ||||||||||||||||||||||||||||||||||||||||||
Agnew/Lawlers | 1,300 | 1,200 | 1,000 | 7 | 4 | 53.7 | 71.1 | 1,000 | 900 | 700 | 5 | 4 | 96.4 | 62.0 | ||||||||||||||||||||||||||||||||||||||||||
Darlot | — | — | 200 | — | 2 | — | 3.6 | 200 | 100 | 30 | 2 | 0.5 | 16.6 | 25.8 | ||||||||||||||||||||||||||||||||||||||||||
Granny Smith | — | — | 800 | — | 7 | — | 21.0 | 800 | 900 | 1,300 | 5 | 9 | 84.6 | 54.1 | ||||||||||||||||||||||||||||||||||||||||||
Corporate and other | — | — | — | — | — | 5.7 | 5.0 | — | — | — | — | — | 2.0 | 1.4 | ||||||||||||||||||||||||||||||||||||||||||
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Total reserves(4) | 53,900 | 61,900 | 54,300 | 499.2 | 610.9 | 54,300 | 53,400 | 51,330 | 656.7 | 609.9 | ||||||||||||||||||||||||||||||||||||||||||||||
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Notes:
| (1) | As of December 31, |
| (2) | As of December 31, |
| (3) | As of December 31, |
| (4) | As of December 31, |
Amortization and depreciation increaseddecreased by 22.4%,7% from U.S.$499.2657 million to U.S.$610.9610 million in 2013.fiscal 2015.
In
At South Deep in South Africa, amortization and depreciation at South Deep increased by 20.0%7% from U.S.$82.4R806 million (U.S.$75 million) in 2012fiscal 2014 to U.S.$98.9R861 million (U.S.$68 million) in 2013fiscal 2015 mainly due to additions to property, plant and equipment and increased production which is used in the calculationreassessment of amortization.useful lives of certain assets.
At the West AfricanGhanaian operations, amortization and depreciation increased by 13.5%16% from U.S.$148.2163 million in 2012fiscal 2014 to U.S.$168.2189 million in 2013.fiscal 2015. Tarkwa increased by 9.7%14% from U.S.$125.4142 million to U.S.$137.6 million due to
additions to property, plant and equipment and the accelerated depreciation of the North heap leach assets during 2013. Damang increased by 34.2% from U.S.$22.8 million to U.S.$30.6162 million due to additions to property, plant and equipment. Damang increased by 24% from U.S.$21 million to U.S.$26 million mainly due to an increase in volume mined.
At Cerro Corona in Peru, amortization and depreciation at Cerro Corona increased by 25%, from U.S.$80 million in fiscal 2014 to U.S.$100 million in fiscal 2015. This significant increase from 2014 to 2015 was due additions to property, plant and equipment capitalized and increased machine hoursreassessment of existinguseful lives of certain assets.
At the Australian operations, amortization and depreciation decreased by 10%, from A$374 million (U.S.$338 million) in fiscal 2014 to A$335 million (U.S.$252 million) in fiscal 2015 mainly due to lower production. At St. Ives, amortization and depreciation decreased by 6% from A$156 million (U.S.$141 million) in fiscal 2014 to A$146 million (U.S.$110 million) due to the decrease in production. Agnew/Lawlers decreased by 23% from A$107 million (U.S.$96 million) in fiscal 2014 to A$82 million (U.S.$62 million) mainly due to lower production. Amortization and depreciation at Darlot increased by 35.5%89% from A$18 million (U.S.$17 million) to A$34 million (U.S.$26 million) as a result of the change in life of mine reserves. At Granny Smith, amortization and depreciation decreased by 23% from A$94 million (U.S.$85 million) to A$72 million (U.S.$54 million) due to lower production.
All-in sustaining and totalall-in cost
The following table sets out for each operation and the Group, total gold sales in ounces, AISC and total AIC, net ofby-product revenue, in U.S.$/oz for fiscal 2015 and fiscal 2014:
| 2015 | 2014 | |||||||||||||||||||||||
| Gold only ounces sold | All-in sustaining costs(2) | Total-all in cost(2) | Gold only ounces sold | All-in sustaining costs(2) | Total-all in cost(2) | |||||||||||||||||||
| (Ozs) | (U.S.$/oz) | (U.S.$/oz) | (Ozs) | (U.S.$/oz) | (U.S.$/oz) | |||||||||||||||||||
South Deep | 198.0 | 1,490 | 1,559 | 200.5 | 1,548 | 1,732 | ||||||||||||||||||
South African operation | 198.0 | 1,490 | 1,559 | 200.5 | 1,548 | 1,732 | ||||||||||||||||||
Tarkwa | 586.1 | 970 | 970 | 558.3 | 1,068 | 1,068 | ||||||||||||||||||
Damang | 167.8 | 1,326 | 1,326 | 177.8 | 1,175 | 1,175 | ||||||||||||||||||
Ghanaian operations | 753.9 | 1,049 | 1,049 | 736.0 | 1,094 | 1,094 | ||||||||||||||||||
Cerro Corona(1) | 158.8 | 718 | 718 | 153.6 | 316 | 316 | ||||||||||||||||||
Peruvian operation | 158.8 | 718 | 718 | 153.6 | 316 | 316 | ||||||||||||||||||
St. Ives | 371.9 | 969 | 969 | 361.7 | 1,164 | 1,164 | ||||||||||||||||||
Agnew/Lawlers | 236.6 | 959 | 959 | 270.7 | 990 | 990 | ||||||||||||||||||
Darlot | 78.4 | 1,057 | 1,057 | 83.6 | 1,222 | 1,222 | ||||||||||||||||||
Granny Smith | 301.1 | 764 | 764 | 315.2 | 809 | 809 | ||||||||||||||||||
Australian operations | 988.0 | 912 | 912 | 1,031.1 | 1,015 | 1,015 | ||||||||||||||||||
GIP and Corporate | — | 6 | 19 | — | 11 | 28 | ||||||||||||||||||
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Total operations | 2,098.8 | 1,007 | 1,026 | 2,121.4 | 1,053 | 1,087 | ||||||||||||||||||
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Notes:
| (1) | Gold sold at Cerro Corona excludes copper equivalents of 134,500 ounces in fiscal 2015 and 175,000 ounces in fiscal 2014. |
| (2) | Net of by-product revenue. |
| (3) | AIC are calculated in accordance with the WGC Industry standard. Refer to page 162 for detailed calculations and discussion ofnon-IFRS measures. |
| (4) | Figures may not add as they are rounded independently. |
AISC decreased by 4% from U.S.$214.1 million1,053 per ounce in 2012fiscal 2014 to U.S.$290.0 million1,007 per ounce in 2013. At St Ives, amortization increasedfiscal 2015. Total AIC decreased by 21.1%6% from U.S.$160.4 million1,087 per ounce in fiscal 2014 to U.S.$194.3 million1,026 per ounce in 2013fiscal 2015. The decrease in AISC and total AIC was due to a 20% increase in more expensive ounces mined undergroundlower net operating costs, the weaker R/US dollar and a move from the Leviathan pit, which had been fully amortized in earlier years, to new pits in 2013 with deeper coverA$/U.S.$ dollar, partially offset by lowerby-product credits and higher amortization charges. Agnewcapital expenditure.
At South Deep in South Africa, AISC of R607,429 per kilogram (U.S.$1,490 per ounce) and total AIC of R635,622 per kilogram (U.S.$1,559 per ounce) in fiscal 2015 compared with AISC of R538,254 per kilogram (U.S.$1,548 per ounce) and total AIC of R602,363 per kilogram (U.S.$1,732 per ounce) in fiscal 2014 due to lower gold sold and higher operating costs, partially offset by lower capital expenditure.
At the Ghanaian operations, AISC and total AIC for the region of U.S.$1,049 per ounce in fiscal 2015 compared with U.S.$1,094 per ounce in fiscal 2014. At Tarkwa, AISC and total AIC of U.S.$970 per ounce in fiscal 2015 compared with U.S.$1,068 per ounce in fiscal 2014 due to increased gold sold and lower operating costs, partially offset by 32.4% fromhigher capital expenditure. At Damang, AISC and total AIC of U.S.$53.71,326 per ounce in fiscal 2015 compared with U.S.$1,175 per ounce in fiscal 2014 due to higher net operating costs, lower gold sold and the U.S.$8 million inventorywrite-off.
At Cerro Corona in Peru, AISC and total AIC amounted to U.S.$71.1 million718 per ounce in fiscal 2015 compared with U.S.$316 per ounce in fiscal 2014 due to lower gold sold, lowerby-product credits and higher capital expenditure, partially offset by lower net operating costs. AISC and total AIC, on a gold equivalent basis amounted to U.S.$777 per ounce in fiscal 2015 compared with U.S.$702 per ounce in fiscal 2014 mainly due to the inclusion of Lawlers (U.S.$10.0 million). Amortization at Darlot and Granny Smith was U.S.$3.6 million and U.S.$21.0 million in fiscal 2013, respectively, and nil in fiscal 2012same reasons as the operations were acquired in fiscal 2013.
In South America, amortization at Cerro Corona remained constant at U.S.$48.8 million.
The discussion that follows focuses on U.S.GAAP figures as disclosed in the consolidated statement of operations.
Corporate expenditure
Corporate expenditure increased from U.S.$38.2 million in fiscal 2012 to U.S.$39.4 million in fiscal 2013, an increase of 3.1%. The increase is due to reorganization of corporate services and inflation. Corporate expenditure consists primarily of general corporate overhead and corporate service department costs, primarily in the areas of technical services, human resources and finance, which are used by the operations. Corporate expenditure also includes business development costs. In Rand terms, corporate expenditure increased from R312.9 million in fiscal 2012 to R378.2 million in fiscal 2013 mainly due to the reorganization of corporate services and inflation.
Employee termination costs
Employee termination costs increased from U.S.$6.1 million in fiscal 2012 to U.S.$35.5 in fiscal 2013, an increase of 482.0%. The termination costs in fiscal 2013 related primarily to restructuring at all the operationsabove as well as lower equivalent ounces sold.
At the closureAustralian operations, AISC and total AIC for the region of the GIP divisionA$1,211 per ounce (U.S.$912 per ounce) in responsefiscal 2015 compared with A$1,124 per ounce (U.S.$1,015 per ounce) in fiscal 2014 due to the lower gold price. The termination costssold and higher capital expenditure, partially offset by lower net operating costs. At St. Ives, AISC and total AIC for St. Ives of A$1,287 per ounce (U.S.$969 per ounce) in fiscal 2012 related primarily2015 compared with A$1,289 per ounce (U.S.$1,164 per ounce) in fiscal 2014 due to restructuring as parthigher gold sold and lower net operating costs, partially offset by higher capital expenditure. At Agnew/Lawlers, AISC and total AIC for Agnew/Lawlers of the BPR programA$1,276 per ounce (U.S.$959 per ounce) in fiscal 2015 compared with A$1,096 per ounce (U.S.$990 per ounce) in fiscal 2014 due to lower gold sold and the Portfolio Reviewhigher capital expenditure, partially offset by lower net operating costs. At Darlot, AISC and total AIC of A$1,403 per ounce (U.S.$1,057 per ounce) in 2012.fiscal 2015 compared with A$1,353 per ounce (U.S.$1,222 per ounce) in fiscal 2014 due to lower gold sold and higher capital expenditure, partially offset by lower operating costs. At Granny Smith, AISC and total AIC of A$1,017 per ounce (U.S.$764 per ounce) in fiscal 2015 compared with A$896 per ounce (U.S.$809 per ounce) in fiscal 2014 due to lower gold sold and higher capital expenditure, partially offset by lower net operating costs.
Exploration expenditureNet Operating Profit
Exploration expenditureNet operating profit decreased by 10% from U.S.$135.3 million in fiscal 2012 to U.S.$77.9 million in fiscal 2013, a decrease of 42.4%. The bulk of the expenditure was incurred on a diversified pipeline of projects in Africa, Australia, Asia and North, South and Central America, with the decrease in fiscal 2013 due to the break-up of the GIP division and deliberate reduction in exploration activities from September 2013. The U.S.$77.9 million in fiscal 2013 comprised mainly U.S.$3 million on Yanfolila in Mali, U.S.$11 million on APP in Finland, U.S.$23 million on Salares Norte in Chile, U.S.$4 million on Pedernales in Chile, U.S.$2 million on Woodjam in Canada, U.S.$2 million on Taguas in Argentina, U.S.$5 million on Talas in Kyrgyzstan and U.S.$5 million on Asosa in Ethiopia and U.S.$21 million was spent on exploration office costs. In addition, U.S.$10 million related to brownfields exploration in Australia is expensed. Subject to continued exploration success, exploration expenditure is expected to be U.S.$35534 million in fiscal 2014 comprising near-mine exploration ofto U.S.$9 million and projects exploration of U.S.$26 million.
Feasibility and evaluation costs
Feasibility and evaluation expenditure decreased from U.S.$103.5479 million in fiscal 20122015 due to reasons discussed earlier.
Investment Income
Income from investments increased by 50% from U.S.$68.04 million in fiscal 2013, a decrease of 34.3%. The decrease was due2014 to the closure of the GIP division and
deliberate reduction in feasibility and evaluation costs from September 2013. The U.S.$68.06 million in fiscal 2013 comprised U.S.$15.3 million on Chucapaca in Peru on a 100% basis, U.S.$17.0 million on Yanfolila in Mali, U.S.$5.0 million on the sulphide and oxide plant study costs in Peru and U.S.$30.7 million on corporate development and strategic project costs and general office costs in the various countries the Group operates in.
(Profit)/loss on disposal of property, plant and equipment
Profit on disposal of property, plant and equipment increased from U.S.$0.2 million in fiscal 2012 to U.S.$10.2 million in fiscal 2013.
2015. The major disposals in fiscal 2013 related to the sale of the Vivienne exploration asset in Agnew as well as the sale of redundant assets at St. Ives, Agnew, Cerro Corona, Tarkwa and South Deep, whereas in fiscal 2012, they related to the sale of various redundant assets primarily at St. Ives, La Cima and South Deep.
Asset impairments and write-offs
There was U.S.$41.6 million in asset impairments and write-offs in fiscal 2012 compared with U.S.$215.3 million in fiscal 2013.
The asset impairments and write-offs charge of U.S.$215.3 million in fiscal 2013 comprised:
U.S.$53.0 million impairment at the Damang asset group;
U.S.$63.0 million at Tarkwa due to the cessation of the North Heap Leach operations (this comprised the write-down of inventory to market value amounting to U.S.$42.8 million as well as the write-off of related assets amounting to U.S.$20.2 million);
U.S.$26.8 million at Tarkwa related to long lead items such as the ball mill of U.S.$22.2 million and components of U.S.$4.6 million for TEP 6 (it was decided not to advance the TEP 6 project as a result of inadequate returns and capital rationing);
U.S.$18.5 million write-downs of stockpiles and consumables to market value at Tarkwa and Damang;
U.S.$14.8 million write-off of redundant assets at Tarkwa, Cerro Corona and Agnew;
U.S.$29.7 million at the Yanfolila project which was written down to fair value less cost to sell after a decision was made to dispose of the project; and
U.S.$9.5 million write-off of the Group’s option payment to Bezant Resources Plc, or Bezant, of (due to the Group’s decision not to pursue the Guinaoang deposit).
The impairment calculations for Damang asset group were based on the following estimates and assumptions:
Long-term gold price of U.S.$1,300 per ounce;
A real discount rate of 8.0%;
Proved and probable reserves as per the most recent life-of-mine plan;
Operating costs and capital expenditure estimates as per the most recent life-of-mine plan; and
Market value, at U.S.$26 per ounce, used for resource valuation.
The impairment charge of U.S.$41.6 million in fiscal 2012 consisted of a U.S.$10.1 million write-off of heap leach assets and U.S.$19.2 million write-down to market value of heap leach inventory at St. Ives in Australia due to the cessation of the heap leach at St. Ives and the U.S.$4.4 million write-off of heavy mining equipment in Ghana. In addition, the Group impaired its patented technology, known as the Biox process, which
is used for the pretreatment of refractory ores and concentrates prior to gold recovery through conventional cyanide leaching techniques. The Group entered into an agreement to sell its Biox technology in 2013. This impairment amounted to U.S.$7.9 million.
Accretion expense on provision for environmental rehabilitation
At all of its operations, Gold Fields makes full provision for environmental rehabilitation based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the balance sheet date. The rehabilitation charge decreased from U.S.$13.9 million in fiscal 2012 to U.S.$10.4 million in fiscal 2013.
For its South African and Ghanaian operations, Gold Fields contributes to environmental trust funds it has established to provide for any environmental rehabilitation obligations and expected closure costs relating to its mining operations. The amounts invested in the trust funds are classified as non-current assets and any income earned on these assets is accounted for as interest income. For the Australian and Peruvian operations Gold Fields does not contribute to a trust fund.
Interest and dividends
Interest and dividend income decreased from U.S.$16.3 million in fiscal 2012 to U.S.$8.5 million in fiscal 2013. The decreaseincrease was mainly due to lower averagehigher cash balances at the international operations in fiscal 2013 compared to fiscal 2012.2015.
The interest and dividends receivedinvestment income in fiscal 20132015 of U.S.$8.56 million comprised U.S.$0.5nil interest on monies invested in the South African rehabilitation trust fund and U.S.$6 million interest on other cash and cash equivalent balances.
The investment income in fiscal 2014 of U.S.$4 million comprised U.S.$1 million interest on monies invested in the South African and Ghanaian environmental rehabilitation trust funds and U.S.$8.03 million interest on other cash and cash equivalent balances.
The interest and dividends received in fiscal 2012 of U.S.$16.3 million comprised U.S.$0.5 million on monies invested in the South African environmental rehabilitation trust fund and U.S.$15.8 million on other cash and cash equivalent balances.
Interest received on the funds invested in rehabilitation trust funds remained flat at U.S.$0.5 million.
Interest on cash balances decreased from U.S.$15.81 million in fiscal 20122014 to U.S.$8.0 millionnil in fiscal 20132015 mainly due to the lower averageweakening of the South Rand resulting in South Deep’s rand contribution being a nil United States Dollar figure.
Interest on other cash balances increased from U.S.$3 million in fiscal 2014 to U.S.$6 million in fiscal 2015 mainly due to higher cash balances at the international operations in fiscal 2013 compared to fiscal 2012.2015.
Finance expenseExpense
Finance expense increaseddecreased by 16% from U.S.$55.699 million in fiscal 20122014 to U.S.$72.483 million in fiscal 2013.2015.
NetThe finance expense of U.S.$83 million in fiscal 2013 consisted2015 comprised U.S.$12 million relating to the accretion of gross interest payments ofthe environmental rehabilitation liability and U.S.$90.788 million (2012: U.S.$68.6 million)on various Group borrowings, partially offset by interest capitalized of U.S.$18.3 million (2012:17 million.
The finance expense of U.S.$13.0 million).
The interest expense in fiscal 2013 and 2012 comprised:
| Fiscal 2013 | Fiscal 2012 | |||||||
| ($ million) | ||||||||
Interest on the U.S.$1 billion 4.875% guaranteed notes due October 7, 2020 | 49.9 | 49.6 | ||||||
Sibanye Gold guarantee fee | 5.0 | — | ||||||
Interest on R1,500 million Nedbank Revolving Credit Facility and various uncommitted facilities | 9.2 | 0.8 | ||||||
Interest on the U.S.$200 million Non-Revolving Senior Secured Term Loan | 2.2 | 3.4 | ||||||
Interest on the U.S.$1 billion Syndicated Revolving credit facility | 1.4 | 7.8 | ||||||
Interest on the Split-tenor Revolving credit facility | — | 1.1 | ||||||
Interest on U.S.$500 million syndicated revolving credit facility | — | 1.8 | ||||||
Interest on the U.S.$1,440 million term loan and revolving credit facility | 18.1 | — | ||||||
Interest on the U.S.$60 million Senior Secured Revolving credit facility | 2.2 | 1.6 | ||||||
Other interest charges | 2.7 | 2.5 | ||||||
Interest capitalized | (18.3 | ) | (13.0 | ) | ||||
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Interest expense | 72.4 | 55.6 | ||||||
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Interest on the U.S.$1 billion guaranteed notes remained relatively flat at U.S.$49.999 million in fiscal 2013.2014 comprised U.S.$18 million relating to the accretion of the environmental rehabilitation liability and U.S.$105 million on various Group borrowings, partially offset by interest capitalized of U.S.$24 million.
The Sibanye Gold guarantee feeenvironmental rehabilitation liability accretion expense decreased from U.S.$18 million in fiscal 2014 to U.S.$12 million in fiscal 2015 mainly due to lower present values of U.S.$5 million became payable to Sibanye Goldthe rehabilitation liabilities which resulted from an increase in 2013 afterdiscount rates.
Below is an analysis of the Spin-off of Sibanye Gold in February 2013.components making up the interest on the various Group borrowings, stated on a comparative basis:
| 2015 | 2014 | |||||||
| (U.S.$ million) | ||||||||
Interest on borrowings to fund capital expenditure and operating costs at the South African operation | 3 | 18 | ||||||
Interest on U.S.$1 billion notes issue | 50 | 50 | ||||||
Sibanye Gold guarantee fee | 1 | 5 | ||||||
Interest on U.S.$70 million senior secured revolving credit facility | 2 | 3 | ||||||
Interest on U.S.$200 millionnon-revolving senior secured term loan | — | 2 | ||||||
Interest on U.S.$150 million revolving senior secured credit facility | 3 | — | ||||||
Interest of U.S.$1,510 million term loan and revolving credit facility | 28 | 25 | ||||||
Other interest charges | 1 | 2 | ||||||
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| 88 | 105 | |||||||
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Interest on borrowings to fund capital expenditure and operating costs at the South African operations increasedoperation decreased from U.S.$0.818 million in fiscal 20122014 to U.S.$9.23 million in fiscal 2013 due to additional borrowings.
Interest on the U.S.$200 million Non-Revolving Senior Secured Term Loan decreased from U.S.$3.4 million in fiscal 2012 to U.S.$2.2 million in fiscal 20132015 due to repayments made during 2013.of South African borrowings in the March 2015 quarter.
Interest on the U.S.$1 billion Syndicated Revolving credit facility, Split-tenor Revolving credit facility,notes issue remained flat at U.S.$500 million syndicated revolving credit facility and the U.S.$1,440 million term loan and Revolving credit facility increased from U.S.$10.750 million in fiscal 20122015.
The yearly guarantee fee of U.S.$5 million became payable to Sibanye Gold in fiscal 2013 after the unbundling of Sibanye Gold. On April 24, 2015, Sibanye Gold was released as guarantor, resulting in apro-rata guarantee fee of U.S.$19.51 million in fiscal 2013 due to additional borrowings.2015.
Interest on the U.S.$6070 million Seniorsenior secured revolving credit facility decreased marginally from U.S.$3 million in fiscal 2014 to U.S.$2 million in fiscal 2015.
On December 19, 2014, the outstanding balance under the U.S.$200 millionnon-revolving senior secured term loan was refinanced by drawing down under the U.S.$150 million revolving senior secured credit facility. Interest on these facilities increased marginally from U.S.$2 million in fiscal 2014 to U.S.$3 million in fiscal 2015.
Interest on the U.S.$1,510 million term loan and revolving credit facilities increased from U.S.$1.625 million in fiscal 20122014 to U.S.$2.228 million in fiscal 20132015. The increase is due to additional borrowings.borrowings during 2015.
Interest on borrowings incurred in respectDuring 2015, U.S.$17 million (2014: U.S.$24 million) of assets requiring a substantial period of time to prepare for their intended use is capitalized to the date on which the assets are substantially completed and ready for their intended use, at which time they will be amortized over the lives of the corresponding assets. During fiscal 2013, U.S.$18.3 millioninterest was capitalized in respectterms of theIAS 23,Borrowing Cost. IAS 23 requires capitalization of borrowing costs whenever general borrowings are used to finance qualifying projects. The only qualifying project was South Deep’s mine development and ventilation shaft deepening projects compared to U.S.$13.0 million in fiscal 2012 in respectdevelopment. An average interest capitalization rate of the same.4.8% (2014: 5.3%) was applied.
(Loss)/gainLoss on financial instrumentsFinancial Instruments
LossThe loss on financial instruments decreased by 58% from U.S.$0.412 million in fiscal 20122014 to U.S.$0.35 million in fiscal 2013.2015.
The loss on financial instruments of U.S.$0.35 million in fiscal 2013 comprised:
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The loss of2015 and U.S.$0.412 million in fiscal 2012 comprised:2014 comprised the loss on the Australian diesel hedges.
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Foreign exchange gains/(losses)
On September 10, 2014, Gold Fields recognized an exchange gainAustralia (Proprietary) Limited entered into a Singapore Gasoil 10ppm cash settled swap transaction contract for a total of 136,500 barrels, effective September 15, 2014 until March 31, 2015 at a fixed price of U.S.$7.3115.00 per barrel. The 136,500 barrels are based on 50 per cent of usage for the seven month period September 2014 to March 2015. Brent Crude at the time of the transaction was U.S.$99.10 per barrel. On November 26, 2014, Gold Fields Australia (Pty) Limited entered into further contracts. A contract for 63,000 barrels for the period from January to March 2015 was committed at a fixed price of U.S.$94.00 per barrel and a further 283,500 barrels was committed at a price of U.S.$96.00 per barrel for the period April to December 2015. Brent Crude at the time of the transaction was U.S.$78.50 per barrel. By entering into the above contracts, the Australian region hedged its full diesel requirements for fiscal 2015.
As at December 31, 2015, the fair value of these oil derivative contracts was negative U.S.$2 million (2014: negative U.S.$10 million).
Foreign Exchange Gains
The foreign exchange gains increased by 25% from U.S.$8 million in fiscal 2013 compared2014 to an exchange loss of U.S.$13.810 million in fiscal 2012.2015.
The gainforeign exchange gains comprised exchange gains on cash and working capital balances. The exchange gains of U.S.$7.310 million in fiscal 2013 comprised:
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The loss2015 were mainly due to the weakening of the Australian Dollar, while the U.S.$13.88 million in fiscal 2012 comprises:2014 were due to the weakening of the Ghanaian Cedi.
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Profit/(loss) on disposal of investments and subsidiariesOther Costs, Net
During fiscal 2013 and 2012, Gold Fields liquidated certain non-current investments. The profit on disposal of investmentsOther costs decreased by 67% from U.S.$27.663 million in fiscal 20122014 to U.S.$17.821 million in fiscal 2013.2015.
The profit of U.S.$17.8 millioncosts in fiscal 2013 resulted from the following sales:
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The profit of U.S.$27.6 million in fiscal 2012 resulted from the following sales:
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Impairment of investments
The charge in fiscal 2012 was U.S.$10.5 million compared with U.S.$10.3 million in fiscal 2013.
The charge of U.S.$10.3 million in fiscal 2013 comprised:
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The charge of U.S.$10.5 million in fiscal 2012 relates to:
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Royalties
Royalties of U.S.$116.8 million in fiscal 2012 compared with U.S.$90.5 million in fiscal 2013. Royalties in fiscal 2013 decreased in line with lower revenues and profits at the international operations.
Other expenses
Other expenses represents miscellaneous corporate expenditure not allocated to the operations, net of miscellaneous revenue items such as scrap sales and rental income. In fiscal 2012, there were other expenses of U.S.$37.9 million compared with U.S.$104.2 million in fiscal 2013.
The charges in 20132015 are mainly made up of:
Social contributions and sponsorships of US$11.4U.S.$12 million;
Global compliance costs of U.S.$4 million;
Facility charges amounting to US$23.5of U.S.$2 million on cancellationthe South African Rand borrowings; and
Rehabilitation income of U.S.$15 million as a result of changes in estimates relating to the US$1 billionprovision for environmental rehabilitation costs recognized in profit or loss.
The costs in fiscal 2014 are mainly made up of:
Social contributions and US$500 million facilities and other costssponsorships of US$13.0 million associated with the unbundling of Sibanye Gold;U.S.$12 million;
New loan facility charges;
Stamp duty and transaction costs amounting to US$27.4Facility charges of U.S.$1 million on the acquisition of the Yilgarn South assets; andAfrican Rand borrowings;
Legal fees amounting to US$11.1U.S.$7 million as a result of the Gold Fields Board examination and regulatory investigation relating to the South Deep Black Economic Empowerment transaction.
The charges in 2012 are mainly made up of:
Social contributions and sponsorships;transaction;
New loan facility charges;
Research and developmentRehabilitation costs into mechanized mining;of U.S.$18 million as a result of changes in estimates relating to the provision for environmental rehabilitation costs recognized in profit or loss; and
Legal fees paid as a resultInformation technology conversion costs at the Yilgarn South Assets of a dispute with a mining contractor in Ghana.U.S.$5 million.
Income and mining tax expenseShare-Based Payments
Income and mining tax expenseGold Fields recognizes the cost of share options granted (share-based payments) in terms of IFRS 2,Share-based payment.
Share-based payments decreased by 58% from U.S.$359.426 million in fiscal 20122014 to U.S.$105.711 million in fiscal 2015. The corresponding entry for the above adjustments was share-based payment reserve within shareholders’ equity.
The decrease in share-based payments was due to the fact that no allocations of options under existing plans were made during 2014 and 2015 following the introduction of the Long Term Incentive Plan during 2014.
Long-Term Incentive Plan Expense
Gold Fields recognizes the long-term incentive plan expense in terms of IAS 19,Employee benefits.
On March 1, 2014, the Remuneration Committee approved the LTIP. The plan provides for executive directors, certain officers and employees to receive a cash award conditional on the achievement of specified performance conditions relating to total shareholder return and FCF Margin. The conditions are assessed over the performance cycle which runs over three calendar years. The expected timing of the cash outflows in respect of each grant is at the end of three years after the original award was made.
These awards are measured on the date the award is made andre-measured at each reporting period. The total shareholder return portion of the award is measured using the Monte Carlo simulation valuation model, which requires assumptions regarding the share price volatility and expected dividend yield. The fair value of the free cash flow portion of the award is valued based on the actual and expected achievement of the cash flow targets set out in the plan. The assumptions used in the Monte Carlo model and the expected cash flow targets are reviewed at each reporting date.
The LTIP expense decreased by 44% from U.S.$9 million in fiscal 2014 to U.S.$5 million in fiscal 2015. The decrease was due tomarked-to-market adjustments, partially offset by two years of grants being valued in fiscal 2015 compared to one year of grants in fiscal 2014.
Exploration Expense
For fiscal 2015, U.S.$95 million was spent on exploration, comprising brownfields exploration of U.S.$72 million (Australia U.S.$68 million, Ghana U.S.$3 million and South Africa U.S.$1 million) and greenfields exploration comprising Salares Norte in Chile (U.S.$16 million), APP in Finland (U.S.$1 million) and U.S.$6 million was spent on exploration office costs. Of the U.S.$95 million exploration costs incurred, U.S.$54 million was recognized in the consolidated income statement of which U.S.$31 million related to Australia.
For fiscal 2014, U.S.$98 million was spent on exploration, comprising brownfields exploration of U.S.$62 million (Australia U.S.$58 million and Ghana U.S.$4 million) and greenfields exploration comprising Yanfolila in Mali (U.S.$4 million) up to the date of disposal, Salares Norte in Chile (U.S.$11 million), APP in Finland (U.S.$3 million) and Chucapaca in Peru (U.S.$3 million) and U.S.$15 million was spent on exploration office costs. Of the U.S.$98 million exploration costs incurred, U.S.$47 million was recognized in the consolidated income statement of which U.S.$15 million related to Australia.
Subject to continued exploration success, U.S.$118 million will be spent on exploration, comprising brownfields exploration of U.S.$63 million (Australia U.S.$63 million) and greenfields exploration of U.S.$55 million.
Share of Results of Equity Accounted Investees After Taxation
Share of results of equity accounted investees after taxation increased by 200% from a loss of U.S.$2 million in fiscal 2014 to a loss of U.S.$6 million in fiscal 2015.
The increase relates mainly to ongoing study and evaluation costs at the FSE project in the Philippines and the Group’s share of losses of U.S.$2 million at Hummingbird (up to June 30, 2015, the date Hummingbird was reclassified toavailable-for-sale financial investments).
Restructuring Costs
Restructuring costs decreased by 79% from U.S.$42 million in fiscal 2014 to U.S.$9 million in fiscal 2015. The cost in fiscal 2015 relates mainly to separation packages in Tarkwa and St. Ives and the cost in fiscal 2014 related mainly to separation packages in Tarkwa, South Deep, Damang and St. Ives.
Impairment of Investments and Assets
Impairment of investments and assets increased from U.S.$27 million in fiscal 2014 to U.S.$221 million in fiscal 2015.
The impairment charge of U.S.$221 million in fiscal 2015 comprises:
U.S.$8 million net realizable write-downs of stockpiles at Damang;
U.S.$7 million impairment of redundant assets at Cerro Corona;
U.S.$14 million cash-generating unit impairment at Darlot;
U.S.$36 million asset specific impairment at Damang, relating to immovable assets that would no longer be used under the current life of mine;
U.S.$39 million at the APP. This project is valued at the lower of fair value less cost of disposal or carrying value after a decision was made to dispose of APP and it was reclassified as held for sale in fiscal 2013. The carrying value at December 31, 2014 was U.S.$40 million based on an offer made as part of the ongoing sale process during 2014. This offer was not realized and during 2015, APP was further impaired by U.S.$39 million to its fair value less cost of disposal;
U.S.$101 million impairment of the Group’s investment in FSE to its recoverable amount;
U.S.$8 million impairment of Hummingbird was recognized to adjust the carrying value of the investment to its fair value upon derecognition of the investment as an equity accounted investee; and
U.S.$8 million related to impairment of listed investments (Hummingbird, Bezant and various junior exploration companies) to their fair values.
The impairment charge of U.S.$27 million in fiscal 2014 comprises:
U.S.$1 million net realizable write-downs of consumables at Lawlers;
U.S.$13 million impairment of redundant assets at South Deep, St. Ives and Agnew/Lawlers;
U.S.$3 million at the APP. This project is valued at the lower of fair value less cost of disposal or carrying value after a decision was made to dispose of APP and it was reclassified as held for sale in fiscal 2013. The carrying value at December 31, 2013 was U.S.$43.2 million based on an offer made as part of the ongoing sale process during 2013. This offer was not realized but a second, lower offer was received closer to the end of 2014 which resulted in the further impairment in fiscal 2014;
U.S.$8 million related to impairment of listed investments (Bezant, Orsu Metals Corporation and various junior exploration companies); and
U.S.$6 million related to impairment of unlisted investments (Rand Refinery and Aurigin Resources Incorporated).
The above impairments were partially offset by the reversal of U.S.$4 million impairment of Yanfolila. Following the Group’s decision during 2013 to dispose ofnon-core projects, Yanfolila was classified as held for sale and, accordingly, valued at the lower of fair value less cost to sell or carrying value which resulted in an impairment of U.S.$30 million during 2013. During 2014, Gold Fields sold its 85% interest in the Yanfolila project in Mali to London-listed Hummingbird for U.S.$21 million, which was settled in the form of 21,258,503 Hummingbird shares. The fair value of Hummingbird shares exceeded the carrying value of Yanfolila, which resulted in a partial reversal of the 2013 impairment in fiscal 2014.
Profit on Disposal of Investments
The profit on the disposal of investments was U.S.$nil in fiscal 2015 compared to U.S.$1 million in fiscal 2014.
The profit on disposal of investments of U.S.$1 million in fiscal 2014 comprises:
| U.S.$ million | ||||
Profit on disposal of shares in Robust Resources Limited | 2 | |||
Additional loss on disposal of the Group’s interest in Talas (exploration project in Kyrgyzstan) | (1 | ) | ||
| 1 | ||||
Profit on Disposal of Chucapaca
During 2014, Gold Fields sold its 51% interest in Canteras del Hallazgo (entity that houses the Chucupaca project in Peru) for U.S.$81 million to Compañía de Minas Buenaventura S.A.A. realizing a profit of U.S.$5 million.
Loss on Disposal of Assets
Loss on disposal of assets was U.S.$nil in fiscal 2015 compared to U.S.$1 million in fiscal 2014.
The major disposals in fiscal 2014 related to the sale of redundant assets at St. Ives, Darlot, Granny Smith, Tarkwa, Cerro Corona and South Deep.
Royalties
Royalties decreased by 12% from U.S.$86 million in fiscal 2014 to U.S.$76 million in fiscal 2015 and are made up as follows:
| 2015 | 2014 | |||||||
| (U.S.$ million) | ||||||||
South Africa | 1 | 1 | ||||||
Ghana | 44 | 47 | ||||||
Peru | 3 | 6 | ||||||
Australia | 28 | 32 | ||||||
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| 76 | 86 | |||||||
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The royalty in Ghana decreased in line with the decrease in gold revenue. The royalty in Peru reduced due to the lower operating margin of Cerro Corona. The royalty in Australia remained stable in Australian Dollar terms from 2014 to 2015, however, decreased in United States Dollar terms due to the weakening of the Australian Dollar against the United States Dollar in fiscal 2015.
Mining and Income Tax
Mining and income tax was a charge of U.S.$247 million in fiscal 2015 compared to U.S.$118 million in fiscal 2014.
The table below sets forthindicates Gold Fields’ effective tax rate forin fiscal 20132015 and fiscal 2012, including normal and deferred tax.2014:
| Fiscal | ||||||||
| 2013 | 2012 | |||||||
Effective tax expense rate | 65.0 | % | 50.4 | % | ||||
As noted in “—Overview—Income and Mining Taxes”, during the budget speech in February 2012, the South African Minister of Finance announced that STC would be abolished. This resulted in there being only one gold mining formula to calculate mining income taxes. The revised formula was enacted on April 1, 2012, with effect from January 1, 2012, and resulted in a reduction in the maximum South African tax rate for mining companies from 43% to 34%.
| 2015 | 2014 | |||||||
Income and mining tax charge—U.S.$ million | (247 | ) | (118 | ) | ||||
Effective tax rate—% | (5,491.1 | ) | (85.3 | ) | ||||
In fiscal 2013,2015, the effective tax expense rate of 65.0%5,491% was higher than the maximum South African mining statutory tax rate of 34% mainly due to the tax-effecttax effect of the following:
U.S.$25.5 million adjustment to reflect the actual realized company tax rates in South Africa and offshore;
The above was primarily offset by the following tax-effected charges:
U.S.$56.1 million non-deductible expenditure comprising mainly U.S.$13.3 million of impairments, U.S.$8.0 million of facility charges, U.S.$8.2 million of legal and consulting fees, U.S.$5.1 million of stamp duty on the Yilgarn South assets acquisition and U.S.$9.4 million of various Peruvian non-deductible expenses:
U.S.$47.2 million of non-deductible exploration and feasibility and evaluation costs;
U.S.$11.5 million of non-deductible share-based compensation;
U.S.$25.3 million of non-deductible interest expense; and
U.S.$29.5 million prior year adjustment relating to Cerro Corona deferred tax. For further detail, refer to note 7 of the consolidated financial statements.
In fiscal 2012, the effective tax expense rate of 50.4% was higher than the maximum South African mining statutory tax rate of 34% mainly due to the tax-effect of the following:
U.S.$17.122 million adjustment to reflect the actual realized company tax rates in South Africa and offshore; and
U.S.$58.25 million reversal of a portion of a valuation allowance previously raised against deferred tax assets. During fiscal 2012,release on the Group reversed a portionchange of tax rate at the valuation allowance against unredeemed capital expenditure and net operating losses to the extent that there is sufficient future taxable income. In making this determination, the Group analyzed, amongst other things, the recent history of earningsPeruvian operations.
|
The above were primarily offset by the followingtax-effected charges:
U.S.$74.412 millionnon-deductible charges comprising share-based payments (U.S.$4 million) and exploration expense (U.S.$8 million);
U.S.$53 millionnon-deductible impairment charges of assets relating mainly to listed investment, Hummingbird, APP and feasibility and evaluation costs;FSE;
U.S.$27 millionnon-deductible interest paid;
U.S.$12.941 million non-deductible share-based compensation;deferred tax charge on Peruvian Nuevo Sol devaluation against United States Dollar;
U.S.$24.8113 million derecognition of deferred tax assets at Cerro Corona and Damang;
U.S.$9 million of netnon-deductible interest expense; expenditure andnon-taxable income;
U.S.$2 million ofnon-deductible share of results of associates after taxation; and
U.S.$8 million of various Peruviannon-deductible expenses.
In fiscal 2014, the effective tax rate of 85% was higher than the maximum South African mining statutory tax rate of 34% mainly due to the tax effect of the following:
U.S.$8 million adjustment to reflect the actual realized company tax rates in South Africa and offshore; and
U.S.$65.42 million netnon-taxable profit on disposal of investments and subsidiaries.
The above were offset by the followingtax-effected charges:
U.S.$18 millionnon-deductible charges comprising share-based payments (U.S.$7 million) and exploration expense (U.S.$11 million);
U.S.$4 millionnon-deductible impairment charges of assets relating mainly to APP, Yanfolila, Bezant and Rand Refinery;
U.S.$28 millionnon-deductible interest paid;
U.S.$2 millionnon-deductible legal and consulting fees;
U.S.$3 million deferred tax charge on increase in the tax rate in GhanaPeruvian Nuevo Sol devaluation against United States Dollar;
U.S.$8 million of netnon-deductible expenditure and decrease in the tax rate in South Africa.non-taxable income;
U.S.$1 million ofnon-deductible share of results of associates after taxation; and
U.S.$8 million of various Peruviannon-deductible expenses.
Share of equity investees’ losses, net of tax
Share of equity investees’ losses decreased from U.S.$63.1 million in fiscal 2012 to U.S.$18.4 million in fiscal 2013.
Gold Fields equity accounts for four associates: Rusoro Mining Limited, or Rusoro, Bezant (from fiscal 2013), Rand Refinery up to the date of unbundling of Sibanye Gold and Timpetra Resources Limited, or Timpetra, up to May 2013 and one joint venture, being Far South East Gold Resources Incorporated, or FSE.
(Loss)/Profit For The charge of U.S.$18.4 million in fiscal 2013 comprised:
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The charge of U.S.$63.1 million in fiscal 2012 comprised:
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The Group’s 26.4% share of after-tax losses accounted for in Rusoro was U.S.$nil million in fiscal 2013 compared with U.S.$13.4 million in fiscal 2012. The share of Rusoro’s fiscal 2012 loss took into account U.S.$924.3 million impairment as a result of the expropriation of all of the company’s mining concessions, property, plant and equipment and mineral properties in Venezuela. The carrying value of the investment is zero at December 31, 2013.
Gold Fields paid U.S.$10.0 million in option fees to Lepanto Consolidated Mining Company during thesix-month period ended December 31, 2010. In addition, Gold Fields paid non-refundable down payments of U.S.$66.0 million during the year ended December 31, 2011 and U.S.$44.0 million during the six month period ended December 31, 2010 to Liberty Express Assets in accordance with the agreement concluded whereby the
Group has the option to acquire 60% of FSE. On March 31, 2012, Gold Fields acquired 40% of the issued share capital of FSE by contributing an additional U.S.$110.0 million in accordance with the agreement’s terms. The Group’s share of losses in FSE was U.S.$18.4 million in fiscal 2013 and U.S.$50.1 million in fiscal 2012.
In January 2013, the Group purchased an associate stake in Bezant for U.S.$7.5 million. The Group’s 21.6% share of after-tax profits in Bezant was U.S.$nil in fiscal 2013.
The Group’s 35% share in Rand Refinery up to the date of unbundling of Sibanye Gold is made up of 2% for continuing operations and 33% for discontinued operations. The continuing operations share of after-tax profits in Rand Refinery was U.S.$nil million in fiscal 2013 compared with U.S.$0.6 million in fiscal 2012.
During fiscal 2011, the Group acquired a 21.8% interest in Timpetra as a result of receiving 15 million Timpetra shares valued at U.S.$3.2 million. Timpetra is an Australian listed junior exploration company and the shares were received in exchange for the Central Victoria tenements, an Australian exploration project previously owned by St. Ives. During fiscal 2013, 13.7 million shares of the 15.0 million previously held were disposed of and due to the decrease in shareholding, Timpetra is no longer equity accounted. The remaining investment was reclassified to listed investments. The Group’s share of after-tax losses in Timpetra was U.S.$nil million during fiscal 2013 and U.S.$0.2 million during fiscal 2012.
(Loss)/income from continuing operations
As a result of the above, income from continuing operations was a loss of U.S.$286.6 million in fiscal 2013 and a profit of U.S.$290.2 million in fiscal 2012.
Income from discontinued operations, net of tax
Income from discontinued operations decreased from U.S.$362.3 million in fiscal 2012 to U.S.$20.5 million in fiscal 2013. The decrease is due to the fact that results for only two months up to the date of Spin-off were included in fiscal 2013 compared to 12 months in fiscal 2012.
Net (loss)/ incomeYear
As a result of the factors discussed above, Gold Fields’Fields posted a loss wasof U.S.$266.1243 in fiscal 2015 compared with a profit of U.S.$20 million in fiscal 2013, compared with net income2014.
(Loss)/Profit Attributable To Owners Of The Parent From Continuing Operations
Gold Fields posted a loss attributable to ordinary shareholders of the company of U.S.$652.5242 million in fiscal 2012.
Net loss attributable2015 compared to noncontrolling interests
Net loss attributable to noncontrolling interests increased froma profit of U.S.$1.813 million in fiscal 20122014.
(Loss)/Profit Attributable ToNon-Controlling Interest Holders
(Loss)/profit attributable tonon-controlling interest was a loss of U.S.$18.21 million in fiscal 2013. This was mainly due2015 compared to the impairment charges by the Ghanaian operations as discussed above.a profit of U.S.$8 million in fiscal 2014.
The noncontrolling interests innon-controlling interest consists of Gold Fields Ghana (Tarkwa) and Abosso Goldfields (Damang) remained at 10% during fiscal 2013each at the end of 2015 and at2014, Gold Fields La Cima (Cerro Corona) noncontrolling interest decreased from 1.4%at 0.47% at the end of 2015 and 2014 and Canteras del Hallazgo (entity that houses the Chucupaca project in fiscal 2012 to 0.5% in fiscal 2013 (effective interest forPeru) at nil% at the yearend of 1.2%).2015 and 2014.
The noncontrollingGold Fields sold its interest in Canteras del Hallazgo remained at 49.0%. Canteras del Hallazgo is a subsidiary company that owns the Chucapaca project.
The amountsamount making up the noncontrolling interests in fiscal 2013 and 2012 were:non-controlling interest is shown below:
| 2015 Non-controlling interest Effective(1) | 2014 Non-controlling interest Effective(1) | 2015 | 2014 | |||||||||||||||||||||||||||||
| Effective(1) interest | Fiscal 2013 | Effective(1) interest | Fiscal 2012 | (%) | (U.S.$ million) | |||||||||||||||||||||||||||
Gold Fields Ghana Limited—Tarkwa | 10 | % | (2.1 | ) | 10.0 | % | 20.6 | 10.0 | 10.0 | 9 | 9 | |||||||||||||||||||||
Abosso Goldfields—Damang | 10 | % | (4.9 | ) | 10.0 | % | (0.3 | ) | 10.0 | 10.0 | (9 | ) | — | |||||||||||||||||||
La Cima—Cerro Corona | 1.2 | % | 0.3 | 1.5 | % | 3.1 | ||||||||||||||||||||||||||
Gold Fields La Cima—Cerro Corona | 0.47 | 0.47 | (1 | ) | — | |||||||||||||||||||||||||||
Canteras del Hallazgo | 49.0 | % | (11.5 | ) | 49.0 | % | (25.3 | ) | — | 49.0 | — | (1 | ) | |||||||||||||||||||
Living Gold (Pty) Limited | — | — | 10.0 | % | 0.1 | |||||||||||||||||||||||||||
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| (18.2 | ) | (1.8 | ) | (1 | ) | 8 | ||||||||||||||||||||||||||
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Note:
| (1) | Average for the year. |
Net income attributable to Gold Fields shareholders(Loss)/Earnings Per Share
As a result of the factors discussed above, net income attributable to Gold Fields shareholders wasrealized a loss of U.S.$247.9 million0.31 per share in fiscal 20132015 compared to a profitwith earnings of U.S.$654.3 million0.02 per share in fiscal 2012 and comprises net loss from continuing operations attributable to Gold Fields shareholders of U.S.$268.4 million in fiscal 2013 (fiscal 2012: net income U.S.$292.1 million) and net income from discontinued operations attributable to Gold Fields shareholders of U.S.$20.5 million in fiscal 2013 (fiscal 2012: U.S.$362.2 million).2014.
Liquidity and Capital Resources
Cash resourcesYears ended December 31, 2016 and December 31, 2015
Cash resources
Cash flowsFlows From Operating Activities
Cash inflows from operations—continuing operations
Net cash providedoperating activities increased by operations in fiscal 2013 was23% from U.S.$334.3 million compared with U.S.$743.8744 million in fiscal 2014, an2015 to U.S.$918 million in fiscal 2016. The increase of U.S.$409.5 million.
Gold Fields’ realized gold price decreased from an average of U.S.$1,386 per ounce in fiscal 2013 to an average of U.S.$1,249 per ounce in fiscal 2014. Gold Fields’ realized copper price increased from an average of U.S.$6,575 per tonne in fiscal 2013 to an average of U.S.$6,897 per tonne in fiscal 2014. The decrease in realized gold price, partially offset by the increase in realized copper price resulted in revenue from product sales decreasing by U.S.$37.5174 million from U.S.$2,906.3 million in fiscal 2013 to U.S.$2,868.8 million in fiscal 2014.
The increase in net cash provided was due to:
| U.S.$ million | ||||
Increase in cash generated from operations due to higher operating profit | 265 | |||
Increase in interest received due to higher cash balances | 1 | |||
Increase in investment in working capital | (46 | ) | ||
Decrease in interest paid due to lower borrowings | 5 | |||
Increase in royalties paid due to higher revenue | (2 | ) | ||
Increase in taxes paid | (37 | ) | ||
Increase in dividends paid due to higher normalized earnings | (12 | ) | ||
| 174 | ||||
a positive movement ofDividends paid increased from U.S.$73.4 million in changes in operating assets and liabilities resulting from a release of working capital of U.S.$8.429 million in fiscal 2013 compared2015 to a release of U.S$81.8U.S.$41 million in fiscal 2014;
a decrease2016. The dividends paid of U.S.$11.8 million in production costs from U.S.$1,819.9 in fiscal 2013 to U.S.$1,808.141 million in fiscal 2014;
a2016 comprised dividends paid to ordinary shareholders of U.S.$11.139 million, decreasenon-controlling interests in royaltiesPeru of U.S.$1 million and South Deep BEE dividend of U.S.$1 million.
The dividends paid fromof U.S.$99.929 million in fiscal 20132015 comprised dividends paid to ordinary shareholders of U.S.$88.815 million,non-controlling interests in Ghana and Peru of U.S.$12 million and South Deep BEE dividend of U.S.$2 million.
Cash Flows From Investing Activities
Cash outflows from investing activities increased by 33% from U.S.$652 million in fiscal 2014 due2015 to lower revenueU.S.$868 million in fiscal 2016. The items comprising these numbers are discussed below.
Additions to property, plant and equipment
Capital expenditure increased by 3% from U.S.$634 million in fiscal 2015 to U.S.$650 million in fiscal 2016.
Capital expenditure at South Deep in South Africa Ghanaincreased by 35% from R848 million (U.S.$67 million) in fiscal 2015 to R1,145 million (U.S.$78 million) in fiscal 2016:
This increase was due to higher spending on fleet, the refurbishment of the man winder at Twin shaft and Peru;higher spend on mining employee accommodation.
Capital expenditure at the Ghanaian operations decreased by 7% from U.S.$221 million in fiscal 2015 to U.S.$206 million in fiscal 2016:
Tarkwa decreased by 18% from U.S.$204 million to U.S.$168 million mainly due to the purchase of mining fleet for replacement in fiscal 2015; and
a U.S.$192.9 million decrease in taxes paidDamang increased by 124% from U.S.$298.2 in fiscal 201317 million to U.S.$105.338 million with the majority spent on waste stripping at the Amoanda pit.
Capital expenditure at Cerro Corona in Peru decreased by 34% from U.S.$65 million in fiscal 2014 due2015 to higher taxes paid in fiscal 2013 for fiscal 2012.
Net cash provided by operations in fiscal 2012 was U.S.$750.4 million compared with U.S.$334.343 million in fiscal 2013, a decrease of U.S.$416.1 million.
Gold Fields’ realized gold price decreased from an average of U.S.$1,656 per ounce in fiscal 2012 to an average of U.S.$1,386 per ounce in fiscal 2013. Gold Fields’ realized copper price decreased from an average of U.S.$7,322 per tonne in fiscal 2012 to an average of U.S.$6,575 per tonne in fiscal 2013. The decrease in realized gold price and decrease in realized copper price resulted in revenue from product sales decreasing by U.S.$624.3 million from U.S.$3,530.6 million in fiscal 2012 to U.S.$2,906.3 million in fiscal 2013.
The decrease in net cash provided by operations was partially offset by:2016:
a positive movement of U.S.$88.5 million in charges in operating assets and liabilities resulting from an investment in working capital of U.S.$80.1 million in fiscal 2012 compared to a release of U.S$8.4 million in fiscal 2013;
a decrease of U.S.$42.7 million in production costs from U.S.$1,862.6 in fiscal 2012 to U.S.$1,819.9 million in fiscal 2013;
a U.S.$12.5 million decrease in royalties paid from U.S.$112.4 in fiscal 2012 to U.S.$99.9 million in fiscal 2013 due to lower revenue; and
a U.S.$35.9 million decrease in taxes paid from U.S.$334.1 in fiscal 2012 to U.S.$298.2 million in fiscal 2013 due to lower profit.
Although revenues from Gold Fields’ South African operation are denominated in U.S. dollars, Gold Fields receives them in Rand, which are then subject to South African exchange control limitations. See “Information on the Company—Environmental and Regulatory Matters—South Africa—Exchange Controls.” As a result, those revenues are generally not available to service Gold Fields’ non-Rand debt obligations or to make investments outside South Africa without the approval of the South African Reserve Bank.
Revenues from Gold Fields’ West African, Australasian and Americas operations are also denominated in U.S. dollars, but, unlike in South Africa, Gold Fields receives them in U.S. dollars or is freely able to convert them into U.S. dollars. The West African and Australasian U.S. dollar revenues can be used by Gold Fields to service its U.S. dollar-denominated debt and to make investments in its non-South African operations, taking into account SARB-applicable requirements.
Cash flows from operations—discontinued operations
Net cash provided by discontinued operations was U.S.$30.9 million in fiscal 2013. This related to cash provided by Sibanye Gold for two months to February 2013, the date of Spin-off of Sibanye Gold.
Net cash provided by operations decreased from U.S.$409.5 million in fiscal 2012 to U.S.$30.9 million in fiscal 2013. The decrease is due to the fact that results for only two months up to the date of Spin-off of Sibanye Gold were included in fiscal 2013 compared to 12 months in fiscal 2012.
Cash flows from investing activities—continuing operations
Cash utilized in investing activities was U.S.$423.9 million in fiscal 2014, U.S.$680.5 million in fiscal 2013 and U.S.$1,003.7 million in fiscal 2012, respectively. The items comprising these amounts are discussed below:
Capital expenditure decreased by U.S.$63.2 million from U.S.$543.7 million in fiscal 2013 to U.S.$480.5 million in fiscal 2014, mainly due to key infrastructure required for the build-up at South Deep having been completed.
The U.S.$63.2 million decrease in capital expenditure to U.S.$480.5 million in fiscal 2014 from U.S.$543.7 million in fiscal 2013 was mainly due to:
decreased capital expenditure at South Deep due to key infrastructure required for the production build-up having been largely completed at the end of December 2013;
decreased expenditure at Tarkwa due to lowerhigher expenditure on mining fleet;construction of the tailings dam, waste storage facilities and
decreased expenditure at St Ives.
Partially offset by:
increased expenditure at Granny Smith, Agnew/Lawlers and Darlot due to the mines being included for a full year in 2014 as opposed to one quarter in 2013.
Expenditure on Gold Fields’ majoronce-off capital projects in fiscal 2014 included:2015.
Capital expenditure at the Australian operations increased by 16% from A$373 million (U.S.$281 million) in fiscal 2015 to A$431 million (U.S.$322 million) in fiscal 2016:
U.S.$91.9St. Ives increased by 24% from A$152 million (U.S.$115 million) to A$188 million (U.S.$140 million) due to increased expenditure onpre-stripping at the developmentInvincible and equipping of the South Deep mine as the mine builds to full production as compared to U.S.$202.4 million in fiscal 2013 and U.S.$314.5 million in fiscal 2012;Neptune open pits;
U.S.$10.1Agnew/Lawlers decreased by 3% from A$97 million on new mining equipment(U.S.$73 million) to A$94 million (U.S.$70 million) due to increased development of Fitzroy Bengal Hastings at Tarkwa, as compared to U.S.$28.5 millionWaroonga in fiscal 2013 and U.S.$62.5 million2015, partially offset by increased exploration expenditure in fiscal 2012;2016.
U.S.$19.3Darlot increased by 7% from A$27 million on(U.S.$20 million) to A$29 million (U.S.$21 million) due to increased exploration and capital development at the tailings storage facility (TSF 5) at Tarkwa compared to U.S.$0.5 million in 2013 and nil million in 2012;Oval ore body.
U.S.$6.6Granny Smith increased by 26% from A$96 million on expenditure on the CIL capacity increase project at Tarkwa, compared(U.S.$72 million) to no expenditure in fiscal 2013 and U.S.$1.7A$121 million in fiscal 2012;
Nil million on the water treatment plant at Tarkwa, compared to U.S.(U.S.$14.4 million in fiscal 2013 and U.S.$12.7 million in fiscal 2012;
U.S.$5.1 million on the raise of the TSF at Damang as compared to U.S.$7.3 million expenditure in fiscal 2013 and U.S.$2.6 million in fiscal 2012;
U.S.$4.1 million on heavy mining equipment at Damang as compared to U.S.$4.5 million expenditure in fiscal 2013 and U.S.$11.1 million in fiscal 2012;
U.S.$27.7 million on the tailings storage facility at Cerro Corona, compared to U.S.$26.6 million in fiscal 2013 and U.S.$41.7 million in 2012;
U.S.$55.6 million expenditure on development and infrastructure of the Waroonga and New Holland underground complexes at Agnew/Lawlers, compared to U.S.$36.1 million in fiscal 2013 and U.S.$31.7 million in fiscal 2012;
U.S.$29.4 million on development of underground mines at St. Ives compared to U.S.$54.7 million in fiscal 2013 and U.S.$91.5 million in fiscal 2012. Athena accounted for U.S.$7.5 million90 million). The majority of expenditure in fiscal 2014, as comparedrelated to U.S.$18.3 million in 2013capital development, exploration and U.S.$20.8 million in 2012;the establishment of new fresh air intake ventilation raises.
U.S.$5.3 millionProceeds on developmentdisposal of the underground mine at Darlot compared to U.S.$0.9 million in fiscal 2013;
U.S.$13.1 million on development of the Wallaby underground mine at Granny Smith compared to U.S.$3.2 million in fiscal 2013;
U.S.$12.2 million on theproperty, plant optimization at Granny Smith; and
U.S.$24.2 million of interest capitalized as compared to U.S.$18.3 million in fiscal 2013 and U.S.$13.0 million in fiscal 2012.equipment
Proceeds on the disposal of property, plant and equipment decreased by 33% from U.S.$10.43 million in fiscal 20132015 to U.S.$4.92 million in fiscal 2014. 2016. In both 2016 and 2015, this related to the sale of various redundant assets.
Purchase of Gruyere Gold Project assets
On December 13, 2016, Gold Fields purchased 50% of the Gruyere Gold Project and entered into a 50:50 unincorporated joint venture with Gold Road for the development and operation of the Gruyere Gold Project in Western Australia, which comprises the Gruyere gold deposit as well as additional resources including Central Bore and Attila/Alaric.
Gold Fields acquired 50% interest in the Gruyere Gold Project for a total purchase consideration of A$350.0 million payable in cash and a 1.5% royalty on Gold Fields’ share of production after total mine production exceeds 2 million ounces. The cash consideration is split with A$250.0 million payable on effective date and A$100.0 million payable according to an agreed construction cash call schedule. Transaction costs of A$19 million were incurred.
At December 31, 2016, Gruyere mining assets of U.S.$276 million (A$372 million) were capitalized of which U.S.$197 million (A$266 million) were cash additions and U.S.$79 million (A$106 million) werenon-cash additions.
The U.S.$197 million (A$266 million) cash additions comprise the initial cash consideration of A$250 million payable, as well as additional development costs. The U.S.$79 million (A$106 million)non-cash additions comprise of the initial A$100 million payable, as well as stamp duties payable.
Purchase of investments
Investment purchases increased by 333% from U.S.$3 million in fiscal 2015 to U.S.$13 million in fiscal 2016.
The purchase of investments of U.S.$13 million in fiscal 2016 comprised:
| U.S.$ million | ||||
Cardinal Resource Limited | 13 | |||
| 13 | ||||
The purchase of investments of U.S.$3 million in fiscal 2015 comprised:
| U.S.$ million | ||||
Mine Vision Systems | 3 | |||
| 3 | ||||
Proceeds on disposal of investments
Proceeds on the disposal of property, plant and equipment wereinvestments increased from U.S.$1.4nil in fiscal 2015 to U.S.$4 million in fiscal 2012. In all three years, this related to the2016.
The proceeds on disposal of various redundant mining assetsinvestments of U.S.$4 million in fiscal 2016 comprised:
| U.S.$ million | ||||
Sale of shares in Sibanye Gold Limited | 2 | |||
Sale of shares in Tocqueville Bullion Reserve Limited | 2 | |||
| 4 | ||||
Environmental trust funds and rehabilitation payments
The environmental trust fund and rehabilitation payments decreased by the South African and international mining operations.
On October 1, 2013, the Group obtained full control of the Yilgarn South Assets through a sale and purchase agreement. The total consideration transferred for the acquisition of the Yilgarn South Assets was17% from U.S.$135.018 million as well as equity instruments (28.7 million ordinary shares) amountingin fiscal 2015 to U.S.$127.3 million.
On September 20, 2010, Gold Fields entered into option agreements with Lepanto, a company listed in the Philippines, and Liberty, a private holding company, to acquire a 60% interest in the FSE deposit in the Philippines. The agreements provide Gold Fields with an 18-month option on FSE, during which time Gold Fields will conduct a major drilling program as part of a feasibility study on FSE. As part of the agreement, Gold Fields was required to pay U.S.$10.015 million in option fees to Lepanto and U.S.$44.0 million as a non-refundable down-payment to Liberty upon signing of the option agreements, totaling U.S.$54.0 million, which payments were made during September 2010. fiscal 2016.
During fiscal 2011,2016, Gold Fields paid U.S.$2 million into its South Deep mine environmental trust fund and U.S.$6 million into its Tarkwa mine environmental trust fund and spent U.S.$7 million onon-going rehabilitation at the international operations, resulting in a further non-refundable down paymenttotal cash outflow of U.S.$66.015 million to Liberty, in accordance withfor the agreement. On March 22, 2012, Gold Fields exercised its option to acquire 40% of the FSE after making a payment of U.S.$110.0 million. The final payment of U.S.$110.0 million is payable at the expiration of the option period. The total pre-agreed acquisition price for a 60% interest in FSE, inclusive of all of the above payments, is U.S.$340.0 million.year.
On October 4, 2011, Gold Fields entered into an option agreement with Bezant to acquire the entire issued share capital of Asean Copper Investment Limited, or Asean, which is incorporated in the British Virgin Islands, a wholly owned subsidiary of Bezant. Asean holds Bezant’s entire interest in the Guinaoang porphyry copper-gold deposit (the Mankayan project) located on Luzon Island in the Philippines.
In fiscal 2011,During 2015, Gold Fields paid an upfront non-refundable option feeU.S.$1 million into its South Deep mine environmental trust fund and U.S.$7 million into its Tarkwa mine environmental trust fund and spent U.S.$10 million onon-going rehabilitation at the international operations, resulting in a total cash outflow of U.S.$7.018 million andfor the year.
Cash Flows From Financing Activities
Cash outflows from financing activities was granted the option to acquire the entire issued share capital of Asean for U.S.$63.0 million. The option could be exercised from the date upon which it is granted until its expiry on January 31, 2013. In January 2013, the option was extended to January 31, 2014 with a revised considerationan inflow of U.S.$60.5 million to be paid on future exercise of the option. In consideration for this extension, Gold Fields made a payment of U.S.$10.0 million comprising a second non-refundable payment of U.S.$2.5 million. Gold Fields also made a U.S.$7.5 million payment for a 21.6% shareholding in Bezant in January 2013. In November 2013, Gold Fields relinquished the option ahead of the expiry date and the U.S.$10.0 million non-refundable option fee was impaired. The 21.6% shareholding in Bezant, acquired in January 2013, is classified as an investment in associate. The Mankayan project is located approximately four kilometers east of the FSE deposit.
On July 2, 2014, Gold Fields sold its 51% interest in Canteras del Hallazgo (entity that housed the Chucupaca project in Peru) for US$81.0 million to Compañía de Minas Buenaventura S.A.A.
Purchase of investments was U.S.$4.437 million in fiscal 2014,2016 compared to an outflow of U.S.$3.588 million in fiscal 20132015.
Share issue
During 2016, Gold Fields completed a U.S.$152 million (R2.3 billion) non-U.S. accelerated equity raising by way of a private placement to institutional investors. A total number of 38,857,913 new Gold Fields shares were placed at a price of R59.50 per share which represented a 6% discount to the30-day volume weighted average traded price, for the period March 17, 2016 and a 0.7% discount to the50-day moving average.
The net proceeds from the placement were used to finance thebuy-back of the notes.
Loans raised
Loans raised increased by 157% from U.S.$0.8506 million in fiscal 2012, respectively.
The investment purchases of2015 to U.S.$4.41,299 million in fiscal 2014 were:2016.
The U.S.$1,299 million loans raised in fiscal 2016 comprised:
| U.S.$ million | ||||
U.S.$150 million revolving senior secured credit facility | 40 | |||
U.S.$1,510 million term loan and revolving credit facilities | 174 | |||
U.S.$1,290 million term loan and revolving credit facilities(1) | 708 | |||
R1,500 million Nedbank revolving credit facility | 21 | |||
Short-term Rand uncommitted credit facilities | 356 | |||
| 1,299 | ||||
| Note: |
Credit facilities refinancing
| (1) | Gold Fields successfully refinanced its U.S.$1,510 million credit facilities due in November fiscal 2017. The new facilities amount to U.S.$1,290 million and comprise three tranches: |
U.S.$380 million: three-year term loan maturing in June fiscal 2019 – margin 250 basis points (bps) over LIBOR;
U.S.$360 million: three-year revolving credit facility also maturing in June fiscal 2019 (with an option to extend to up to five years) – margin 220bps over LIBOR; and
U.S.$550 million: five-year revolving credit facility maturing in June fiscal 2021 – margin 245bps over LIBOR.
The new facilities were concluded with a syndicate of 15 banks. On average, the interest rate on the new facilities is similar to the interest rate on the existing facilities. A total of U.S.$645 million was drawn down from the new facilities on 13 June 2016 to repay the Group’s existing U.S.$ facilities, with U.S.$645 million remaining unutilized. The refinancing is a key milestone in Gold Fields’ balance sheet management and increases the maturity of its core debt, with the first maturity now only in June fiscal 2019 (previously November fiscal 2017).
The U.S.$506 million loans raised in fiscal 2015 comprised:
| U.S.$ million | ||||
U.S.$70 million senior secured revolving credit facility | 10 | |||
U.S.$1,510 million term loan and revolving credit facilities | 400 | |||
Short-term Rand uncommitted credit facilities | 96 | |||
| 506 | ||||
Loans repaid
Loans repaid increased by 138% from U.S.$594 million in fiscal 2015 to U.S.$1,413 million in fiscal 2016.
The U.S.$1,413 million loans repaid in fiscal 2016 comprised:
| U.S.$ million | ||||
| ||||
| ||||
U.S.$1,290 million term loan and revolving credit facility | 49 | |||
R1,500 million Nedbank revolving credit facility | 21 | |||
Short-term Rand uncommitted credit facilities | 315 | |||
|
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Note:
Bond buy-back
| (1) | On |
The investment purchases of U.S.$3.5594 million loans repaid in fiscal 2013 were:2015 comprised:
| U.S.$ million | ||||
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The investment purchasesNet cash generated
As a result of the above, net cash generated increased by 2,075% from U.S.$0.84 million in fiscal 2012 were:2015 to U.S.$87 million in fiscal 2016.
Cash and cash equivalents increased from U.S.$440 million at December 31, 2015 to U.S.$527 million at December 31, 2016.
Liquidity and Capital Resources
Years ended December 31, 2015 and December 31, 2014
Cash resources
Cash Flows From Operating Activities
Cash inflows from operating activities decreased by 8% from U.S.$809 million in fiscal 2014 to U.S.$744 million in fiscal 2015. The decrease of U.S.$65 million was due to:
| U.S.$ million | ||||
| ( | ) | ||
| 2 | |||
Decrease in release of | ( | ) | ||
Decrease in interest paid due to lower borrowings | 17 | |||
Decrease in royalties paid due to lower revenue | 12 | |||
Increase in taxes paid | (13 | ) | ||
Decrease in dividends paid due to lower normalized earnings | 13 | |||
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| ( | ) | |||
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Proceeds
Dividends paid decreased from the sale of listed investments were U.S.$6.442 million in fiscal 2014 to U.S.$35.029 million in fiscal 2013 and2015. The dividends paid of U.S.$65.429 million in fiscal 2012, respectively.2015 comprised dividends paid to ordinary shareholders of U.S.$15 million,non-controlling interests in Ghana and Peru of U.S.$12 million and South Deep BEE dividend of U.S.$2 million.
The investment disposals comprising thedividends paid of U.S.$6.442 million in fiscal 2014 were:comprised dividends paid to ordinary shareholders of U.S.$30 million,non-controlling interests in Ghana and Peru of U.S.$10 million and South Deep BEE dividend of U.S.$2 million.
Cash Flows From Investing Activities
Cash outflows from investing activities increased by 23% from U.S.$531 million in fiscal 2014 to U.S.$652 million in fiscal 2015. The items comprising these numbers are discussed below.
Additions to property, plant and equipment
Capital expenditure increased by 4% from U.S.$609 million in fiscal 2014 to U.S.$634 million in fiscal 2015.
Capital expenditure at South Deep in South Africa decreased from R994 million (U.S.$92 million) in fiscal 2014 to R848 million (U.S.$67 million) in fiscal 2015:
This decrease was mainly due to lower expenditure on new mine development.
Capital expenditure at the Ghanaian operations increased from U.S.$190 million in fiscal 2014 to U.S.$221 million in fiscal 2015:
Tarkwa increased from U.S.$174 million to U.S.$204 million mainly due to increased expenditure on the purchase of mining fleet and additional capital waste stripping; and
Damang increased from U.S.$16 million to U.S.$17 million mainly due to increased expenditure on the processing plant upgrade and heavy vehicle equipment components.
Capital expenditure at Cerro Corona in Peru increased from U.S.$51 million in fiscal 2014 to U.S.$65 million in fiscal 2015:
The increase in expenditure was on the raising of the tailings management facility and expenditure on the new fuel station and camp.
Capital expenditure at the Australian operations increased from A$304 million (U.S.$274 million) in fiscal 2014 to A$373 million (U.S.$281 million) in fiscal 2015:
St. Ives increased from A$130 million (U.S.$118 million) to A$152 million (U.S.$115 million) due to increased expenditure on exploration andpre-stripping at the Invincible pit;
Agnew/Lawlers increased from A$92 million (U.S.$83 million) to A$97 million (U.S.$73 million) due to increased exploration expenditure;
Darlot increased from A$16 million (U.S.$15 million) to A$27 million (U.S.$20 million) due to increased capital development at LSL as well as additional exploration expenditure.
Granny Smith increased from A$65 million (U.S.$59 million) to A$96 million (U.S.$72 million) due to increased capital development and exploration.
Proceeds on disposal of property, plant and equipment
Proceeds on the disposal of property, plant and equipment decreased by 40% from U.S.$5 million in fiscal 2014 to U.S.$3 million in fiscal 2015. In both 2015 and 2014, this related to the sale of various redundant assets.
Proceeds on disposal of Chucapaca
During 2014, Gold Fields sold its 51% interest in Canteras del Hallazgo (entity that houses the Chucupaca project in Peru) for U.S.$81 million to Compañía de Minas Buenaventura S.A.A.
Purchase of investments
Investment purchases decreased by 25% from U.S.$4 million in fiscal 2014 to U.S.$3 million in fiscal 2015.
The purchase of investments of U.S.$3 million in fiscal 2015 comprised:
| U.S.$ million | ||||
Mine Vision Systems | 3 | |||
| 3 | ||||
The purchase of investments of U.S.$4 million in fiscal 2014 comprised:
| U.S.$ million | ||||
Rand Refinery Limited | 3 | |||
Tocqueville Bullion Reserve Limited | 1 | |||
| 4 | ||||
Proceeds on disposal of investments
Proceeds on the disposal of investments decreased from U.S.$6 million in fiscal 2014 to U.S.$nil in fiscal 2015.
The proceeds on disposal of investments of U.S.$6 million in fiscal 2014 comprised:
| U.S.$ million | ||||
Sale of shares in Robust Resources Limited | ||||
Sale of the Group’s interest in Talas (exploration project in | ||||
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Environmental trust funds and rehabilitation payments
The investment disposals comprising theenvironmental trust fund and rehabilitation payments increased from U.S.$35.010 million in fiscal 2013 were:2014 to U.S.$18 million in fiscal 2015.
During 2015, Gold Fields paid U.S.$1 million into its South Deep mine environmental trust fund and U.S.$7 million into its Tarkwa mine environmental trust fund and spent U.S.$10 million onon-going rehabilitation at the international operations, resulting in a total cash outflow of U.S.$18 million for the year.
During 2014, Gold Fields paid U.S.$1 million into its South Deep mine environmental trust fund and U.S.$6 million into its Tarkwa mine environmental trust fund and spent U.S.$3 million onon-going rehabilitation at the international operations, resulting in a total cash outflow of U.S.$10 million for the year.
Cash Flows From Financing Activities
Cash outflows from financing activities decreased by 30% from U.S.$126 million in fiscal 2014 to U.S.$88 million in fiscal 2015.
Equity contributions fromnon-controlling interest holders
Equity contributions fromnon-controlling interest holders decreased from U.S.$2 million in fiscal 2014 to U.S.$nil in fiscal 2015. The U.S.$2 million received in fiscal 2014 related to cash advanced by Buenaventura in accordance with their obligations under the Chucapaca agreement. The reason for the decrease in equity contributions fromnon-controlling interest holders from 2015 to 2014 is the disposal of Chucapaca in August 2014.
Loans raised
Loans raised increased from U.S.$464 million in fiscal 2014 to U.S.$506 million in fiscal 2015.
The U.S.$506 million loans raised in fiscal 2015 comprised:
| U.S.$ million | ||||
| ||||
| ||||
| ||||
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| |||
|
| |||
The investment disposals comprising the U.S.$65.4464 million in fiscal 2012 were:
| ||||
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| ||||
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For its South African and Ghanaian operations (from fiscal 2013), Gold Fields contributes to environmental trust funds it established to provide for any environmental rehabilitation obligations and expected closure costs relating to its mining operations. The amounts invested in the trust funds are classified as non-current assets and
any income earned on these assets is accounted for as interest income. The amount required to be contributed each year is calculated pursuant to a statutory formula, and can vary depending on how the fund’s investments performed, the lives of mines and various other factors. During fiscal 2014, Gold Fields contributed U.S.$7.1 million to the environmental trust fund comprising U.S.$0.5 million contributed by the South African operation and U.S.$6.6 million contributed by the Ghanaian operation, compared to U.S.$15.4 million contributed in fiscal 2013 comprising U.S.$0.9 million contributed by the South African operation and U.S.$14.5 million contributed by the Ghanaian operation and U.S.$0.6 million from the South African operation only in fiscal 2012. For the Australasia and Americas operations, Gold Fields does not contribute to a trust fund.
Cash flows from investing activities—discontinued operations
Cash utilized in investing activities was U.S.$54.9 million in fiscal 2013. This related to cash utilized by Sibanye Gold for two months to February 2013, the date of Spin-off of Sibanye Gold.
Cash utilized in investing activities decreased from U.S.$381.8 million in fiscal 2012 to U.S.$54.9 million in fiscal 2013. The decrease is due to the fact that results for only two months up to the date of Spin-off of Sibanye Gold were included in fiscal 2013 compared to 12 months in fiscal 2012.
Cash flows from financing activities—continuing operations
Net cash utilized by financing activities was U.S.$168.2 million in fiscal 2014 as compared to cash provided of U.S.$30.3 million in fiscal 2013 and cash utilized of U.S.$398.9 million in fiscal 2012. The items comprising these amounts are discussed below:
Long- and short-term loans received were U.S.$463.9 million in fiscal 2014, U.S.$3,177.7 million in fiscal 2013 and U.S.$936.3 million in fiscal 2012.
The U.S.$463.9 million in loans receivedraised in fiscal 2014 comprised:
| U.S.$ million | ||||
| ||||
| ||||
| ||||
| ||||
| ||||
|
| |||
|
| |||
Loans repaid
Loans repaid increased from U.S.$592 million in fiscal 2014 to U.S.$594 million in fiscal 2015.
The U.S.$3,177.7594 million in loans receivedrepaid in fiscal 20132015 comprised:
| U.S.$ million | ||||
| ||||
| ||||
| ||||
| 21 | |||
Short-term | ||||
|
| |||
|
| |||
The U.S.$936.3592 million in loans received in fiscal 2012 comprised:
| ||||
| ||||
| ||||
| ||||
Long- and short-term loans repaid were U.S.$591.8 million in fiscal 2014, U.S.$2,971.3 million in fiscal 2013 and U.S.$975.9 million in fiscal 2012.
The U.S.$591.8 million in loans repaid in fiscal 2014 comprised:
| U.S.$ million | ||||
U.S.$200 millionnon-revolving senior secured term loan | ||||
U.S.$70 million senior secured revolving credit facility | ||||
U.S.$1,510 million term loan and revolving credit | ||||
R500 million Rand Merchant Bank revolving credit facility | ||||
Short-term Rand uncommitted credit facilities | ||||
|
| |||
|
| |||
The U.S.$2,971.3 million inNet loans repaid in fiscal 2013 comprised:
| ||||
| ||||
| ||||
| ||||
| ||||
Thedecreased from U.S.$975.9 million in loans repaid in fiscal 2012 comprised:
| ||||
| ||||
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For a description of Gold Fields’ various credit facilities, see “—Credit Facilities and Other Capital Resources”.
U.S.$2.0 million, U.S.$6.8 million and U.S.$27.7 million of noncontrolling shareholder loans were received in fiscal 2014, fiscal 2013 and fiscal 2012, respectively, from Buenaventura which holds a 49% noncontrolling interest in Canteras del Hallazgo, the company that owns the Chucapaca project in Peru.
During fiscal 2013, Gold Fields purchased an additional noncontrolling interest of 0.9% in La Cima for U.S.$12.8 million. During fiscal 2012, Gold Fields purchased 0.1% in La Cima for U.S.$0.8 million and the noncontrolling interest of 40% in the Talas project from Orsu Metals Corporation for U.S.$10.0 million. There was no additional buy-out of La Cima’s noncontrolling interest during fiscal 2014.
Dividends paid amounted to U.S.$29.8128 million in fiscal 2014 compared to U.S.$61.288 million in fiscal 2013 and U.S.$364.2 million in fiscal 2012. Dividend payments amounted to R324.2 million, or 42 SA cents per ordinary share, in fiscal 2014, R557.9 million, or 75 SA cents per ordinary share, in fiscal 2013 and R2,846.3 million, or 390 SA cents per ordinary share, in fiscal 2012.The2015. The decrease in dividends paid in fiscal 2014net loans repaid was mainly due to lower normalized earnings.
During fiscal 2014, Tarkwaoperating cash flows and La Cima paid dividends to noncontrolling shareholders amounting to U.S.$10.6 million, compared with U.S.$1.1 million paid by Tarkwa and La Cima and U.S.$11.5 million paid by Tarkwa, Damang and La Cima in fiscal 2013 and fiscal 2012, respectively.
During the six-month period ended December 31, 2010, Gold Fields implemented three empowerment transactions which included a broad-based BEE transaction for 10.0% of South Deep. The South Deep transaction amounted to U.S.$115.5 million and was made up of a preferred BEE dividend of U.S.$21.2 million and an equity component equivalent to U.S.$94.3 million. Under the South Deep transaction, a wholly owned subsidiary company of Gold Fields was created to acquire 100% of the South Deep asset from GFIMSA. The new company then issued 10 million Class B ordinary shares representing 10.0% of South Deep’s net worth to a consortium of BEE partners. Class B ordinary shareholders are entitled to a dividend of R2 per share. During fiscal 2014, 2013 and 2012, U.S.$1.9 million, U.S.$2.2 million and U.S.$2.5 million of the Class B dividend was paid, respectively.
In fiscal 2014, U.S.$nil was received as a result of share options exercised, as compared to U.S.$0.8 million and U.S.$2.0 million in fiscal 2013 and 2012, respectively.
In fiscal 2013,higher investing activities cash of U.S.$106.4 million relating to discontinued operations was transferred to Sibanye Gold on Spin-off.flows.
Cash flows from financing operations by discontinued operations
Net cash provided by financing activities was U.S.$39.0 million in fiscal 2013. This related to cash provided by Sibanye Gold for two months to February 2013, the date of Spin-off of Sibanye Gold.
Net cash provided by financing activities decreased from U.S.$514.7 million in fiscal 2012 to U.S.$39.0 million in fiscal 2013. The decrease is due to the fact that results for only two months up to the date of unbundling were included in fiscal 2013 compared to 12 months in fiscal 2012.
Net decrease in cash and cash equivalentsgenerated
As a result of the above, net cash provided after accounting for the effect of exchange rate on cash and cash equivalents wasgenerated decreased from U.S.$133.0152 million in fiscal 2014 compared with net cash utilized ofto U.S.$330.64 million in fiscal 20132015.
Cash and cash equivalents amounted to U.S.$88.4440 million at December 31, 2015, as compared to U.S.$458 million at December 31, 2014.
STATEMENT OF FINANCIAL POSITION
Borrowings
Total debt (short and long-term borrowings) decreased from U.S.$1,820 million at December 31, 2015 to U.S.$1,693 million at December 31, 2016. Net debt (total debt less cash and cash equivalents) decreased from U.S.$1,380 million at December 31, 2015 to U.S.$1,166 million at December 31, 2016 as a result of lower debt and higher cash balance.
The Group monitors capital using the ratio of net debt to adjusted EBITDA. Adjusted EBITDA is defined as net operating profit before depreciation and amortization, adjusted for exploration expenses and certain other costs. The definition of adjusted EBITDA is as defined in the U.S.$1,290 million term loan and revolving credit facilities agreement. Net debt is defined as total borrowings less cash and cash equivalents. The Group’s long-term target is a ratio of net debt to adjusted EBITDA of one times or lower. The bank covenants on external borrowings require a net debt to adjusted EBITDA ratio of 2.5 or below and the ratio is measured based on amounts in United States dollar. Net debt to adjusted EBITDA at December 31, 2016 was 0.95 (2015: 1.38), surpassing the Group’s target of 1.0 which was set at the start of 2015. Refer to note 39 to the consolidated financial statements.
Provisions
Long-term provisions increased by 3% from U.S.$284 million at December 31, 2015 to U.S.$292 million at December 31, 2016 and included a provision for environmental rehabilitation costs of U.S.$283 million (2015: U.S.$275 million) and other long term provisions of U.S.$9 million (2015: U.S.$9 million).
Provision for environmental rehabilitation costs
The amount provided for environmental rehabilitation costs increased by 3% from U.S.$275 million at December 31, 2015 to U.S.$283 million at December 31, 2016. The increase is largely due to the increase in the gross closure costs at the Ghanaian and Peruvian operations. This provision represents the present value of closure, rehabilitation and other environmental obligations incurred up to December 31, 2016. This provision is updated annually to take account of inflation, the time value of money and any new environmental obligations incurred.
The inflation and range of discount rates applied in fiscal 2016 and 2015 for each region are shown in the table below:
| South Africa | Ghana | Australia | Peru | |||||||||||||
Inflation rates | ||||||||||||||||
2016 | 5.5 | % | 2.2 | % | 2.5 | % | 2.2 | % | ||||||||
2015 | 5.4 | % | 2.2 | % | 2.5 | % | 2.2 | % | ||||||||
Discount rates | ||||||||||||||||
2016 | 9.7 | % | 9.7 – 9.8 | % | 1.9 – 3.0 | % | 3.7 | % | ||||||||
2015 | 10.1 | % | 7.8 – 8.8 | % | 2.0 – 2.8 | % | 3.5 | % | ||||||||
The interest charge decreased by 8% from U.S.$12 million in fiscal 2012, respectively.2015 to U.S.$11 million in fiscal 2016 mainly due to lower present values of the rehabilitation liabilities which resulted from an increase in discount rates used in the 2015 rehabilitation liabilities calculation.
Adjustments for new disturbances and changes in environmental legislation during 2016 and 2015, after applying the above inflation and discount rates were:
| 2016 | 2015 | |||||||
| (U.S.$ million) | ||||||||
South Africa | (2 | ) | (6 | ) | ||||
Ghana | 8 | 5 | ||||||
Australia | (8 | ) | (4 | ) | ||||
Peru | 7 | (9 | ) | |||||
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Total | 5 | (14 | ) | |||||
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The resultant cashSouth African and cash equivalentsGhanaian operations contribute to dedicated environmental trust funds to provide financing for final closure and rehabilitation costs. The amount invested in the fund is shown as anon-current asset in the financial statements and increased by 29% from U.S.$35 million at December 31, 2014, December 31, 2013 and December 31, 2012 was2015 to U.S.$458.045 million U.S.$325.0 million and U.S.$655.6 million, respectively.
Credit Facilities and Other Capital Resources
As at December 31, 2014, Gold Fields2016. The increase is mainly as a result of contributions amounting to U.S.$8 million and interest income of U.S.$1 million in fiscal 2016. The South African and Ghanaian operations are required to contribute annually to the trust fund over the remaining lives of the mines, to ensure that sufficient funds are available to discharge commitments for future rehabilitation costs.
Other long-term provisions
Other long term provisions remained flat at U.S.$9 million and include the South Deep dividend of U.S.$7 million (2015: U.S.$7 million) and other provisions of U.S.$2 million (2015: U.S.$2 million).
Credit facilities
At December 31, 2016, the Group had committed unutilized banking facilities of U.S.$1,016.9 million available under the following facilities, details of which are discussed below:in note 24 to the consolidated financial statements:
U.S.$884.0632 million available under the U.S.$1,5101,290 million term loan and revolving credit facilities;
U.S.$33.068 million available under the La CimaU.S.$150 million revolving senior secured credit facility;
U.S.$35.025 million available under the U.S.$70 million senior secured revolving credit facility;
U.S.$148 million available under the U.S.$1 billion notes as the notes bought back were never cancelled; and
U.S.$64.9107 million (R750.0(R1,500 million) available under various committedR1,500 million Nedbank revolving credit facilities discussed further below.facility.
Subsequent to year end, on January 19, 2015, a further U.S.$75.0 million became available under the La Cima revolving senior secured credit facility.
Substantial contractual arrangements for uncommitted borrowing facilities are maintained with several banking counterparties to meet Gold Fields’the Group’s normal contingency funding requirements.
As of the date of this report, Gold Fieldsthe Group was not in default under the terms of any of its outstanding credit facilities.
Contractual obligations and commitments as at December 31, 2016
| Payments due by period | ||||||||||||||||||||
| Total | Less than 12 months | 12-36 months | 36-60 months | After 60 months | ||||||||||||||||
| (U.S.$ millions) | ||||||||||||||||||||
Long-term debt | ||||||||||||||||||||
Notes Issue | ||||||||||||||||||||
Capital | 852.4 | — | — | 852.4 | — | |||||||||||||||
Interest | 157.1 | 41.6 | 83.1 | 32.4 | — | |||||||||||||||
U.S.$150 million revolving senior secured credit facility | ||||||||||||||||||||
Capital | 82.0 | 82.0 | — | — | — | |||||||||||||||
Interest | 1.9 | 1.9 | — | — | — | |||||||||||||||
U.S.$1,290 million term loan and revolving credit facility | ||||||||||||||||||||
Capital | 658.5 | — | 658.5 | — | — | |||||||||||||||
Interest | 50.2 | 20.6 | 29.6 | — | — | |||||||||||||||
U.S.$70 million senior secured revolving credit facility | ||||||||||||||||||||
Capital | 45.0 | 45.0 | — | — | — | |||||||||||||||
Interest | 0.5 | 0.5 | — | — | — | |||||||||||||||
Short term Rand credit facilities | ||||||||||||||||||||
Capital | 61.0 | 61.0 | — | — | — | |||||||||||||||
Interest | 5.1 | 5.1 | — | — | — | |||||||||||||||
Operating lease obligations | 549.7 | 42.5 | 116.2 | 113.7 | 277.3 | |||||||||||||||
Other long-term obligations | ||||||||||||||||||||
Environmental obligations(1)(2) | 380.8 | 3.6 | 7.7 | 22.1 | 347.4 | |||||||||||||||
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Total contractual obligations | 2,844.2 | 303.8 | 895.1 | 1,020.6 | 624.7 | |||||||||||||||
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Notes:
| (1) | Gold Fields makes full provision for all environmental obligations based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the reporting date. Management believes that the provisions made for environmental obligations are adequate to cover the expected volume of such obligations. |
| (2) | Represents the undiscounted liability. |
| Amounts of commitments expiring by period | ||||||||||||||||||||
| Total | Less than 12 months | 12-36 months | 36-60 months | After 60 months | ||||||||||||||||
| (U.S.$ millions) | ||||||||||||||||||||
Other commercial commitments | ||||||||||||||||||||
Guarantees(1) | — | — | — | — | — | |||||||||||||||
Capital expenditure | 46.2 | 46.2 | — | — | — | |||||||||||||||
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Total commercial commitments | 46.2 | 46.2 | — | — | — | |||||||||||||||
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Note:
| (1) | Gold Fields provides environmental obligation guarantees with respect to its South African, Peruvian and Ghanaian operations. These guarantees amounted to U.S.$100.1 million at 31 December 2016. |
Working capital
Management believes that Gold Fields’ working capital resources, by way of internal sources and banking facilities, are sufficient to fund Gold Fields’ currently foreseeable future business requirements.
Off balance sheet items
At December 31, 2016, Gold Fields had no material off balance sheet items.
Recent Developments
See “Information on the Company—Developments since December 31, 2015”.
Trend and Outlook
Attributable equivalent gold production for the Group for fiscal 2017 is expected to be between 2.10 million ounces and 2.15 million ounces, unchanged from the updated guidance provided in fiscal 2016. The Australian operations are expected to produce around 910,000 ounces. Cerro Corona’s gold equivalent production of around 290,000 ounces is higher than 2016 with the increase mainly due to the positive impact of the higher copper/gold price ratio. Lower production is expected at Damang given the reinvestment currently underway and South Deep is expected to increase production to around 9,800 kilograms (315,000 ounces).
Theall-in-sustaining cost for the Group is expected to be between U.S.$1,010 per ounce and U.S.$1,030 per ounce.
Gold Fields plans to embark on a year of reinvestment in fiscal 2017 with the focus on new growth and development projects, and to target both sustaining and growing free cash flow. Apart from the growth invested in South Deep, three other major projects namely the Damang Reinvestment Plan, the Gruyere Gold Project and the Salares Norte project require significant investment. Growth expenditure at South Deep is planned to increase to R287 million (U.S.$20 million) in fiscal 2017 (2016: R115 million/U.S.$8 million). In fiscal 2017, U.S.$120 million will be invested in future growth at Damang, while the eventA$153 million (U.S.$112 million) is planned to be spent on the development of Gruyere. In Chile, Salares Norte received water rights and the project is on track to complete a prefeasibility study in the second half of fiscal 2017. The plan is to increase expenditure to U.S.$64 million at Salares Norte in fiscal 2017 (2016: U.S.$39 million).
As a result of the above, AIC for the Group is planned to increase significantly to between U.S.$1,170 per ounce to U.S.$1,190 per ounce. Group capital expenditure for the year is planned at U.S.$870 million. It includes U.S.$120 million at Damang and A$153 million (U.S.$112 million) for Gruyere, as well as R287 million (U.S.$20 million) at South Deep. These expectations assume exchange rates of R/U.S.$: 14.14 and A$/U.S.$: 0.73.
ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors
Gold Fields’ directors and their ages and positions are:
Name | Age | Position | Term Expires(1) | |||||||
Cheryl A. Carolus | 58 | Non-executive Chair | May 2018 | |||||||
Nicholas J. Holland | 58 | Executive Director and Chief Executive Officer | May 2017 | |||||||
Paul A. Schmidt | 49 | Executive Director and Chief Financial Officer | May 2017 | |||||||
Alhassan Andani(2) | 55 | Non-executive Director | May 2017 | |||||||
Peter J. Bacchus(3) | 47 | Non-executive Director | May 2017 | |||||||
Terence P. Goodlace(4) | 57 | Non-executive Director | May 2017 | |||||||
Carmen Letton(5) | 51 | Non-executive Director | May 2017 | |||||||
Richard P. Menell | 61 | Non-executive Director and Deputy Chair | May 2018 | |||||||
Donald M. J. Ncube | 69 | Non-executive Director | May 2019 | |||||||
Steven P. Reid(6) | 61 | Non-executive Director | May 2019 | |||||||
Yunus G.H. Suleman(7) | 59 | Non-executive Director | May 2017 | |||||||
Gayle M. Wilson(8) | 72 | Non-executive Director | May 2019 | |||||||
Notes:
| (1) | Terms expire on the date of the annual general meeting in that year for newly appointed directors and once every three years after their first election. |
| (2) | Appointed asNon-executive Director on August 1, 2016. |
| (3) | Appointed asNon- executive Director on September 1, 2016. |
| (4) | Appointed asNon-executive Director on July 1, 2016. |
| (5) | Appointed asNon-executive Director on May 1, 2017. |
| (6) | Appointed as aNon-executive Director on February 1, 2016. |
| (7) | Appointed asNon-executive Director on September 1, 2016. |
| (8) | Scheduled to retire on May 24, 2017. |
Directors and Executive Officers
The Memorandum of Incorporation of Gold Fields provides that the Board must consist of no less than four and no more than 15 directors at any time. The Board currently consists of two executive directors andten non-executive directors, all of whom are independent.
The Memorandum of Incorporation of Gold Fields providesone-third of all directors (including executive directors) must retire from office at each annual general meeting of Gold Fields. The first to retire are those directors appointed as additional members of the Board during the year, followed by the longest serving members. Retiring directors normally make themselves available forre-election and arere-elected at the annual general meeting at which they retire. The number of directors serving must at all times be less thanone-half of the total number of directors in office. Gold Fields’ current executive directors are appointed to their positions as directors by contract.
According to the Memorandum of Incorporation, the Board is required to meet at least four times a year and beyond that, may meet as it sees fit. The Board sets its own policies for adjourning and otherwise regulating meetings. Any director may call a meeting at any time by requesting the company secretary to convene a meeting. The Memorandum of Incorporation further provides for the following:
if a Director has a personal financial interest in a matter to be considered at a meeting of the Board, that Director is obliged to disclose that interest, must leave the meeting after making that disclosure and
must not take part in the consideration of the matter. While absent from such meeting, the interested Director will nevertheless be regarded as being present for the purposes of determining a quorum, but will not be regarded as being present for the purpose of determining whether a resolution has sufficient support to be adopted. However, a Director who owns ordinary shares may vote his ordinary shares at a general meeting of shareholders in a transaction in which the Director is interested; |
a director may not vote as a director to determine his own compensation. The shareholders in a general meeting determine the fees fornon-executive directors from time to time. Any additional compensation, including compensation for additional services performed by the director for Gold Fields’ business or for other positions in Gold Fields or its subsidiaries, must be determined by a quorum of directors whose compensation would not be affected by the decision; and
the directors are not required to hold shares in Gold Fields, although a shareholding qualification may be imposed at any meeting of the shareholders.
The Memorandum of Incorporation does not provide for a mandatory retirement age for directors. However, Gold Fields’ Board charter specifies the retirement age to be 72 years with a discretionary extension of 12 months in the year a director turns 72 years of age.
Some of Gold Fields’ executive officers, executive directors andnon-executive directors are members of the boards of directors of various of its subsidiaries.
Under Section 303A.11 of the NYSE Company Manual, or the NYSE Listing Standards, foreign private issuers such as Gold Fields must disclose any significant ways in which their corporate governance practices differ from those followed by U.S. listed companies under the NYSE Listing Standards. Disclosure of the significant ways in which Gold Fields’ corporate governance practices differ from practices followed by U.S. companies listed on the NYSE can be found in Item 16G of this report.
The business address of all the directors and executive officers of Gold Fields is 150 Helen Road, Sandown, Sandton, 2196 South Africa, the address of Gold Fields’ head office.
Executive Directors
Nicholas J. HollandBCom, BAcc, Witwatersrand; CA (SA)
Executive Director and Chief Executive Officer. Mr. Holland has been an Executive Director of Gold Fields since April 14, 1998 and became Chief Executive Officer on May 1, 2008. He served as Executive Director of Finance from April 1997. On April 15, 2002, his title changed to Chief Financial Officer until April 30, 2008. Mr. Holland has more than 37 years’ experience in financial management and over 27 years of experience in the mining industry. Prior to joining Gold Fields, he was Financial Director and Senior Manager of Corporate Finance of Gencor Limited and a Director of Rand Refinery from July 12, 2000 until September 30, 2008. He remained an alternate director until February 2013.
Paul A. SchmidtBCom, Witwatersrand; BCompt (Hons), UNISA; CA (SA)
Executive Director and Chief Financial Officer. Mr. Schmidt was appointed Chief Financial Officer on January 1, 2009 and joined the Board on November 6, 2009. Prior to this, Mr. Schmidt was acting Chief Financial Officer from May 1, 2008. Prior to this appointment, Mr. Schmidt was financial controller for Gold Fields from April 1, 2003. He has more than 21 years’ experience in the mining industry. Mr. Schmidt holds no other directorships.
Non-executive Directors
Cheryl A. CarolusBA Law; Bachelor of Education, University of the Western Cape; Honorary Doctorate in Law, University of Cape Town
Chair of the Board. Ms. Carolus has been a director of Gold Fields since March 10, 2009. She was appointedNon-executive Chair effective February 14, 2013. Ms. Carolus is an Executive Chairperson of Peotona Group Holdings, which has diverse interests in mining. In 2009, she was appointed Chairperson of the Board of South African Airways and served on a number of listed and unlisted companies. Ms. Carolus has previously held senior leadership positions in the liberation movement in South Africa and in the ANC. She has served as Deputy Secretary General under Nelson Mandela, and helped to negotiate the new South African constitution and coordinate the drafting of post-apartheid ANC policy. She served as South Africa’s High Commissioner to the United Kingdom from 1998 to 2001 and was the CEO of SA Tourism from 2001 to 2004. She was Chairperson of South African National Parks Board for six years and currently serves on the boards of other public and private companies andnot-for-profit organizations, including the International Crisis Group, Soul City, World Wildlife Fund (South Africa and internationally), The British Museum (appointed by HM Queen Elizabeth), and is Chair Person of the SA Constitution Hill Education Trust. She also works with NGOs focused on young people at risk and conflict prevention. She was awarded an honorary doctorate in law from the University of Cape Town in 2004 for her contribution to freedom and human rights. She was awarded the French National Order of Merit by Elisabeth Barbier, the French Ambassador to South Africa, on March 8, 2014.
Alhassan AndaniBSc Agriculture, University of Ghana; MA Banking and Finance, Finafrica Institute, Italy
Mr. Andani was appointed as a director of Gold Fields on August 1, 2016. He is currently Chief Executive and Executive Director of Stanbic Bank Ghana; the Board Chairman of the Ghana CSIR (Council for Scientific & Industrial Research) and a director of SOS Villages Ghana and has held other corporate directorships in the past.
Peter J. BacchusMA Economics, Cambridge University
Mr. Bacchus was appointed as a director of Gold Fields with effect from September 1, 2016. Mr. Bacchus is chairman of the independent merchant banking boutique, Bacchus Capital Advisers. He has acted as the global head of Mining and Metals, and is joint head of European Investment Banking at Investment Bank Jefferies, a position he held until 2016. Before this he served as global head of Mining and Metals at Morgan Stanley, and prior to that, he was head of Investment Banking, Industrials and Natural Resources at Citigroup. Mr. Bacchus has spent 25 years in investment and corporate banking with a focus on the global natural resources sector and is a member of the Institute of Chartered Accountants, England and Wales. He is also anon-executive director ofUK-listed mining group NordGold and a trustee of Space for Giants, an African-focused conservation charity.
Terence P. GoodlaceMA Business Administration, University of Wales; BCom, University of South Africa; NDip Witwatersrand Technikon
Mr. Goodlace was appointed as a director of Gold Fields with effect from July 1, 2016. Mr. Goodlace’s mining career commenced in 1977, spanning nearly 40 years of working with different organizations. He has previously served as both an Executive Vice-President and the Chief Operating Officer for Gold Fields, returning now to the Company to serve as an independentnon-executive director. He has experience serving as chief executive officer at Impala Platinum Holdings Limited and Metorex Limited. He served on the Impala Platinum Holdings Limited board for two years as an independentnon-executive director and four and a half years as an executive director. He spent three years as an executive director of Metorex Limited. Mr. Goodlace was also appointed as a non-executive director at Kumba Iron Ore on March 24, 2017.
Carmen Letton PhD in Mineral Economics (UQ) and Degree in Engineering (Mining—WASM)
Dr. Letton’s has been appointed to the Board effective May 1, 2017. She is a mining engineer and mineral economist (PhD) with 30 years of global mining exposure, working for major andmid-tier mining houses in senior management and leadership roles, with experience in operations, corporate strategy development,
engineering, asset and business development, continuous improvement, mergers and acquisitions. Currently, Dr. Letton is the Head—Open Pit Mining for the Technical and Sustainability Group in Anglo American. Dr. Letton has experience in large and medium sized projects in both the Australian and International mining environment; challenging operations leadership, complex technical roles; expertise in due diligence, corporate governance, risk management, corporate strategy and asset development. Core skills and accountabilities include operations executive general management and leadership of all key mine engineering faculties and associated technical services areas (Mine Engineering, Metallurgy, Geology).
Richard P. MenellBA (Hons), MA (Natural Sciences, Geology), Trinity College, Cambridge, United Kingdom; M.Sc. (Mineral Exploration and Management), Stanford University, California, United States of America
Mr. Menell was appointed Deputy Chair of the Board in August 2015 and has been a Director of Gold Fields since October 8, 2008. He has over 37 years’ experience in the mining industry. Previously, he has been the President and Member of the Chamber of Mines of South Africa, President and Chief Executive Officer of TEAL Exploration & Mining Inc., Executive Chairman of Anglovaal Mining Limited and Avgold Limited, Chairman of Bateman Engineering and Deputy Chairman of Harmony Gold Limited and African Rainbow Minerals. He is currently a director of Weir Group Plc and Rockwell Diamonds Inc., and Senior Advisor to Credit Suisse Securities Johannesburg, a director of Rockwell Diamonds Inc., the National Business Initiative and the Tourism Enterprise Partnership. Mr. Menell is a Trustee of Brand South Africa and a Council Member of Business Leadership South Africa. He is also Chairman of the City Year South Africa Citizen Service Organization, the Carrick Foundation and the Palaeontological Scientific Trust. Mr. Menell became a director of Sibanye Gold with effect from January 1, 2013.
Donald M. J. NcubeBA Economics and Political Science, Fort Hare University; Post Graduate Diploma in Labor Relations, Strathclyde University, Scotland; Graduate MSc Manpower Studies, University of Manchester, United Kingdom; Diploma in Financial Management; Honorary Doctorate in Commerce, University of the Transkei
Mr. Ncube was appointed a Director of Gold Fields on February 15, 2006. Previously, he was an alternate director of Anglo American Industrial Corporation Limited and Anglo American Corporation of South Africa Limited, a Director of AngloGold Ashanti Limited, as well asnon-executive chairman of South African Airways. He is currently the executive chairman of Badimo Gas (Pty) Ltd and Afro Energy.
Steven P. ReidBachelor of Applied Science in Mineral Engineering (Mining), South Australian Institute of Technology; MBA, Trium Global Executive NYU/LSE/HEC; Directors’ Education Program, Institute of Corporate Directors
Mr. Reid was appointed as a director of Gold Fields on February 1, 2016. He has over 40 years’ international mining experience and has held senior leadership roles in numerous countries. He has served as a director of Silver Standard Resources since January 2013 and a director of Eldorado Gold since May 2013. He served as chief operating officer of Goldcorp from January 2007 until his retirement in September 2012, and was Goldcorp’s executive vice president in Canada and the USA. Before joining Goldcorp, Steven spent 13 years at Placer Dome in numerous corporate, mine-management and operating roles. He also held leadership positions at Kingsgate Consolidated and Newcrest Mining, where he was responsible for the Asian and Australian operations.
Yunus G.H. SulemanBCom, University ofKwa-Zulu Natal; BCompt (Hons), University of South Africa,CA (SA)
Mr. Suleman was appointed as a director of Gold Fields with effect from September 1, 2016. Mr. Suleman serves as an independentnon-executive director of Liberty Holdings Ltd, Tiger Brands Ltd, Enactus SA (Chairman) and Albaraka Bank Ltd, and is the Global Treasurer of the World Memon Organization. He was previously Chair of KPMG South Africa.
Gayle M. WilsonBCom, BCompt (Hons), UNISA; CA (SA)
Mrs. Wilson was appointed a Director on August 1, 2008. She was previously an audit partner at Ernst & Young for 16 years where her main focus was on gold and platinum mining clients. In 1998, she was involved in AngloGold Ashanti Limited’s listing on the NYSE and in 2001 she took over as the lead partner on the global audit. Other mining clients during her career include Northam Platinum Limited, Aquarius Platinum Limited, Avmin (now African Rainbow Minerals Limited) and certain Anglo Platinum operations.
Former Officers
Kofi AnsahBSc (Mechanical Engineering) UST Ghana; MSc (Metallurgy) Georgia Institute of Technology, United States of America
Mr. Ansah was appointed a Director of Gold Fields in April 2004. He also serves as a Director of Ecobank (Ghana) Limited. From 1984 to 1999, Mr. Ansah was the Chief Executive of the Minerals Commission Accra in Ghana where his key responsibilities included advising on matters relating to the exploration and exploitation of all mineral resources in Ghana. Mr. Ansah is currently a Mining & Energy Consultant, in which capacity he provides general advice to mining and power companies and negotiates with service providers as well as regulatory authorities. Mr. Ansah retired from the Board with effect from December 31, 2016.
Alan R. HillB.Sc (Hons), M. Phil (Rock Mechanics), Leeds University, United Kingdom
Mr. Hill joined the Board on August 21, 2009. From 2004 to 2007, Mr. Hill was thenon-executive chairman of Alamos Gold Limited and, from 2005 to 2009, he held the position of President and CEO of Gabriel Resources Limited. Both companies are involved in gold exploration and development. Mr. Hill’s mining career started on the Zambian Copperbelt, following which he joined Noranda, Inc. where he managed gold and nickel mines. He worked as a consultant for a short period, before joining Camflo Mines in 1981, which merged with Barrick in 1984. Mr. Hill joined Barrick as part of the merger and spent 19 years with Barrick and was instrumental in its considerable growth, having played a pivotal role in its various merger and acquisition initiatives through the years. He retired from Barrick in 2003 as its Executive Vice President, Development. He has served asNon-Executive Chairman of Teranga Gold Corporation since April 20, 2013, having previously served as its Executive Chairman since September 2012 as well as Chairman and CEO since the company was founded in October 2010. Mr. Hill retired from the Board with effect from December 31, 2016.
David N. Murray BA Hons Econ; MBA (UCT)
Mr. Murray joined the Board on January 1, 2008. He has more than 40 years’ experience in the mining industry and has been Chief Executive Officer of Rio Tinto Portugal, Rio Tinto Brazil, TVX Gold Inc., Avgold Limited and Avmin Limited. He also served as anon-executive Director of Ivernia, Inc. Mr. Murray retired from the Board with effect from June 1, 2016.
Executive Officers
Alfred Baku(50) MSc (Mining Engineering), University of Mines and Technology, Statutory Mines Manager certificate, Ghana Mines Department of Minerals Commission, Executive Education, University of Virginia, Darden School of Business, USA and member of the Australian Institute of Mining Metallurgy (AusIMM)
Mr. Baku has over two decades of mining experience, mostly in senior management positions at Gold Fields. Prior to joining Gold Fields, Alfred worked in Australia for Billiton and Ranger Minerals in production and mine planning engineering capacities. He joined the Damang Mine in 2002 as mine manager and a member of the senior management team. Alfred was appointed General Manager of the Damang Mine in 2008, General Manager of the Tarkwa Mine in 2010, and subsequently, Vice President of Operations for both mines. In 2013, Alfred was promoted to Senior Vice President for West Africa, becoming a member of the Group’s Executive Committee. In February 2014, he became Executive Vice President and head of West Africa. As the Vice
President of the Ghana Chamber of Mines’ Executive Council, Mr. Baku serves on the Advisory Board of the Ministry of Lands and Natural Resources. He is also a member of the Australasian Institute of Mining and Metallurgy.
Richard J Butcher(52) Diploma Coal Mining Engineering Advanced Rock Engineering Certificate Graduate Diploma in Mining Engineering (Mineral economics) MSc (Eng) Mining Engineering & CEng (UK) / FAusIMM (CP) WA First Class (Mine Managers) Cert No: 766 General Managers Course Cert—AGSM / UNSW
Executive Vice President: Technical. Mr. Butcher has 30 years’ experience in gold mining, obtained globally in companies that include Gencor, Anglo-American and Barrick. He was previously Head of Technical Services at MMG, the overseas arm of the Chinese CMC/CMN Corporation. This position involves being discipline head for all Technical functions, long-term planning and closure for the Group’s operations in Australasia, Africa and South America.
Naseem A. Chohan(55) BE (Electronic), University of Limerick
Executive Vice President: Sustainable Development. Mr. Chohan was appointed to the position of Senior Vice President: Sustainable Development on September 13, 2010. Mr. Chohan was previously self-employed as a consultant to various companies and, prior to that, spent 25 years at De Beers. When he left De Beers in 2009, he was acting as Group Consultant, Sustainability and ECOHS (Environment, Community, Occupational Health and Hygiene and Safety).
Taryn L. Harmse(44) BCom & LLB, University of Johannesburg, Advanced Corporate Law, University of Witwatersrand
Executive Vice-President: Group General Counsel. Ms. Harmse was appointed Executive Vice-President: Group General Counsel on May 1, 2014. Ms. Harmse was appointed as Assistant General Counsel and Company Secretary on August 1, 2013, and resigned from the position of Company Secretary on September 15, 2014. She previously served as Assistant General Counsel and Vice President, Group Legal. Before joining Gold Fields, Ms. Harmse worked at Linklaters LLP in London for a number of years having completed her articles at Hofmeyr Herbstein Gihwala (now Cliffe Dekker Hofmeyr). She was admitted as an attorney to the High Court of South Africa in 2000.
Stuart J. Mathews (56),Master of Science (Geology) from University of Canterbury, New Zealand
Executive Vice-President: Australasia. Stuart Mathews is an international mining professional with 25 years’ experience having worked in Australia (Queensland, NSW, WA), Mexico and New Zealand. He has progressed through geology ranks to Geology Manager level and in the last 12 years worked in project development and general operations management to COO level. Stuart joined Gold Fields inmid-2013 initially at St. Ives, as then General Manager at Granny Smith Mine after which he became Vice President Operations: Australia. From February 1, 2017 Stuart took over the position of Executive Vice President: Australasia.
Brett J. Mattison(39) BComm (Hons) Law, BAcc, University of Stellenbosch; Masters in Law, Higher Tax Diploma, University of Johannesburg; Exec. MBA (PLD), Harvard Business School
Executive Vice-President: Strategy, Planning and Corporate Development. Mr. Mattison was appointed Executive Vice-President: Strategy, Planning and Corporate Development effective May 1, 2013. He began his career with Gold Fields in 2001 as part of the Global Legal team providing commercial, legal and tax structuring advice in relation to various global transactions. He subsequently joined the Corporate Development team in 2005 where he worked for six years in South Africa, Peru and Australia until 2010. In late 2010, Mr. Mattison was appointed as the Country Manager of the Philippines tasked with the mandate of setting up Gold Fields’ activities in the Philippines. Most recently, he has been in the role of Vice President of Special Projects tasked with setting out the groundwork for the Gold Fields strategy sessions.
Avishkar Nagaser(33), BBusSc Finance and Economics, University of KwaZulu-Natal
Executive Vice President: Investor Relations and Corporate Affairs. Mr. Nagaser joined Gold Fields as Executive Vice President: Investor Relations and Corporate Affairs in January 2015. Before joining Gold Fields, he was with Merrill Lynch from 2012 to 2014 and Macquarie from 2007 to 2012, where he held the position of gold and platinum equity research analyst.
Luis A. Rivera(51), Bachelor Degree in Geology, the Title of Geological Engineer, both by the Universidad de San Marcos and MBA studies at the Universidad Politecnica de Madrid, Spain
Executive Vice-President of the Americas Region for La Cima. Mr. Rivera joined Gold Fields in October 2016. Prior to joining Gold Fields, Mr. Rivera was, since 2014, the Vice-President of Operations for Las Bambas and before that, since 2013, was the General Manager of Copper Operations for Glencore Peru and, since 2012, Executive General Manager for all Xstrata Copper Operations in Peru. His career also includes 5 years as General Manager of the large Copper Tintaya and Antapaccay operations, as well as 11 year experience in the Xstrata Copper Operations of Minera Alumbrera, a large gold – copper operation in North Argentina, where he became Tech Services Manager after servicing as Chief Engineer and Senior Geologist. Mr. Rivera has over 28 years’ experience in the copper and gold mining industry, in large open pit copper project and operations in Peru and Argentina, including his direct involvement and leadership in the merge & acquisition of Falconbridge Inc. and BHP Tintaya S.A. by Xstrata Copper as well as the sale of Las Bambas Project by Glencore.
Lee-Ann N. Samuel(39) BA Psychology and Honors Political Science, University of Johannesburg, Global Remuneration Practitioner (GRP), WorldatWork, USA
Executive Vice President: People and Organizational Effectiveness. Mrs. Samuel joined Gold Fields in 2009 as Vice President, Group Remuneration and Employee Benefits, and, effective March 1, 2013, she was promoted to Executive Vice President: People and Organizational Effectiveness. Mrs. Samuel has 16 years of Human Resources experience in financial services, mining and telecommunications. Prior to joining Gold Fields, Mrs. Samuel worked as Head of People Development at Telkom Media, a subsidiary of Telkom, for three years. Her overall responsibility is to provide strategic direction for the Human Resources discipline at Gold Fields, including the development of Human Resource policies to ensure alignment with the strategy for the Group, as well as external trends and demands impacting on HR.
Former Executive Officers
Ernesto Balarezo(49) MSc Industrial Management, BSc Industrial Engineering, Texas A&M University, Management Studies, Wharton School of Business, Management Studies, Harvard University
Executive Vice President: America. Mr. Balarezo joined Gold Fields effective March 11, 2013 as Executive Vice President: America. He has 23 years of professional experience at industrial and mining companies with a focus on finance and operations. Prior to joining Gold Fields, Mr. Balarezo was the Vice-President: Operations of Hochschild Mining plc, or Hochschild. In this capacity, he was responsible for overseeing the Hochschild group’s six silver and gold mining operations in Peru, Argentina and Mexico, as well as its growth projects. He had 9,000 employees under his management. He joined Hochschild in 2007 as General Manager of the Mexican operation before being promoted to General Manager for Peru in 2008 and Vice President of Operations in 2010. Prior to Hochschild, Ernesto worked at other subsidiaries of the Hochschild group since 1997, including at Hochschild’s cement subsidiary, Cementos Pacasmayo, as deputy CEO. Mr. Balarezo resigned from Gold Fields with effect from June 30, 2016.
Nico J. Muller(49), BSC Mining Engineering, University of Pretoria
Executive Vice President: South Africa. Mr. Muller joined Gold Fields as Executive Vice President: South Africa on October 1, 2014. Prior to joining Gold Fields, he was with Royal Bafokeng Platinum where he held the
position of Chief Operating Officer since January 2009. He has extensive technical mechanized mining experience, having held various positions in the mining industry while employed at De Beers, Avgold and Two Rivers Platinum. Mr. Muller resigned from Gold Fields with effect from March 3, 2017.
Richard M. Weston(64) FAIMM, CPEng, IEA. MSc Mining Geomechanics, UNSW; GDM, UCQ; BE (Civil), Sydney University
Executive Vice President: Head of Australasia. Mr. Weston was appointed to the position of Executive Vice President, Head of Australasia on May 1, 2010. He was formerly Senior Vice-President, Operations for Coeur d’Alene Mines Corporation, a gold and silver mining company based in Idaho in the United States. Before joining Coeur, he led the site team responsible for the development of Barrick Australia’s Cowal gold project and, prior to that, he headed operations at Rio Tinto Australia’s ERA Ranger and Jabiluka uranium mines in the Northern Territory. Mr. Weston retired from Gold Fields with effect from February 28, 2017.
Company Secretary
Lucy M. M. Mokoka(45) BJuris, University of Durban-Westville and LLB degree, University of Pretoria
Company Secretary. Ms. Lucy Mokoka was appointed Company Secretary of Gold Fields on September 16, 2014. Prior to joining Gold Fields, Ms. Mokoka was General Manager: Company Secretary, for MTN South Africa (Pty) Ltd from October 1, 2010 to September 15, 2014 and Director: Company Secretarial at the Standard Bank between January 2009 and December 2009. Ms. Mokoka is an admitted attorney and has held various roles as a Company Secretary and Legal Advisor. Her career includes roles as Company Secretary for Ithala Limited, Tongaat-Hulett and Standard Bank. She has also acted as legal advisor to the South African Revenue Service and the State Attorney’s office.
Board of Directors’ Committees
In order to ensure good corporate governance, the Board has formed an Audit Committee, a Risk Committee, a Remuneration Committee, a Nominating and Governance Committee, a Safety, Health and Sustainable Development Committee, a Capital Projects Control and Review Committee and a Social, Ethics and Transformation Committee. All the committees are composed exclusively of independentNon-executive Directors. All committees are chaired by an independentNon-executive Director. The remuneration ofNon-executive Directors for their service on the various committees was approved at the annual general meeting in May 2016.
The Audit Committee monitors and reviews Gold Fields’ accounting controls and procedures, including the effectiveness of the Group’s information systems and other systems of internal control; the effectiveness of the internal audit function; reports of both external and internal auditors; quarterly reports, the Form20-F, annual report and the annual financial statements; the accounting policies of the Group and any proposed revisions thereto; external audit findings, reports and fees, and the approval of fees; and compliance with applicable legislation and requirements of regulatory authorities and Gold Fields’ Code of Conduct. The membership of the Audit Committee is as follows:
Gayle M. Wilson (chair)
Alhassan Andani
Peter J. Bacchus
Richard P. Menell
Donald M. J. Ncube
Yunus G. H. Suleman
The Risk Committee oversees the integrity and effectiveness of risk management processes as they relate to the Board and the boards of Gold Fields’ subsidiaries. The Risk Committee ensures that management identifies and implements appropriate risk management controls, including guidelines and policies that govern management’s assessments and risk. The Risk Committee also reviews the effectiveness and efficiency of the Enterprise Risk Management system within the Company and obtains assurance that material risks are identified and that appropriate risk management processes are in place, including the formulation and subsequent updating of appropriate Company policies. The implementation of operational and corporate risk management plans is also monitored on an ongoing basis, and the Risk Committee ensures that appropriate resources are directed towards areas of high risk. The current membership of the Risk Committee is as follows:
Peter J. Bacchus (chair)
Alhassan Andani
Terence P. Goodlace
Alan R. Hill (retired December 31, 2016)
Steven P. Reid
Yunus G.H. Suleman
Gayle M. Wilson
The Remuneration Committee establishes the compensation philosophy of Gold Fields and the terms and conditions of employment of Executive Directors and other executive officers, and reviews the remuneration policies on a regular basis. The current membership of the Remuneration Committee is as follows:
Steven P. Reid (chair)
Alhassan Andani
Peter J. Bacchus
Cheryl A. Carolus
Donald M. J. Ncube
Gayle M. Wilson
The Safety, Health and Sustainable Development Committee reviews adherence to occupational health, safety and environmental standards by Gold Fields. The Safety, Health and Sustainable Development Committee seeks to minimize health, safety and environment-related accidents, to ensure that the Company’s operations are in compliance with all relevant regulations around health, safety and the environment, and to establish policy in respect of HIV/AIDS and health matters. The current membership of the Safety, Health and Sustainable Development Committee is as follows:
Terence P. Goodlace (chair)
Alhassan Andani
Cheryl A. Carolus
Richard P. Menell
Donald M.J. Ncube (by invitation)
Steven P. Reid
Yunus G.H. Suleman
The Nominating and Governance Committee develops and implements policy on corporate governance issues, develops the policy and process for evaluating nominations to the Board of Directors, identifies successors to the Chairman and Chief Executive Officer, considers selection and rotation of the Board committee members and evaluate the effectiveness of the Board and report the findings of this evaluation to the Board. The current membership of the Nominating and Governance Committee is as follows:
Cheryl A. Carolus (chair)
Donald M.J. Ncube
Richard P. Menell (by invitation)
Steven P. Reid
The Capital Projects Control and Review Committee was established on May 1, 2009 as asub-committee to satisfy the Board that Gold Fields undertakes any acquisitionshas used appropriate and efficient methodologies and has adequate controls in place in respect of new capital projects proposed by management in excess of R1.5 billion or incurs significant capital expenditure,U.S.$200 million. These projects are reviewed from inception to completion and the committee makes recommendations to management as it may needconsiders appropriate. The current membership of the Capital Projects Control and Review Committee is as follows:
Richard P. Menell (chair)
Peter. J. Bacchus
Cheryl A. Carolus (by invitation)
Terence P. Goodlace
Steven P. Reid
Yunus G.H Suleman (by invitation)
Gayle M. Wilson
The Social, Ethics and Transformation Committee was established on November 29, 2011 and is responsible for ensuring, among other things, that Gold Fields discharges its statutory duties in respect of section 72 of Companies Act 71 and its applicable regulations, which include monitoring Gold Fields’ activities in relation to incur further debt or arrangerelevant legislation, other financing to fundlegal requirements and prevailing codes of best practice regarding: (i) social and economic development; (ii) good corporate citizenship; (iii) the costs, which could have an adverse effectenvironment, health and public safety and their impact on Gold Fields’ liquidity,activities, products and services; (iv) consumer relations; and (v) labor and employment legislation. The Social and Ethics Committee must bring any matters relating to this monitoring to
the attention of the Board and report to shareholders at the annual general meeting. The Board seeks the assistance of the Social and Ethics Committee in ensuring that Gold Fields complies with best practice recommendations in respect of social and ethical management. The current members of the committee include the chairs of the Audit Committee, the Safety, Health and Sustainable Development Committee, the Nominating and Governance Committee and the Capital Projects Committee, as follows:
Donald M. J. Ncube (chair)
Cheryl A. Carolus
Terence P. Goodlace
Richard P. Menell
Yunus G.H. Suleman
Gayle M. Wilson
Executive Committee
Gold Fields’ Executive Committee meets on a regular basis to review Company performance against set objectives and develop Company strategy and policy proposals for consideration by the Board. The Executive Committee also assists the Board in the execution of the Company’s disclosure obligations. The current composition of the Executive Committee is as follows:
Name | Position | |
Nicholas J. Holland | Chief Executive Officer | |
Paul A. Schmidt | Chief Financial Officer | |
Brett J. Mattison | Executive Vice President: Strategy, Planning and Corporate Development | |
Lee-Ann N. Samuel | Executive Vice President: People and Organizational Effectiveness | |
Taryn L. Harmse | Executive Vice President: Group General Counsel | |
Adrian De Beer | Acting Executive Vice President: South Africa | |
Alfred Baku | Executive Vice President: West Africa | |
Luis A. Rivera | Executive Vice President: Americas | |
Avishkar Nagaser | Executive Vice President: Investor Relations and Corporate Affairs | |
Stuart J. Mathews | Executive Vice President: Australasia | |
Naseem A. Chohan | Executive Vice President: Sustainable Development | |
Richard J. Butcher | Executive Vice President: Mining Excellence | |
Lucy M. Mokoka | Company Secretary | |
Regional Executive Management Committees
Each of Gold Fields’ four operating regions (South Africa, Australasia, West Africa and South America) has a Regional Executive Management Committee.
South African Regional Executive Management Committee composition:
Name | Position | |
Adrian De Beer | Acting Executive Vice President: South Africa | |
Stuart Sepetla | Acting Vice President and Head of Operations | |
Ken Matthysen | Vice President: Technical | |
Jana Strydom | Vice President: Legal | |
Bonny Sebola | Vice President Stakeholder Engagement and Community Relations | |
Liesl Withers | Head of Business Analysis and Reporting | |
MI Botha | Head Mineral and Resources Management (Operational) | |
Australasian Regional Executive Management Committee composition:
Name | Position | |
Stuart J. Mathews | Executive Vice President: Australasia Region | |
Tim Hewitt | General Manager: St. Ives Gold | |
Jason Sander | General Manager: Agnew Gold | |
Wimpie Du Toit | Vice President and Regional Head of Human Resources: Australasia | |
Alex Munt | Vice President and Regional Head of Finance: Australasia | |
Philip Woodhouse | Vice President and Regional Head of Sustainable Development: Australasia | |
Ian Suckling | Vice President: Technical, Operations Support and Technology | |
Graeme Ovens | Vice President: Operations | |
Andrew Bywater | General Manager: Granny Smith Mine | |
Kelly Carter | Vice President of Legal & Australasia Compliance | |
Gary Snow | Vice President: Exploration | |
Frederick Louw | Vice President: Projects | |
Mark Dominy | Manager: Supply Chain | |
Malcolm Jolly | General Manager: Darlot Gold Mine | |
West Africa Regional Executive Management Committee composition:
Name | Position | |
Alfred Baku | Executive Vice President and Head of West Africa | |
Lindley Witbooi | Vice President and Head of Finance: West Africa | |
Francis Eduku | Vice President and Head of Human Resources: West Africa | |
David Johnson | Vice President and Head of Stakeholder Relations | |
Michiel van der Merwe | General Manager: Damang | |
Stephen Osei - Bempah | General Manager: Tarkwa | |
Serge Ntiema | Vice President and Head of Exploration and Business Development | |
Johannes de Beer | Vice President of Projects and Head of Engineering | |
Michael Akafia | Vice President and Head of Legal, Compliance & Company Secretary | |
Chris Turek | Vice President: Technical | |
Americas Regional Executive Management Committee composition:
Name | Position | |
Luis A. Rivera | Executive Vice President: The Americas | |
Alberto Cardenas | Vice President: Operations | |
Jorge Redhead | Vice President: Head of Finance | |
Miguel Inchaustegui | Vice President: Head of Corporate Affairs | |
Veronica Valderrama | Vice President: Head of Human Resources | |
Juan Jose Granda | Vice President: Head of Legal | |
Compensation of Directors and Senior Management
During fiscal 2016, the aggregate compensation paid or payable to directors and senior management of Gold Fields as a group was U.S.$17.0 million (R249.9 million), including increasingall salaries, fees, bonuses and contributions during such period to provide pension, retirement or similar benefits for directors and senior management of Gold Fields, of which U.S.$0.5 million (R7.4 million) was due to pension scheme contributions and life insurance, U.S.$7.5 million (R110.9 million) was due to bonus and performance-related share payments, U.S.$0.7 million (R10.3 million) was expenses/special bonus, U.S.$6.6 million (R97.1 million) was due to salary payments, directors’ fees and committee fees and U.S.$1.6 million (R24.2 million) was due to severance payments.
The following table presents information regarding the compensation paid by Gold Fields for fiscal 2016 to its leveldirectors and prescribed officers. The remuneration paid to directors and prescribed officers excludes the value of debt.deferred remuneration in the form of restricted shares, or Restricted Shares (see “Introduction of a MSR for members of the Group Executive Committee”), for fiscal 2016. Details of deferred remuneration are included in note 4 below. Average exchange rates were R14.70 per U.S.$1 for fiscal 2016 and R12.68 per U.S.$1 for fiscal 2015.
| Directors’ fees | Committee fees | Salary(1) | Pension Scheme Contribution | Annual Bonus(2) | Sundry | Severance | Sub-total | Pre-tax Share Proceeds for shares awarded in previous years | Total realized earnings for fiscal 2016(3) | Total for fiscal 2015 | ||||||||||||||||||||||||||||||||||
| (U.S.$’000) | ||||||||||||||||||||||||||||||||||||||||||||
Executive Directors | ||||||||||||||||||||||||||||||||||||||||||||
Nicholas J. Holland(4) | — | — | 1,030.0 | 40.9 | 677.6 | — | — | 1,748.5 | 18.1 | 1,766.6 | 2,832.4 | |||||||||||||||||||||||||||||||||
Paul A. Schmidt | — | — | 496.7 | 54.4 | 648.6 | 4 | — | 1,203.7 | 547.8 | 1,751.5 | 1,755.3 | |||||||||||||||||||||||||||||||||
Prescribed Officers | ||||||||||||||||||||||||||||||||||||||||||||
Ernesto Balarezo(5) | — | — | 332.5 | — | — | — | 1,644.4 | 1,976.9 | 338.8 | 2,315.7 | 1,572.4 | |||||||||||||||||||||||||||||||||
Luis A. Rivera(6) | — | — | 154.5 | — | 111.0 | 246.4 | — | 511.9 | — | 511.9 | — | |||||||||||||||||||||||||||||||||
Alfred Baku(7) | — | — | 746.1 | 156.4 | 620.2 | 314.5 | — | 1,837.2 | 96.8 | 1,934.0 | 1,938.7 | |||||||||||||||||||||||||||||||||
Richard M. Weston | — | — | 576.4 | 64.2 | 570.7 | 7.4 | — | 1,218.7 | 562.2 | 1,780.9 | 1,796.0 | |||||||||||||||||||||||||||||||||
Richard J. Butcher(8) | — | — | 275.1 | 27.5 | 323.2 | 110.7 | — | 736.5 | — | 736.5 | — | |||||||||||||||||||||||||||||||||
Naseem A. Chohan | — | — | 284.0 | 27.7 | 328.6 | 2.9 | — | 643.2 | 198.1 | 841.3 | 864.4 | |||||||||||||||||||||||||||||||||
Brett J. Mattison | — | — | 362.4 | 25.5 | 429.7 | 0.6 | — | 818.2 | 245.3 | 1,063.5 | 972.6 | |||||||||||||||||||||||||||||||||
Lee-Ann N. Samuel | — | — | 288.4 | 24.8 | 339.9 | 3.7 | — | 656.8 | 345.1 | 1,001.9 | 839.0 | |||||||||||||||||||||||||||||||||
Taryn L. Harmse | — | — | 282.3 | 29.5 | 345.7 | 4.3 | — | 661.8 | 100.1 | 761.9 | 759.6 | |||||||||||||||||||||||||||||||||
Nico J. Muller | — | — | 450.4 | 26.4 | 477.0 | 2.4 | — | 956.2 | — | 956.2 | 1,078.5 | |||||||||||||||||||||||||||||||||
Avishkar Nagaser | — | — | 193.9 | 21.5 | 221.1 | 0.3 | — | 436.8 | — | 436.8 | 442.5 | |||||||||||||||||||||||||||||||||
Manuel Diaz(9) | — | — | 136.1 | — | 1.2 | — | — | 137.3 | — | 137.3 | — | |||||||||||||||||||||||||||||||||
Non-Executive Directors | ||||||||||||||||||||||||||||||||||||||||||||
Cheryl A. Carolus | 183.0 | — | — | — | — | — | — | 183.0 | — | 183.0 | 203.8 | |||||||||||||||||||||||||||||||||
Alan R. Hill(10) | 64.5 | 49.9 | — | — | — | — | — | 114.4 | — | 114.4 | 110.2 | |||||||||||||||||||||||||||||||||
David N. Murray(11) | 24.1 | 12.2 | — | — | — | — | — | 36.3 | — | 36.3 | 100.8 | |||||||||||||||||||||||||||||||||
Richard P. Menell(12) | 95.5 | 16.7 | — | — | — | — | — | 112.2 | — | 112.2 | 113.3 | |||||||||||||||||||||||||||||||||
Gayle M. Wilson | 60.1 | 54.6 | — | — | — | — | — | 114.7 | — | 114.7 | 119.5 | |||||||||||||||||||||||||||||||||
Donald M. J. Ncube | 60.1 | 41.6 | — | — | — | — | — | 101.7 | — | 101.7 | 113.3 | |||||||||||||||||||||||||||||||||
Yunus G.H. Suleman(13) | 20.6 | 12.6 | — | — | — | — | — | 33.2 | — | 33.2 | — | |||||||||||||||||||||||||||||||||
Peter J. Bacchus(14) | 23.1 | 14.2 | — | — | — | — | — | 37.3 | — | 37.3 | — | |||||||||||||||||||||||||||||||||
Steve Reid(15) | 59.7 | 29.6 | — | — | — | — | — | 89.3 | — | 89.3 | — | |||||||||||||||||||||||||||||||||
Terence P. Goodlace(16) | 30.9 | 15.1 | — | — | — | — | — | 46.0 | — | 46.0 | — | |||||||||||||||||||||||||||||||||
Alhassan Andani(17) | 28.9 | 14.2 | — | — | — | — | — | 43.1 | — | 43.1 | — | |||||||||||||||||||||||||||||||||
Kofi Ansah(10) | 64.5 | 18.2 | — | — | — | — | — | 82.7 | — | 82.7 | 85.8 | |||||||||||||||||||||||||||||||||
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Total | 715.0 | 278.9 | 5,608.8 | 498.8 | 5,094.5 | 697.2 | 1,644.4 | 14,537.6 | 2,452.3 | 16,989,9 | 15,698.1 | |||||||||||||||||||||||||||||||||
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Notes:
| (1) | The total U.S. dollar amounts paid for fiscal 2016, and included in Salary, were as follows: Nick Holland U.S.$390,000, Paul Schmidt U.S.$119,000, Brett J. Mattison U.S.$84,500. |
| (2) | The annual bonus accruals for the 12 month period ended December 31, 2016, paid in February 2017. |
| (3) | These amounts reflect the full directors’ emoluments for comparative purposes. The portion of executive directors’ emoluments payable in U.S. dollars is paid in terms of agreements with the offshore subsidiaries for work done by directors’ offshore for offshore companies. Refer to note 1 above for such amounts paid. |
| (4) | Nick Holland elected prior to the determination of the annual performance bonus for fiscal 2016, and in line with the rules of the minimum shareholding requirement, or MSR, policy, to defer 50% of his annual performance bonus (U.S.$677,600) into Restricted Shares. A similar election was made in fiscal 2015 to defer 50% of his annual performance bonus (U.S.$618,900) into Restricted Shares. The aggregate of his total realized earnings of U.S.$1,766,600 (fiscal 2015: U.S.$2,832,400), as reflected in the table above, and |
| the deferred remuneration of U.S.$677,600 (fiscal 2015: U.S.$618,900) in the form of Restricted Shares amounts to U.S.$2,444,200 (fiscal 2015: U.S.$3,451,300). |
| (5) | Ernesto Balarezo resigned on June 30, 2016. |
| (6) | Luis A. Rivera was appointed on October 1, 2016. Luis A. Rivera’s sundry payment relates tosign-on and legislated bonuses. |
| (7) | Alfred Baku’s sundry payment relates to leave allowance (U.S.$66,500) and special bonus (U.S.$248,000). |
| (8) | Richard J. Butcher was appointed on February 8, 2016. Richard J. Butcher’s sundry payments relates tosign-on bonus. |
| (9) | Manuel Diaz was appointed as Acting EVP: Americas Region for the period July 2016 to September 2016. |
| (10) | Alan R. Hill and Kofi Ansah retired from Board membership on December 31, 2016. |
| (11) | David Murray retired from Board membership on June 1, 2016. |
| (12) | Richard P. Menell was appointed as Deputy Chairperson on June 1, 2016. |
| (13) | Yunus G.H. Suleman was appointed to the Board on September 1, 2016. |
| (14) | Peter J. Bacchus was appointed to the Board on September 1, 2016. |
| (15) | Steven P. Reid was appointed to the Board on February 1, 2016. |
| (16) | Terence P. Goodlace was appointed to the Board on July 1, 2016. |
| (17) | Alhassan Andani was appointed to the Board on August 1, 2016. |
The directors and prescribed officers held the following equity settled instruments on March 20, 2017:
| Equity-settled instruments at 31 December 2015 | Equity- settled instruments granted during the year | Equity- settled instruments forfeited during the year | Equity-settled instruments exercised during the year | Equity- settled instruments transferred to Restricted Shares(2) | Equity-settled instruments at 31 December 2016 | Expiration date | ||||||||||||||||||||||||||||||||||||||
| Number | Average strike price (US$) | Granted | Number | Number | Average market price of vested shares | Benefit arising (US$) | Number | Number | Weighted Average strike price (US$)(1) | Last date of expiration | ||||||||||||||||||||||||||||||||||
Director | ||||||||||||||||||||||||||||||||||||||||||||
Nicholas J. Holland(2) | 296,555 | 7.46 | 460,233 | 65,045 | — | — | — | 374,966 | 316,747 | 7.04 | December 31, 2020 | |||||||||||||||||||||||||||||||||
Paul A. Schmidt | 123,652 | 7.38 | 240,945 | 24,640 | 138,652 | 3.94 | 545,836 | — | 201,305 | 7.04 | March 1, 2019 | |||||||||||||||||||||||||||||||||
Prescribed Officer | ||||||||||||||||||||||||||||||||||||||||||||
Richard M. Weston | 95,768 | 7.38 | 221,379 | 12,333 | 124,932 | 4.50 | 562,194 | — | 179,882 | 7.04 | May 31, 2017 | |||||||||||||||||||||||||||||||||
Ernesto Balarezo | 39,182 | — | 39,182 | — | 78,364 | 4.32 | 338,831 | — | — | — | ||||||||||||||||||||||||||||||||||
Alfred Baku | 35,302 | 7.44 | 182,682 | 9,674 | 35,118 | 4.41 | 154,925 | — | 173,192 | 5.16 | March 1, 2019 | |||||||||||||||||||||||||||||||||
Taryn L. Harmse | 29,392 | 7.54 | 100,710 | 7,441 | 25,324 | 3.94 | 99,694 | — | 97,337 | 6.91 | March 1, 2019 | |||||||||||||||||||||||||||||||||
Lee-Ann N. Samuel | 42,948 | 7.52 | 105,205 | — | 78,226 | 4.41 | 345,099 | — | 69,927 | 6.48 | March 1, 2019 | |||||||||||||||||||||||||||||||||
Brett J. Mattison | 56,448 | 7.46 | 139,478 | 14,111 | 61,202 | 3.94 | 240,936 | — | 120,613 | 7.04 | March 1, 2019 | |||||||||||||||||||||||||||||||||
Naseem A. Chohan | 46,133 | 8.15 | 92,487 | 4,752 | 52,904 | 4.41 | 233,389 | — | 80,964 | 7.04 | March 1, 2019 | |||||||||||||||||||||||||||||||||
Nico J. Muller | 245,208 | — | 137,280 | — | — | — | — | — | 382,488 | — | March 31, 2017 | |||||||||||||||||||||||||||||||||
Richard J. Butcher | — | — | 23,964 | — | — | — | — | — | 23,964 | — | March 1, 2019 | |||||||||||||||||||||||||||||||||
Avishkar Nagaser | — | — | 33,136 | — | — | — | — | — | 33,136 | — | March 1, 2019 | |||||||||||||||||||||||||||||||||
Notes:
| (1) | Share Appreciation Rights (SARS) weighted average strike price. |
| (2) | Nick Holland elected to defer vesting of 100% of the 2013 Performance Share award which was due to vest on 1 March 2016 into Restricted Shares. Mr. Holland has 507,473 Restricted Shares held in Escrow as at |
| 31 December 2016, which will vest after the five-year holding period or termination of employment, whichever comes first. The 507,473 Restricted Shares comprises of 132,477 shares relating to the 2015 short-term incentive and 374,996 shares to the 2013 Performance Share award. A further 408,617 Restricted Shares were acquired in March 2017 relating to the 2016 short-term incentive and the 2014 LTIP award. |
Share Ownership of Directors and Prescribed Officers
The following sets forth, to the knowledge of Gold Fields’ management, the total amount of ordinary shares directly or indirectly owned by the directors and executive officers of Gold Fields and excludes shares held in escrow for Mr. Holland as of March 20, 2017:
Holder | Ordinary shares | Percentage | ||||||
Director | ||||||||
Nicholas J. Holland(1) | 1,526,967 | 0.1860 | % | |||||
Paul A. Schmidt | 122,549 | 0.0149 | % | |||||
Cheryl A. Carolus | 3,129 | 0.0004 | % | |||||
Richard P. Menell | 5,850 | 0.0007 | % | |||||
Gayle M. Wilson | 2,378 | 0.0003 | % | |||||
Prescribed Officer | ||||||||
Richard M. Weston | 204,636 | 0.0249 | % | |||||
Naseem A. Chohan | 82,023 | 0.0100 | % | |||||
Brett J. Mattison | 43,103 | 0.0052 | % | |||||
Lee-Ann N. Samuel | 76,525 | 0.0093 | % | |||||
Taryn L. Harmse | 7,777 | 0.0009 | % | |||||
Alfred Baku | 40,404 | 0.0049 | % | |||||
Total Directors (5 persons) | 1,660,873 | 0.2024 | % | |||||
Total Prescribed Officers (6 persons) | 454,468 | 0.0554 | % | |||||
Total Directors and Prescribed Officers (11 persons) | 2,115,341 | 0.2578 | % | |||||
| Note: |
| (1) | The 1,526,967 comprises 610,877 shares directly held by Mr. Holland and 916,090 Restricted Shares indirectly held by Mr. Holland. See “Introduction of a MSR for members of the Group Executive Committee”. |
Long-term Cash Incentive Plan
A LTIP was implemented on March 1, 2014. The key objectives of the LTIP are to reinforce a high performance culture and create stronger alignment between executive compensation and shareholder value.
At the annual general meeting in May 2016 approval was obtained to make certain amendments to the 2012 Share Plan and the Plan wasre-introduced following the approval, no new awards will be made under the LTIP.
U.S.$200 million Non-revolving Senior Secured Term LoanAwards made under the Long-term Cash Incentive Plan
On September 17, 2010, La Cima entered into
Award | TSR – 50% | FCF Margin – 50% | Total Potential Vesting % of initial awards | |||||||||||||||||
| (Achieved) | (Vesting) | (Achieved) | (Vesting) | (%) | ||||||||||||||||
2014 LTIP Award | ||||||||||||||||||||
Performance period—January 1, 2014 to Dec 31, 2016 | 0 | % | 0 | % | 12.7 | % | 77 | % | 38.5 | |||||||||||
2015 LTIP Award | ||||||||||||||||||||
Performance period—January 1, 2015 to Dec 31, 2017 | 0 | % | 0 | % | 12.5 | % | 75.0 | % | 37.5 | |||||||||||
The table below reflects the indicative vesting quantum for the Group Executive Committee for the 2014 LTIP award, which was paid on February 28, 2017 but does not reflect in the remuneration table above:
Name | Designation | U.S.$ Value of Initial LTIP Award | U.S.$ Value of Awards Vested on 28 February 2017 | |||||||
| (U.S.$ million) | ||||||||||
N.J. Holland(1) | Chief Executive Officer | 1.30 | 0 | |||||||
P.A. Schmidt | Chief Financial Officer | 0.63 | 0.24 | |||||||
R. Weston | EVP: Australasia | 0.91 | 0.35 | |||||||
A. Baku | EVP: West Africa | 0.79 | 0.30 | |||||||
L.N. Samuel | EVP: People and Organizational Effectiveness | 0.47 | 0.18 | |||||||
B.J. Mattison | EVP: Strategy Planning and Corporate | 0.50 | 0.19 | |||||||
N.A. Chohan | EVP: Sustainable Development | 0.23 | 0.09 | |||||||
T.L. Harmse | EVP: Group General Counsel | 0.36 | 0.14 | |||||||
N.J. Muller | EVP: South Africa | 0.06 | 0.02 | |||||||
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| 5.25 | 1.52 | |||||||||
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| Note: |
| (1) | Mr. N.J. Holland elected prior to the vesting of the 2014 LTIP award and in line with the MSR policy, to defer 100% (U.S.$500,000) in the form of Restricted Shares. |
The table below reflects the indicative vesting quantum for the Group Executive Committee based on the current tracking of the performance conditions based on the 2015 LTIP award:
Name | Designation | U.S.$ Value of Initial LTIP Award | U.S.$ Value of Awards | |||||||
| (U.S.$ million) | ||||||||||
N.J. Holland | Chief Executive Officer | 0.93 | 0.35 | |||||||
P.A. Schmidt | Chief Financial Officer | 0.92 | 0.34 | |||||||
R. Weston | EVP: Australasia | 0.70 | 0.26 | |||||||
A. Baku | EVP: West Africa | 1.20 | 0.45 | |||||||
L.N. Samuel | EVP: People and Organizational Effectiveness | 0.52 | 0.19 | |||||||
B.J. Mattison | EVP: Strategy Planning and Corporate | 0.60 | 0.22 | |||||||
N.A. Chohan | EVP: Sustainable Development | 0.25 | 0.09 | |||||||
T.L. Harmse | EVP: Group General Counsel | 0.51 | 0.19 | |||||||
N.J. Muller | EVP: South Africa | 0.34 | 0.13 | |||||||
A. Nagaser | EVP: Investor Relations and Corporate Affairs | 0.18 | 0.07 | |||||||
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| 6.15 | 2.29 | |||||||||
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The Gold Fields Limited 2005 Share Plan
The 2005 Plan provided for two types of awards: performance vesting restricted shares, or PVRS, and performance allocated share appreciation rights, or SARS. All PVRS have previously settled. SARS have a non-revolving senior secured term loanthree-year vesting after being awarded a further three years before expiration. Remaining SARS are all currently under water and expired on March 1, 2017 upon which the 2005 Plan was closed.
Introduction of a MSR for upmembers of the Group Executive Committee
In line with best practice and in response to U.S.$200 million withshareholder input, the Company has adopted a MSR policy, which was approved by shareholders on May 18, 2016 and which is mandatory for executives. The Bankpolicy requires executives to hold a specific percentage of Nova Scotiashares in the Company. The proposed target shareholdings of vested and Banco de Crédito del Perú. The purposeunencumbered shares for the relevant executives are:
CEO: 200% of this facility wasthe annual guaranteed remuneration package; and
CFO and other executives: 100% of the annual guaranteed remuneration package.
Executives may use the following shares to (i) repay La Cima’s outstanding subordinated loans with its affiliates,meet the MSR:
Personal investments in the Company’s shares through the use ofafter-tax income; and (ii)
Executives will be given the opportunity to finance its working capital requirements.
On September 22, 2010,elect, prior to the lenders advanced U.S.$200 millioncash bonus being communicated or the vesting of the LTIP, to La Cimareceive all or a portion of the cash bonus/LTIP in Restricted Shares which will be subject to a further time period (holding period) during which executives will be required to hold the Restricted Shares. In addition, executives will be given the opportunity to elect, prior to the relevant vesting dates, to convert all or a portion of their Retention Shares or Performance Shares awarded under this facility. The facility amount wasthe plan, in Restricted Shares, which will also be subject to the holding period, towards the fulfilment of the MSR. This holding period will mean that the Restricted Shares may not be repaid in 20 equal quarterly installmentssold or disposed of U.S.$10 million each. The final maturity date of this facility wasand that the beneficial interest must be retained therein until the earlier of:
Notice given by the executive, provided that such notice may only be given after the five years from the disbursementstart of the holding period;
Termination of employment of that employee, ie retirement, retrenchment, ill health, death, resignation or dismissal;
Abolishment of the MSR; or
In special circumstances such as proven financial hardship or compliance with the MSR, upon application by the employee and approval by the Remuneration Committee.
The Restricted Shares will be held in escrow for the holding period, which commenced on June 1, 2016. The Restricted Shares will, however, not be subject to any further forfeiture provisions post the original restricted period (performance shares and cash LTIP) or communication of the cash bonus.
To facilitate the introduction of the MSR policy and to compensate executives for locking in their vested shares for an additional five years, thus exposing themselves to further market volatility, the Company will grant a matching share award. This is intended to entail a conditional award of shares of one share for every three shares committed towards the MSR (matching shares). The matching shares will vest on a date that corresponds with the end of the holding period of the shares committed towards the MSR provided the executive is still in the employment of the Company, has met the MSR as per the requirements of the MSR policy, including having sustainably accumulated shares to reach the MSR over the five-year holding period, ie the Company aims to guard against a situation where an executive only accumulates the shares in year four of the five-year period. In the event ofno-fault termination (retirement, death, disability, retrenchment or corporate action), the matching shares will be apportioned based on time.
The MSR is expected to encourage executive share ownership within the Company and reinforce the creation of shareholder value over the long term through executives becoming shareholders.
Mr. Nicholas J. Holland elected, prior to the accrual or vesting and determination of the respective incentive, to defer:
50% of his 2015 short-term incentive;
50% of his 2016 short-term incentive; and
100% of the 2014 LTIP award which was due to vest on February 28, 2017
towards achieving the MSR, which will be held in escrow in the form of Restricted Shares for a five-year restricted period.
In addition, he elected to defer vesting of 100% of the 2013 Performance Share award which was due to vest on March 1, 2016.
Effective March 20, 2017, Mr. Holland committed a total of 916,090 shares towards the fulfilment of the MSR comprising:
507,473 Restricted Shares held in escrow as at December 31, 2016; and
408,617 Restricted Shares acquired in March 2017 held in escrow.
The total US dollar value of the Restricted Shares held in escrow, based on the March 15, 2017 Gold Fields share price of R40 (U.S.$3.08), is U.S.$2,821,557. Mr Holland now holds in excess of the 200% of annual GRP in terms of the MSR. No other executive has elected to receive any Restricted Shares and no executive has committed any personal investments to meet the MSR.
The Revised Gold Fields Limited 2012 Share Plan
The revised Gold Fields Limited 2012 Share Plan was approved by shareholders at the annual general meeting in May 2016, which has replaced the 2014 LTIP.
Nature of Instruments
Retention Shares
For high performance outcomes and on anad-hoc basis, selected Participants will be awarded conditional rights to receive shares at the end of the Vesting Period. The award will only be settled after the vesting date and the Participant will not have any shareholder or voting rights prior to the vesting date. The vesting of the award will be subject to the Vesting Condition being met and may not have performance conditions attached.
Borrowings underPerformance Shares
Participants will be awarded conditional rights to receive shares at the non-revolving senior secured term loanend of the Vesting Period. The award will only be settled after the vesting date and the Participant will not be entitled to any shareholder rights (including voting rights and distribution rights) prior to the vesting date. The vesting of the award will be subject to the Vesting Condition and applicable Performance Conditions being met.
Restricted Shares
As stated above, executives will be given the opportunity, prior to the annual bonus being communicated or the upcoming vesting date of the LTIP award or Performance Shares, to elect to receive a portion of the annual bonus or cash LTIP in Restricted Shares or convert a portion of the unvested Performance Shares into Restricted Shares towards fulfilment of the MSR. These shares are subject to a five-year Holding Period, however, all shareholders’ rights will accrue in respect of the Restricted Shares.
Matching Shares
In recognition of compliance with the MSR and the risk associated with holding shares in the Company, executives will receive conditional rights to receive shares and will not be entitled to any shareholder rights prior to settlement. Settlement will take place after the vesting date which will be on the fulfilment of the MSR over the five-year holding period and the vesting condition, provided that they have sustainably accumulated shares to reach the MSR over the holding period. The number of matching shares subject to an award made to an Executive will be based on the MSR policy as set out above.
Corporate Performance Conditions Relating to Performance Shares
Performance Shares are intended to be subject to the following performance conditions, which are similar to the existing LTIP’s performance condition except for the addition of the relative TSR measure:
Vesting conditions of the Long-Term Incentive
Performance condition | Weighting | Threshold | Target | Stretch | ||||||
Absolute TSR | 33 | % | N/A—No vesting below target | Compounded cost of equity in real terms over the three-year performance period | Compounded cost of equity in real terms over the three-year performance period + 6% per annum | |||||
Relative TSR | 33 | % | Median of the peer group | Linear vesting to apply between above-median and upper quartile performance and capped at upper quartile performance | ||||||
FCF Margin | 34 | % | Average FCF Margin over performance period of 5% at a gold price of U.S.$1,300/oz—margin to be adjusted relative to the actual gold price for the three-year period | Average FCF Margin over performance period of 15% at a gold price of U.S.$1,300/oz—margin to be adjusted relative to the actual gold price for the three-year period | Average FCF Margin over performance period of 20% at a gold price of U.S.$1,300/oz—margin to be adjusted relative to the actual gold price for the three-year period | |||||
The vesting profile is intended to be as follows:
Performance condition | Threshold | Target | Stretch and cap | |||||||||
| (%) | ||||||||||||
Absolute TSR(1) | 0 | 100 | 200 | |||||||||
Relative TSR(1)(3)(4) | 0 | 100 | 200 | |||||||||
FCF Margin(2) | 0 | 100 | 200 | |||||||||
| Notes: |
| (1) | Absolute TSR and relative TSR: Linear vesting will occur between target and stretch (no vesting occurs for performance below target). |
| (2) | FCF Margin: Linear vesting will occur between threshold, target and stretch. |
| (3) | The peer group will consist of ten companies: AngloGold Ashanti, Goldcorp, Barrick, Eldorado Gold, Randgold, Yamana, Agnico Eagle, Kinross, Newmont and Newcrest. |
| (4) | TSR will be calculated as the Compounded Annual Growth Rate, or CAGR, of the TSR index between the average of the 60 trading days up to the first day of the performance period and the average of the 60 trading days up to the last day of the performance period. TSR will be defined as the return on investing in ordinary shares in the Company at the start of the performance period, holding the shares and reinvesting the dividends received on the portfolio in Gold Fields shares over the performance period. The USD TSR index, provided by external service providers will be used based on the USD share price. The above Performance Conditions will be measured over three years which will coincide with the Company’s financial years (i.e. performance period). |
Vesting of the 2013 Performance Share Award
According to the Performance Criteria set by the Remuneration Committee, the number of Performance Shares awarded was modified according to the Gold Fields share price performance, measured against seven other gold companies, namely AngloGold Ashanti, Goldcorp, Barrick, Harmony, Kinross, Newmont, and Newcrest. The share price performance was measured over the 36 month period from March 1, 2013 to February 11, 2016.
Gold Fields has been positioned within the upper quartile of the peer group, resulting in a settlement of 200% of the shares initially awarded.
The table below depicts the long-term share vesting percentages over the previous seven years in terms of the 2005 Plan and the 2012 Plan.
Long-Term Share vesting based on corporate performance conditions | ||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | Average | |||||||||||||||||||||
| (%) | ||||||||||||||||||||||||||||
24 | 144 | 300 | 186 | 100 | 198 | 200 | 165 | |||||||||||||||||||||
Executive Directors’ Terms of Employment
Nicholas J. Holland (Executive Director and Chief Executive Officer) and Paul A. Schmidt (Executive Director and Chief Financial Officer) are party to employment agreements with Gold Fields Ghana Holdings, Gold Fields Orogen, or Orogen, and Gold Fields Group Services (Pty) Limited, or GFGS.
The terms and conditions of employment for each executive director are substantially similar, except where otherwise indicated below. The annual gross remuneration packages, or GRP, payable to each of Mr. Holland and Mr. Schmidt for 2017 were secureddetermined by first-ranking assignmentsthe Remuneration Committee and were as follows:
Nicholas J. Holland: R11,006,700 plus U.S.$397,800; and
Paul A. Schmidt: R6,954,800 plus U.S.$121,400.
The split between the three companies is determined by the amount of all rights, titletime spent by the executive directors with each company.
South African Contracts
Under the South African contracts, the employment of an executive director will continue until terminated upon (i) 24 or 12 months’ notice by either party for the CEO and interest in allCFO, respectively or (ii) retirement of La Cima’s concentrate sale agreements.the relevant executive director (currently provided for at age 63). The notice period for members of the Group Executive Committee is six months.
Gold Fields can also terminate the executive director’s employment summarily for any reason recognized by law as justifying summary termination.
Should the Company require the Executive Director not to work the notice period (albeit Company or employee initiated), or any part thereof, the Executive Director shall be entitled to his GRP up to the last day of the notice period. In addition, the offshoreExecutive Director shall be entitled to the following benefits:
To receive the annual performance bonuspro-rated up to the last day of the notice period based on the average percentage annual performance bonus received over the previous two years;
To exercise all share appreciation rights in terms of the 2005 Plan, which have vested prior to or on the last day of the notice period and onshore collection accountswill have 12 (twelve) months in which to do so;
| • | To exercise allpro-rata performance shares and long-term cash incentive awards in terms of the amended 2012 Plan, and the LTIP, which have settled prior to or on the last day of the notice period and will have 20 (twenty) days in which to do so; and |
To be compensated for any business travel and cell phone reimbursement up to the last day worked.
The value of La Cima wouldthe GRP payable in terms of the South African contracts is to be allocated among the following benefits: (i) salary; (ii) compulsory retirement fund contribution; (iii) voluntary participation in a vehicle scheme; (iv) compulsory medical coverage; and (v) compulsory Group Personal Accident Policy coverage. Furthermore, the executive director will contribute a compulsory 1% of his GRP to the Unemployment Insurance Fund is subject to any legislated contribution maximum at the time.
The Offshore Contracts
Under the agreements with Gold Fields Ghana Holdings and Orogen, the executive director is paid offshore in the appropriate currency. The portion of the GRP paid relates to the amount of time spent performing duties offshore for the companies. No benefits accrue to each executive director in terms of the offshore contracts.
The employment of an Account Control Agreementexecutive director will continue until terminated (i) 24 or 12 months’ notice by either party for the CEO and CFO respectively, or (ii) retirement of the relevant executive director (currently provided for at age 63).
Other Remuneration
In addition to the gross guaranteed remuneration payable, each executive director is entitled, among other things, to the following benefits under their employment contracts:
Participation in the 2005 Plan, the 2012 Plan and the LTIP;
Consideration of an annual (financial year) incentive bonus based upon the fulfillment of certain targets set by the Board of Directors;
An expense allowance; and
Matching Shares in terms of the MSR policy.
As of January 1, 2017, the rules of the annual performance bonus for the CEO and CFO remained unchanged for 2017.
The employment contracts also provide that, in the event of the relevant executive director’s employment being terminated solely as a result of a “change of control” as defined below, such termination occurring within 12 months of the change of control, the director is entitled to:
Payment of an amount equal totwo-and-a-half times GRP in the case of the CEO and two times GRP in the case of the CFO;
Payment of an amount equal to the average percentage of the incentive bonuses paid to the executive director during the previous two completed financial years;
Any other payments and/or benefits due under the contracts;
Payment of any annual incentive bonus he/she has earned during the financial year notwithstanding that the financial year is incomplete; and
Full vesting of all long-term incentive awards.
The employment contracts further provide that these payments cover any compensation or damages the executive director may have under any applicable employment legislation.
A change of control for the above is defined as the acquisition by a third-party or concert parties of 30% or more of Gold Fields’ ordinary shares.
In the event of the consummation of an acquisition, merger, consolidation, scheme of arrangement or other reorganization, whether or not there is a change of control, if the executive director’s services are terminated, the “change of control” provisions summarized above also apply.
The Remuneration Committee resolved to discontinue the compensation entitlement in the event of change of control for senior executives appointed from January 1, 2013. The senior executives who are currently entitled to the change of control compensation benefits will retain their rights under the previous policy.
Non-executive Director Fees
An independent advisor was commissioned to benchmark thenon-executive directors’ fees to that of the South African and international markets.
On the basis of the independent advisor’s report, approval of a 7% increase tonon-executive directors’ fees, effective June 1, 2017 and a first ranking charge in favor3% increase to the fees ofnon-residentnon-executive directors, will be sought.
The proposednon-executive director fees for fiscal 2017, excluding value added taxes, are as follows:
| Per Annum 2016 Current Fees | Proposed Fees for Fiscal 2017 | |||||||||||||||
| (Rand) | (U.S.$) | (Rand) | (U.S.$) | |||||||||||||
The Chair of the Board(all-inclusive fee) | 2,765,000 | — | 2,960,000 | — | ||||||||||||
The Deputy Chair of the Board(all-inclusive fee) | 1,800,000 | — | 1,926,000 | — | ||||||||||||
The Chair of the Audit Committee | 329,000 | — | 352,000 | — | ||||||||||||
The Chairs of the Capital Projects Control and Review Committee, Nominating and Governance Committee, Remuneration Committee, Risk Committee, Social, Ethics and Transformation Committee and Safety and Health and Sustainable Development Committee (excluding the Chair of the board and the Deputy Chair of the Board) | 203,000 | 16,700 | 217,200 | 17,200 | ||||||||||||
Members of the Board (excluding the Chair and the Deputy Chair of the Board) | 907,900 | 74,900 | 971,500 | 77,200 | ||||||||||||
Members of the Audit Committee (excluding the chair of the audit committee and the deputy chair of the board) | 170,000 | 14,100 | 182,000 | 14,500 | ||||||||||||
Members of the Capital Projects Control and Review Committee, Nominating and Governance Committee, Remuneration Committee, Risk Committee, Social, Ethics and Transformation Committee and Safety and the Health and Sustainable Development Committee (excluding the Chairs of the relevant committees, Chair of the Board and the Deputy Chair of the Board) | 128,000 | 10,600 | 137,000 | 11,000 | ||||||||||||
Employees
The total number of employees, excluding employees of outside contractors who are not on Gold Fields’ payroll, as of the lenders. This facility would be non-recourseend of the last three fiscal years at each of the operations owned by Gold Fields as of those dates was:
| As of(1)(2) | ||||||||||||
| December 31, 2016 | December 31, 2015 | December 31, 2014 | ||||||||||
South Africa | ||||||||||||
South Deep | 3,900 | (3) | 3,700 | (3) | 3,500 | (3) | ||||||
Ghana | ||||||||||||
Tarkwa | 2,500 | (3) | 2,500 | (3) | 2,500 | (3) | ||||||
Damang | 400 | (3) | 900 | (3) | 900 | (3) | ||||||
Australia | ||||||||||||
St. Ives | 460 | (4) | 470 | (4) | 520 | (4) | ||||||
Agnew/Lawlers | 300 | (4) | 290 | (4) | 300 | (4) | ||||||
Darlot | 200 | (4) | 210 | (4) | 220 | (4) | ||||||
Granny Smith | 460 | (4) | 460 | (4) | 420 | (4) | ||||||
Perth | 130 | (4) | 120 | (4) | 110 | (4) | ||||||
Peru | ||||||||||||
Cerro Corona | 390 | (4) | 380 | (4) | 450 | (4) | ||||||
Corporate | 120 | (4) | 90 | (4) | 80 | (4) | ||||||
Total | 9,000 | (3) | 9,100 | (3) | 9,000 | (3) | ||||||
Notes:
| (1) | The employee numbers presented do not include contractors who are not on the payroll. As at December 31, 2016, Gold Fields employed 9,127 outside contractors divided among its operations as follows: South Deep: 2,330; Tarkwa: 2,367; Damang: 1,717; St. Ives: 438; Agnew/Lawlers: 307; Darlot: 42; Perth: 1; Granny Smith: 139 and Cerro Corona: 1,786. |
| (2) | Table may not sum due to rounding. |
| (3) | Rounded to the nearest hundred. |
| (4) | Rounded to the nearest ten. |
Labor Relations
South Africa
91% of the labor force at Gold Fields’ South African operations is unionized, with the major portion of its South African workforce being members of the NUM and the other recognized union being UASA. Gold Fields attempts to balance union demands with the need to contain and reduce AIC in order to ensure the long-term viability of its operations. For the Group’s South Africa operations, labor costs constituted 47% of operating costs excluding amortization and depreciation.
There were no labor-related work stoppages at South Deep in fiscal 2016. Gold Fields continues to promote health and safety in South Africa as part of a comprehensive effort to improve mine safety. In fiscal 2016, there have been five work stoppages to address safety issues.
Wage Agreements
In total, labor costs in South Africa increased from 46% in fiscal 2015 to 47% of operating costs in fiscal 2016. The increase was primarily due to changes in the employee profile, a three year wage agreement and incentives to align to the restnew business objectives.
On April 10, 2015, the Group signed a three year wage and other conditions of employment agreement with the NUM and UASA, the registered trade unions at South Deep. The agreement resulted in average annual wage increases of 10% over the three year period of the deal. The first increase took effect on April 1, 2015. In addition, the agreement varies depending on the employee category and goes beyond wage increases to provide employees with a range of benefits, including:
A scarce skills allowance of R4,000 per month in the first year, escalating by R500 per annum over the next two years, for certain artisans and machine operators;
A retention allowance of R1,000 per month for other machine operators and artisans in the plant, backfill, shafts as well as tramming and recovery areas, for each of the three years covered by the agreement;
An increase of 20.96%, 14.29% and 12.5%, respectively in each of the three years, for Category4-8 (A and B Band or entry level employees) and an increase of 8% in fiscal 2015, 8% in fiscal 2016 and 9% in fiscal 2017 for miners, artisans and officials; and
A housing allowance to replace the current living out allowance over the three year period.
Ghana
In total, labor costs in Ghana remained at 22% in fiscal 2016. Of the Ghanaian employees at Tarkwa, Damang and the Accra office, the majority are members of the GMWU whose employment is governed by a collective agreement originally concluded in 2000 and revised in 2003, 2006, 2010 and 2013. In January 2016, a wage deal was reached with the GMWU for fiscal 2015. Under the agreement, employees received a 5% increase on monthly basic pay for all union categories; a one off payment of 1,000 Ghana Cedis for employees to invest in development and a rental allowance increase from 25% to 30% of salary for fiscal 2016 for employees who are not in mine accommodation. In January 2017, atwo-year wage agreement was reached with the GMWU for fiscal 2016 and fiscal 2017. Under the agreement, employees received a 10% increase on monthly basic pay and aone-off payment of 1000 Ghana Cedis for fiscal 2016 and a 6% increase on monthly basic pay for fiscal 2017.
In order to reduce AIC in West Africa, management is focusing on restructuring the Damang operations in line with the business plan.
In this regard, Management and GMWU are committed to the Region’s efforts to rebase its existing business operating models through productivity improvements and efficiency mechanisms in order to optimize all areas of the business value chain. This shall include ensuring optimal utilization of labor and timeously addressing any inherent operational deficiencies that may exist.
Australia
In total, labor costs in Australia remained at 26% in fiscal 2016. In Western Australia, where Gold Fields’ Australian operations are located, labor is now primarily regulated by the Fair Work Act (2009), or the Fair Work Act, which came into effect on July 1, 2009 and the associated federal industrial relations regulations and minimum National Employment Standards.
The commencement of the Fair Work Act means that unions may potentially have an increased role in negotiating collective agreements for pay and working conditions which may lead to an increased union presence in Western Australia’s mining industry, including at Gold Fields’ mining operations in Australia.
With the exception of a range of state statutes limited to health and safety, long-service leave, discrimination and workers’ compensation, Gold Fields and its employees’ conditions of employment are regulated by an employee collective agreement.
In April 2015, in order to manage labor risks, Gold Fields implemented a four year Companies Enterprise Agreement, or the CEA, with employee representatives and representatives of a union which has been endorsed by the Fair Work Commission. The CEA provides for standardized conditions of employment across Gold Fields’ mining operations in Australia for all of its employees including minimum ‘safety net’ rates of pay, work hours, redundancy provisions, discretionary market-based annual wage reviews and general ‘best practice’ employer and employee obligations. Also contained in the agreement is a dispute settlement procedure that includes an internal ‘up the line’ escalation process as well as provision (by mutual agreement) for external arbitration and provides that during the four year term of this agreement protected industrial actions such as strikes and bans will be regarded as illegal. The CEA will come up for review early in fiscal 2018.
Peru
In total, labor costs in Peru increased from 23% in fiscal 2015 to 28% in fiscal 2016. Prior to 2011, the employees at Cerro Corona were not unionized and had no collective bargaining agreement. However, Peruvian labor regulations provide that a collective negotiation process may be commenced by a union or by workers’ representatives elected by the majority thereof.
In June 2011, operational employees at Cerro Corona formed a labor union and negotiated a five year collective bargaining agreement with the Group up to June 2016. In January 2017, a new agreement was signed for a 3 year period, up to fiscal 2019. Currently 17% of Peruvian employees are unionized. This agreement provides for a S/. 220 annual wage increase in fiscal 2017 which is equivalent to a 5.3% annual wage increase on average for this group of employees, 5.5% increase in fiscal 2018 and 5.8% increase in fiscal 2019. In addition, eligible employees are entitled to a special bonus payment, education expenses and other benefits.
Also, Gold Fields provides to its workers, as a working condition, free transportation between the mine site and the city of Cajamarca.
Over the last few years, Peru has seen many cases of conflicts and dissention between local communities and mining operations and mining projects, stemming largely from the communities’ desire for greater participation in the economic benefits of these mining projects. Cerro Corona has undertaken extensive community consultation and negotiation since 2003 through the land purchase and permitting process to achieve agreement with local communities on various aspects of community involvement. A comprehensive strategy to work with the communities has been implemented through the operations stages. The main focus of this strategy relies on three pillars, which are (i) promoting the development of basic local infrastructure such as, for example, improvements to local drinking water, (ii) training and employing the local communities and (iii) developing economically self-sustaining projects and suppliers. Gold Fields believes its social strategy has created goodwill with the local communities.
Benefits
Gold Fields provides benefits to its employees, generally including pension, medical and accommodation benefits. Employees are also entitled to a severance package if they are laid off. Gold Fields’ own employees are generally provided with medical and retirement benefits. In Australia, benefits for contractors’ employees are the responsibility of each contractor and Gold Fields’ own employees are generally responsible for their own medical costs and other benefits, except that Gold Fields contributes to a third-party pension plan.
In South Africa, Gold Fields attempts to attract and retain motivated high caliber employees through a mix of guaranteed and performance-based remuneration, as well as short-term and long-term incentives, andnon-financial rewards relating to work experience. Gold Fields has also implemented company pay structuring for management employees and also for supervisory employees in South Africa, known as the Gross Remuneration Package.
Furthermore, in order to maintain competitiveness in the South African labor market, regular industry market surveys are conducted, to benchmark remuneration practices and to keep abreast of industry movements regarding employee benefits andnon-financial employee reward and recognition programs. Gold Fields was actively involved in an industry task team working with the Institute of Directors in formulating industry standards for remuneration practices based on labor market dynamics.
Bonus Schemes
Gold Fields offers appropriate bonus schemes for employees at all levels. The focus of Gold Fields’ bonus schemes is based on specific production, safety, cost and development at management levels.
Employee Share Option Scheme
With respect to Gold Fields’ South African operations, an Employee Share Option Scheme, or ESOP, in respect of an effective 10.75% stake in GFIMSA was registered on December 1, 2010. The ESOP is housed and administered through the Thusano Share Trust. The effective holding in GFIMSA was equivalent to about 13.5 million unencumbered Gold Fields shares with full voting rights, which were issued to and held by the trust at par value of R0.50 which represented a 99.5% discount to the 30 days volume-weighted average price at July 30, 2010. This represents 1.75% of the current Gold Fields shares in issue. See “Additional Information—Material Contracts—Additional Black Economic Empowerment Transactions”.
Employment Equity
Under the South African Employment Equity Act, or the Employment Equity Act, Gold Fields has a responsibility to: (1) promote equal opportunity and fair treatment in employment by eliminating unfair discrimination; and (2) implement affirmative action measures to redress the disadvantages in employment experienced by certain groups, in order to ensure their equitable representation in all occupational categories and levels in the workforce. As required by the Employment Equity Act, Gold Fields had a formal employment equity plan, which has been approved by its unions and submitted as part of its report to South African regulatory officials. The plan includes numerical targets to be achieved over a five year period, with regular meetings of employment equity forums involving management and employee representatives to monitor progress against the plan. Management believes that Gold Fields is currently making adequate progress toward the targets under its plan and is in compliance with legal and regulatory requirements regarding employment equity.
Training
Gold Fields continues to provide comprehensive training to its employees, in full compliance with the regulatory requirements at the sites at which it operates. The training provided in South Africa is aligned with South Africa’s National Qualifications Framework, and is carried out within the ambit of Gold Fields’ education, training and development, or ETD, establishment, in partnership with other institutions to provide accreditation. In order to secure optimal workplace safety and productive work performance, Gold Fields exposes its employees to ETD interventions which significantly exceed compliance to minimum standards, in the form of additional mining and safety skills training, team-based behavioral training, andnon-mining related life and social skills training.
In addition, Gold Fields continues to focus systematically on managerial, leadership, and professional development through the provision of “Management Development Leadership” programs in association with Duke University, as well as its Leadership and Professional Talent Pipeline program, by means of a process known as the Talent Review, which is integrated with its performance management system.
In South Africa, Gold Fields has maintained its enrollment of University Bursars and entry-level scholarships across the technical disciplines. At South Deep, the mechanized training center has now been established and provides essential mechanized training required for our South Deep operations.
Gold Fields continues to review the performance of its human resource development, which seeks to identify further opportunities to improve the training and development initiatives. This new focus has resulted in changes in the approach of human resource development, with a conscious departure from the traditional training-only approach, towards a holistic talent and change management approach. Gold Fields believes that this approach will facilitate the cultural and behavioral changes required for the organization to achieve its Safe Production performance objectives. This includes theroll-out of the Gold Fields group.Foundational program which all employees are required to complete across the Group, and which provides a foundation of company knowledge, key business concepts and company strategy.
Gold Fields continues to subscribe to initiatives concerning national critical skills formation, operating through various private sector collaborative initiatives. In addition, Gold Fields continues to work closely with local and national government forums towards the development of business initiatives aimed at addressing youth development.
All of Gold Fields’ employee training activities in South Africa take account of the human resources development requirements of the Mining Charter, and are fully described in the SLP submitted by Gold Fields to the Department of Minerals and Energy. See “Information on the Company—Environmental and Regulatory Matters—South Africa—Mineral Rights”.
Gold Fields has initiated training and development programs internationally that are appropriate to the specific regions, commensurate with regional and site-specific objectives and constraints. A comprehensive leadership development program at Gold Fields’ operations has been developed to further the growth of high-potential individuals, including management, specialists, and other high performers.
Safety and Wellness
Gold Fields continues to uphold its promise, “if we cannot mine safely, we will not mine”. This reflects the need to minimize any potential negative impact on our employees and contractors, maintain operational continuity and protect the Company’s reputation. The loan boreGroup’s annual performance bonus contains a significant safety component. Furthermore, maintaining safe and healthy working conditions is a key compliance issue for the Company.
As stated in its Occupational Health and Safety Policy, Gold Fields strives for “Zero Harm” at all of its operations and to minimize occupational health and safety hazards. All of the Group’s operations are certified to the OHSAS 18001 international health and safety management system standard.
The work on safety and wellness is integral to Gold Fields’ operational discipline and is widely accepted as the foundation for improved operational performance. As such, there is no conflict between pursuing safety and productivity at the same time.
Safety Management
Gold Fields remains vigilant and continues to introduce and monitor proactive measures to build on progress made in our safety performance.
Tragically, one fatality occurred during fiscal 2016 when Vakele Thafeni, an employee learner miner, was killed after a 1.5 magnitude seismic event caused an underground rock burst at our South Deep mine. Subsequent toyear-end, Gold Fields had two further fatalities at South Deep. Thankslord Bekwayo, a dump truck operator,
was killed in an underground accident on January 1, 2017 involving the truck he was driving, while Nceba Mehlwana, a locomotive driver, was fatally injured during a tramming accident on February 16, 2017. Our heartfelt condolences go out to the families, friends and colleagues of Messrs Thafeni, Bekwayo and Mehlwana. The Group’s safety performance showed a 33% improvement in the TRIFR with 2.27 incidents per million hours worked in fiscal 2016 compared to 3.40 in fiscal 2015. This is a significant achievement and is the lowest TRIFR rate at Gold Fields since fiscal 2013 when the ICMM adopted the measure as the gauge of safety performance. The Group’s TRIFR rate in fiscal 2013 was 4.14, while the number of recordable injuries since then has declined from 181 in fiscal 2013 to 124 in fiscal 2016. Of the 124 injuries, 76 were employee injuries (2015: 100) and 48 were contractor injuries (2015: 74).
During fiscal 2016, each of Gold Fields’ eight operations reported an improvement in their TRIFR rate, a tribute to the behavior-based safety programs in place across the Group. Gold Fields’ work at embedding these into our day-to-day performance, along with visible management leadership on the ground, continues.
Group safety performance
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | Fiscal 2013 | |||||||||||||
TRIFR(1) | 2.27 | 3.40 | 4.04 | 4.14 | ||||||||||||
Fatalities | 1 | 4 | (5) | 3 | 2 | |||||||||||
Lost time injuries(2) | 39 | 68 | 75 | 52 | ||||||||||||
Restricted work injuries(3) | 59 | 68 | 84 | 73 | ||||||||||||
Medically treated injuries(4) | 25 | 35 | 38 | 54 | ||||||||||||
Total recordable injuries | 124 | 174 | 200 | 181 | ||||||||||||
Notes:
| (1) | TRIFR Group safety metric was introduced in 2013. TRIFR = (Fatalities + Lost Time Injuries + Restricted Work Injuries + Medically Treated Injuries) x 1,000,000/number ofman-hours worked. |
| (2) | A LTI is a work-related injury resulting in the employee or contractor being unable to attend work for a period of one or more days after the day of the injury. The employee or contractor is unable to perform any of his/her duties. |
| (3) | A RWI is a work-related injury sustained by an employee or contractor which results in the employee or contractor being unable to perform one or more of their routine functions for a full working day, from the day after the injury occurred. The employee or contractor can still perform some of his/her duties. |
| (4) | A Medically Treated Injury, or MTI, is a work-related injury sustained by an employee or contractor which does not incapacitate that employee and who, after having received medical treatment, is deemed fit to immediately resume his/her normal duties on the next calendar day, immediately following the treatment orre-treatment. |
| (5) | Three of the four fatalities in 2015 were workplace accidents. A fourth fatality was a member of the protection services team at South Deep who was shot and killed during a robbery at the mine. |
Regional Performance
Details of specific regional safety initiatives implemented in fiscal 2016 are set out below.
Americas
After slipping in fiscal 2015 to 1.09 from 0.38 in fiscal 2014, the TRIFR at the Cerro Corona mine improved by 69% to 0.34 in fiscal 2016, with the operation only reporting one lost time and one MTI during the year. Following the relatively poor performance in fiscal 2015 the mine intensified its safety campaign, containing 10 rules that every employee and contractor has to sign up to. It also focused on improving the leadership skills of safety supervisors, as part of visible safety leadership. Furthermore, 190 employees and contractors have been tasked with driving safe behavior by highlighting good working practices.
Australia
During fiscal 2016, the TRIFR for Gold Fields Australia improved by 42% to 9.43 from the fiscal 2015 rate of 16.27. This is the lowest rate since the acquisition of the Yilgarn South Assets in fiscal 2013, when the region’s integrated safety strategy was first launched. The TRIFR has been reduced by 73% since then. Three of the mines, St. Ives, Darlot and Granny Smith, showed improvements ranging from 47% to 55% during fiscal 2016 and all three recorded their lowest TRIFR rate since fiscal 2013. Agnew/Lawlers’ improvement was lower at 13% after a number of safety related incidents with a contracting firm early in fiscal 2016. Targeted interventions managed to address their performance.
At the heart of Gold Fields Australia’s safety efforts are two programs: the ongoing Visible Felt Leadership and Vital Behaviors programs, both of which were introduced in fiscal 2014. Risk assessments undertaken on all recordable injuries since fiscal 2012 indicate that the risk of incidences that result in recordable injuries is steadily declining with no high-risk events having occurred since fiscal 2014.
During fiscal 2016, all mines in the region revitalized their safety programs as well as safety discipline. A particular focus has been on new employees and contractors, where there was evidence of a greater risk of injury. The findings of an anonymous survey among employees about the safety programs and standards, carried out annually over the past three years, will feed into the region’s safety strategy for the next three years.
In addition, the St. Ives mine is currently in the process of re-certification following an initial negative finding by the International Cyanide Management Institute, or ICMI. The external certification auditors have recommended re-certification and the ICMI is currently evaluating their findings.
South Africa
South Deep’s safety performance showed a significant improvement with the TRIFR falling by 17% from 2.91 in fiscal 2015 to 2.42 in fiscal 2016. However, this overall improvement was overshadowed by the fatalfall-of-ground accident experienced by the mine in September. In fiscal 2015, South Deep reported two mining-related fatalities and one fatal shooting. As a result of the fatal accident, the Department of Mineral Resources issued two Section 54 work-safety related stoppages. A further 13 Section 54 stoppages were issued during fiscal 2016 following visits by the DMR due to either perceived or actual unsafe working conditions, inadequate safety procedures or untrained personnel. This brings the total number of Section 54s in fiscal 2016 to 15 (2015: 16). Gold Fields continues to work with the DMR in addressing safety and wellness related issues at South Deep.
The number of total injuries reported by the mine went up from 68 in fiscal 2015 to 75 in fiscal 2016 (the TRIFR for South Deep is lower due to more hours worked.). Three categories (Material & Equipment,Fall-of-Ground and Slip & Fall) accounting for 77% of these injuries.Fall-of-ground accidents had been on a steady decline to six in fiscal 2015 but picked up again in fiscal 2016 with 15 incidents, including the fatal accident. Gold Fields continues its efforts to move mineworkers away from potentially dangerous areas and has installed extensive secondary support throughout the mine to limit the impact of rock bursts. The number of seismic events at South Deep registering above one on the Richter scale increased from 73 in fiscal 2015 to 101 in fiscal 2016 (of which six were over two on the scale) as the mine accelerated its ramp-up. Despite the fact that the average energy released per seismic event has dropped, the mine has intensified its efforts at improving its forecasting abilities. It is working with 12 consultancies and institutions, including the Institute of Mine Seismology and the Council for Geoscience, to monitor, understand and mitigate against seismic underground events.
Behavior-based incident management and strict enforcement of safety standards continue to be the pillars on which the mine relies to improve working place physical conditions and address risky behavior. In addition, 30% of bonuses, on average, are linked to safety-related performance. During fiscal 2016, South Deep rolled out four programs to improve its safety performance, includingback-to-basics training, hazard identification and risk assessments as well as artisan upskilling. Testing for alcohol and cannabis is also carried out as part of the mine’s zero tolerance policy.
Beyond behavioral-based management, South Deep has also intensified its effort toengineer-out safety risks, through pre-conditioning of working areas, as well as a focus on consumable material and equipment. As part of this, the installation of a rail-bound proximity detection system was completed in the first quarter of fiscal 2016, with which all 56 locomotives at the mine were fitted and relevant operators and artisans trained in its use. The installation of fixed beacons at the mine during the latter part of fiscal 2016 has helped to facilitate direct communication between the locomotives.
West Africa
Both Tarkwa and Damang reported better TRIFR during fiscal 2016, with Tarkwa improving by 23% to 0.31 and Damang by 37% to 1.67. The region reported no fatality in fiscal 2016 after recording one fatal accident during fiscal 2015. An external health and safety audit undertaken in the fourth quarter of fiscal 2016 made no adverse finding and reported no high-risk events at either mine.
The mines rely on a number of behavioral-based and safety discipline awareness programs to entrench safe behavior and during fiscal 2016 this was supported by more frequent walkabouts by senior management. A key part of the safety strategy is a zero tolerance approach to drug and alcohol use, which is applicable to all employees in the West Africa region. Over 130,000 sobriety tests were conducted during fiscal 2016 and 28 employees and contractors, who were found to be over the limit, were discharged immediately. The zero tolerance approach is supported by free counselling and educational sessions on drug and alcohol abuse.
Employee Health and Wellness
Gold Fields is committed to reducing the exposure of its employees to occupational health risks, including those associated with air quality, silicosis, tuberculosis, diesel particulate matter and hearing loss. As such, each region has implemented occupational health and hygiene monitoring for diesel particulates, respirable and silica dust, other airborne pollutants, radiation and noise. Particular emphasis is placed on managing the underground working environments in Gold Fields’ Australian and South African operations, due to the heightened health risks that underground mining poses to workers.
All of Gold Fields’ regions run dedicated wellness programs, tailored to both the national and local context of each mining operation. These programs aim to identify and manage chronic medical conditions within the workforce, whilst also maximizing its productive capacity and reducing absenteeism.
Occupational disease at the South Deep mine (rate per 1,000 employees)
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014(1) | Fiscal 2013(1) | |||||||||||||
Noise-induced hearing loss (NIHL)(1) | 0.80 | 0.68 | 1.52 | 0.62 | ||||||||||||
Cardio-respiratory tuberculosis (CRTB) | 5.26 | 6.16 | 9.15 | 6.5 | ||||||||||||
Silicosis(2) | 1.12 | 1.54 | 2.67 | 1.86 | ||||||||||||
Chronic obstructive airways disease (COAD)(1) | 0.64 | 0.17 | 0.76 | 0.00 | ||||||||||||
South Deep workforce | 6,277 | 5,837 | 5,246 | 6,466 | ||||||||||||
Notes:
| (1) | Numbers are now presented per 1,000 employees. Comparatives have been restated. |
| (2) | Based on the number of cases submitted for compensation. |
Noise
During fiscal 2016, Gold Fields’ South Deep mine reported a rise in the NIHL rate to 0.80 per 1,000 employees and contractors (fiscal 2015: 0.68), while the number of NIHL cases submitted rose from four to five. During the year, the mine met the Mine Health and Safety Council, or MHSC, milestone for equipment noise not to exceed 110(A-weighted) decibels (dB(A)), though 10% of samples were above the 2024 milestone of 107 dB(A).
It is important to note that these measurements do not incorporate the noise reduction effect provided by hearing protection devices, which are freely available and are compulsory to wear in demarcated areas.
South Deep continues to implement a range of medical, educational and engineering interventions to improve its performance in this regard. These include:
Early diagnosis and management of treatable lifestyle diseases;
Preventative counseling on NIHL;
Training on correct use of personal protection equipment, or PPE; and
Application of noise management measures to the underground mining fleet.
At Gold Fields’ Australian operations only two vehicles and machinery equipment across our four operations recorded noise levels above 110dB(A) throughout 2016. Operators of this equipment use appropriate hearing protection to ensure noise levels experienced are below 85dB(A). Two new NIHL cases were reported during fiscal 2016. NIHL mitigating strategies include implementation of engineering solutions to reduce exposure, the correct use of PPE and ongoing monitoring.
In West Africa, the number of NIHL cases remained at two new cases in fiscal 2016, amid the mandatory use of hearing protection devices (ear plugs and ear muffs) in areas with noise exposures above 85dB(A). Furthermore, continuous monitoring of the operator workstations as well as a number ofin-pit machines, including drill rigs, excavators, dump trucks and graders are undertaken every six months. Engineering controls, such as sound proof seals for equipment operator cabins, are also having a positive impact on noise levels.
There were no reported NIHL cases at Cerro Corona.
Diesel Particulate Matter
Gold Fields undertakes regular monitoring and analysis of the concentration of DPM at all of its operations. This issue is particularly material at Gold Fields’ underground mines in Australia and South Africa, due to the potential concentration of particulates in specific working areas.
While there are no regulatory limits, the Australia region implemented a strategy in fiscal 2014 designed to reduce exposure to DPM with a focus on fitting filters to equipment, refining maintenance schedules, ensuring the correct levels of ventilation and providing appropriate procedural controls. Sampling programs during fiscal 2016 have indicated the success of this initiative with a sharp decline in DPM levels underground, to a point where only 0.5% of samples have exceeded the 70µg/m3 target recommended by the Australian Institute for Occupational Hygienists.
In South Africa, the DMR developed a draft regulatory framework, released in fiscal 2014, to establish a DPM OEL. This plan recommended a four-year‘step-in- approach’ starting at 350µg/m3 in fiscal 2015 and systematically decreasing to 160µg/m3 by January 2018. Gold Fields has over the years introduced a range of measures to improve monitoring and bring down the DPM exposure levels underground. These include the acquisition of vehicles and machines with more advanced engine technology as well as use ofultra-low sulphur content diesel. As a result, the 160µg/m3 DPM OEL was only exceeded in 11% of samples during fiscal 2016 compared with 15% in 2015 and 19% in fiscal 2011.
In Ghana and Cerro Corona, the exposure levels and concentration of personal and area DPM samples are insignificant.
Silicosis and Tuberculosis
In fiscal 2015, the MHSC introduced new aspirational silica dust exposure targets for South African gold mines. These milestones require that personal exposure levels to silica dust be reduced from 0.1mg/m³ to <0.05mg/m3 by fiscal 2024. South Deep is already using the fiscal 2024 level to guide its performance and in
fiscal 2016, 26% of the personal silica dust samples exceeded this level. South Deep has accelerated the implementation of a range of improved dust control measures to gradually reduce these levels, including:
Real-time dust monitoring;
Fitting water mist sprays at dust sources;
Dust management controls on footwalls and internal tips; and
Installation of manually controlled water blasts in all working areas.
During fiscal 2016, the silicosis rate per 1,000 employees improved by 28% to 1.12 from 1.54 in fiscal 2015 with the number of silicosis cases submitted to the relevant health authorities falling from nine to seven. Similarly, the CRTB rate improved by 15% in fiscal 2016 to 5.26 per 1,000 employees (fiscal 2015: 6.16) and the number of CRTB cases submitted fell to 33 in fiscal 2016 from 36 in fiscal 2015.
In 2014, an industry working group was formed to address issues relating to compensation and medical care for occupational lung disease in the South African gold mining industry. During fiscal 2016, the working group had extensive engagements with a wide range of stakeholders in fiscal 2016, including government, organized labor, other mining companies and legal representatives of claimants who have filed legal suits against the companies.
The companies, Anglo American South Africa, AngloGold Ashanti, African Rainbow Minerals, Gold Fields, Harmony and Sibanye, believe that fairness and sustainability are crucial elements of any solution and are working together with these stakeholders to design and implement a comprehensive solution that is both fair to past, present and future gold mining employees and also sustainable for the sector. The companies are among respondent companies in a number of lawsuits related to occupational lung disease, but do not believe that they are liable in respect of the claims brought, and they are defending these.
At Gold Fields’ open pit operations in Ghana, Australia and Peru, contact with silica dust is limited due to the nature of open pit mining and the low silica content of the ore bodies. In 2016, there were no new cases of silicosis and two CRTB cases at our Ghanaian operations. Despite this, regular gravimetric sampling of respirable silica dust samples are carried out and evaluated.
HIV/AIDS
HIV/AIDS management is integrated into Gold Fields’ mainstream health services and Voluntary Counselling and Testing, or VCT, takes place during regular employee health assessments. This has the added benefit of directly addressing the interaction of HIV/AIDS with related health issues such as tuberculosis, or TB, and other sexually transmitted infections, or STIs.
In South Africa an estimated 19% of adults (aged 15 to 49) live with HIV/AIDS. Gold Fields is committed to lowering the HIV/AIDS prevalence at South Deep, where the prevalence rate (by percentage of the workforce living with HIV/AIDS) was 5% in December 2016. There was an increase in the number of employees tested positive to 112 in fiscal 2016 from 69 in 2015. Since 2011, 3,440 employees have been tested of which 403 tested positive. South Deep’s integrated HIV/AIDS, STI and TB strategy directly addresses interactions between these diseases. It has four key pillars:
Promotion: This includes regular publicity campaigns and condom distribution at all workplaces;
Prevention: VCT is provided to all employees, contractors, their partners and family members on a confidential basis. In 2016, the mine’s VCT participation rate was around 23%;
Treatment: Free Highly Active Anti-retroviral Treatment, or HAART, is provided toHIV-infected employees through onsite, doctor-staffed medical clinics. In 2016, 53 employees joined the HAART program (2015: 50). This takes the total number of active participants to 332 (2015: 296), with 533 cumulatively enrolled since the HAART program began in 2004. Employees’ dependants can also receive HAART via the Company’s medical aid schemes Gold Fields does not provide treatment to employees from contracting firms, which provide their own support to their staff; and
Support: This includes doctor-based primary healthcare, psychological counselling and social services for all employees and contractors. South Deep also supports a number of community based HIV/AIDS projects.
In Ghana, where the national HIV/AIDS rate is around 1.5%, employees and contractors have access to a confidential VCT program which employees receive free of charge. During fiscal 2016, about 45% of the Ghana operations’ workforce underwent the VCT program. Anyone testing positive is provided with free treatment in line with the government’s national HIV/AIDS treatment program. Byyear-end fiscal 2016 Ghana had 15 employees on HAART (fiscal 2015: 19).
Malaria
Gold Fields’ workforce in Ghana faces a high risk of exposure to malaria and the Company has a comprehensive malaria strategy in place, which incorporates education, prevention, prophylaxis and treatment. It also includes provision of mosquito repellent for workers, support for community health facilities and rapid diagnosis and treatment.
In fiscal 2016, 505 employees (fiscal 2015: 523) tested positive for malaria after 3,181 individuals (fiscal 2015: 3,104) were tested at both of our mines. None of the treated cases proved fatal. Employees and dependants who live in the mine villages have their company housing units sprayed as part of our Malaria Vector Control program. Under this programs a total of 195 company housing units at both mines were sprayed in fiscal 2016.
TRIFR, Fatalities and Fatal Injury Frequency Rate
In fiscal 2016, Gold Fields continued to focus on implementing its Group Safety Reporting Guideline, which is based on ICMM guidelines. Since fiscal 2013, Gold Fields has aligned its health and safety metrics with those of the ICMM, headed by the TRIFR. As Gold Fields’ peer companies tend to use the TRIFR metric, this alignment assists with benchmarking of Group performance against the wider sector.
The following tables set out the TRIFR data for Gold Fields’ mining operations for the periods indicated. The tables also provide the number of fatalities and fatal injury frequency rate data for Gold Fields’ South African, West African, Australian and Americas operations.
South Africa
West Africa
Australia
South America
ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
To the knowledge of management: (1) Gold Fields is not directly or indirectly owned or controlled (a) by another corporation or (b) by any foreign government; and (2) there are no arrangements the operation of which may at a subsequent date result in a change in control of Gold Fields. To the knowledge of Gold Fields’ management, there is no controlling shareholder of Gold Fields.
As of December 31, 2016, the issued share capital of Gold Fields consisted of 820,606,945 ordinary shares.
A list of the individuals and organizations holding, to the knowledge of management, directly or indirectly, 5% or more of its issued share capital as of February 24, 2017 is set forth below.
Beneficial owner | Ordinary shares | Percentage | ||||||
Allan Gray | 62,532,579 | 7.61 | % | |||||
Public Investment Corporation Limited | 60,506,206 | 7.37 | % | |||||
BlackRock Investment Management | 53,582,374 | 6.52 | %(1) | |||||
Van Eck Global | 52,874,536 | 6.44 | % | |||||
Note:
| (1) | On March 13, 2017, BlackRock Investment Management notified Gold Fields that its shareholding in the Company was 9.63%. |
To the knowledge of management, none of the above shareholders hold voting rights which are different from those held by Gold Fields’ other shareholders.
The table below shows the significant changes in the percentage of ownership by Gold Fields’ major shareholders, to the knowledge of Gold Fields’ management, during the past three fiscal years.
| Beneficial ownership as of | ||||||||||||
| December 31, 2016 | December 31, 2015 | December 31, 2014 | ||||||||||
| (%) | ||||||||||||
Beneficial owner | ||||||||||||
Public Investment Corporation Limited | 7.37 | 8.09 | 8.97 | |||||||||
Allan Gray | 7.02 | 7.93 | 6.21 | |||||||||
Van Eck Global | 6.02 | 6.62 | 6.32 | |||||||||
BlackRock Investment Management | 7.30 | 3.07 | 4.76 | |||||||||
Related Party Transactions
None of the directors, officers or major shareholders of Gold Fields or, to the knowledge of Gold Fields’ management, their families, had any interest, at LIBOR plusdirect or indirect, in any transaction during the last three fiscal years or in any proposed transaction which has affected or will materially affect Gold Fields or its investment interests or subsidiaries. Refer note 40 to the consolidated financial statements for related party disclosure as required by IFRS.
Reference is made to Item 18 for a marginlist of 2.0%all financial statements filed as part of this annual report. For information on legal proceedings, please refer to “Information on the Company—Legal Proceedings and Investigations”.
Dividends and Dividend Policy
The following table sets forth the dividends announced and paid per annum.share in respect of Gold Fields’ ordinary shares for the periods indicated:
| Year ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2010 | December 31, 2010 | December 31, 2011 | December 31, 2012 | December 31, 2013 | December 31, 2014 | December 31, 2015 | December 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | |||||||||||||||||||||||||||||||||||||||||||||||||
Prior year’s final dividend | 0.10 | 0.80 | 0.10 | 0.70 | 0.10 | 0.70 | 0.30 | 2.30 | 0.08 | 0.75 | 0.02 | 0.22 | 0.02 | 0.20 | 0.01 | 0.21 | ||||||||||||||||||||||||||||||||||||||||||||||||
Interim dividend | 0.07 | 0.50 | — | — | 0.14 | 1.00 | 0.20 | 1.60 | — | — | 0.02 | 0.20 | — | 0.04 | 0.04 | 0.50 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total dividend | 0.17 | 1.30 | 0.10 | 0.70 | 0.24 | 1.70 | 0.50 | 3.90 | 0.08 | 0.75 | 0.04 | 0.42 | 0.02 | 0.24 | 0.05 | 0.71 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Note:
| (1) | A final dividend of 0.60 per share was announced on February 16, 2017 and paid on March 13, 2017. |
Gold Fields’ dividend policy is to pay a dividend of between 25% and 35% of normalized earnings.
Significant Changes
Please refer to “Operating and Financial Review and Prospects—Recent Developments”.
Listing Details
As of December 31, 2016, the principalnon-United States trading market for the ordinary shares of Gold Fields is the JSE on which they trade under the symbol “GFI”. The ordinary shares of Gold Fields are also listed on the SWX Swiss Exchange. As of December 31, 2016, 13,761 record holders of Gold Fields’ ordinary shares, holding an aggregate of 190,670,781 ordinary shares (23.21%), were listed as having addresses in South Africa. As of December 31, 2016, 462 record holders of Gold Fields’ ordinary shares, holding an aggregate of 461,915,963 ordinary shares (56.23%), were listed as having addresses in the United States.
Gold Fields’ ADSs currently trade in the United States on the NYSE under the symbol “GFI”. ADRs representing the ADSs are issued by The Bank of New York Mellon, as Depositary. Each ADS represents one ordinary share. Gold Fields’ ADRs are also listed on the NASDAQ Dubai.
JSE Trading History
The tables below show the high and low closing prices in Rand and the average daily volume of trading activity on the JSE for Gold Fields’ ordinary shares for the last five fiscal years.
The following table sets out ordinary share trading information on a yearly basis for the last five fiscal years, as reported byI-Net Bridge, a South African financial information service:
Year ended | Ordinary share price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
(Rand per share) | (number of ordinary shares) | |||||||||||
December 31, 2012 | 131.31 | 96.00 | 2,304,320 | |||||||||
December 31, 2013 | 109.85 | 31.40 | 3,524,334 | |||||||||
December 31, 2014 | 53.09 | 32.35 | 2,211,070 | |||||||||
December 31, 2015 | 67.45 | 31.00 | 2,337,302 | |||||||||
December 31, 2016 | 91.30 | 38.78 | 3,378,480 | |||||||||
through April 3, 2017 | 49.75 | 38.03 | 3,458,524 | |||||||||
The following table sets out ordinary share trading information on a quarterly basis for the periods indicated, as reported byI-Net Bridge:
Quarter ended | Ordinary share price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
(Rand per share) | (number of ordinary shares) | |||||||||||
March 31, 2015 | 67.45 | 52.20 | 2,409,328 | |||||||||
June 30, 2015 | 54.45 | 37.64 | 2,147,905 | |||||||||
September 30, 2015 | 47.40 | 31.41 | 2,504,830 | |||||||||
December 31, 2015 | 45.24 | 31.00 | 2,276,433 | |||||||||
March 31, 2016 | 69.50 | 43.50 | 3,438,054 | |||||||||
June 30, 2016 | 72.20 | 55.42 | 2,979,195 | |||||||||
September 30, 2016 | 91.30 | 67.87 | 3,086,390 | |||||||||
December 31, 2016 | 66.88 | 38.78 | 4,017,030 | |||||||||
March 31, 2017 | 49.75 | 38.03 | 3,477,821 | |||||||||
The following table sets out ordinary share trading information on a monthly basis for each of the last six months, as reported byI-Net Bridge:
Month ended | Ordinary share price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
(Rand per share) | (number of ordinary shares) | |||||||||||
October 31, 2016 | 66.88 | 56.39 | 3,395,978 | |||||||||
November 30, 2016 | 61.34 | 44.95 | 3,415,228 | |||||||||
December 31, 2016 | 44.29 | 38.78 | 5,400,310 | |||||||||
January 31, 2017 | 48.56 | 43.98 | 2,583,874 | |||||||||
February 28, 2017 | 50.04 | 40.25 | 3,894,261 | |||||||||
March 31, 2017 | 46.77 | 38.03 | 3,952,568 | |||||||||
On April 3, 2017, the closing price of the ordinary shares on the JSE was R47.95.
New York Stock Exchange Trading History
The tables below show the high and low closing prices in U.S. dollars and the average daily volume of trading activity on the NYSE for the last five fiscal years.
The following table sets out ADS trading information on a yearly basis for the last five fiscal years, as reported by Bloomberg:
Year ended | ADS price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
| ($ per ADS) | (number of ADSs) | |||||||||||
December 31, 2012 | 16.92 | 11.32 | 3,994,433 | |||||||||
December 31, 2013 | 12.49 | 3.02 | 5,566,292 | |||||||||
December 31, 2014 | 4.84 | 3.00 | 4,970,039 | |||||||||
December 31, 2015 | 5.97 | 2.08 | 5,214,476 | |||||||||
December 31, 2016 | 6.45 | 2.64 | 6,421,988 | |||||||||
through April 3, 2017 | 3.67 | 2.95 | 7,221,965 | |||||||||
The following table sets out ADS trading information on a quarterly basis for the periods indicated, as reported by Bloomberg:
Quarter ended | ADS price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
| ($ per ADS) | (number of ADSs) | |||||||||||
March 31, 2015 | 5.97 | 3.66 | 5,642,608 | |||||||||
June 30, 2015 | 4.62 | 3.07 | 4,109,483 | |||||||||
September 30, 2015 | 3.55 | 2.42 | 5,520,601 | |||||||||
December 31, 2015 | 3.08 | 2.08 | 5,588,013 | |||||||||
March 31, 2016 | 4.56 | 2.86 | 7,257,014 | |||||||||
June 30, 2016 | 4.91 | 3.50 | 5,542,144 | |||||||||
September 30, 2016 | 6.45 | 4.75 | 5,548,086 | |||||||||
December 31, 2016 | 4.80 | 2.64 | 6,379,179 | |||||||||
March 31, 2017 | 3.67 | 2.95 | 7,263,275 | |||||||||
The following table sets out ADS trading information on a monthly basis for each of the last six months, as reported by Bloomberg:
Month ended | ADS price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
| ($ per ADS) | (number of ADSs) | |||||||||||
October 31, 2016 | 4.80 | 4.01 | 5,214,481 | |||||||||
November 30, 2016 | 4.33 | 3.05 | 6,626,845 | |||||||||
December 31, 2016 | 3.19 | 2.64 | 7,296,212 | |||||||||
January 31, 2017 | 3.61 | 3.20 | 6,939,995 | |||||||||
February 28, 2017 | 3.67 | 2.97 | 8,068,630 | |||||||||
March 31, 2017 | 3.64 | 2.95 | 6,879,094 | |||||||||
On April 3, 2017, the closing price of Gold Fields’ ADSs quoted on the NYSE was U.S.$3.62.
JSE Limited
The JSE was formed in 1887. The JSE provides facilities for the buying and selling of a wide range of securities, including equity and corporate debt securities and warrants in respect of securities, as well as Krugerrands.
The JSE is a self-regulating organization operating under the ultimate supervision of the Ministry of Finance, through the Financial Services Board and its representative, the Registrar of Stock Exchanges. Following the introduction of the Stock Exchanges Control Amendment Act No. 54 of 1995, or the Stock Exchange Act, which provides the statutory framework for the deregulation of the JSE, the JSE’s rules were amended with effect from November 8, 1995. These amendments removed the restrictions on corporate membership and allowed stockbrokers to form limited liability corporate entities. Members were, for the first time, also required to keep client funds in trust accounts separate from members’ own funds. Further rules to complete the deregulation of the JSE, as envisaged by the Stock Exchange Act, were promulgated during 1996 to permit members of the JSE to trade either as agents or as principals in any transaction in equities and to allow members to negotiate freely the brokerage commissions payable on agency transactions in equities. With effect from 1996, screen trading commenced on the JSE. The Securities Services Act No. 36 of 2004 came into effect on January 18, 2005. This act consolidates and amends the laws relating to the regulation and control of exchanges and securities trading, the regulation and control of central securities depositories and the custody and administration of securities and the prohibition of insider trading.
The actual float available for public trading is significantly smaller than the aggregate market capitalization because of the large number of long-term holdings by listed holding companies in listed subsidiaries and associates, the existence of listed pyramid companies and cross-holdings between listed companies.
South Africa was included in the Morgan Stanley Capital International Emerging Markets Free Index and the International Finance Corporation Investable Index in March and April 1995, respectively. South Africa has a significant representation in these emerging market indices.
The JSE has established a project named Share Transactions Totally Electronic, or STRATE, which has involved the dematerialization of share certificates in a central securities depositary and the introduction of contractual, rolling, electronic settlement in order to increase the speed, certainty and efficiency of settlement and to fall into line with international practice. Gold Fields joined STRATE on October 1, 2001. Investors are given the choice of either holding their securities in dematerialized form in the central securities depositary or retaining their share certificates. Shareholders who elect to retain their share certificates are not able to trade their shares on the JSE, although they may trade their sharesoff-market. Settlement of dematerialized shares traded electronically on the JSE is made three days after each trade (T+3).
ITEM 10: ADDITIONAL INFORMATION
General
Gold Fields is a public company registered in South Africa under the Companies Act, which limits the liability of its shareholders, and is governed by its memorandum of incorporation, the Companies Act and the JSE Listings Requirements. Gold Fields’ registration number is 1968/004880/06.
On December 19, 2014,April 8, 2009, South Africa passed the outstanding balanceCompanies Act, which came into force on May 1, 2011. At the annual general meeting held on May 14, 2012, Gold Fields adopted a new memorandum of US$40.0 million under this facility was refinanced by drawing downincorporation, or the Gold Fields MOI, to replace its memorandum of association and articles of association adopted under the La Cima revolving senior secured credit facilityprevious Companies Act, or the Companies Act 61 of 1973. Gold Fields amended the Gold Fields MOI at its annual general meeting on May 9, 2013. The amended Gold Fields MOI conforms to the requirements of the Companies Act and the amended JSE Listings Requirements.
Clause 4 of the Gold Fields MOI provides that Gold Fields has the powers and capacity of a natural person and is not subject to any special conditions.
Dividends and Payments to Shareholders
Gold Fields may make distributions (including the payment of dividends) from time to time in accordance with provisions of the Companies Act, the JSE Listings Requirements and the Gold Fields MOI. In terms of the Companies Act, a company may only make a distribution (including the payment of any dividend) if:
it reasonably appears that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution;
the board of the company, by resolution, has acknowledged that it has applied the solvency and liquidity test and reasonably concluded that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution.
In terms of the Companies Act, a company satisfies the solvency and liquidity test at a particular time if, considering all reasonably foreseeable financial circumstances of the company at that time:
the assets of the company, fairly valued, equal or exceed the liabilities of the company, as detailed below. This facility was also canceledfairly valued; and
it appears that the company will be able to pay its debts as they become due in the ordinary course of business for a period of:
12 months after the date on December 19, 2014.which the test is considered; or
in the case of a distribution (including the payment of dividends), 12 months following that distribution.
Subject to the above requirements, the directors of Gold Fields may from time to time declare a dividend or any other distribution to shareholders in proportion to the number of shares held by them.
The outstanding balanceCompany must hold all monies due to the shareholders in trust indefinitely, subject to the laws of prescription. The Company shall be entitled at December 31,any time to delegate its obligations in respect of unclaimed dividends, or other unclaimed distributions, to any one of the Company’s bankers.
Voting Rights
Every shareholder of Gold Fields, or representative of a shareholder, who is present at a shareholders meeting has one vote on a show of hands, irrespective of the number of shares he or she holds or represents,
provided that a representative of a shareholder shall, irrespective of the number of shareholders he or she represents, have only one vote. At a shareholders meeting, a resolution put to the vote shall be decided on a show of hands, unless a poll is demanded by not less than five persons having the right to vote on that matter, a person or persons entitled to exercise not less than one tenth of the total voting rights entitled to vote on that matter or the chairperson. Every Gold Fields shareholder is, on a poll, entitled to one vote per ordinary share held. Neither the Companies Act nor the Gold Fields MOI provide for cumulative voting.
A shareholder entitled to attend and vote at a shareholders meeting shall be entitled to appoint a proxy to attend, participate in, speak and vote at such shareholders meeting in the place of such shareholder. The proxy need not be a shareholder. However, the proxy may not delegate the authority granted to him or her as a proxy.
Issue of Additional Shares
In accordance with the provisions of the JSE Listings Requirements and the Gold Fields MOI, the Board shall not have the power to issue authorized shares other than:
the issue of capitalization shares or the offer of a cash payment in lieu of awarding capitalization shares;
issues in respect of a rights offer; and
issues which do not require the approval of shareholders in terms of the Companies Act or the JSE Listings Requirements
without shareholder approval.
In accordance with the provisions of the Companies Act:
an issue of shares must be approved by a special resolution of the shareholders of a company if the shares are issued to a director or officer of the company or any other person related or inter-related to the company, save for certain exceptions, including an issue pursuant to an employee share scheme; and
an issue of shares in a transaction requires approval of the shareholders by special resolution if the voting power of the shares that are issued as a result of the transaction will be equal to or exceed 30% of the voting power of all the shares held by shareholders immediately before the transaction.
Issues for Cash
In accordance with the provisions of the JSE Listings Requirements and the Gold Fields MOI, shareholders may either convey a:
special authority to issue shares for cash on terms that are specifically approved by shareholders in a shareholders meeting in respect of a particular issue, or a Specific Issue for Cash; or
general authority to issue shares for cash on terms generally approved by shareholders in a shareholders meeting by granting the Board the authority to issue a specified number of securities for cash, which authority will be valid until the next annual general meeting or for fifteen months from the date on which the resolution was passed, whichever period is shorter, or a General Issue for Cash.
In terms of the JSE Listings Requirements, a company may only undertake:
a Specific Issue for Cash or a General Issue for Cash on the basis that a 75% majority of votes cast by shareholders at a shareholders meeting must approve the granting of such authority to the directors;
a General Issue for Cash is subject to satisfactory compliance with certain requirements, including:
the shares that are the subject of a General Issue for Cash may not exceed 15% of the company’s listed shares; and
the maximum discount at which shares may be issued is 10% of the weighted average traded price of such shares measured over the 30 business days prior to the date that the price of the issue is agreed between the company and the party subscribing for the shares.
Pre-emptive Rights
The Companies Act, the JSE Listings Requirements and the Gold Fields MOI require that any new issue of shares by Gold Fields must first be offered to existing shareholders in proportion to their shareholding in the Company, unless, among other things, the issuance to new shareholders is:
the necessary shareholder approvals have been obtained;
a capitalization issue, an issue for an acquisition of assets (including another company) or an amalgamation or merger is to be undertaken; or
the shares are to be issued in terms of option or conversion rights.
Transfer of Shares
The transfer of any Gold Fields certificated shares will be implemented in accordance with the provisions of the Companies Act, using the then common form of transfer. Dematerialized shares, which have been traded on the JSE, are transferred on the STRATE system and delivered five business days after each trade. The transferor of any share is deemed to remain the holder of that share until the name of the transferee is entered in Gold Fields’ register for that share. Since Gold Fields shares are traded through STRATE, only shares that have been dematerialized may be traded on the JSE. Accordingly, Gold Fields shareholders who hold shares in certificated form will need to dematerialize their shares in order to trade on the JSE.
Disclosure of Beneficial Interest in Shares
The Companies Act requires a registered holder of Gold Fields shares who is not the beneficial owner of such shares to disclose to Gold Fields, within five business days of the end of every month during which a change has occurred in the beneficial ownership, the identity of the beneficial owner and the number and class of securities held on behalf of the beneficial owner. Moreover, Gold Fields may, by notice in writing, require a person who is a registered shareholder, or whom Gold Fields knows or has reasonable cause to believe has a beneficial interest in Gold Fields ordinary shares, to confirm or deny whether or not such person holds the ordinary shares or beneficial interest and, if the ordinary shares are held for another person, to disclose to Gold Fields the identity of the person on whose behalf the ordinary shares are held. Gold Fields may also require the person to give particulars of the extent of the beneficial interest held during the three years preceding the date of the notice. Gold Fields is obligated to establish and maintain a register of the disclosures described above and to publish in its annual financial statements a list of the persons who hold a beneficial interest equal to or in excess of 5% of the total number of ordinary shares issued by Gold Fields, together with the extent of those beneficial interests.
General Meetings of Shareholders
The shareholders and/or directors may convene Gold Fields shareholders meetings in accordance with the requirements of the Companies Act and the Gold Fields MOI. Gold Fields is obligated to hold an annual general meeting for each fiscal year prior to 15 months after the date of the last annual general meeting.
Shareholders meetings, including annual general meetings, require at least 15 business days’ notice in writing of the place, day and time of the meeting to shareholders.
Business may be transacted at any shareholders meeting only while a quorum of shareholders is present. The quorum for the commencement of a shareholders meeting shall be sufficient persons present to exercise, in aggregate, at least 25% of all the voting rights that are entitled to be exercised, but the shareholders meeting may not begin unless, in addition, at least three shareholders entitled to vote are present at the meeting.
The annual general meeting deals with and disposes of all matters prescribed by the Gold Fields MOI and the Companies Act, including:
the presentation of the directors’ report, the audited financial statements for the immediately preceding financial year and the audit committee report;
the election of directors; and
the appointment of an auditor and an audit committee.
Accounting Records and Financial Statements
Gold Fields is required to keep the accounting records and books of accounts as are necessary to present the state of affairs of the Company and to explain the financial position of the company as prescribed by the Companies Act.
The directors shall from time to time determine at what times and places and under what conditions, subject to the requirements of the Companies Act, shareholders are entitled to inspect and take copies of certain documents, including the Gold Fields MOI, accounting records required to be maintained by the Company and annual financial statements. Apart from the shareholders, no other person shall be entitled to inspect any of the documents of the Company (other than the share register) unless expressly authorized by the directors or in accordance with the Promotion of Access to Information Act, No 2 of 2000, as amended.
The directors of Gold Fields will cause to be prepared annual financial statements and an annual report as required by the Companies Act and the JSE Listings Requirements. Gold Fields will send by mail to the registered address of every shareholder a copy of the annual report and annual financial statements. Not later than three months after the first six months of its financial year, Gold Fields will mail to every shareholder an interim report for the previous six month period.
Amendments to Gold Fields’ Memorandum of Incorporation
The Gold Fields shareholders may, by the passing of a special resolution in accordance with the provisions of the Companies Act and the Gold Fields MOI, amend the Gold Fields MOI, including:
the creation of any class of shares;
the variation of any preferences, rights, limitations and other terms attaching to any class of shares;
the conversion of one class of shares into one or more other classes;
an increase in Gold Fields’ authorized share capital;
a consolidation of Gold Fields’ equity securities;
asub-division of Gold Fields’ equity securities; and/or
the change of Gold Fields’ name.
Variation of Rights
All or any of the rights, privileges or conditions attached to Gold Fields’ ordinary shares may be varied by a special resolution of Gold Fields passed in accordance with the provisions of the Companies Act and the Gold Fields MOI.
Distribution of Assets on Liquidation
In the event of a voluntary or compulsory liquidation, dissolution orwinding-up, the assets remaining after payment of all the debts and liabilities of Gold Fields, including the costs of liquidation, shall be dealt with by a
liquidator who may, with the sanction of a special resolution, among other things, divide among the shareholders any part of the assets of Gold Fields, and may vest any part of the assets of Gold Fields as the liquidator deems fit in trust for the benefit of shareholders. The division of assets is not required to be done in accordance with the legal rights of shareholders of Gold Fields. In particular, any class may be given preferential or special rights or may be partly or fully excluded.
Employee Share Scheme
The Companies Act permits the establishment of employee share schemes, whether by means of a trust or otherwise, for the purpose of offering participation therein solely to employees, including salaried directors, officers and other persons closely involved in the business of the company or a subsidiary of the company, either by means of the issue of shares in the company or by the grant of options for shares in the company.
Purchase of Shares
Gold Fields or any subsidiary of Gold Fields may, if authorized by special resolution by way of a general approval, acquire ordinary shares in the capital of Gold Fields in accordance with the Companies Act and the JSE Listings Requirements, provided among other things that:
the number of its own ordinary shares acquired by Gold Fields in any one financial year shall not exceed 20% of the ordinary shares in issue at the date on which this resolution is passed;
this authority shall lapse on the earlier of the date of the next annual general meeting or the date 15 months after the date on which the special resolution is passed;
the Board has resolved to authorize the acquisition and that Gold Fields and its subsidiaries, or the Group, will satisfy the solvency and liquidity test immediately after the acquisition and that since the test was done there have been no material changes to the financial position of the Group;
the price paid per ordinary share may not be greater than 10% above the weighted average of the market value of the ordinary shares for the five business days immediately preceding the date on which an acquisition is made;
the number of shares acquired by subsidiaries of Gold Fields shall not exceed 10% in the aggregate of the number of issued shares in Gold Fields.
Borrowing Powers
In terms of the provisions of Section 19(1) of the Companies Act, read together with Clause 4 of the Gold Fields MOI, the borrowing powers of the Company are unlimited.
Non-South African Shareholders
There are no limitations imposed by South African law or by the Memorandum of Incorporation of Gold Fields on the rights ofnon-South African shareholders to hold or vote Gold Fields’ ordinary shares.
Rights of Minority Shareholders and Directors’ Duties
The Companies Act provides instances in which a minority shareholder may seek relief from the courts if he, she or it has been unfairly prejudiced by the company.
In South Africa, a director of a company, when acting in that capacity, must exercise the powers and perform the functions of a director:
in good faith and for a proper purpose;
in the best interests of the company; and
with the degree of care, skill and diligence that may reasonably be expected of a person:
carrying out the same functions in relation to the company as those carried out by that director; and
having the general knowledge, skill and experience of that director.
Material Contracts
Additional Black Economic Empowerment Transactions
On August 5, 2010, Gold Fields announced a series of empowerment transactions to meet its 2014 was U.S.$nil comparedBlack Economic Empowerment equity ownership requirements. On November 2, 2010, the shareholders of Gold Fields approved these transactions at the General Meeting which included the establishment of an ESOP, the issue of approximately 600,000 Gold Fields shares to a BBBEE consortium, or BEECO, and BEECO’s subscription for a 10% holding in South Deep with U.S.$70.0 million at December 31, 2013a phase in participation over 20 years. On November 19, 2010, Gold Fields issued 13,525,394 shares to the ESOP, housed and U.S.$110.0 million at December 31, 2012.administered by the Gold Fields Thusano Share Trust, thereby commencing the implementation of the ESOP transaction. The remaining empowerment transactions have been completed.
U.S.$70 million Senior Secured RevolvingGhana Credit Facility
On December 22, 2010, GFGold Fields Ghana and Abosso entered into a U.S.$60 million reducing senior secured revolving credit facility agreement dated December 22, 2010, as amended and restated on May 6, 2014, pursuant to which The Standard Bank of South Africa Limited, or Standard Bank, agreed to make available to Gold Fields Ghana and Abosso, or the Ghana Borrowers, a senior secured revolving credit facility became available on February 21, 2011. The availablein a maximum aggregate principal amount of US$70,000,000, or the Original Ghana Facility.
With effect from October 28, 2016, the Original Ghana Facility was again amended and restated, or the U.S.$70 million Ghana Credit Facility. Under the facility amount reduces annually oneach Ghana Borrower must apply all amounts borrowed by it under the anniversary date, being February 21, from U.S.$60 million to U.S.$43 million to U.S.$35 million in the last and final year, with the final maturity date being February 21, 2014. The final
maturity date was subsequently extended to May 21, 2014. This facility is for (i)towards general corporate purposes, (ii) working capital purposes and/or (iii) capital expenditure purposes, including the purchase of a miningyellow metal fleet.
On May 6, 2014, the facility was amended and increased to US$70 million. The final maturity date of the amended facility is three years from the financial close date.
During fiscal 2014, the outstanding balance of US$35.0 million under the initial facility was refinanced by drawing down US$35.0 million under the amended facility.
The outstanding borrowings for GF Ghana on December 31, 2014, December 31, 2013 and December 31, 2012 were U.S.$35.0 million, U.S.$35.0 million and U.S.$nil, respectively.
The loan bears interest at LIBOR plus a margin of 2.40% per annum. The borrowers are required to pay a quarterly commitment fee of 1.00% per annum.
Borrowings under this facility are guaranteed by GFthe Ghana and Abosso.Borrowers. Borrowings under this facility are also secured by the registration of security over certain fleet vehicles owned by GFGold Fields Ghana, and Abosso, or the Secured Assets. In addition, the lenders are noted as first loss payees under the insurance contracts in respect of the Secured Assets and are assigned the rights under the maintenance contracts between certain suppliers of the Secured Assets. This facility isnon-recourse to the rest of the Gold Fields group.
The facility bears interest at LIBOR plus a margin of 2.40% per annum. The Ghana Borrowers are required to pay a quarterly commitment fee of 1.00% per annum.
The final maturity date of the U.S.$70 million Ghana Credit Facility is May 6, 2017. The Ghana Borrowers intend to refinance the U.S.$70 million Ghana Credit Facility prior to the final maturity date.
The outstanding borrowings under this facility on December 31, 2016 and December 31, 2015 were U.S.$45.0 million and U.S.$45.0 million, respectively.
U.S.$200 million La Cima revolving senior secured credit facilityCredit Facility
On December 16, 2014, La Cima, entered into a revolving senior secured credit facility for up to U.S.$200 million. The purpose of this facility was to refinancemillion, or the U.S.$200 million La Cima Credit Facility. Under this facility, the borrower must apply all amounts borrowed by it under the facility to refinance a then existing U.S.$200 millionnon-revolving senior secured term loan, to finance its working capital requirements and for general corporate purposes. The final maturity date of this facility is three years from the agreement date. On the agreement date, the total commitments under this facility amounted to U.S.$75.0 million. On January 19, 2015, total commitments were increased by U.S.$75.0 million to U.S.$150.0 million.
The loan bears interest at LIBOR plus a margin of 1.625% per annum. Borrowings under the revolving senior secured credit facility are secured by first-ranking assignments of all rights, title and interest in all of La Cima’s concentrate sale agreements. In addition, the offshore and onshore collection accounts of La Cima are subject to an account control agreement and a first-ranking charge in favour of the lenders. This facility is non-recourse to the rest of the Gold Fields Group.
Where the utilization under this facility is less than or equal to U.S.$66,666,666, a utilization fee of 0.075% per annum will be payable on the amount of utilizations. Where the utilization under this facility is greater than U.S.$66,666,666 and less than or equal to U.S.$133,333,333, a utilization fee of 0.15% per annum will be payable on the amount of utilizations. Where the utilization under this facility is greater than U.S.$133,333,333, a utilization fee of 0.25% per annum will be payable on the amount of utilizations. Such utilization fee is payable quarterly in arrears.
The borrowers areborrower is required to pay a quarterly commitment fee of 0.65% per annum on the undrawn amount.
Borrowings under the U.S.$200 million La Cima Credit Facility are secured by first-ranking assignments of all rights, title and interest in all of La Cima’s concentrate sale agreements. In addition, the offshore and onshore collection accounts of La Cima are subject to an account control agreement and a first-ranking charge in favor of the lenders. This facility isnon-recourse to the rest of the Gold Fields Group.
The outstanding balance under U.S.$200 million La Cima Credit Facility at December 31, 2016 was U.S.$82.0 million, compared to U.S.$42.0 million on December 31, 2015.
At December 31, 2015, La Cima did not meet certain covenants specified in the revolving senior secured credit facility agreement. The lenders subsequently waived their rights and entitlements arising from the failure of La Cima to meet the specific covenants.
R1.0 billion Rand Revolving Credit Facilities
In 2013, GFO and GFIJVH entered into two revolving credit facilities with Standard Bank and RMB, respectively. The purpose of these facilities is to fund capital expenditure and general corporate and working capital requirements of the Gold Fields group.
The salient terms of these facilities could be summarized as follows:
a R500.0 million (U.S.$33.1 million) revolving credit facility entered into by the borrowers and Standard Bank on December 20, 2013, bearing interest at JIBAR plus a margin of 2.75% per annum, with a semi-annual commitment fee of 1.05% per annum on the undrawn and uncanceled amounts of the facility, or the Standard Bank RCF; and
a R500.0 million (U.S.$33.1 million) revolving credit facility entered into by the borrowers and RMB on June 19, 2013, bearing interest at JIBAR plus a margin of 2.50% per annum, with a semi-annual commitment fee of 1% per annum on the undrawn and uncanceled amounts of the facility, or the RMB RCF.
Borrowings under these facilities were guaranteed by Gold Fields, GFO, GFIJVH, Orogen, and Gold Fields Holdings Company (BVI) Limited, or GF Holdings.
The RMB RCF and the Standard Bank RCF matured on June 19, 2016 and December 20, 2016 respectively.
U.S.$1 billion Notes Issue
On September 30, 2010, Orogen announced the issue of U.S.$1,000,000,000 4.875% guaranteed notes due October 7, 2020, issued October 7, 2010. Gold Fields, GFO, GF Holdings and Sibanye Gold, or the Guarantors, on a joint and several basis, unconditionally and irrevocably guaranteed the payment of all amounts due in respect of the U.S.$1 billion Notes. The U.S.$1 billion Notes and guarantees constitute direct, unsubordinated and unsecured obligations of Orogen and the Guarantors, respectively, and rank equally in right of payment among themselves and with all other existing and future unsubordinated and unsecured obligations of Orogen and the Guarantors, respectively. With effect from April 24, 2015, the noteholders released Sibanye Gold as a Guarantor pursuant to a consent solicitation process.
Gold Fields used the net proceeds of the offering of the U.S.$1 billion Notes to repay certain existing indebtedness of the Group and for general corporate purposes.
On February 19, 2016, GFA, a wholly-owned subsidiary of Gold Fields, announced an offer to purchase U.S.$200.0 million of the U.S.$1 billion Notes at discounts of 17% to the original value. Gold Fields accepted for purchase an aggregate principal amount of the U.S.$1 billion Notes equal to U.S.$147.6 million at a purchase price of U.S.$880 per U.S.$1,000 in principal amount of the U.S.$1 billion Notes. Gold Fields intends to hold the U.S.$1 billion Notes acquired until their maturity date on October 7, 2020. The outstanding balance under this facility on December 31, 2016 was U.S.$846.4 million.
U.S.$1,510 million Term Loan and Revolving Credit Facility
Orogen, GFO and GFIJVH entered into a term loan and revolving credit facility agreement dated November 28, 2012, as amended and restated on January 30, 2013 and as further amended and restated on July 22, 2013, or the Original U.S.$ Facility. Pursuant to the Original U.S.$ Facility a syndicated bank group, agreed to make available to the borrowers certain credit facilities in the aggregate amount of U.S.$1.44 billion.
On June 18, 2014, the Original U.S.$ Facility was again amended and restated, or the U.S.$1,510 million Term Loan and Revolving Credit Facility. Under this facility, the lenders have made a US$120 million term loan (Facility A) and two revolving credit facilities of US$720 million (Facility B) and US$670 million (Facility C) each available to the borrowers.
The outstanding balance under the U.S.$1,510 million Term Loan and Revolving Credit Facility at December 31, 20142015 was U.S.$42.0724.0 million.
SubsequentBorrowings under the U.S.$1,510 million Term Loan and Revolving Credit Facility were guaranteed by Gold Fields, GF Holdings, Orogen, GFO and GFIJVH.
On June 13, 2016, the outstanding balance of U.S.$630.0 million under the U.S.$1,510 million Term Loan and Revolving Credit Facility was refinanced by the US$1,290,000,000 Credit Facilities Agreement, as detailed below. The U.S.$1,510 million Term Loan and Revolving Credit Facility was also canceled on June 13, 2016.
R1,500 million Nedbank Revolving Credit Facility
On March 1, 2013, Nedbank, GFIJVH and GFO entered into a R1,500 million Revolving Credit Facility. The purpose of the facility is to year-end,fund capital expenditure and general corporate and working capital requirements of the Gold Fields group. The tenor of the facility is five years. The final maturity date of this facility is March 7, 2018.
The facility bears interest at JIBAR plus a margin of 2.50% per annum. The borrowers are required to pay a commitment fee of 0.85% per annum every six months.
Borrowings under the facility are guaranteed by Gold Fields, GFO, GFH, Orogen and GFIJVH.
The outstanding borrowings under this facility at December 31, 2016 and December 31, 2015 were nil and nil, respectively.
U.S.$1,290 million Credit Facilities Agreement
On June 6, 2016, The Bank of Tokyo-Mitsubishi UFJ, Ltd., GFIJVH, GFO, Orogen, Gold Fields Ghana Holdings (BVI) Limited, or GF Ghana, and certain wholly owned subsidiaries of Gold Fields entered into a U.S.$1,290 million Credit Facilities Agreement, or the U.S.$1,290 million Credit Facilities Agreement. The U.S.$1,290 million Credit Facilities Agreement comprises of a:
U.S.$380 million Term Loan (Facility A) maturing June 2019;
U.S.$360 million RCF (Facility B) maturing June 2019; and
U.S.$550 million RCF (Facility C) maturing June 2021;
The facility bears interest at LIBOR plus a margin as follows:
the margin in relation to each Facility A Loan is 2.50 per cent. per annum;
the margin in relation to each Facility B Loan is 2.20 per cent. per annum; and
the margin in relation to each Facility C Loan is 2.45 per cent. per annum;
based on January 19, 2015, total commitments were increasedthe current long-term credit rating of Gold Fields. The margin shall be adjusted to the following percentages dependent on the long-term credit rating assigned from to time to Gold Fields by either Moody’s or Standard & Poor’s:
Rating (Standard & | Rating (Moody’s) | Facility A Margin p.a. | Facility B Margin p.a. | Facility C Margin p.a. | ||||
BBB | Baa2 | 1.75% | 1.45% | 1.70% | ||||
BBB- | Baa3 | 2.00% | 1.70% | 1.95% | ||||
BB+ | Ba1 | 2.50% | 2.20% | 2.45% | ||||
BB | Ba2 | 3.00% | 2.70% | 2.95% | ||||
BB- | Ba3 | 3.50% | 3.20% | 3.45% |
The borrowers are required to pay a quarterly commitment fee of 35% of the applicable margin per annum on the undrawn and uncanceled amounts of the facilities.
The borrowers must apply all amounts borrowed by them under the U.S.$75.01,290 million to US$150.0Credit Facilities Agreement towards, firstly, (i) repayment of the U.S.$1,510 million Term Loan and Revolving Credit Facility and thereafter (ii) their general corporate and working capital purposes.
Borrowings under the U.S.$1,290 million Credit Facilities Agreement are guaranteed by Gold Fields, Orogen, GF Holdings, GF Ghana, Gruyere Holdings Pty Ltd, or Gruyere Holdings, GFO and GFIJVH.
The outstanding borrowings under U.S.$1,290 million Credit Facilities Agreement at December 31, 2016 was U.S.$658.5 million.
R500 million ABSA Bank Revolving Credit Facility
Effective March 31, 2017, ABSA Bank Limited, GFIJVH, GFO and certain wholly owned subsidiaries of Gold Fields entered into a R500 million Revolving Credit Facility. The purpose of the facility is to fund capital expenditure and general corporate and working capital requirements of the Gold Fields group. The tenor of the facility is six years. The final maturity date of this facility is March 31, 2020.
The facility bears interest at JIBAR plus a margin of 2.55% per annum based on the current long-term credit rating of Gold Fields.
The margin shall be adjusted to the following percentages dependent on the long-term credit rating assigned from to time to Gold Fields by either Moody’s or Standard & Poor’s:
Rating | Margin | |||
| (%) | ||||
BBB-/Baa3 | 2.05 | |||
BB+/Ba1 | 2.55 | |||
BB/Ba2 | 3.05 | |||
The borrowers are required to pay a commitment fee of 35% of the applicable margin per annum on the undrawn portion of the facility every six months.
Borrowings under the facility are guaranteed by Gold Fields, Orogen, GF Holdings, GF Ghana, Gruyere Holdings, GFO and GFIJVH.
R500 million Standard Bank Revolving Credit Facility
Effective March 31, 2017, Standard Bank, GFIJVH, GFO and certain wholly owned subsidiaries of Gold Fields entered into a R500 million Revolving Credit Facility. The purpose of the facility is to fund capital expenditure and general corporate and working capital requirements of the Gold Fields group. The tenor of the facility is six years. The final maturity date of this facility is March 31, 2020.
The facility bears interest at JIBAR plus a margin of 2.75% per annum.
The borrowers are required to pay a commitment fee of 1.05% per annum on the undrawn portion of the facility every six months.
Borrowings under the facility are guaranteed by Gold Fields, Orogen, GF Holdings, GF Ghana, Gruyere Holdings, GFO and GFIJVH.
Recent Developments See “Information on the Company—Developments since December 31, 2015”. Trend and Outlook Attributable equivalent gold production for the Group for fiscal 2017 is expected to be between 2.10 million ounces and 2.15 million ounces, unchanged from the updated guidance provided in fiscal 2016. The Australian operations are expected to produce around 910,000 ounces. Cerro Corona’s gold equivalent production of around 290,000 ounces is higher than 2016 with the increase mainly due to the positive impact of the higher copper/gold price ratio. Lower production is expected at Damang given the reinvestment currently underway and South Deep is expected to increase production to around 9,800 kilograms (315,000 ounces). Theall-in-sustaining cost for the Group is expected to be between U.S.$1,010 per ounce and U.S.$1,030 per ounce. Gold Fields plans to embark on a year of reinvestment in fiscal 2017 with the focus on new growth and development projects, and to target both sustaining and growing free cash flow. Apart from the growth invested in South Deep, three other major projects namely the Damang Reinvestment Plan, the Gruyere Gold Project and the Salares Norte project require significant investment. Growth expenditure at South Deep is planned to increase to R287 million (U.S.$20 million) in fiscal 2017 (2016: R115 million/U.S.$8 million). In fiscal 2017, U.S.$120 million will be invested in future growth at Damang, while the A$153 million (U.S.$112 million) is planned to be spent on the development of Gruyere. In Chile, Salares Norte received water rights and the project is on track to complete a prefeasibility study in the second half of fiscal 2017. The plan is to increase expenditure to U.S.$64 million at Salares Norte in fiscal 2017 (2016: U.S.$39 million). As a result of the above, AIC for the Group is planned to increase significantly to between U.S.$1,170 per ounce to U.S.$1,190 per ounce. Group capital expenditure for the year is planned at U.S.$870 million. It includes U.S.$120 million at Damang and A$153 million (U.S.$112 million) for Gruyere, as well as R287 million (U.S.$20 million) at South Deep. These expectations assume exchange rates of R/U.S.$: 14.14 and A$/U.S.$: 0.73.
ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors
Gold Fields’ directors and their ages and positions are:
Name | Age | Position | Term Expires(1) | |||||||
Cheryl A. Carolus | 58 | Non-executive Chair | May 2018 | |||||||
Nicholas J. Holland | 58 | Executive Director and Chief Executive Officer | May 2017 | |||||||
Paul A. Schmidt | 49 | Executive Director and Chief Financial Officer | May 2017 | |||||||
Alhassan Andani(2) | 55 | Non-executive Director | May 2017 | |||||||
Peter J. Bacchus(3) | 47 | Non-executive Director | May 2017 | |||||||
Terence P. Goodlace(4) | 57 | Non-executive Director | May 2017 | |||||||
Carmen Letton(5) | 51 | Non-executive Director | May 2017 | |||||||
Richard P. Menell | 61 | Non-executive Director and Deputy Chair | May 2018 | |||||||
Donald M. J. Ncube | 69 | Non-executive Director | May 2019 | |||||||
Steven P. Reid(6) | 61 | Non-executive Director | May 2019 | |||||||
Yunus G.H. Suleman(7) | 59 | Non-executive Director | May 2017 | |||||||
Gayle M. Wilson(8) | 72 | Non-executive Director | May 2019 | |||||||
Notes:
| (1) | Terms expire on the date of the annual general meeting in that year for newly appointed directors and once every three years after their first election. |
| (2) | Appointed asNon-executive Director on August 1, 2016. |
| (3) | Appointed asNon- executive Director on September 1, 2016. |
| (4) | Appointed asNon-executive Director on July 1, 2016. |
| (5) | Appointed asNon-executive Director on May 1, 2017. |
| (6) | Appointed as aNon-executive Director on February 1, 2016. |
| (7) | Appointed asNon-executive Director on September 1, 2016. |
| (8) | Scheduled to retire on May 24, 2017. |
Directors and Executive Officers
The Memorandum of Incorporation of Gold Fields provides that the Board must consist of no less than four and no more than 15 directors at any time. The Board currently consists of two executive directors andten non-executive directors, all of whom are independent.
The Memorandum of Incorporation of Gold Fields providesone-third of all directors (including executive directors) must retire from office at each annual general meeting of Gold Fields. The first to retire are those directors appointed as additional members of the Board during the year, followed by the longest serving members. Retiring directors normally make themselves available forre-election and arere-elected at the annual general meeting at which they retire. The number of directors serving must at all times be less thanone-half of the total number of directors in office. Gold Fields’ current executive directors are appointed to their positions as directors by contract.
According to the Memorandum of Incorporation, the Board is required to meet at least four times a year and beyond that, may meet as it sees fit. The Board sets its own policies for adjourning and otherwise regulating meetings. Any director may call a meeting at any time by requesting the company secretary to convene a meeting. The Memorandum of Incorporation further provides for the following:
if a Director has a personal financial interest in a matter to be considered at a meeting of the Board, that Director is obliged to disclose that interest, must leave the meeting after making that disclosure and
must not take part in the consideration of the matter. While absent from such meeting, the interested Director will nevertheless be regarded as being present for the purposes of determining a quorum, but will not be regarded as being present for the purpose of determining whether a resolution has sufficient support to be adopted. However, a Director who owns ordinary shares may vote his ordinary shares at a general meeting of shareholders in a transaction in which the Director is interested; |
a director may not vote as a director to determine his own compensation. The shareholders in a general meeting determine the fees fornon-executive directors from time to time. Any additional compensation, including compensation for additional services performed by the director for Gold Fields’ business or for other positions in Gold Fields or its subsidiaries, must be determined by a quorum of directors whose compensation would not be affected by the decision; and
the directors are not required to hold shares in Gold Fields, although a shareholding qualification may be imposed at any meeting of the shareholders.
The Memorandum of Incorporation does not provide for a mandatory retirement age for directors. However, Gold Fields’ Board charter specifies the retirement age to be 72 years with a discretionary extension of 12 months in the year a director turns 72 years of age.
Some of Gold Fields’ executive officers, executive directors andnon-executive directors are members of the boards of directors of various of its subsidiaries.
Under Section 303A.11 of the NYSE Company Manual, or the NYSE Listing Standards, foreign private issuers such as Gold Fields must disclose any significant ways in which their corporate governance practices differ from those followed by U.S. listed companies under the NYSE Listing Standards. Disclosure of the significant ways in which Gold Fields’ corporate governance practices differ from practices followed by U.S. companies listed on the NYSE can be found in Item 16G of this report.
The business address of all the directors and executive officers of Gold Fields is 150 Helen Road, Sandown, Sandton, 2196 South Africa, the address of Gold Fields’ head office.
Executive Directors
Nicholas J. HollandBCom, BAcc, Witwatersrand; CA (SA)
Executive Director and Chief Executive Officer. Mr. Holland has been an Executive Director of Gold Fields since April 14, 1998 and became Chief Executive Officer on May 1, 2008. He served as Executive Director of Finance from April 1997. On April 15, 2002, his title changed to Chief Financial Officer until April 30, 2008. Mr. Holland has more than 37 years’ experience in financial management and over 27 years of experience in the mining industry. Prior to joining Gold Fields, he was Financial Director and Senior Manager of Corporate Finance of Gencor Limited and a Director of Rand Refinery from July 12, 2000 until September 30, 2008. He remained an alternate director until February 2013.
Paul A. SchmidtBCom, Witwatersrand; BCompt (Hons), UNISA; CA (SA)
Executive Director and Chief Financial Officer. Mr. Schmidt was appointed Chief Financial Officer on January 1, 2009 and joined the Board on November 6, 2009. Prior to this, Mr. Schmidt was acting Chief Financial Officer from May 1, 2008. Prior to this appointment, Mr. Schmidt was financial controller for Gold Fields from April 1, 2003. He has more than 21 years’ experience in the mining industry. Mr. Schmidt holds no other directorships.
Non-executive Directors
Cheryl A. CarolusBA Law; Bachelor of Education, University of the Western Cape; Honorary Doctorate in Law, University of Cape Town
Chair of the Board. Ms. Carolus has been a director of Gold Fields since March 10, 2009. She was appointedNon-executive Chair effective February 14, 2013. Ms. Carolus is an Executive Chairperson of Peotona Group Holdings, which has diverse interests in mining. In 2009, she was appointed Chairperson of the Board of South African Airways and served on a number of listed and unlisted companies. Ms. Carolus has previously held senior leadership positions in the liberation movement in South Africa and in the ANC. She has served as Deputy Secretary General under Nelson Mandela, and helped to negotiate the new South African constitution and coordinate the drafting of post-apartheid ANC policy. She served as South Africa’s High Commissioner to the United Kingdom from 1998 to 2001 and was the CEO of SA Tourism from 2001 to 2004. She was Chairperson of South African National Parks Board for six years and currently serves on the boards of other public and private companies andnot-for-profit organizations, including the International Crisis Group, Soul City, World Wildlife Fund (South Africa and internationally), The British Museum (appointed by HM Queen Elizabeth), and is Chair Person of the SA Constitution Hill Education Trust. She also works with NGOs focused on young people at risk and conflict prevention. She was awarded an honorary doctorate in law from the University of Cape Town in 2004 for her contribution to freedom and human rights. She was awarded the French National Order of Merit by Elisabeth Barbier, the French Ambassador to South Africa, on March 8, 2014.
Alhassan AndaniBSc Agriculture, University of Ghana; MA Banking and Finance, Finafrica Institute, Italy
Mr. Andani was appointed as a director of Gold Fields on August 1, 2016. He is currently Chief Executive and Executive Director of Stanbic Bank Ghana; the Board Chairman of the Ghana CSIR (Council for Scientific & Industrial Research) and a director of SOS Villages Ghana and has held other corporate directorships in the past.
Peter J. BacchusMA Economics, Cambridge University
Mr. Bacchus was appointed as a director of Gold Fields with effect from September 1, 2016. Mr. Bacchus is chairman of the independent merchant banking boutique, Bacchus Capital Advisers. He has acted as the global head of Mining and Metals, and is joint head of European Investment Banking at Investment Bank Jefferies, a position he held until 2016. Before this he served as global head of Mining and Metals at Morgan Stanley, and prior to that, he was head of Investment Banking, Industrials and Natural Resources at Citigroup. Mr. Bacchus has spent 25 years in investment and corporate banking with a focus on the global natural resources sector and is a member of the Institute of Chartered Accountants, England and Wales. He is also anon-executive director ofUK-listed mining group NordGold and a trustee of Space for Giants, an African-focused conservation charity.
Terence P. GoodlaceMA Business Administration, University of Wales; BCom, University of South Africa; NDip Witwatersrand Technikon
Mr. Goodlace was appointed as a director of Gold Fields with effect from July 1, 2016. Mr. Goodlace’s mining career commenced in 1977, spanning nearly 40 years of working with different organizations. He has previously served as both an Executive Vice-President and the Chief Operating Officer for Gold Fields, returning now to the Company to serve as an independentnon-executive director. He has experience serving as chief executive officer at Impala Platinum Holdings Limited and Metorex Limited. He served on the Impala Platinum Holdings Limited board for two years as an independentnon-executive director and four and a half years as an executive director. He spent three years as an executive director of Metorex Limited. Mr. Goodlace was also appointed as a non-executive director at Kumba Iron Ore on March 24, 2017.
Carmen Letton PhD in Mineral Economics (UQ) and Degree in Engineering (Mining—WASM)
Dr. Letton’s has been appointed to the Board effective May 1, 2017. She is a mining engineer and mineral economist (PhD) with 30 years of global mining exposure, working for major andmid-tier mining houses in senior management and leadership roles, with experience in operations, corporate strategy development,
engineering, asset and business development, continuous improvement, mergers and acquisitions. Currently, Dr. Letton is the Head—Open Pit Mining for the Technical and Sustainability Group in Anglo American. Dr. Letton has experience in large and medium sized projects in both the Australian and International mining environment; challenging operations leadership, complex technical roles; expertise in due diligence, corporate governance, risk management, corporate strategy and asset development. Core skills and accountabilities include operations executive general management and leadership of all key mine engineering faculties and associated technical services areas (Mine Engineering, Metallurgy, Geology).
Richard P. MenellBA (Hons), MA (Natural Sciences, Geology), Trinity College, Cambridge, United Kingdom; M.Sc. (Mineral Exploration and Management), Stanford University, California, United States of America
Mr. Menell was appointed Deputy Chair of the Board in August 2015 and has been a Director of Gold Fields since October 8, 2008. He has over 37 years’ experience in the mining industry. Previously, he has been the President and Member of the Chamber of Mines of South Africa, President and Chief Executive Officer of TEAL Exploration & Mining Inc., Executive Chairman of Anglovaal Mining Limited and Avgold Limited, Chairman of Bateman Engineering and Deputy Chairman of Harmony Gold Limited and African Rainbow Minerals. He is currently a director of Weir Group Plc and Rockwell Diamonds Inc., and Senior Advisor to Credit Suisse Securities Johannesburg, a director of Rockwell Diamonds Inc., the National Business Initiative and the Tourism Enterprise Partnership. Mr. Menell is a Trustee of Brand South Africa and a Council Member of Business Leadership South Africa. He is also Chairman of the City Year South Africa Citizen Service Organization, the Carrick Foundation and the Palaeontological Scientific Trust. Mr. Menell became a director of Sibanye Gold with effect from January 1, 2013.
Donald M. J. NcubeBA Economics and Political Science, Fort Hare University; Post Graduate Diploma in Labor Relations, Strathclyde University, Scotland; Graduate MSc Manpower Studies, University of Manchester, United Kingdom; Diploma in Financial Management; Honorary Doctorate in Commerce, University of the Transkei
Mr. Ncube was appointed a Director of Gold Fields on February 15, 2006. Previously, he was an alternate director of Anglo American Industrial Corporation Limited and Anglo American Corporation of South Africa Limited, a Director of AngloGold Ashanti Limited, as well asnon-executive chairman of South African Airways. He is currently the executive chairman of Badimo Gas (Pty) Ltd and Afro Energy.
Steven P. ReidBachelor of Applied Science in Mineral Engineering (Mining), South Australian Institute of Technology; MBA, Trium Global Executive NYU/LSE/HEC; Directors’ Education Program, Institute of Corporate Directors
Mr. Reid was appointed as a director of Gold Fields on February 1, 2016. He has over 40 years’ international mining experience and has held senior leadership roles in numerous countries. He has served as a director of Silver Standard Resources since January 2013 and a director of Eldorado Gold since May 2013. He served as chief operating officer of Goldcorp from January 2007 until his retirement in September 2012, and was Goldcorp’s executive vice president in Canada and the USA. Before joining Goldcorp, Steven spent 13 years at Placer Dome in numerous corporate, mine-management and operating roles. He also held leadership positions at Kingsgate Consolidated and Newcrest Mining, where he was responsible for the Asian and Australian operations.
Yunus G.H. SulemanBCom, University ofKwa-Zulu Natal; BCompt (Hons), University of South Africa,CA (SA)
Mr. Suleman was appointed as a director of Gold Fields with effect from September 1, 2016. Mr. Suleman serves as an independentnon-executive director of Liberty Holdings Ltd, Tiger Brands Ltd, Enactus SA (Chairman) and Albaraka Bank Ltd, and is the Global Treasurer of the World Memon Organization. He was previously Chair of KPMG South Africa.
Gayle M. WilsonBCom, BCompt (Hons), UNISA; CA (SA)
Mrs. Wilson was appointed a Director on August 1, 2008. She was previously an audit partner at Ernst & Young for 16 years where her main focus was on gold and platinum mining clients. In 1998, she was involved in AngloGold Ashanti Limited’s listing on the NYSE and in 2001 she took over as the lead partner on the global audit. Other mining clients during her career include Northam Platinum Limited, Aquarius Platinum Limited, Avmin (now African Rainbow Minerals Limited) and certain Anglo Platinum operations.
Former Officers
Kofi AnsahBSc (Mechanical Engineering) UST Ghana; MSc (Metallurgy) Georgia Institute of Technology, United States of America
Mr. Ansah was appointed a Director of Gold Fields in April 2004. He also serves as a Director of Ecobank (Ghana) Limited. From 1984 to 1999, Mr. Ansah was the Chief Executive of the Minerals Commission Accra in Ghana where his key responsibilities included advising on matters relating to the exploration and exploitation of all mineral resources in Ghana. Mr. Ansah is currently a Mining & Energy Consultant, in which capacity he provides general advice to mining and power companies and negotiates with service providers as well as regulatory authorities. Mr. Ansah retired from the Board with effect from December 31, 2016.
Alan R. HillB.Sc (Hons), M. Phil (Rock Mechanics), Leeds University, United Kingdom
Mr. Hill joined the Board on August 21, 2009. From 2004 to 2007, Mr. Hill was thenon-executive chairman of Alamos Gold Limited and, from 2005 to 2009, he held the position of President and CEO of Gabriel Resources Limited. Both companies are involved in gold exploration and development. Mr. Hill’s mining career started on the Zambian Copperbelt, following which he joined Noranda, Inc. where he managed gold and nickel mines. He worked as a consultant for a short period, before joining Camflo Mines in 1981, which merged with Barrick in 1984. Mr. Hill joined Barrick as part of the merger and spent 19 years with Barrick and was instrumental in its considerable growth, having played a pivotal role in its various merger and acquisition initiatives through the years. He retired from Barrick in 2003 as its Executive Vice President, Development. He has served asNon-Executive Chairman of Teranga Gold Corporation since April 20, 2013, having previously served as its Executive Chairman since September 2012 as well as Chairman and CEO since the company was founded in October 2010. Mr. Hill retired from the Board with effect from December 31, 2016.
David N. Murray BA Hons Econ; MBA (UCT)
Mr. Murray joined the Board on January 1, 2008. He has more than 40 years’ experience in the mining industry and has been Chief Executive Officer of Rio Tinto Portugal, Rio Tinto Brazil, TVX Gold Inc., Avgold Limited and Avmin Limited. He also served as anon-executive Director of Ivernia, Inc. Mr. Murray retired from the Board with effect from June 1, 2016.
Executive Officers
Alfred Baku(50) MSc (Mining Engineering), University of Mines and Technology, Statutory Mines Manager certificate, Ghana Mines Department of Minerals Commission, Executive Education, University of Virginia, Darden School of Business, USA and member of the Australian Institute of Mining Metallurgy (AusIMM)
Mr. Baku has over two decades of mining experience, mostly in senior management positions at Gold Fields. Prior to joining Gold Fields, Alfred worked in Australia for Billiton and Ranger Minerals in production and mine planning engineering capacities. He joined the Damang Mine in 2002 as mine manager and a member of the senior management team. Alfred was appointed General Manager of the Damang Mine in 2008, General Manager of the Tarkwa Mine in 2010, and subsequently, Vice President of Operations for both mines. In 2013, Alfred was promoted to Senior Vice President for West Africa, becoming a member of the Group’s Executive Committee. In February 2014, he became Executive Vice President and head of West Africa. As the Vice
President of the Ghana Chamber of Mines’ Executive Council, Mr. Baku serves on the Advisory Board of the Ministry of Lands and Natural Resources. He is also a member of the Australasian Institute of Mining and Metallurgy.
Richard J Butcher(52) Diploma Coal Mining Engineering Advanced Rock Engineering Certificate Graduate Diploma in Mining Engineering (Mineral economics) MSc (Eng) Mining Engineering & CEng (UK) / FAusIMM (CP) WA First Class (Mine Managers) Cert No: 766 General Managers Course Cert—AGSM / UNSW
Executive Vice President: Technical. Mr. Butcher has 30 years’ experience in gold mining, obtained globally in companies that include Gencor, Anglo-American and Barrick. He was previously Head of Technical Services at MMG, the overseas arm of the Chinese CMC/CMN Corporation. This position involves being discipline head for all Technical functions, long-term planning and closure for the Group’s operations in Australasia, Africa and South America.
Naseem A. Chohan(55) BE (Electronic), University of Limerick
Executive Vice President: Sustainable Development. Mr. Chohan was appointed to the position of Senior Vice President: Sustainable Development on September 13, 2010. Mr. Chohan was previously self-employed as a consultant to various companies and, prior to that, spent 25 years at De Beers. When he left De Beers in 2009, he was acting as Group Consultant, Sustainability and ECOHS (Environment, Community, Occupational Health and Hygiene and Safety).
Taryn L. Harmse(44) BCom & LLB, University of Johannesburg, Advanced Corporate Law, University of Witwatersrand
Executive Vice-President: Group General Counsel. Ms. Harmse was appointed Executive Vice-President: Group General Counsel on May 1, 2014. Ms. Harmse was appointed as Assistant General Counsel and Company Secretary on August 1, 2013, and resigned from the position of Company Secretary on September 15, 2014. She previously served as Assistant General Counsel and Vice President, Group Legal. Before joining Gold Fields, Ms. Harmse worked at Linklaters LLP in London for a number of years having completed her articles at Hofmeyr Herbstein Gihwala (now Cliffe Dekker Hofmeyr). She was admitted as an attorney to the High Court of South Africa in 2000.
Stuart J. Mathews (56),Master of Science (Geology) from University of Canterbury, New Zealand
Executive Vice-President: Australasia. Stuart Mathews is an international mining professional with 25 years’ experience having worked in Australia (Queensland, NSW, WA), Mexico and New Zealand. He has progressed through geology ranks to Geology Manager level and in the last 12 years worked in project development and general operations management to COO level. Stuart joined Gold Fields inmid-2013 initially at St. Ives, as then General Manager at Granny Smith Mine after which he became Vice President Operations: Australia. From February 1, 2017 Stuart took over the position of Executive Vice President: Australasia.
Brett J. Mattison(39) BComm (Hons) Law, BAcc, University of Stellenbosch; Masters in Law, Higher Tax Diploma, University of Johannesburg; Exec. MBA (PLD), Harvard Business School
Executive Vice-President: Strategy, Planning and Corporate Development. Mr. Mattison was appointed Executive Vice-President: Strategy, Planning and Corporate Development effective May 1, 2013. He began his career with Gold Fields in 2001 as part of the Global Legal team providing commercial, legal and tax structuring advice in relation to various global transactions. He subsequently joined the Corporate Development team in 2005 where he worked for six years in South Africa, Peru and Australia until 2010. In late 2010, Mr. Mattison was appointed as the Country Manager of the Philippines tasked with the mandate of setting up Gold Fields’ activities in the Philippines. Most recently, he has been in the role of Vice President of Special Projects tasked with setting out the groundwork for the Gold Fields strategy sessions.
Avishkar Nagaser(33), BBusSc Finance and Economics, University of KwaZulu-Natal
Executive Vice President: Investor Relations and Corporate Affairs. Mr. Nagaser joined Gold Fields as Executive Vice President: Investor Relations and Corporate Affairs in January 2015. Before joining Gold Fields, he was with Merrill Lynch from 2012 to 2014 and Macquarie from 2007 to 2012, where he held the position of gold and platinum equity research analyst.
Luis A. Rivera(51), Bachelor Degree in Geology, the Title of Geological Engineer, both by the Universidad de San Marcos and MBA studies at the Universidad Politecnica de Madrid, Spain
Executive Vice-President of the Americas Region for La Cima. Mr. Rivera joined Gold Fields in October 2016. Prior to joining Gold Fields, Mr. Rivera was, since 2014, the Vice-President of Operations for Las Bambas and before that, since 2013, was the General Manager of Copper Operations for Glencore Peru and, since 2012, Executive General Manager for all Xstrata Copper Operations in Peru. His career also includes 5 years as General Manager of the large Copper Tintaya and Antapaccay operations, as well as 11 year experience in the Xstrata Copper Operations of Minera Alumbrera, a large gold – copper operation in North Argentina, where he became Tech Services Manager after servicing as Chief Engineer and Senior Geologist. Mr. Rivera has over 28 years’ experience in the copper and gold mining industry, in large open pit copper project and operations in Peru and Argentina, including his direct involvement and leadership in the merge & acquisition of Falconbridge Inc. and BHP Tintaya S.A. by Xstrata Copper as well as the sale of Las Bambas Project by Glencore.
Lee-Ann N. Samuel(39) BA Psychology and Honors Political Science, University of Johannesburg, Global Remuneration Practitioner (GRP), WorldatWork, USA
Executive Vice President: People and Organizational Effectiveness. Mrs. Samuel joined Gold Fields in 2009 as Vice President, Group Remuneration and Employee Benefits, and, effective March 1, 2013, she was promoted to Executive Vice President: People and Organizational Effectiveness. Mrs. Samuel has 16 years of Human Resources experience in financial services, mining and telecommunications. Prior to joining Gold Fields, Mrs. Samuel worked as Head of People Development at Telkom Media, a subsidiary of Telkom, for three years. Her overall responsibility is to provide strategic direction for the Human Resources discipline at Gold Fields, including the development of Human Resource policies to ensure alignment with the strategy for the Group, as well as external trends and demands impacting on HR.
Former Executive Officers
Ernesto Balarezo(49) MSc Industrial Management, BSc Industrial Engineering, Texas A&M University, Management Studies, Wharton School of Business, Management Studies, Harvard University
Executive Vice President: America. Mr. Balarezo joined Gold Fields effective March 11, 2013 as Executive Vice President: America. He has 23 years of professional experience at industrial and mining companies with a focus on finance and operations. Prior to joining Gold Fields, Mr. Balarezo was the Vice-President: Operations of Hochschild Mining plc, or Hochschild. In this capacity, he was responsible for overseeing the Hochschild group’s six silver and gold mining operations in Peru, Argentina and Mexico, as well as its growth projects. He had 9,000 employees under his management. He joined Hochschild in 2007 as General Manager of the Mexican operation before being promoted to General Manager for Peru in 2008 and Vice President of Operations in 2010. Prior to Hochschild, Ernesto worked at other subsidiaries of the Hochschild group since 1997, including at Hochschild’s cement subsidiary, Cementos Pacasmayo, as deputy CEO. Mr. Balarezo resigned from Gold Fields with effect from June 30, 2016.
Nico J. Muller(49), BSC Mining Engineering, University of Pretoria
Executive Vice President: South Africa. Mr. Muller joined Gold Fields as Executive Vice President: South Africa on October 1, 2014. Prior to joining Gold Fields, he was with Royal Bafokeng Platinum where he held the
position of Chief Operating Officer since January 2009. He has extensive technical mechanized mining experience, having held various positions in the mining industry while employed at De Beers, Avgold and Two Rivers Platinum. Mr. Muller resigned from Gold Fields with effect from March 3, 2017.
Richard M. Weston(64) FAIMM, CPEng, IEA. MSc Mining Geomechanics, UNSW; GDM, UCQ; BE (Civil), Sydney University
Executive Vice President: Head of Australasia. Mr. Weston was appointed to the position of Executive Vice President, Head of Australasia on May 1, 2010. He was formerly Senior Vice-President, Operations for Coeur d’Alene Mines Corporation, a gold and silver mining company based in Idaho in the United States. Before joining Coeur, he led the site team responsible for the development of Barrick Australia’s Cowal gold project and, prior to that, he headed operations at Rio Tinto Australia’s ERA Ranger and Jabiluka uranium mines in the Northern Territory. Mr. Weston retired from Gold Fields with effect from February 28, 2017.
Company Secretary
Lucy M. M. Mokoka(45) BJuris, University of Durban-Westville and LLB degree, University of Pretoria
Company Secretary. Ms. Lucy Mokoka was appointed Company Secretary of Gold Fields on September 16, 2014. Prior to joining Gold Fields, Ms. Mokoka was General Manager: Company Secretary, for MTN South Africa (Pty) Ltd from October 1, 2010 to September 15, 2014 and Director: Company Secretarial at the Standard Bank between January 2009 and December 2009. Ms. Mokoka is an admitted attorney and has held various roles as a Company Secretary and Legal Advisor. Her career includes roles as Company Secretary for Ithala Limited, Tongaat-Hulett and Standard Bank. She has also acted as legal advisor to the South African Revenue Service and the State Attorney’s office.
Board of Directors’ Committees
In order to ensure good corporate governance, the Board has formed an Audit Committee, a Risk Committee, a Remuneration Committee, a Nominating and Governance Committee, a Safety, Health and Sustainable Development Committee, a Capital Projects Control and Review Committee and a Social, Ethics and Transformation Committee. All the committees are composed exclusively of independentNon-executive Directors. All committees are chaired by an independentNon-executive Director. The remuneration ofNon-executive Directors for their service on the various committees was approved at the annual general meeting in May 2016.
The Audit Committee monitors and reviews Gold Fields’ accounting controls and procedures, including the effectiveness of the Group’s information systems and other systems of internal control; the effectiveness of the internal audit function; reports of both external and internal auditors; quarterly reports, the Form20-F, annual report and the annual financial statements; the accounting policies of the Group and any proposed revisions thereto; external audit findings, reports and fees, and the approval of fees; and compliance with applicable legislation and requirements of regulatory authorities and Gold Fields’ Code of Conduct. The membership of the Audit Committee is as follows:
Gayle M. Wilson (chair)
Alhassan Andani
Peter J. Bacchus
Richard P. Menell
Donald M. J. Ncube
Yunus G. H. Suleman
The Risk Committee oversees the integrity and effectiveness of risk management processes as they relate to the Board and the boards of Gold Fields’ subsidiaries. The Risk Committee ensures that management identifies and implements appropriate risk management controls, including guidelines and policies that govern management’s assessments and risk. The Risk Committee also reviews the effectiveness and efficiency of the Enterprise Risk Management system within the Company and obtains assurance that material risks are identified and that appropriate risk management processes are in place, including the formulation and subsequent updating of appropriate Company policies. The implementation of operational and corporate risk management plans is also monitored on an ongoing basis, and the Risk Committee ensures that appropriate resources are directed towards areas of high risk. The current membership of the Risk Committee is as follows:
Peter J. Bacchus (chair)
Alhassan Andani
Terence P. Goodlace
Alan R. Hill (retired December 31, 2016)
Steven P. Reid
Yunus G.H. Suleman
Gayle M. Wilson
The Remuneration Committee establishes the compensation philosophy of Gold Fields and the terms and conditions of employment of Executive Directors and other executive officers, and reviews the remuneration policies on a regular basis. The current membership of the Remuneration Committee is as follows:
Steven P. Reid (chair)
Alhassan Andani
Peter J. Bacchus
Cheryl A. Carolus
Donald M. J. Ncube
Gayle M. Wilson
The Safety, Health and Sustainable Development Committee reviews adherence to occupational health, safety and environmental standards by Gold Fields. The Safety, Health and Sustainable Development Committee seeks to minimize health, safety and environment-related accidents, to ensure that the Company’s operations are in compliance with all relevant regulations around health, safety and the environment, and to establish policy in respect of HIV/AIDS and health matters. The current membership of the Safety, Health and Sustainable Development Committee is as follows:
Terence P. Goodlace (chair)
Alhassan Andani
Cheryl A. Carolus
Richard P. Menell
Donald M.J. Ncube (by invitation)
Steven P. Reid
Yunus G.H. Suleman
The Nominating and Governance Committee develops and implements policy on corporate governance issues, develops the policy and process for evaluating nominations to the Board of Directors, identifies successors to the Chairman and Chief Executive Officer, considers selection and rotation of the Board committee members and evaluate the effectiveness of the Board and report the findings of this evaluation to the Board. The current membership of the Nominating and Governance Committee is as follows:
Cheryl A. Carolus (chair)
Donald M.J. Ncube
Richard P. Menell (by invitation)
Steven P. Reid
The Capital Projects Control and Review Committee was established on May 1, 2009 as asub-committee to satisfy the Board that Gold Fields has used appropriate and efficient methodologies and has adequate controls in place in respect of new capital projects proposed by management in excess of R1.5 billion or U.S.$200 million. These projects are reviewed from inception to completion and the committee makes recommendations to management as it considers appropriate. The current membership of the Capital Projects Control and Review Committee is as follows:
Richard P. Menell (chair)
Peter. J. Bacchus
Cheryl A. Carolus (by invitation)
Terence P. Goodlace
Steven P. Reid
Yunus G.H Suleman (by invitation)
Gayle M. Wilson
The Social, Ethics and Transformation Committee was established on November 29, 2011 and is responsible for ensuring, among other things, that Gold Fields discharges its statutory duties in respect of section 72 of Companies Act 71 and its applicable regulations, which include monitoring Gold Fields’ activities in relation to relevant legislation, other legal requirements and prevailing codes of best practice regarding: (i) social and economic development; (ii) good corporate citizenship; (iii) the environment, health and public safety and their impact on Gold Fields’ activities, products and services; (iv) consumer relations; and (v) labor and employment legislation. The Social and Ethics Committee must bring any matters relating to this monitoring to
the attention of the Board and report to shareholders at the annual general meeting. The Board seeks the assistance of the Social and Ethics Committee in ensuring that Gold Fields complies with best practice recommendations in respect of social and ethical management. The current members of the committee include the chairs of the Audit Committee, the Safety, Health and Sustainable Development Committee, the Nominating and Governance Committee and the Capital Projects Committee, as follows:
Donald M. J. Ncube (chair)
Cheryl A. Carolus
Terence P. Goodlace
Richard P. Menell
Yunus G.H. Suleman
Gayle M. Wilson
Executive Committee
Gold Fields’ Executive Committee meets on a regular basis to review Company performance against set objectives and develop Company strategy and policy proposals for consideration by the Board. The Executive Committee also assists the Board in the execution of the Company’s disclosure obligations. The current composition of the Executive Committee is as follows:
Name | Position | |
Nicholas J. Holland | Chief Executive Officer | |
Paul A. Schmidt | Chief Financial Officer | |
Brett J. Mattison | Executive Vice President: Strategy, Planning and Corporate Development | |
Lee-Ann N. Samuel | Executive Vice President: People and Organizational Effectiveness | |
Taryn L. Harmse | Executive Vice President: Group General Counsel | |
Adrian De Beer | Acting Executive Vice President: South Africa | |
Alfred Baku | Executive Vice President: West Africa | |
Luis A. Rivera | Executive Vice President: Americas | |
Avishkar Nagaser | Executive Vice President: Investor Relations and Corporate Affairs | |
Stuart J. Mathews | Executive Vice President: Australasia | |
Naseem A. Chohan | Executive Vice President: Sustainable Development | |
Richard J. Butcher | Executive Vice President: Mining Excellence | |
Lucy M. Mokoka | Company Secretary | |
Regional Executive Management Committees
Each of Gold Fields’ four operating regions (South Africa, Australasia, West Africa and South America) has a Regional Executive Management Committee.
South African Regional Executive Management Committee composition:
Name | Position | |
Adrian De Beer | Acting Executive Vice President: South Africa | |
Stuart Sepetla | Acting Vice President and Head of Operations | |
Ken Matthysen | Vice President: Technical | |
Jana Strydom | Vice President: Legal | |
Bonny Sebola | Vice President Stakeholder Engagement and Community Relations | |
Liesl Withers | Head of Business Analysis and Reporting | |
MI Botha | Head Mineral and Resources Management (Operational) | |
Australasian Regional Executive Management Committee composition:
Name | Position | |
Stuart J. Mathews | Executive Vice President: Australasia Region | |
Tim Hewitt | General Manager: St. Ives Gold | |
Jason Sander | General Manager: Agnew Gold | |
Wimpie Du Toit | Vice President and Regional Head of Human Resources: Australasia | |
Alex Munt | Vice President and Regional Head of Finance: Australasia | |
Philip Woodhouse | Vice President and Regional Head of Sustainable Development: Australasia | |
Ian Suckling | Vice President: Technical, Operations Support and Technology | |
Graeme Ovens | Vice President: Operations | |
Andrew Bywater | General Manager: Granny Smith Mine | |
Kelly Carter | Vice President of Legal & Australasia Compliance | |
Gary Snow | Vice President: Exploration | |
Frederick Louw | Vice President: Projects | |
Mark Dominy | Manager: Supply Chain | |
Malcolm Jolly | General Manager: Darlot Gold Mine | |
West Africa Regional Executive Management Committee composition:
Name | Position | |
Alfred Baku | Executive Vice President and Head of West Africa | |
Lindley Witbooi | Vice President and Head of Finance: West Africa | |
Francis Eduku | Vice President and Head of Human Resources: West Africa | |
David Johnson | Vice President and Head of Stakeholder Relations | |
Michiel van der Merwe | General Manager: Damang | |
Stephen Osei - Bempah | General Manager: Tarkwa | |
Serge Ntiema | Vice President and Head of Exploration and Business Development | |
Johannes de Beer | Vice President of Projects and Head of Engineering | |
Michael Akafia | Vice President and Head of Legal, Compliance & Company Secretary | |
Chris Turek | Vice President: Technical | |
Americas Regional Executive Management Committee composition:
Name | Position | |
Luis A. Rivera | Executive Vice President: The Americas | |
Alberto Cardenas | Vice President: Operations | |
Jorge Redhead | Vice President: Head of Finance | |
Miguel Inchaustegui | Vice President: Head of Corporate Affairs | |
Veronica Valderrama | Vice President: Head of Human Resources | |
Juan Jose Granda | Vice President: Head of Legal | |
Compensation of Directors and Senior Management
During fiscal 2016, the aggregate compensation paid or payable to directors and senior management of Gold Fields as a group was U.S.$17.0 million (R249.9 million), including all salaries, fees, bonuses and contributions during such period to provide pension, retirement or similar benefits for directors and senior management of Gold Fields, of which U.S.$0.5 million (R7.4 million) was due to pension scheme contributions and life insurance, U.S.$7.5 million (R110.9 million) was due to bonus and performance-related share payments, U.S.$0.7 million (R10.3 million) was expenses/special bonus, U.S.$6.6 million (R97.1 million) was due to salary payments, directors’ fees and committee fees and U.S.$1.6 million (R24.2 million) was due to severance payments.
The following table presents information regarding the compensation paid by Gold Fields for fiscal 2016 to its directors and prescribed officers. The remuneration paid to directors and prescribed officers excludes the value of deferred remuneration in the form of restricted shares, or Restricted Shares (see “Introduction of a MSR for members of the Group Executive Committee”), for fiscal 2016. Details of deferred remuneration are included in note 4 below. Average exchange rates were R14.70 per U.S.$1 for fiscal 2016 and R12.68 per U.S.$1 for fiscal 2015.
| Directors’ fees | Committee fees | Salary(1) | Pension Scheme Contribution | Annual Bonus(2) | Sundry | Severance | Sub-total | Pre-tax Share Proceeds for shares awarded in previous years | Total realized earnings for fiscal 2016(3) | Total for fiscal 2015 | ||||||||||||||||||||||||||||||||||
| (U.S.$’000) | ||||||||||||||||||||||||||||||||||||||||||||
Executive Directors | ||||||||||||||||||||||||||||||||||||||||||||
Nicholas J. Holland(4) | — | — | 1,030.0 | 40.9 | 677.6 | — | — | 1,748.5 | 18.1 | 1,766.6 | 2,832.4 | |||||||||||||||||||||||||||||||||
Paul A. Schmidt | — | — | 496.7 | 54.4 | 648.6 | 4 | — | 1,203.7 | 547.8 | 1,751.5 | 1,755.3 | |||||||||||||||||||||||||||||||||
Prescribed Officers | ||||||||||||||||||||||||||||||||||||||||||||
Ernesto Balarezo(5) | — | — | 332.5 | — | — | — | 1,644.4 | 1,976.9 | 338.8 | 2,315.7 | 1,572.4 | |||||||||||||||||||||||||||||||||
Luis A. Rivera(6) | — | — | 154.5 | — | 111.0 | 246.4 | — | 511.9 | — | 511.9 | — | |||||||||||||||||||||||||||||||||
Alfred Baku(7) | — | — | 746.1 | 156.4 | 620.2 | 314.5 | — | 1,837.2 | 96.8 | 1,934.0 | 1,938.7 | |||||||||||||||||||||||||||||||||
Richard M. Weston | — | — | 576.4 | 64.2 | 570.7 | 7.4 | — | 1,218.7 | 562.2 | 1,780.9 | 1,796.0 | |||||||||||||||||||||||||||||||||
Richard J. Butcher(8) | — | — | 275.1 | 27.5 | 323.2 | 110.7 | — | 736.5 | — | 736.5 | — | |||||||||||||||||||||||||||||||||
Naseem A. Chohan | — | — | 284.0 | 27.7 | 328.6 | 2.9 | — | 643.2 | 198.1 | 841.3 | 864.4 | |||||||||||||||||||||||||||||||||
Brett J. Mattison | — | — | 362.4 | 25.5 | 429.7 | 0.6 | — | 818.2 | 245.3 | 1,063.5 | 972.6 | |||||||||||||||||||||||||||||||||
Lee-Ann N. Samuel | — | — | 288.4 | 24.8 | 339.9 | 3.7 | — | 656.8 | 345.1 | 1,001.9 | 839.0 | |||||||||||||||||||||||||||||||||
Taryn L. Harmse | — | — | 282.3 | 29.5 | 345.7 | 4.3 | — | 661.8 | 100.1 | 761.9 | 759.6 | |||||||||||||||||||||||||||||||||
Nico J. Muller | — | — | 450.4 | 26.4 | 477.0 | 2.4 | — | 956.2 | — | 956.2 | 1,078.5 | |||||||||||||||||||||||||||||||||
Avishkar Nagaser | — | — | 193.9 | 21.5 | 221.1 | 0.3 | — | 436.8 | — | 436.8 | 442.5 | |||||||||||||||||||||||||||||||||
Manuel Diaz(9) | — | — | 136.1 | — | 1.2 | — | — | 137.3 | — | 137.3 | — | |||||||||||||||||||||||||||||||||
Non-Executive Directors | ||||||||||||||||||||||||||||||||||||||||||||
Cheryl A. Carolus | 183.0 | — | — | — | — | — | — | 183.0 | — | 183.0 | 203.8 | |||||||||||||||||||||||||||||||||
Alan R. Hill(10) | 64.5 | 49.9 | — | — | — | — | — | 114.4 | — | 114.4 | 110.2 | |||||||||||||||||||||||||||||||||
David N. Murray(11) | 24.1 | 12.2 | — | — | — | — | — | 36.3 | — | 36.3 | 100.8 | |||||||||||||||||||||||||||||||||
Richard P. Menell(12) | 95.5 | 16.7 | — | — | — | — | — | 112.2 | — | 112.2 | 113.3 | |||||||||||||||||||||||||||||||||
Gayle M. Wilson | 60.1 | 54.6 | — | — | — | — | — | 114.7 | — | 114.7 | 119.5 | |||||||||||||||||||||||||||||||||
Donald M. J. Ncube | 60.1 | 41.6 | — | — | — | — | — | 101.7 | — | 101.7 | 113.3 | |||||||||||||||||||||||||||||||||
Yunus G.H. Suleman(13) | 20.6 | 12.6 | — | — | — | — | — | 33.2 | — | 33.2 | — | |||||||||||||||||||||||||||||||||
Peter J. Bacchus(14) | 23.1 | 14.2 | — | — | — | — | — | 37.3 | — | 37.3 | — | |||||||||||||||||||||||||||||||||
Steve Reid(15) | 59.7 | 29.6 | — | — | — | — | — | 89.3 | — | 89.3 | — | |||||||||||||||||||||||||||||||||
Terence P. Goodlace(16) | 30.9 | 15.1 | — | — | — | — | — | 46.0 | — | 46.0 | — | |||||||||||||||||||||||||||||||||
Alhassan Andani(17) | 28.9 | 14.2 | — | — | — | — | — | 43.1 | — | 43.1 | — | |||||||||||||||||||||||||||||||||
Kofi Ansah(10) | 64.5 | 18.2 | — | — | — | — | — | 82.7 | — | 82.7 | 85.8 | |||||||||||||||||||||||||||||||||
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Total | 715.0 | 278.9 | 5,608.8 | 498.8 | 5,094.5 | 697.2 | 1,644.4 | 14,537.6 | 2,452.3 | 16,989,9 | 15,698.1 | |||||||||||||||||||||||||||||||||
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Notes:
| (1) | The total U.S. dollar amounts paid for fiscal 2016, and included in Salary, were as follows: Nick Holland U.S.$390,000, Paul Schmidt U.S.$119,000, Brett J. Mattison U.S.$84,500. |
| (2) | The annual bonus accruals for the 12 month period ended December 31, 2016, paid in February 2017. |
| (3) | These amounts reflect the full directors’ emoluments for comparative purposes. The portion of executive directors’ emoluments payable in U.S. dollars is paid in terms of agreements with the offshore subsidiaries for work done by directors’ offshore for offshore companies. Refer to note 1 above for such amounts paid. |
| (4) | Nick Holland elected prior to the determination of the annual performance bonus for fiscal 2016, and in line with the rules of the minimum shareholding requirement, or MSR, policy, to defer 50% of his annual performance bonus (U.S.$677,600) into Restricted Shares. A similar election was made in fiscal 2015 to defer 50% of his annual performance bonus (U.S.$618,900) into Restricted Shares. The aggregate of his total realized earnings of U.S.$1,766,600 (fiscal 2015: U.S.$2,832,400), as reflected in the table above, and |
| the deferred remuneration of U.S.$677,600 (fiscal 2015: U.S.$618,900) in the form of Restricted Shares amounts to U.S.$2,444,200 (fiscal 2015: U.S.$3,451,300). |
| (5) | Ernesto Balarezo resigned on June 30, 2016. |
| (6) | Luis A. Rivera was appointed on October 1, 2016. Luis A. Rivera’s sundry payment relates tosign-on and legislated bonuses. |
| (7) | Alfred Baku’s sundry payment relates to leave allowance (U.S.$66,500) and special bonus (U.S.$248,000). |
| (8) | Richard J. Butcher was appointed on February 8, 2016. Richard J. Butcher’s sundry payments relates tosign-on bonus. |
| (9) | Manuel Diaz was appointed as Acting EVP: Americas Region for the period July 2016 to September 2016. |
| (10) | Alan R. Hill and Kofi Ansah retired from Board membership on December 31, 2016. |
| (11) | David Murray retired from Board membership on June 1, 2016. |
| (12) | Richard P. Menell was appointed as Deputy Chairperson on June 1, 2016. |
| (13) | Yunus G.H. Suleman was appointed to the Board on September 1, 2016. |
| (14) | Peter J. Bacchus was appointed to the Board on September 1, 2016. |
| (15) | Steven P. Reid was appointed to the Board on February 1, 2016. |
| (16) | Terence P. Goodlace was appointed to the Board on July 1, 2016. |
| (17) | Alhassan Andani was appointed to the Board on August 1, 2016. |
The directors and prescribed officers held the following equity settled instruments on March 20, 2017:
| Equity-settled instruments at 31 December 2015 | Equity- settled instruments granted during the year | Equity- settled instruments forfeited during the year | Equity-settled instruments exercised during the year | Equity- settled instruments transferred to Restricted Shares(2) | Equity-settled instruments at 31 December 2016 | Expiration date | ||||||||||||||||||||||||||||||||||||||
| Number | Average strike price (US$) | Granted | Number | Number | Average market price of vested shares | Benefit arising (US$) | Number | Number | Weighted Average strike price (US$)(1) | Last date of expiration | ||||||||||||||||||||||||||||||||||
Director | ||||||||||||||||||||||||||||||||||||||||||||
Nicholas J. Holland(2) | 296,555 | 7.46 | 460,233 | 65,045 | — | — | — | 374,966 | 316,747 | 7.04 | December 31, 2020 | |||||||||||||||||||||||||||||||||
Paul A. Schmidt | 123,652 | 7.38 | 240,945 | 24,640 | 138,652 | 3.94 | 545,836 | — | 201,305 | 7.04 | March 1, 2019 | |||||||||||||||||||||||||||||||||
Prescribed Officer | ||||||||||||||||||||||||||||||||||||||||||||
Richard M. Weston | 95,768 | 7.38 | 221,379 | 12,333 | 124,932 | 4.50 | 562,194 | — | 179,882 | 7.04 | May 31, 2017 | |||||||||||||||||||||||||||||||||
Ernesto Balarezo | 39,182 | — | 39,182 | — | 78,364 | 4.32 | 338,831 | — | — | — | ||||||||||||||||||||||||||||||||||
Alfred Baku | 35,302 | 7.44 | 182,682 | 9,674 | 35,118 | 4.41 | 154,925 | — | 173,192 | 5.16 | March 1, 2019 | |||||||||||||||||||||||||||||||||
Taryn L. Harmse | 29,392 | 7.54 | 100,710 | 7,441 | 25,324 | 3.94 | 99,694 | — | 97,337 | 6.91 | March 1, 2019 | |||||||||||||||||||||||||||||||||
Lee-Ann N. Samuel | 42,948 | 7.52 | 105,205 | — | 78,226 | 4.41 | 345,099 | — | 69,927 | 6.48 | March 1, 2019 | |||||||||||||||||||||||||||||||||
Brett J. Mattison | 56,448 | 7.46 | 139,478 | 14,111 | 61,202 | 3.94 | 240,936 | — | 120,613 | 7.04 | March 1, 2019 | |||||||||||||||||||||||||||||||||
Naseem A. Chohan | 46,133 | 8.15 | 92,487 | 4,752 | 52,904 | 4.41 | 233,389 | — | 80,964 | 7.04 | March 1, 2019 | |||||||||||||||||||||||||||||||||
Nico J. Muller | 245,208 | — | 137,280 | — | — | — | — | — | 382,488 | — | March 31, 2017 | |||||||||||||||||||||||||||||||||
Richard J. Butcher | — | — | 23,964 | — | — | — | — | — | 23,964 | — | March 1, 2019 | |||||||||||||||||||||||||||||||||
Avishkar Nagaser | — | — | 33,136 | — | — | — | — | — | 33,136 | — | March 1, 2019 | |||||||||||||||||||||||||||||||||
Notes:
| (1) | Share Appreciation Rights (SARS) weighted average strike price. |
| (2) | Nick Holland elected to defer vesting of 100% of the 2013 Performance Share award which was due to vest on 1 March 2016 into Restricted Shares. Mr. Holland has 507,473 Restricted Shares held in Escrow as at |
| 31 December 2016, which will vest after the five-year holding period or termination of employment, whichever comes first. The 507,473 Restricted Shares comprises of 132,477 shares relating to the 2015 short-term incentive and 374,996 shares to the 2013 Performance Share award. A further 408,617 Restricted Shares were acquired in March 2017 relating to the 2016 short-term incentive and the 2014 LTIP award. |
Share Ownership of Directors and Prescribed Officers
The following sets forth, to the knowledge of Gold Fields’ management, the total amount of ordinary shares directly or indirectly owned by the directors and executive officers of Gold Fields and excludes shares held in escrow for Mr. Holland as of March 20, 2017:
Holder | Ordinary shares | Percentage | ||||||
Director | ||||||||
Nicholas J. Holland(1) | 1,526,967 | 0.1860 | % | |||||
Paul A. Schmidt | 122,549 | 0.0149 | % | |||||
Cheryl A. Carolus | 3,129 | 0.0004 | % | |||||
Richard P. Menell | 5,850 | 0.0007 | % | |||||
Gayle M. Wilson | 2,378 | 0.0003 | % | |||||
Prescribed Officer | ||||||||
Richard M. Weston | 204,636 | 0.0249 | % | |||||
Naseem A. Chohan | 82,023 | 0.0100 | % | |||||
Brett J. Mattison | 43,103 | 0.0052 | % | |||||
Lee-Ann N. Samuel | 76,525 | 0.0093 | % | |||||
Taryn L. Harmse | 7,777 | 0.0009 | % | |||||
Alfred Baku | 40,404 | 0.0049 | % | |||||
Total Directors (5 persons) | 1,660,873 | 0.2024 | % | |||||
Total Prescribed Officers (6 persons) | 454,468 | 0.0554 | % | |||||
Total Directors and Prescribed Officers (11 persons) | 2,115,341 | 0.2578 | % | |||||
| Note: |
| (1) | The 1,526,967 comprises 610,877 shares directly held by Mr. Holland and 916,090 Restricted Shares indirectly held by Mr. Holland. See “Introduction of a MSR for members of the Group Executive Committee”. |
Long-term Cash Incentive Plan
A LTIP was implemented on March 1, 2014. The key objectives of the LTIP are to reinforce a high performance culture and create stronger alignment between executive compensation and shareholder value.
At the annual general meeting in May 2016 approval was obtained to make certain amendments to the 2012 Share Plan and the Plan wasre-introduced following the approval, no new awards will be made under the LTIP.
Awards made under the Long-term Cash Incentive Plan
Award | TSR – 50% | FCF Margin – 50% | Total Potential Vesting % of initial awards | |||||||||||||||||
| (Achieved) | (Vesting) | (Achieved) | (Vesting) | (%) | ||||||||||||||||
2014 LTIP Award | ||||||||||||||||||||
Performance period—January 1, 2014 to Dec 31, 2016 | 0 | % | 0 | % | 12.7 | % | 77 | % | 38.5 | |||||||||||
2015 LTIP Award | ||||||||||||||||||||
Performance period—January 1, 2015 to Dec 31, 2017 | 0 | % | 0 | % | 12.5 | % | 75.0 | % | 37.5 | |||||||||||
The table below reflects the indicative vesting quantum for the Group Executive Committee for the 2014 LTIP award, which was paid on February 28, 2017 but does not reflect in the remuneration table above:
Name | Designation | U.S.$ Value of Initial LTIP Award | U.S.$ Value of Awards Vested on 28 February 2017 | |||||||
| (U.S.$ million) | ||||||||||
N.J. Holland(1) | Chief Executive Officer | 1.30 | 0 | |||||||
P.A. Schmidt | Chief Financial Officer | 0.63 | 0.24 | |||||||
R. Weston | EVP: Australasia | 0.91 | 0.35 | |||||||
A. Baku | EVP: West Africa | 0.79 | 0.30 | |||||||
L.N. Samuel | EVP: People and Organizational Effectiveness | 0.47 | 0.18 | |||||||
B.J. Mattison | EVP: Strategy Planning and Corporate | 0.50 | 0.19 | |||||||
N.A. Chohan | EVP: Sustainable Development | 0.23 | 0.09 | |||||||
T.L. Harmse | EVP: Group General Counsel | 0.36 | 0.14 | |||||||
N.J. Muller | EVP: South Africa | 0.06 | 0.02 | |||||||
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| 5.25 | 1.52 | |||||||||
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| Note: |
| (1) | Mr. N.J. Holland elected prior to the vesting of the 2014 LTIP award and in line with the MSR policy, to defer 100% (U.S.$500,000) in the form of Restricted Shares. |
The table below reflects the indicative vesting quantum for the Group Executive Committee based on the current tracking of the performance conditions based on the 2015 LTIP award:
Name | Designation | U.S.$ Value of Initial LTIP Award | U.S.$ Value of Awards | |||||||
| (U.S.$ million) | ||||||||||
N.J. Holland | Chief Executive Officer | 0.93 | 0.35 | |||||||
P.A. Schmidt | Chief Financial Officer | 0.92 | 0.34 | |||||||
R. Weston | EVP: Australasia | 0.70 | 0.26 | |||||||
A. Baku | EVP: West Africa | 1.20 | 0.45 | |||||||
L.N. Samuel | EVP: People and Organizational Effectiveness | 0.52 | 0.19 | |||||||
B.J. Mattison | EVP: Strategy Planning and Corporate | 0.60 | 0.22 | |||||||
N.A. Chohan | EVP: Sustainable Development | 0.25 | 0.09 | |||||||
T.L. Harmse | EVP: Group General Counsel | 0.51 | 0.19 | |||||||
N.J. Muller | EVP: South Africa | 0.34 | 0.13 | |||||||
A. Nagaser | EVP: Investor Relations and Corporate Affairs | 0.18 | 0.07 | |||||||
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| 6.15 | 2.29 | |||||||||
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The Gold Fields Limited 2005 Share Plan
The 2005 Plan provided for two types of awards: performance vesting restricted shares, or PVRS, and performance allocated share appreciation rights, or SARS. All PVRS have previously settled. SARS have a three-year vesting after being awarded a further three years before expiration. Remaining SARS are all currently under water and expired on March 1, 2017 upon which the 2005 Plan was closed.
Introduction of a MSR for members of the Group Executive Committee
In line with best practice and in response to shareholder input, the Company has adopted a MSR policy, which was approved by shareholders on May 18, 2016 and which is mandatory for executives. The policy requires executives to hold a specific percentage of shares in the Company. The proposed target shareholdings of vested and unencumbered shares for the relevant executives are:
CEO: 200% of the annual guaranteed remuneration package; and
CFO and other executives: 100% of the annual guaranteed remuneration package.
Executives may use the following shares to meet the MSR:
Personal investments in the Company’s shares through the use ofafter-tax income; and
Executives will be given the opportunity to elect, prior to the cash bonus being communicated or the vesting of the LTIP, to receive all or a portion of the cash bonus/LTIP in Restricted Shares which will be subject to a further time period (holding period) during which executives will be required to hold the Restricted Shares. In addition, executives will be given the opportunity to elect, prior to the relevant vesting dates, to convert all or a portion of their Retention Shares or Performance Shares awarded under the plan, in Restricted Shares, which will also be subject to the holding period, towards the fulfilment of the MSR. This holding period will mean that the Restricted Shares may not be sold or disposed of and that the beneficial interest must be retained therein until the earlier of:
Notice given by the executive, provided that such notice may only be given after the five years from the start of the holding period;
Termination of employment of that employee, ie retirement, retrenchment, ill health, death, resignation or dismissal;
Abolishment of the MSR; or
In special circumstances such as proven financial hardship or compliance with the MSR, upon application by the employee and approval by the Remuneration Committee.
The Restricted Shares will be held in escrow for the holding period, which commenced on June 1, 2016. The Restricted Shares will, however, not be subject to any further forfeiture provisions post the original restricted period (performance shares and cash LTIP) or communication of the cash bonus.
To facilitate the introduction of the MSR policy and to compensate executives for locking in their vested shares for an additional five years, thus exposing themselves to further market volatility, the Company will grant a matching share award. This is intended to entail a conditional award of shares of one share for every three shares committed towards the MSR (matching shares). The matching shares will vest on a date that corresponds with the end of the holding period of the shares committed towards the MSR provided the executive is still in the employment of the Company, has met the MSR as per the requirements of the MSR policy, including having sustainably accumulated shares to reach the MSR over the five-year holding period, ie the Company aims to guard against a situation where an executive only accumulates the shares in year four of the five-year period. In the event ofno-fault termination (retirement, death, disability, retrenchment or corporate action), the matching shares will be apportioned based on time.
The MSR is expected to encourage executive share ownership within the Company and reinforce the creation of shareholder value over the long term through executives becoming shareholders.
Mr. Nicholas J. Holland elected, prior to the accrual or vesting and determination of the respective incentive, to defer:
50% of his 2015 short-term incentive;
50% of his 2016 short-term incentive; and
100% of the 2014 LTIP award which was due to vest on February 28, 2017
towards achieving the MSR, which will be held in escrow in the form of Restricted Shares for a five-year restricted period.
In addition, he elected to defer vesting of 100% of the 2013 Performance Share award which was due to vest on March 1, 2016.
Effective March 20, 2017, Mr. Holland committed a total of 916,090 shares towards the fulfilment of the MSR comprising:
507,473 Restricted Shares held in escrow as at December 31, 2016; and
408,617 Restricted Shares acquired in March 2017 held in escrow.
The total US dollar value of the Restricted Shares held in escrow, based on the March 15, 2017 Gold Fields share price of R40 (U.S.$3.08), is U.S.$2,821,557. Mr Holland now holds in excess of the 200% of annual GRP in terms of the MSR. No other executive has elected to receive any Restricted Shares and no executive has committed any personal investments to meet the MSR.
The Revised Gold Fields Limited 2012 Share Plan
The revised Gold Fields Limited 2012 Share Plan was approved by shareholders at the annual general meeting in May 2016, which has replaced the 2014 LTIP.
Nature of Instruments
Retention Shares
For high performance outcomes and on anad-hoc basis, selected Participants will be awarded conditional rights to receive shares at the end of the Vesting Period. The award will only be settled after the vesting date and the Participant will not have any shareholder or voting rights prior to the vesting date. The vesting of the award will be subject to the Vesting Condition being met and may not have performance conditions attached.
Performance Shares
Participants will be awarded conditional rights to receive shares at the end of the Vesting Period. The award will only be settled after the vesting date and the Participant will not be entitled to any shareholder rights (including voting rights and distribution rights) prior to the vesting date. The vesting of the award will be subject to the Vesting Condition and applicable Performance Conditions being met.
Restricted Shares
As stated above, executives will be given the opportunity, prior to the annual bonus being communicated or the upcoming vesting date of the LTIP award or Performance Shares, to elect to receive a portion of the annual bonus or cash LTIP in Restricted Shares or convert a portion of the unvested Performance Shares into Restricted Shares towards fulfilment of the MSR. These shares are subject to a five-year Holding Period, however, all shareholders’ rights will accrue in respect of the Restricted Shares.
Matching Shares
In recognition of compliance with the MSR and the risk associated with holding shares in the Company, executives will receive conditional rights to receive shares and will not be entitled to any shareholder rights prior to settlement. Settlement will take place after the vesting date which will be on the fulfilment of the MSR over the five-year holding period and the vesting condition, provided that they have sustainably accumulated shares to reach the MSR over the holding period. The number of matching shares subject to an award made to an Executive will be based on the MSR policy as set out above.
Corporate Performance Conditions Relating to Performance Shares
Performance Shares are intended to be subject to the following performance conditions, which are similar to the existing LTIP’s performance condition except for the addition of the relative TSR measure:
Vesting conditions of the Long-Term Incentive
Performance condition | Weighting | Threshold | Target | Stretch | ||||||
Absolute TSR | 33 | % | N/A—No vesting below target | Compounded cost of equity in real terms over the three-year performance period | Compounded cost of equity in real terms over the three-year performance period + 6% per annum | |||||
Relative TSR | 33 | % | Median of the peer group | Linear vesting to apply between above-median and upper quartile performance and capped at upper quartile performance | ||||||
FCF Margin | 34 | % | Average FCF Margin over performance period of 5% at a gold price of U.S.$1,300/oz—margin to be adjusted relative to the actual gold price for the three-year period | Average FCF Margin over performance period of 15% at a gold price of U.S.$1,300/oz—margin to be adjusted relative to the actual gold price for the three-year period | Average FCF Margin over performance period of 20% at a gold price of U.S.$1,300/oz—margin to be adjusted relative to the actual gold price for the three-year period | |||||
The vesting profile is intended to be as follows:
Performance condition | Threshold | Target | Stretch and cap | |||||||||
| (%) | ||||||||||||
Absolute TSR(1) | 0 | 100 | 200 | |||||||||
Relative TSR(1)(3)(4) | 0 | 100 | 200 | |||||||||
FCF Margin(2) | 0 | 100 | 200 | |||||||||
| Notes: |
| (1) | Absolute TSR and relative TSR: Linear vesting will occur between target and stretch (no vesting occurs for performance below target). |
| (2) | FCF Margin: Linear vesting will occur between threshold, target and stretch. |
| (3) | The peer group will consist of ten companies: AngloGold Ashanti, Goldcorp, Barrick, Eldorado Gold, Randgold, Yamana, Agnico Eagle, Kinross, Newmont and Newcrest. |
| (4) | TSR will be calculated as the Compounded Annual Growth Rate, or CAGR, of the TSR index between the average of the 60 trading days up to the first day of the performance period and the average of the 60 trading days up to the last day of the performance period. TSR will be defined as the return on investing in ordinary shares in the Company at the start of the performance period, holding the shares and reinvesting the dividends received on the portfolio in Gold Fields shares over the performance period. The USD TSR index, provided by external service providers will be used based on the USD share price. The above Performance Conditions will be measured over three years which will coincide with the Company’s financial years (i.e. performance period). |
Vesting of the 2013 Performance Share Award
According to the Performance Criteria set by the Remuneration Committee, the number of Performance Shares awarded was modified according to the Gold Fields share price performance, measured against seven other gold companies, namely AngloGold Ashanti, Goldcorp, Barrick, Harmony, Kinross, Newmont, and Newcrest. The share price performance was measured over the 36 month period from March 1, 2013 to February 11, 2016.
Gold Fields has been positioned within the upper quartile of the peer group, resulting in a settlement of 200% of the shares initially awarded.
The table below depicts the long-term share vesting percentages over the previous seven years in terms of the 2005 Plan and the 2012 Plan.
Long-Term Share vesting based on corporate performance conditions | ||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | Average | |||||||||||||||||||||
| (%) | ||||||||||||||||||||||||||||
24 | 144 | 300 | 186 | 100 | 198 | 200 | 165 | |||||||||||||||||||||
Executive Directors’ Terms of Employment
Nicholas J. Holland (Executive Director and Chief Executive Officer) and Paul A. Schmidt (Executive Director and Chief Financial Officer) are party to employment agreements with Gold Fields Ghana Holdings, Gold Fields Orogen, or Orogen, and Gold Fields Group Services (Pty) Limited, or GFGS.
The terms and conditions of employment for each executive director are substantially similar, except where otherwise indicated below. The annual gross remuneration packages, or GRP, payable to each of Mr. Holland and Mr. Schmidt for 2017 were determined by the Remuneration Committee and were as follows:
Nicholas J. Holland: R11,006,700 plus U.S.$397,800; and
Paul A. Schmidt: R6,954,800 plus U.S.$121,400.
The split between the three companies is determined by the amount of time spent by the executive directors with each company.
South African Contracts
Under the South African contracts, the employment of an executive director will continue until terminated upon (i) 24 or 12 months’ notice by either party for the CEO and CFO, respectively or (ii) retirement of the relevant executive director (currently provided for at age 63). The notice period for members of the Group Executive Committee is six months.
Gold Fields can also terminate the executive director’s employment summarily for any reason recognized by law as justifying summary termination.
Should the Company require the Executive Director not to work the notice period (albeit Company or employee initiated), or any part thereof, the Executive Director shall be entitled to his GRP up to the last day of the notice period. In addition, the Executive Director shall be entitled to the following benefits:
To receive the annual performance bonuspro-rated up to the last day of the notice period based on the average percentage annual performance bonus received over the previous two years;
To exercise all share appreciation rights in terms of the 2005 Plan, which have vested prior to or on the last day of the notice period and will have 12 (twelve) months in which to do so;
| • | To exercise allpro-rata performance shares and long-term cash incentive awards in terms of the amended 2012 Plan, and the LTIP, which have settled prior to or on the last day of the notice period and will have 20 (twenty) days in which to do so; and |
To be compensated for any business travel and cell phone reimbursement up to the last day worked.
The value of the GRP payable in terms of the South African contracts is to be allocated among the following benefits: (i) salary; (ii) compulsory retirement fund contribution; (iii) voluntary participation in a vehicle scheme; (iv) compulsory medical coverage; and (v) compulsory Group Personal Accident Policy coverage. Furthermore, the executive director will contribute a compulsory 1% of his GRP to the Unemployment Insurance Fund is subject to any legislated contribution maximum at the time.
The Offshore Contracts
Under the agreements with Gold Fields Ghana Holdings and Orogen, the executive director is paid offshore in the appropriate currency. The portion of the GRP paid relates to the amount of time spent performing duties offshore for the companies. No benefits accrue to each executive director in terms of the offshore contracts.
The employment of an executive director will continue until terminated (i) 24 or 12 months’ notice by either party for the CEO and CFO respectively, or (ii) retirement of the relevant executive director (currently provided for at age 63).
Other Short-TermRemuneration
In addition to the gross guaranteed remuneration payable, each executive director is entitled, among other things, to the following benefits under their employment contracts:
Participation in the 2005 Plan, the 2012 Plan and the LTIP;
Consideration of an annual (financial year) incentive bonus based upon the fulfillment of certain targets set by the Board of Directors;
An expense allowance; and
Matching Shares in terms of the MSR policy.
As of January 1, 2017, the rules of the annual performance bonus for the CEO and CFO remained unchanged for 2017.
The employment contracts also provide that, in the event of the relevant executive director’s employment being terminated solely as a result of a “change of control” as defined below, such termination occurring within 12 months of the change of control, the director is entitled to:
Payment of an amount equal totwo-and-a-half times GRP in the case of the CEO and two times GRP in the case of the CFO;
Payment of an amount equal to the average percentage of the incentive bonuses paid to the executive director during the previous two completed financial years;
Any other payments and/or benefits due under the contracts;
Payment of any annual incentive bonus he/she has earned during the financial year notwithstanding that the financial year is incomplete; and
Full vesting of all long-term incentive awards.
The employment contracts further provide that these payments cover any compensation or damages the executive director may have under any applicable employment legislation.
A change of control for the above is defined as the acquisition by a third-party or concert parties of 30% or more of Gold Fields’ ordinary shares.
In the event of the consummation of an acquisition, merger, consolidation, scheme of arrangement or other reorganization, whether or not there is a change of control, if the executive director’s services are terminated, the “change of control” provisions summarized above also apply.
The Remuneration Committee resolved to discontinue the compensation entitlement in the event of change of control for senior executives appointed from January 1, 2013. The senior executives who are currently entitled to the change of control compensation benefits will retain their rights under the previous policy.
Non-executive Director Fees
An independent advisor was commissioned to benchmark thenon-executive directors’ fees to that of the South African and international markets.
On the basis of the independent advisor’s report, approval of a 7% increase tonon-executive directors’ fees, effective June 1, 2017 and a 3% increase to the fees ofnon-residentnon-executive directors, will be sought.
The proposednon-executive director fees for fiscal 2017, excluding value added taxes, are as follows:
| Per Annum 2016 Current Fees | Proposed Fees for Fiscal 2017 | |||||||||||||||
| (Rand) | (U.S.$) | (Rand) | (U.S.$) | |||||||||||||
The Chair of the Board(all-inclusive fee) | 2,765,000 | — | 2,960,000 | — | ||||||||||||
The Deputy Chair of the Board(all-inclusive fee) | 1,800,000 | — | 1,926,000 | — | ||||||||||||
The Chair of the Audit Committee | 329,000 | — | 352,000 | — | ||||||||||||
The Chairs of the Capital Projects Control and Review Committee, Nominating and Governance Committee, Remuneration Committee, Risk Committee, Social, Ethics and Transformation Committee and Safety and Health and Sustainable Development Committee (excluding the Chair of the board and the Deputy Chair of the Board) | 203,000 | 16,700 | 217,200 | 17,200 | ||||||||||||
Members of the Board (excluding the Chair and the Deputy Chair of the Board) | 907,900 | 74,900 | 971,500 | 77,200 | ||||||||||||
Members of the Audit Committee (excluding the chair of the audit committee and the deputy chair of the board) | 170,000 | 14,100 | 182,000 | 14,500 | ||||||||||||
Members of the Capital Projects Control and Review Committee, Nominating and Governance Committee, Remuneration Committee, Risk Committee, Social, Ethics and Transformation Committee and Safety and the Health and Sustainable Development Committee (excluding the Chairs of the relevant committees, Chair of the Board and the Deputy Chair of the Board) | 128,000 | 10,600 | 137,000 | 11,000 | ||||||||||||
Employees
The total number of employees, excluding employees of outside contractors who are not on Gold Fields’ payroll, as of the end of the last three fiscal years at each of the operations owned by Gold Fields as of those dates was:
| As of(1)(2) | ||||||||||||
| December 31, 2016 | December 31, 2015 | December 31, 2014 | ||||||||||
South Africa | ||||||||||||
South Deep | 3,900 | (3) | 3,700 | (3) | 3,500 | (3) | ||||||
Ghana | ||||||||||||
Tarkwa | 2,500 | (3) | 2,500 | (3) | 2,500 | (3) | ||||||
Damang | 400 | (3) | 900 | (3) | 900 | (3) | ||||||
Australia | ||||||||||||
St. Ives | 460 | (4) | 470 | (4) | 520 | (4) | ||||||
Agnew/Lawlers | 300 | (4) | 290 | (4) | 300 | (4) | ||||||
Darlot | 200 | (4) | 210 | (4) | 220 | (4) | ||||||
Granny Smith | 460 | (4) | 460 | (4) | 420 | (4) | ||||||
Perth | 130 | (4) | 120 | (4) | 110 | (4) | ||||||
Peru | ||||||||||||
Cerro Corona | 390 | (4) | 380 | (4) | 450 | (4) | ||||||
Corporate | 120 | (4) | 90 | (4) | 80 | (4) | ||||||
Total | 9,000 | (3) | 9,100 | (3) | 9,000 | (3) | ||||||
Notes:
| (1) | The employee numbers presented do not include contractors who are not on the payroll. As at December 31, 2016, Gold Fields employed 9,127 outside contractors divided among its operations as follows: South Deep: 2,330; Tarkwa: 2,367; Damang: 1,717; St. Ives: 438; Agnew/Lawlers: 307; Darlot: 42; Perth: 1; Granny Smith: 139 and Cerro Corona: 1,786. |
| (2) | Table may not sum due to rounding. |
| (3) | Rounded to the nearest hundred. |
| (4) | Rounded to the nearest ten. |
Labor Relations
South Africa
91% of the labor force at Gold Fields’ South African operations is unionized, with the major portion of its South African workforce being members of the NUM and the other recognized union being UASA. Gold Fields attempts to balance union demands with the need to contain and reduce AIC in order to ensure the long-term viability of its operations. For the Group’s South Africa operations, labor costs constituted 47% of operating costs excluding amortization and depreciation.
There were no labor-related work stoppages at South Deep in fiscal 2016. Gold Fields continues to promote health and safety in South Africa as part of a comprehensive effort to improve mine safety. In fiscal 2016, there have been five work stoppages to address safety issues.
Wage Agreements
In total, labor costs in South Africa increased from 46% in fiscal 2015 to 47% of operating costs in fiscal 2016. The increase was primarily due to changes in the employee profile, a three year wage agreement and incentives to align to the new business objectives.
On April 10, 2015, the Group signed a three year wage and other conditions of employment agreement with the NUM and UASA, the registered trade unions at South Deep. The agreement resulted in average annual wage increases of 10% over the three year period of the deal. The first increase took effect on April 1, 2015. In addition, the agreement varies depending on the employee category and goes beyond wage increases to provide employees with a range of benefits, including:
A scarce skills allowance of R4,000 per month in the first year, escalating by R500 per annum over the next two years, for certain artisans and machine operators;
A retention allowance of R1,000 per month for other machine operators and artisans in the plant, backfill, shafts as well as tramming and recovery areas, for each of the three years covered by the agreement;
An increase of 20.96%, 14.29% and 12.5%, respectively in each of the three years, for Category4-8 (A and B Band or entry level employees) and an increase of 8% in fiscal 2015, 8% in fiscal 2016 and 9% in fiscal 2017 for miners, artisans and officials; and
A housing allowance to replace the current living out allowance over the three year period.
Ghana
In total, labor costs in Ghana remained at 22% in fiscal 2016. Of the Ghanaian employees at Tarkwa, Damang and the Accra office, the majority are members of the GMWU whose employment is governed by a collective agreement originally concluded in 2000 and revised in 2003, 2006, 2010 and 2013. In January 2016, a wage deal was reached with the GMWU for fiscal 2015. Under the agreement, employees received a 5% increase on monthly basic pay for all union categories; a one off payment of 1,000 Ghana Cedis for employees to invest in development and a rental allowance increase from 25% to 30% of salary for fiscal 2016 for employees who are not in mine accommodation. In January 2017, atwo-year wage agreement was reached with the GMWU for fiscal 2016 and fiscal 2017. Under the agreement, employees received a 10% increase on monthly basic pay and aone-off payment of 1000 Ghana Cedis for fiscal 2016 and a 6% increase on monthly basic pay for fiscal 2017.
In order to reduce AIC in West Africa, management is focusing on restructuring the Damang operations in line with the business plan.
In this regard, Management and GMWU are committed to the Region’s efforts to rebase its existing business operating models through productivity improvements and efficiency mechanisms in order to optimize all areas of the business value chain. This shall include ensuring optimal utilization of labor and timeously addressing any inherent operational deficiencies that may exist.
Australia
In total, labor costs in Australia remained at 26% in fiscal 2016. In Western Australia, where Gold Fields’ Australian operations are located, labor is now primarily regulated by the Fair Work Act (2009), or the Fair Work Act, which came into effect on July 1, 2009 and the associated federal industrial relations regulations and minimum National Employment Standards.
The commencement of the Fair Work Act means that unions may potentially have an increased role in negotiating collective agreements for pay and working conditions which may lead to an increased union presence in Western Australia’s mining industry, including at Gold Fields’ mining operations in Australia.
With the exception of a range of state statutes limited to health and safety, long-service leave, discrimination and workers’ compensation, Gold Fields and its employees’ conditions of employment are regulated by an employee collective agreement.
In April 2015, in order to manage labor risks, Gold Fields implemented a four year Companies Enterprise Agreement, or the CEA, with employee representatives and representatives of a union which has been endorsed by the Fair Work Commission. The CEA provides for standardized conditions of employment across Gold Fields’ mining operations in Australia for all of its employees including minimum ‘safety net’ rates of pay, work hours, redundancy provisions, discretionary market-based annual wage reviews and general ‘best practice’ employer and employee obligations. Also contained in the agreement is a dispute settlement procedure that includes an internal ‘up the line’ escalation process as well as provision (by mutual agreement) for external arbitration and provides that during the four year term of this agreement protected industrial actions such as strikes and bans will be regarded as illegal. The CEA will come up for review early in fiscal 2018.
Peru
In total, labor costs in Peru increased from 23% in fiscal 2015 to 28% in fiscal 2016. Prior to 2011, the employees at Cerro Corona were not unionized and had no collective bargaining agreement. However, Peruvian labor regulations provide that a collective negotiation process may be commenced by a union or by workers’ representatives elected by the majority thereof.
In June 2011, operational employees at Cerro Corona formed a labor union and negotiated a five year collective bargaining agreement with the Group up to June 2016. In January 2017, a new agreement was signed for a 3 year period, up to fiscal 2019. Currently 17% of Peruvian employees are unionized. This agreement provides for a S/. 220 annual wage increase in fiscal 2017 which is equivalent to a 5.3% annual wage increase on average for this group of employees, 5.5% increase in fiscal 2018 and 5.8% increase in fiscal 2019. In addition, eligible employees are entitled to a special bonus payment, education expenses and other benefits.
Also, Gold Fields provides to its workers, as a working condition, free transportation between the mine site and the city of Cajamarca.
Over the last few years, Peru has seen many cases of conflicts and dissention between local communities and mining operations and mining projects, stemming largely from the communities’ desire for greater participation in the economic benefits of these mining projects. Cerro Corona has undertaken extensive community consultation and negotiation since 2003 through the land purchase and permitting process to achieve agreement with local communities on various aspects of community involvement. A comprehensive strategy to work with the communities has been implemented through the operations stages. The main focus of this strategy relies on three pillars, which are (i) promoting the development of basic local infrastructure such as, for example, improvements to local drinking water, (ii) training and employing the local communities and (iii) developing economically self-sustaining projects and suppliers. Gold Fields believes its social strategy has created goodwill with the local communities.
Benefits
Gold Fields provides benefits to its employees, generally including pension, medical and accommodation benefits. Employees are also entitled to a severance package if they are laid off. Gold Fields’ own employees are generally provided with medical and retirement benefits. In Australia, benefits for contractors’ employees are the responsibility of each contractor and Gold Fields’ own employees are generally responsible for their own medical costs and other benefits, except that Gold Fields contributes to a third-party pension plan.
In South Africa, Gold Fields attempts to attract and retain motivated high caliber employees through a mix of guaranteed and performance-based remuneration, as well as short-term and long-term incentives, andnon-financial rewards relating to work experience. Gold Fields has also implemented company pay structuring for management employees and also for supervisory employees in South Africa, known as the Gross Remuneration Package.
Furthermore, in order to maintain competitiveness in the South African labor market, regular industry market surveys are conducted, to benchmark remuneration practices and to keep abreast of industry movements regarding employee benefits andnon-financial employee reward and recognition programs. Gold Fields was actively involved in an industry task team working with the Institute of Directors in formulating industry standards for remuneration practices based on labor market dynamics.
Bonus Schemes
Gold Fields offers appropriate bonus schemes for employees at all levels. The focus of Gold Fields’ bonus schemes is based on specific production, safety, cost and development at management levels.
Employee Share Option Scheme
With respect to Gold Fields’ South African operations, an Employee Share Option Scheme, or ESOP, in respect of an effective 10.75% stake in GFIMSA was registered on December 1, 2010. The ESOP is housed and administered through the Thusano Share Trust. The effective holding in GFIMSA was equivalent to about 13.5 million unencumbered Gold Fields shares with full voting rights, which were issued to and held by the trust at par value of R0.50 which represented a 99.5% discount to the 30 days volume-weighted average price at July 30, 2010. This represents 1.75% of the current Gold Fields shares in issue. See “Additional Information—Material Contracts—Additional Black Economic Empowerment Transactions”.
Employment Equity
Under the South African Employment Equity Act, or the Employment Equity Act, Gold Fields has a responsibility to: (1) promote equal opportunity and fair treatment in employment by eliminating unfair discrimination; and (2) implement affirmative action measures to redress the disadvantages in employment experienced by certain groups, in order to ensure their equitable representation in all occupational categories and levels in the workforce. As required by the Employment Equity Act, Gold Fields had a formal employment equity plan, which has been approved by its unions and submitted as part of its report to South African regulatory officials. The plan includes numerical targets to be achieved over a five year period, with regular meetings of employment equity forums involving management and employee representatives to monitor progress against the plan. Management believes that Gold Fields is currently making adequate progress toward the targets under its plan and is in compliance with legal and regulatory requirements regarding employment equity.
Training
Gold Fields continues to provide comprehensive training to its employees, in full compliance with the regulatory requirements at the sites at which it operates. The training provided in South Africa is aligned with South Africa’s National Qualifications Framework, and is carried out within the ambit of Gold Fields’ education, training and development, or ETD, establishment, in partnership with other institutions to provide accreditation. In order to secure optimal workplace safety and productive work performance, Gold Fields exposes its employees to ETD interventions which significantly exceed compliance to minimum standards, in the form of additional mining and safety skills training, team-based behavioral training, andnon-mining related life and social skills training.
In addition, Gold Fields continues to focus systematically on managerial, leadership, and professional development through the provision of “Management Development Leadership” programs in association with Duke University, as well as its Leadership and Professional Talent Pipeline program, by means of a process known as the Talent Review, which is integrated with its performance management system.
In South Africa, Gold Fields has maintained its enrollment of University Bursars and entry-level scholarships across the technical disciplines. At South Deep, the mechanized training center has now been established and provides essential mechanized training required for our South Deep operations.
Gold Fields continues to review the performance of its human resource development, which seeks to identify further opportunities to improve the training and development initiatives. This new focus has resulted in changes in the approach of human resource development, with a conscious departure from the traditional training-only approach, towards a holistic talent and change management approach. Gold Fields believes that this approach will facilitate the cultural and behavioral changes required for the organization to achieve its Safe Production performance objectives. This includes theroll-out of the Gold Fields Foundational program which all employees are required to complete across the Group, and which provides a foundation of company knowledge, key business concepts and company strategy.
Gold Fields continues to subscribe to initiatives concerning national critical skills formation, operating through various private sector collaborative initiatives. In addition, Gold Fields continues to work closely with local and national government forums towards the development of business initiatives aimed at addressing youth development.
All of Gold Fields’ employee training activities in South Africa take account of the human resources development requirements of the Mining Charter, and are fully described in the SLP submitted by Gold Fields to the Department of Minerals and Energy. See “Information on the Company—Environmental and Regulatory Matters—South Africa—Mineral Rights”.
Gold Fields has initiated training and development programs internationally that are appropriate to the specific regions, commensurate with regional and site-specific objectives and constraints. A comprehensive leadership development program at Gold Fields’ operations has been developed to further the growth of high-potential individuals, including management, specialists, and other high performers.
Safety and Wellness
Gold Fields continues to uphold its promise, “if we cannot mine safely, we will not mine”. This reflects the need to minimize any potential negative impact on our employees and contractors, maintain operational continuity and protect the Company’s reputation. The Group’s annual performance bonus contains a significant safety component. Furthermore, maintaining safe and healthy working conditions is a key compliance issue for the Company.
As stated in its Occupational Health and Safety Policy, Gold Fields strives for “Zero Harm” at all of its operations and to minimize occupational health and safety hazards. All of the Group’s operations are certified to the OHSAS 18001 international health and safety management system standard.
The work on safety and wellness is integral to Gold Fields’ operational discipline and is widely accepted as the foundation for improved operational performance. As such, there is no conflict between pursuing safety and productivity at the same time.
Safety Management
Gold Fields remains vigilant and continues to introduce and monitor proactive measures to build on progress made in our safety performance.
Tragically, one fatality occurred during fiscal 2016 when Vakele Thafeni, an employee learner miner, was killed after a 1.5 magnitude seismic event caused an underground rock burst at our South Deep mine. Subsequent toyear-end, Gold Fields had two further fatalities at South Deep. Thankslord Bekwayo, a dump truck operator,
was killed in an underground accident on January 1, 2017 involving the truck he was driving, while Nceba Mehlwana, a locomotive driver, was fatally injured during a tramming accident on February 16, 2017. Our heartfelt condolences go out to the families, friends and colleagues of Messrs Thafeni, Bekwayo and Mehlwana. The Group’s safety performance showed a 33% improvement in the TRIFR with 2.27 incidents per million hours worked in fiscal 2016 compared to 3.40 in fiscal 2015. This is a significant achievement and is the lowest TRIFR rate at Gold Fields since fiscal 2013 when the ICMM adopted the measure as the gauge of safety performance. The Group’s TRIFR rate in fiscal 2013 was 4.14, while the number of recordable injuries since then has declined from 181 in fiscal 2013 to 124 in fiscal 2016. Of the 124 injuries, 76 were employee injuries (2015: 100) and 48 were contractor injuries (2015: 74).
During fiscal 2016, each of Gold Fields’ eight operations reported an improvement in their TRIFR rate, a tribute to the behavior-based safety programs in place across the Group. Gold Fields’ work at embedding these into our day-to-day performance, along with visible management leadership on the ground, continues.
Group safety performance
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | Fiscal 2013 | |||||||||||||
TRIFR(1) | 2.27 | 3.40 | 4.04 | 4.14 | ||||||||||||
Fatalities | 1 | 4 | (5) | 3 | 2 | |||||||||||
Lost time injuries(2) | 39 | 68 | 75 | 52 | ||||||||||||
Restricted work injuries(3) | 59 | 68 | 84 | 73 | ||||||||||||
Medically treated injuries(4) | 25 | 35 | 38 | 54 | ||||||||||||
Total recordable injuries | 124 | 174 | 200 | 181 | ||||||||||||
Notes:
| (1) | TRIFR Group safety metric was introduced in 2013. TRIFR = (Fatalities + Lost Time Injuries + Restricted Work Injuries + Medically Treated Injuries) x 1,000,000/number ofman-hours worked. |
| (2) | A LTI is a work-related injury resulting in the employee or contractor being unable to attend work for a period of one or more days after the day of the injury. The employee or contractor is unable to perform any of his/her duties. |
| (3) | A RWI is a work-related injury sustained by an employee or contractor which results in the employee or contractor being unable to perform one or more of their routine functions for a full working day, from the day after the injury occurred. The employee or contractor can still perform some of his/her duties. |
| (4) | A Medically Treated Injury, or MTI, is a work-related injury sustained by an employee or contractor which does not incapacitate that employee and who, after having received medical treatment, is deemed fit to immediately resume his/her normal duties on the next calendar day, immediately following the treatment orre-treatment. |
| (5) | Three of the four fatalities in 2015 were workplace accidents. A fourth fatality was a member of the protection services team at South Deep who was shot and killed during a robbery at the mine. |
Regional Performance
Details of specific regional safety initiatives implemented in fiscal 2016 are set out below.
Americas
After slipping in fiscal 2015 to 1.09 from 0.38 in fiscal 2014, the TRIFR at the Cerro Corona mine improved by 69% to 0.34 in fiscal 2016, with the operation only reporting one lost time and one MTI during the year. Following the relatively poor performance in fiscal 2015 the mine intensified its safety campaign, containing 10 rules that every employee and contractor has to sign up to. It also focused on improving the leadership skills of safety supervisors, as part of visible safety leadership. Furthermore, 190 employees and contractors have been tasked with driving safe behavior by highlighting good working practices.
Australia
During fiscal 2016, the TRIFR for Gold Fields Australia improved by 42% to 9.43 from the fiscal 2015 rate of 16.27. This is the lowest rate since the acquisition of the Yilgarn South Assets in fiscal 2013, when the region’s integrated safety strategy was first launched. The TRIFR has been reduced by 73% since then. Three of the mines, St. Ives, Darlot and Granny Smith, showed improvements ranging from 47% to 55% during fiscal 2016 and all three recorded their lowest TRIFR rate since fiscal 2013. Agnew/Lawlers’ improvement was lower at 13% after a number of safety related incidents with a contracting firm early in fiscal 2016. Targeted interventions managed to address their performance.
At the heart of Gold Fields Australia’s safety efforts are two programs: the ongoing Visible Felt Leadership and Vital Behaviors programs, both of which were introduced in fiscal 2014. Risk assessments undertaken on all recordable injuries since fiscal 2012 indicate that the risk of incidences that result in recordable injuries is steadily declining with no high-risk events having occurred since fiscal 2014.
During fiscal 2016, all mines in the region revitalized their safety programs as well as safety discipline. A particular focus has been on new employees and contractors, where there was evidence of a greater risk of injury. The findings of an anonymous survey among employees about the safety programs and standards, carried out annually over the past three years, will feed into the region’s safety strategy for the next three years.
In addition, the St. Ives mine is currently in the process of re-certification following an initial negative finding by the International Cyanide Management Institute, or ICMI. The external certification auditors have recommended re-certification and the ICMI is currently evaluating their findings.
South Africa
South Deep’s safety performance showed a significant improvement with the TRIFR falling by 17% from 2.91 in fiscal 2015 to 2.42 in fiscal 2016. However, this overall improvement was overshadowed by the fatalfall-of-ground accident experienced by the mine in September. In fiscal 2015, South Deep reported two mining-related fatalities and one fatal shooting. As a result of the fatal accident, the Department of Mineral Resources issued two Section 54 work-safety related stoppages. A further 13 Section 54 stoppages were issued during fiscal 2016 following visits by the DMR due to either perceived or actual unsafe working conditions, inadequate safety procedures or untrained personnel. This brings the total number of Section 54s in fiscal 2016 to 15 (2015: 16). Gold Fields continues to work with the DMR in addressing safety and wellness related issues at South Deep.
The number of total injuries reported by the mine went up from 68 in fiscal 2015 to 75 in fiscal 2016 (the TRIFR for South Deep is lower due to more hours worked.). Three categories (Material & Equipment,Fall-of-Ground and Slip & Fall) accounting for 77% of these injuries.Fall-of-ground accidents had been on a steady decline to six in fiscal 2015 but picked up again in fiscal 2016 with 15 incidents, including the fatal accident. Gold Fields continues its efforts to move mineworkers away from potentially dangerous areas and has installed extensive secondary support throughout the mine to limit the impact of rock bursts. The number of seismic events at South Deep registering above one on the Richter scale increased from 73 in fiscal 2015 to 101 in fiscal 2016 (of which six were over two on the scale) as the mine accelerated its ramp-up. Despite the fact that the average energy released per seismic event has dropped, the mine has intensified its efforts at improving its forecasting abilities. It is working with 12 consultancies and institutions, including the Institute of Mine Seismology and the Council for Geoscience, to monitor, understand and mitigate against seismic underground events.
Behavior-based incident management and strict enforcement of safety standards continue to be the pillars on which the mine relies to improve working place physical conditions and address risky behavior. In addition, 30% of bonuses, on average, are linked to safety-related performance. During fiscal 2016, South Deep rolled out four programs to improve its safety performance, includingback-to-basics training, hazard identification and risk assessments as well as artisan upskilling. Testing for alcohol and cannabis is also carried out as part of the mine’s zero tolerance policy.
Beyond behavioral-based management, South Deep has also intensified its effort toengineer-out safety risks, through pre-conditioning of working areas, as well as a focus on consumable material and equipment. As part of this, the installation of a rail-bound proximity detection system was completed in the first quarter of fiscal 2016, with which all 56 locomotives at the mine were fitted and relevant operators and artisans trained in its use. The installation of fixed beacons at the mine during the latter part of fiscal 2016 has helped to facilitate direct communication between the locomotives.
West Africa
Both Tarkwa and Damang reported better TRIFR during fiscal 2016, with Tarkwa improving by 23% to 0.31 and Damang by 37% to 1.67. The region reported no fatality in fiscal 2016 after recording one fatal accident during fiscal 2015. An external health and safety audit undertaken in the fourth quarter of fiscal 2016 made no adverse finding and reported no high-risk events at either mine.
The mines rely on a number of behavioral-based and safety discipline awareness programs to entrench safe behavior and during fiscal 2016 this was supported by more frequent walkabouts by senior management. A key part of the safety strategy is a zero tolerance approach to drug and alcohol use, which is applicable to all employees in the West Africa region. Over 130,000 sobriety tests were conducted during fiscal 2016 and 28 employees and contractors, who were found to be over the limit, were discharged immediately. The zero tolerance approach is supported by free counselling and educational sessions on drug and alcohol abuse.
Employee Health and Wellness
Gold Fields is committed to reducing the exposure of its employees to occupational health risks, including those associated with air quality, silicosis, tuberculosis, diesel particulate matter and hearing loss. As such, each region has implemented occupational health and hygiene monitoring for diesel particulates, respirable and silica dust, other airborne pollutants, radiation and noise. Particular emphasis is placed on managing the underground working environments in Gold Fields’ Australian and South African operations, due to the heightened health risks that underground mining poses to workers.
All of Gold Fields’ regions run dedicated wellness programs, tailored to both the national and local context of each mining operation. These programs aim to identify and manage chronic medical conditions within the workforce, whilst also maximizing its productive capacity and reducing absenteeism.
Occupational disease at the South Deep mine (rate per 1,000 employees)
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014(1) | Fiscal 2013(1) | |||||||||||||
Noise-induced hearing loss (NIHL)(1) | 0.80 | 0.68 | 1.52 | 0.62 | ||||||||||||
Cardio-respiratory tuberculosis (CRTB) | 5.26 | 6.16 | 9.15 | 6.5 | ||||||||||||
Silicosis(2) | 1.12 | 1.54 | 2.67 | 1.86 | ||||||||||||
Chronic obstructive airways disease (COAD)(1) | 0.64 | 0.17 | 0.76 | 0.00 | ||||||||||||
South Deep workforce | 6,277 | 5,837 | 5,246 | 6,466 | ||||||||||||
Notes:
| (1) | Numbers are now presented per 1,000 employees. Comparatives have been restated. |
| (2) | Based on the number of cases submitted for compensation. |
Noise
During fiscal 2016, Gold Fields’ South Deep mine reported a rise in the NIHL rate to 0.80 per 1,000 employees and contractors (fiscal 2015: 0.68), while the number of NIHL cases submitted rose from four to five. During the year, the mine met the Mine Health and Safety Council, or MHSC, milestone for equipment noise not to exceed 110(A-weighted) decibels (dB(A)), though 10% of samples were above the 2024 milestone of 107 dB(A).
It is important to note that these measurements do not incorporate the noise reduction effect provided by hearing protection devices, which are freely available and are compulsory to wear in demarcated areas.
South Deep continues to implement a range of medical, educational and engineering interventions to improve its performance in this regard. These include:
Early diagnosis and management of treatable lifestyle diseases;
Preventative counseling on NIHL;
Training on correct use of personal protection equipment, or PPE; and
Application of noise management measures to the underground mining fleet.
At Gold Fields’ Australian operations only two vehicles and machinery equipment across our four operations recorded noise levels above 110dB(A) throughout 2016. Operators of this equipment use appropriate hearing protection to ensure noise levels experienced are below 85dB(A). Two new NIHL cases were reported during fiscal 2016. NIHL mitigating strategies include implementation of engineering solutions to reduce exposure, the correct use of PPE and ongoing monitoring.
In West Africa, the number of NIHL cases remained at two new cases in fiscal 2016, amid the mandatory use of hearing protection devices (ear plugs and ear muffs) in areas with noise exposures above 85dB(A). Furthermore, continuous monitoring of the operator workstations as well as a number ofin-pit machines, including drill rigs, excavators, dump trucks and graders are undertaken every six months. Engineering controls, such as sound proof seals for equipment operator cabins, are also having a positive impact on noise levels.
There were no reported NIHL cases at Cerro Corona.
Diesel Particulate Matter
Gold Fields undertakes regular monitoring and analysis of the concentration of DPM at all of its operations. This issue is particularly material at Gold Fields’ underground mines in Australia and South Africa, due to the potential concentration of particulates in specific working areas.
While there are no regulatory limits, the Australia region implemented a strategy in fiscal 2014 designed to reduce exposure to DPM with a focus on fitting filters to equipment, refining maintenance schedules, ensuring the correct levels of ventilation and providing appropriate procedural controls. Sampling programs during fiscal 2016 have indicated the success of this initiative with a sharp decline in DPM levels underground, to a point where only 0.5% of samples have exceeded the 70µg/m3 target recommended by the Australian Institute for Occupational Hygienists.
In South Africa, the DMR developed a draft regulatory framework, released in fiscal 2014, to establish a DPM OEL. This plan recommended a four-year‘step-in- approach’ starting at 350µg/m3 in fiscal 2015 and systematically decreasing to 160µg/m3 by January 2018. Gold Fields has over the years introduced a range of measures to improve monitoring and bring down the DPM exposure levels underground. These include the acquisition of vehicles and machines with more advanced engine technology as well as use ofultra-low sulphur content diesel. As a result, the 160µg/m3 DPM OEL was only exceeded in 11% of samples during fiscal 2016 compared with 15% in 2015 and 19% in fiscal 2011.
In Ghana and Cerro Corona, the exposure levels and concentration of personal and area DPM samples are insignificant.
Silicosis and Tuberculosis
In fiscal 2015, the MHSC introduced new aspirational silica dust exposure targets for South African gold mines. These milestones require that personal exposure levels to silica dust be reduced from 0.1mg/m³ to <0.05mg/m3 by fiscal 2024. South Deep is already using the fiscal 2024 level to guide its performance and in
fiscal 2016, 26% of the personal silica dust samples exceeded this level. South Deep has accelerated the implementation of a range of improved dust control measures to gradually reduce these levels, including:
Real-time dust monitoring;
Fitting water mist sprays at dust sources;
Dust management controls on footwalls and internal tips; and
Installation of manually controlled water blasts in all working areas.
During fiscal 2016, the silicosis rate per 1,000 employees improved by 28% to 1.12 from 1.54 in fiscal 2015 with the number of silicosis cases submitted to the relevant health authorities falling from nine to seven. Similarly, the CRTB rate improved by 15% in fiscal 2016 to 5.26 per 1,000 employees (fiscal 2015: 6.16) and the number of CRTB cases submitted fell to 33 in fiscal 2016 from 36 in fiscal 2015.
In 2014, an industry working group was formed to address issues relating to compensation and medical care for occupational lung disease in the South African gold mining industry. During fiscal 2016, the working group had extensive engagements with a wide range of stakeholders in fiscal 2016, including government, organized labor, other mining companies and legal representatives of claimants who have filed legal suits against the companies.
The companies, Anglo American South Africa, AngloGold Ashanti, African Rainbow Minerals, Gold Fields, Harmony and Sibanye, believe that fairness and sustainability are crucial elements of any solution and are working together with these stakeholders to design and implement a comprehensive solution that is both fair to past, present and future gold mining employees and also sustainable for the sector. The companies are among respondent companies in a number of lawsuits related to occupational lung disease, but do not believe that they are liable in respect of the claims brought, and they are defending these.
At Gold Fields’ open pit operations in Ghana, Australia and Peru, contact with silica dust is limited due to the nature of open pit mining and the low silica content of the ore bodies. In 2016, there were no new cases of silicosis and two CRTB cases at our Ghanaian operations. Despite this, regular gravimetric sampling of respirable silica dust samples are carried out and evaluated.
HIV/AIDS
HIV/AIDS management is integrated into Gold Fields’ mainstream health services and Voluntary Counselling and Testing, or VCT, takes place during regular employee health assessments. This has the added benefit of directly addressing the interaction of HIV/AIDS with related health issues such as tuberculosis, or TB, and other sexually transmitted infections, or STIs.
In South Africa an estimated 19% of adults (aged 15 to 49) live with HIV/AIDS. Gold Fields is committed to lowering the HIV/AIDS prevalence at South Deep, where the prevalence rate (by percentage of the workforce living with HIV/AIDS) was 5% in December 2016. There was an increase in the number of employees tested positive to 112 in fiscal 2016 from 69 in 2015. Since 2011, 3,440 employees have been tested of which 403 tested positive. South Deep’s integrated HIV/AIDS, STI and TB strategy directly addresses interactions between these diseases. It has four key pillars:
Promotion: This includes regular publicity campaigns and condom distribution at all workplaces;
Prevention: VCT is provided to all employees, contractors, their partners and family members on a confidential basis. In 2016, the mine’s VCT participation rate was around 23%;
Treatment: Free Highly Active Anti-retroviral Treatment, or HAART, is provided toHIV-infected employees through onsite, doctor-staffed medical clinics. In 2016, 53 employees joined the HAART program (2015: 50). This takes the total number of active participants to 332 (2015: 296), with 533 cumulatively enrolled since the HAART program began in 2004. Employees’ dependants can also receive HAART via the Company’s medical aid schemes Gold Fields does not provide treatment to employees from contracting firms, which provide their own support to their staff; and
Support: This includes doctor-based primary healthcare, psychological counselling and social services for all employees and contractors. South Deep also supports a number of community based HIV/AIDS projects.
In Ghana, where the national HIV/AIDS rate is around 1.5%, employees and contractors have access to a confidential VCT program which employees receive free of charge. During fiscal 2016, about 45% of the Ghana operations’ workforce underwent the VCT program. Anyone testing positive is provided with free treatment in line with the government’s national HIV/AIDS treatment program. Byyear-end fiscal 2016 Ghana had 15 employees on HAART (fiscal 2015: 19).
Malaria
Gold Fields’ workforce in Ghana faces a high risk of exposure to malaria and the Company has a comprehensive malaria strategy in place, which incorporates education, prevention, prophylaxis and treatment. It also includes provision of mosquito repellent for workers, support for community health facilities and rapid diagnosis and treatment.
In fiscal 2016, 505 employees (fiscal 2015: 523) tested positive for malaria after 3,181 individuals (fiscal 2015: 3,104) were tested at both of our mines. None of the treated cases proved fatal. Employees and dependants who live in the mine villages have their company housing units sprayed as part of our Malaria Vector Control program. Under this programs a total of 195 company housing units at both mines were sprayed in fiscal 2016.
TRIFR, Fatalities and Fatal Injury Frequency Rate
In fiscal 2016, Gold Fields continued to focus on implementing its Group Safety Reporting Guideline, which is based on ICMM guidelines. Since fiscal 2013, Gold Fields has aligned its health and safety metrics with those of the ICMM, headed by the TRIFR. As Gold Fields’ peer companies tend to use the TRIFR metric, this alignment assists with benchmarking of Group performance against the wider sector.
The following tables set out the TRIFR data for Gold Fields’ mining operations for the periods indicated. The tables also provide the number of fatalities and fatal injury frequency rate data for Gold Fields’ South African, West African, Australian and Americas operations.
South Africa
West Africa
Australia
South America
ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
To the knowledge of management: (1) Gold Fields is not directly or indirectly owned or controlled (a) by another corporation or (b) by any foreign government; and (2) there are no arrangements the operation of which may at a subsequent date result in a change in control of Gold Fields. To the knowledge of Gold Fields’ management, there is no controlling shareholder of Gold Fields.
As of December 31, 2016, the issued share capital of Gold Fields consisted of 820,606,945 ordinary shares.
A list of the individuals and organizations holding, to the knowledge of management, directly or indirectly, 5% or more of its issued share capital as of February 24, 2017 is set forth below.
Beneficial owner | Ordinary shares | Percentage | ||||||
Allan Gray | 62,532,579 | 7.61 | % | |||||
Public Investment Corporation Limited | 60,506,206 | 7.37 | % | |||||
BlackRock Investment Management | 53,582,374 | 6.52 | %(1) | |||||
Van Eck Global | 52,874,536 | 6.44 | % | |||||
Note:
| (1) | On March 13, 2017, BlackRock Investment Management notified Gold Fields that its shareholding in the Company was 9.63%. |
To the knowledge of management, none of the above shareholders hold voting rights which are different from those held by Gold Fields’ other shareholders.
The table below shows the significant changes in the percentage of ownership by Gold Fields’ major shareholders, to the knowledge of Gold Fields’ management, during the past three fiscal years.
| Beneficial ownership as of | ||||||||||||
| December 31, 2016 | December 31, 2015 | December 31, 2014 | ||||||||||
| (%) | ||||||||||||
Beneficial owner | ||||||||||||
Public Investment Corporation Limited | 7.37 | 8.09 | 8.97 | |||||||||
Allan Gray | 7.02 | 7.93 | 6.21 | |||||||||
Van Eck Global | 6.02 | 6.62 | 6.32 | |||||||||
BlackRock Investment Management | 7.30 | 3.07 | 4.76 | |||||||||
Related Party Transactions
None of the directors, officers or major shareholders of Gold Fields or, to the knowledge of Gold Fields’ management, their families, had any interest, direct or indirect, in any transaction during the last three fiscal years or in any proposed transaction which has affected or will materially affect Gold Fields or its investment interests or subsidiaries. Refer note 40 to the consolidated financial statements for related party disclosure as required by IFRS.
Reference is made to Item 18 for a list of all financial statements filed as part of this annual report. For information on legal proceedings, please refer to “Information on the Company—Legal Proceedings and Investigations”.
Dividends and Dividend Policy
The following table sets forth the dividends announced and paid per share in respect of Gold Fields’ ordinary shares for the periods indicated:
| Year ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2010 | December 31, 2010 | December 31, 2011 | December 31, 2012 | December 31, 2013 | December 31, 2014 | December 31, 2015 | December 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | |||||||||||||||||||||||||||||||||||||||||||||||||
Prior year’s final dividend | 0.10 | 0.80 | 0.10 | 0.70 | 0.10 | 0.70 | 0.30 | 2.30 | 0.08 | 0.75 | 0.02 | 0.22 | 0.02 | 0.20 | 0.01 | 0.21 | ||||||||||||||||||||||||||||||||||||||||||||||||
Interim dividend | 0.07 | 0.50 | — | — | 0.14 | 1.00 | 0.20 | 1.60 | — | — | 0.02 | 0.20 | — | 0.04 | 0.04 | 0.50 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Total dividend | 0.17 | 1.30 | 0.10 | 0.70 | 0.24 | 1.70 | 0.50 | 3.90 | 0.08 | 0.75 | 0.04 | 0.42 | 0.02 | 0.24 | 0.05 | 0.71 | ||||||||||||||||||||||||||||||||||||||||||||||||
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Note:
| (1) | A final dividend of 0.60 per share was announced on February 16, 2017 and paid on March 13, 2017. |
Gold Fields’ dividend policy is to pay a dividend of between 25% and 35% of normalized earnings.
Significant Changes
Please refer to “Operating and Financial Review and Prospects—Recent Developments”.
Listing Details
As of December 31, 2016, the principalnon-United States trading market for the ordinary shares of Gold Fields is the JSE on which they trade under the symbol “GFI”. The ordinary shares of Gold Fields are also listed on the SWX Swiss Exchange. As of December 31, 2016, 13,761 record holders of Gold Fields’ ordinary shares, holding an aggregate of 190,670,781 ordinary shares (23.21%), were listed as having addresses in South Africa. As of December 31, 2016, 462 record holders of Gold Fields’ ordinary shares, holding an aggregate of 461,915,963 ordinary shares (56.23%), were listed as having addresses in the United States.
Gold Fields’ ADSs currently trade in the United States on the NYSE under the symbol “GFI”. ADRs representing the ADSs are issued by The Bank of New York Mellon, as Depositary. Each ADS represents one ordinary share. Gold Fields’ ADRs are also listed on the NASDAQ Dubai.
JSE Trading History
The tables below show the high and low closing prices in Rand and the average daily volume of trading activity on the JSE for Gold Fields’ ordinary shares for the last five fiscal years.
The following table sets out ordinary share trading information on a yearly basis for the last five fiscal years, as reported byI-Net Bridge, a South African financial information service:
Year ended | Ordinary share price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
(Rand per share) | (number of ordinary shares) | |||||||||||
December 31, 2012 | 131.31 | 96.00 | 2,304,320 | |||||||||
December 31, 2013 | 109.85 | 31.40 | 3,524,334 | |||||||||
December 31, 2014 | 53.09 | 32.35 | 2,211,070 | |||||||||
December 31, 2015 | 67.45 | 31.00 | 2,337,302 | |||||||||
December 31, 2016 | 91.30 | 38.78 | 3,378,480 | |||||||||
through April 3, 2017 | 49.75 | 38.03 | 3,458,524 | |||||||||
The following table sets out ordinary share trading information on a quarterly basis for the periods indicated, as reported byI-Net Bridge:
Quarter ended | Ordinary share price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
(Rand per share) | (number of ordinary shares) | |||||||||||
March 31, 2015 | 67.45 | 52.20 | 2,409,328 | |||||||||
June 30, 2015 | 54.45 | 37.64 | 2,147,905 | |||||||||
September 30, 2015 | 47.40 | 31.41 | 2,504,830 | |||||||||
December 31, 2015 | 45.24 | 31.00 | 2,276,433 | |||||||||
March 31, 2016 | 69.50 | 43.50 | 3,438,054 | |||||||||
June 30, 2016 | 72.20 | 55.42 | 2,979,195 | |||||||||
September 30, 2016 | 91.30 | 67.87 | 3,086,390 | |||||||||
December 31, 2016 | 66.88 | 38.78 | 4,017,030 | |||||||||
March 31, 2017 | 49.75 | 38.03 | 3,477,821 | |||||||||
The following table sets out ordinary share trading information on a monthly basis for each of the last six months, as reported byI-Net Bridge:
Month ended | Ordinary share price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
(Rand per share) | (number of ordinary shares) | |||||||||||
October 31, 2016 | 66.88 | 56.39 | 3,395,978 | |||||||||
November 30, 2016 | 61.34 | 44.95 | 3,415,228 | |||||||||
December 31, 2016 | 44.29 | 38.78 | 5,400,310 | |||||||||
January 31, 2017 | 48.56 | 43.98 | 2,583,874 | |||||||||
February 28, 2017 | 50.04 | 40.25 | 3,894,261 | |||||||||
March 31, 2017 | 46.77 | 38.03 | 3,952,568 | |||||||||
On April 3, 2017, the closing price of the ordinary shares on the JSE was R47.95.
New York Stock Exchange Trading History
The tables below show the high and low closing prices in U.S. dollars and the average daily volume of trading activity on the NYSE for the last five fiscal years.
The following table sets out ADS trading information on a yearly basis for the last five fiscal years, as reported by Bloomberg:
Year ended | ADS price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
| ($ per ADS) | (number of ADSs) | |||||||||||
December 31, 2012 | 16.92 | 11.32 | 3,994,433 | |||||||||
December 31, 2013 | 12.49 | 3.02 | 5,566,292 | |||||||||
December 31, 2014 | 4.84 | 3.00 | 4,970,039 | |||||||||
December 31, 2015 | 5.97 | 2.08 | 5,214,476 | |||||||||
December 31, 2016 | 6.45 | 2.64 | 6,421,988 | |||||||||
through April 3, 2017 | 3.67 | 2.95 | 7,221,965 | |||||||||
The following table sets out ADS trading information on a quarterly basis for the periods indicated, as reported by Bloomberg:
Quarter ended | ADS price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
| ($ per ADS) | (number of ADSs) | |||||||||||
March 31, 2015 | 5.97 | 3.66 | 5,642,608 | |||||||||
June 30, 2015 | 4.62 | 3.07 | 4,109,483 | |||||||||
September 30, 2015 | 3.55 | 2.42 | 5,520,601 | |||||||||
December 31, 2015 | 3.08 | 2.08 | 5,588,013 | |||||||||
March 31, 2016 | 4.56 | 2.86 | 7,257,014 | |||||||||
June 30, 2016 | 4.91 | 3.50 | 5,542,144 | |||||||||
September 30, 2016 | 6.45 | 4.75 | 5,548,086 | |||||||||
December 31, 2016 | 4.80 | 2.64 | 6,379,179 | |||||||||
March 31, 2017 | 3.67 | 2.95 | 7,263,275 | |||||||||
The following table sets out ADS trading information on a monthly basis for each of the last six months, as reported by Bloomberg:
Month ended | ADS price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
| ($ per ADS) | (number of ADSs) | |||||||||||
October 31, 2016 | 4.80 | 4.01 | 5,214,481 | |||||||||
November 30, 2016 | 4.33 | 3.05 | 6,626,845 | |||||||||
December 31, 2016 | 3.19 | 2.64 | 7,296,212 | |||||||||
January 31, 2017 | 3.61 | 3.20 | 6,939,995 | |||||||||
February 28, 2017 | 3.67 | 2.97 | 8,068,630 | |||||||||
March 31, 2017 | 3.64 | 2.95 | 6,879,094 | |||||||||
On April 3, 2017, the closing price of Gold Fields’ ADSs quoted on the NYSE was U.S.$3.62.
JSE Limited
The JSE was formed in 1887. The JSE provides facilities for the buying and selling of a wide range of securities, including equity and corporate debt securities and warrants in respect of securities, as well as Krugerrands.
The JSE is a self-regulating organization operating under the ultimate supervision of the Ministry of Finance, through the Financial Services Board and its representative, the Registrar of Stock Exchanges. Following the introduction of the Stock Exchanges Control Amendment Act No. 54 of 1995, or the Stock Exchange Act, which provides the statutory framework for the deregulation of the JSE, the JSE’s rules were amended with effect from November 8, 1995. These amendments removed the restrictions on corporate membership and allowed stockbrokers to form limited liability corporate entities. Members were, for the first time, also required to keep client funds in trust accounts separate from members’ own funds. Further rules to complete the deregulation of the JSE, as envisaged by the Stock Exchange Act, were promulgated during 1996 to permit members of the JSE to trade either as agents or as principals in any transaction in equities and to allow members to negotiate freely the brokerage commissions payable on agency transactions in equities. With effect from 1996, screen trading commenced on the JSE. The Securities Services Act No. 36 of 2004 came into effect on January 18, 2005. This act consolidates and amends the laws relating to the regulation and control of exchanges and securities trading, the regulation and control of central securities depositories and the custody and administration of securities and the prohibition of insider trading.
The actual float available for public trading is significantly smaller than the aggregate market capitalization because of the large number of long-term holdings by listed holding companies in listed subsidiaries and associates, the existence of listed pyramid companies and cross-holdings between listed companies.
South Africa was included in the Morgan Stanley Capital International Emerging Markets Free Index and the International Finance Corporation Investable Index in March and April 1995, respectively. South Africa has a significant representation in these emerging market indices.
The JSE has established a project named Share Transactions Totally Electronic, or STRATE, which has involved the dematerialization of share certificates in a central securities depositary and the introduction of contractual, rolling, electronic settlement in order to increase the speed, certainty and efficiency of settlement and to fall into line with international practice. Gold Fields joined STRATE on October 1, 2001. Investors are given the choice of either holding their securities in dematerialized form in the central securities depositary or retaining their share certificates. Shareholders who elect to retain their share certificates are not able to trade their shares on the JSE, although they may trade their sharesoff-market. Settlement of dematerialized shares traded electronically on the JSE is made three days after each trade (T+3).
ITEM 10: ADDITIONAL INFORMATION
General
Gold Fields is a public company registered in South Africa under the Companies Act, which limits the liability of its shareholders, and is governed by its memorandum of incorporation, the Companies Act and the JSE Listings Requirements. Gold Fields’ registration number is 1968/004880/06.
On April 8, 2009, South Africa passed the Companies Act, which came into force on May 1, 2011. At the annual general meeting held on May 14, 2012, Gold Fields adopted a new memorandum of incorporation, or the Gold Fields MOI, to replace its memorandum of association and articles of association adopted under the previous Companies Act, or the Companies Act 61 of 1973. Gold Fields amended the Gold Fields MOI at its annual general meeting on May 9, 2013. The amended Gold Fields MOI conforms to the requirements of the Companies Act and the amended JSE Listings Requirements.
Clause 4 of the Gold Fields MOI provides that Gold Fields has the powers and capacity of a natural person and is not subject to any special conditions.
Dividends and Payments to Shareholders
Gold Fields may make distributions (including the payment of dividends) from time to time in accordance with provisions of the Companies Act, the JSE Listings Requirements and the Gold Fields MOI. In terms of the Companies Act, a company may only make a distribution (including the payment of any dividend) if:
it reasonably appears that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution;
the board of the company, by resolution, has acknowledged that it has applied the solvency and liquidity test and reasonably concluded that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution.
In terms of the Companies Act, a company satisfies the solvency and liquidity test at a particular time if, considering all reasonably foreseeable financial circumstances of the company at that time:
the assets of the company, fairly valued, equal or exceed the liabilities of the company, as fairly valued; and
it appears that the company will be able to pay its debts as they become due in the ordinary course of business for a period of:
12 months after the date on which the test is considered; or
in the case of a distribution (including the payment of dividends), 12 months following that distribution.
Subject to the above requirements, the directors of Gold Fields may from time to time declare a dividend or any other distribution to shareholders in proportion to the number of shares held by them.
The Company must hold all monies due to the shareholders in trust indefinitely, subject to the laws of prescription. The Company shall be entitled at any time to delegate its obligations in respect of unclaimed dividends, or other unclaimed distributions, to any one of the Company’s bankers.
Voting Rights
Every shareholder of Gold Fields, or representative of a shareholder, who is present at a shareholders meeting has one vote on a show of hands, irrespective of the number of shares he or she holds or represents,
provided that a representative of a shareholder shall, irrespective of the number of shareholders he or she represents, have only one vote. At a shareholders meeting, a resolution put to the vote shall be decided on a show of hands, unless a poll is demanded by not less than five persons having the right to vote on that matter, a person or persons entitled to exercise not less than one tenth of the total voting rights entitled to vote on that matter or the chairperson. Every Gold Fields shareholder is, on a poll, entitled to one vote per ordinary share held. Neither the Companies Act nor the Gold Fields MOI provide for cumulative voting.
A shareholder entitled to attend and vote at a shareholders meeting shall be entitled to appoint a proxy to attend, participate in, speak and vote at such shareholders meeting in the place of such shareholder. The proxy need not be a shareholder. However, the proxy may not delegate the authority granted to him or her as a proxy.
Issue of Additional Shares
In accordance with the provisions of the JSE Listings Requirements and the Gold Fields MOI, the Board shall not have the power to issue authorized shares other than:
the issue of capitalization shares or the offer of a cash payment in lieu of awarding capitalization shares;
issues in respect of a rights offer; and
issues which do not require the approval of shareholders in terms of the Companies Act or the JSE Listings Requirements
without shareholder approval.
In accordance with the provisions of the Companies Act:
an issue of shares must be approved by a special resolution of the shareholders of a company if the shares are issued to a director or officer of the company or any other person related or inter-related to the company, save for certain exceptions, including an issue pursuant to an employee share scheme; and
an issue of shares in a transaction requires approval of the shareholders by special resolution if the voting power of the shares that are issued as a result of the transaction will be equal to or exceed 30% of the voting power of all the shares held by shareholders immediately before the transaction.
Issues for Cash
In accordance with the provisions of the JSE Listings Requirements and the Gold Fields MOI, shareholders may either convey a:
special authority to issue shares for cash on terms that are specifically approved by shareholders in a shareholders meeting in respect of a particular issue, or a Specific Issue for Cash; or
general authority to issue shares for cash on terms generally approved by shareholders in a shareholders meeting by granting the Board the authority to issue a specified number of securities for cash, which authority will be valid until the next annual general meeting or for fifteen months from the date on which the resolution was passed, whichever period is shorter, or a General Issue for Cash.
In terms of the JSE Listings Requirements, a company may only undertake:
a Specific Issue for Cash or a General Issue for Cash on the basis that a 75% majority of votes cast by shareholders at a shareholders meeting must approve the granting of such authority to the directors;
a General Issue for Cash is subject to satisfactory compliance with certain requirements, including:
the shares that are the subject of a General Issue for Cash may not exceed 15% of the company’s listed shares; and
the maximum discount at which shares may be issued is 10% of the weighted average traded price of such shares measured over the 30 business days prior to the date that the price of the issue is agreed between the company and the party subscribing for the shares.
Pre-emptive Rights
The Companies Act, the JSE Listings Requirements and the Gold Fields MOI require that any new issue of shares by Gold Fields must first be offered to existing shareholders in proportion to their shareholding in the Company, unless, among other things, the issuance to new shareholders is:
the necessary shareholder approvals have been obtained;
a capitalization issue, an issue for an acquisition of assets (including another company) or an amalgamation or merger is to be undertaken; or
the shares are to be issued in terms of option or conversion rights.
Transfer of Shares
The transfer of any Gold Fields certificated shares will be implemented in accordance with the provisions of the Companies Act, using the then common form of transfer. Dematerialized shares, which have been traded on the JSE, are transferred on the STRATE system and delivered five business days after each trade. The transferor of any share is deemed to remain the holder of that share until the name of the transferee is entered in Gold Fields’ register for that share. Since Gold Fields shares are traded through STRATE, only shares that have been dematerialized may be traded on the JSE. Accordingly, Gold Fields shareholders who hold shares in certificated form will need to dematerialize their shares in order to trade on the JSE.
Disclosure of Beneficial Interest in Shares
The Companies Act requires a registered holder of Gold Fields shares who is not the beneficial owner of such shares to disclose to Gold Fields, within five business days of the end of every month during which a change has occurred in the beneficial ownership, the identity of the beneficial owner and the number and class of securities held on behalf of the beneficial owner. Moreover, Gold Fields may, by notice in writing, require a person who is a registered shareholder, or whom Gold Fields knows or has reasonable cause to believe has a beneficial interest in Gold Fields ordinary shares, to confirm or deny whether or not such person holds the ordinary shares or beneficial interest and, if the ordinary shares are held for another person, to disclose to Gold Fields the identity of the person on whose behalf the ordinary shares are held. Gold Fields may also require the person to give particulars of the extent of the beneficial interest held during the three years preceding the date of the notice. Gold Fields is obligated to establish and maintain a register of the disclosures described above and to publish in its annual financial statements a list of the persons who hold a beneficial interest equal to or in excess of 5% of the total number of ordinary shares issued by Gold Fields, together with the extent of those beneficial interests.
General Meetings of Shareholders
The shareholders and/or directors may convene Gold Fields shareholders meetings in accordance with the requirements of the Companies Act and the Gold Fields MOI. Gold Fields is obligated to hold an annual general meeting for each fiscal year prior to 15 months after the date of the last annual general meeting.
Shareholders meetings, including annual general meetings, require at least 15 business days’ notice in writing of the place, day and time of the meeting to shareholders.
Business may be transacted at any shareholders meeting only while a quorum of shareholders is present. The quorum for the commencement of a shareholders meeting shall be sufficient persons present to exercise, in aggregate, at least 25% of all the voting rights that are entitled to be exercised, but the shareholders meeting may not begin unless, in addition, at least three shareholders entitled to vote are present at the meeting.
The annual general meeting deals with and disposes of all matters prescribed by the Gold Fields MOI and the Companies Act, including:
the presentation of the directors’ report, the audited financial statements for the immediately preceding financial year and the audit committee report;
the election of directors; and
the appointment of an auditor and an audit committee.
Accounting Records and Financial Statements
Gold Fields is required to keep the accounting records and books of accounts as are necessary to present the state of affairs of the Company and to explain the financial position of the company as prescribed by the Companies Act.
The directors shall from time to time determine at what times and places and under what conditions, subject to the requirements of the Companies Act, shareholders are entitled to inspect and take copies of certain documents, including the Gold Fields MOI, accounting records required to be maintained by the Company and annual financial statements. Apart from the shareholders, no other person shall be entitled to inspect any of the documents of the Company (other than the share register) unless expressly authorized by the directors or in accordance with the Promotion of Access to Information Act, No 2 of 2000, as amended.
The directors of Gold Fields will cause to be prepared annual financial statements and an annual report as required by the Companies Act and the JSE Listings Requirements. Gold Fields will send by mail to the registered address of every shareholder a copy of the annual report and annual financial statements. Not later than three months after the first six months of its financial year, Gold Fields will mail to every shareholder an interim report for the previous six month period.
Amendments to Gold Fields’ Memorandum of Incorporation
The Gold Fields shareholders may, by the passing of a special resolution in accordance with the provisions of the Companies Act and the Gold Fields MOI, amend the Gold Fields MOI, including:
the creation of any class of shares;
the variation of any preferences, rights, limitations and other terms attaching to any class of shares;
the conversion of one class of shares into one or more other classes;
an increase in Gold Fields’ authorized share capital;
a consolidation of Gold Fields’ equity securities;
asub-division of Gold Fields’ equity securities; and/or
the change of Gold Fields’ name.
Variation of Rights
All or any of the rights, privileges or conditions attached to Gold Fields’ ordinary shares may be varied by a special resolution of Gold Fields passed in accordance with the provisions of the Companies Act and the Gold Fields MOI.
Distribution of Assets on Liquidation
In the event of a voluntary or compulsory liquidation, dissolution orwinding-up, the assets remaining after payment of all the debts and liabilities of Gold Fields, including the costs of liquidation, shall be dealt with by a
liquidator who may, with the sanction of a special resolution, among other things, divide among the shareholders any part of the assets of Gold Fields, and may vest any part of the assets of Gold Fields as the liquidator deems fit in trust for the benefit of shareholders. The division of assets is not required to be done in accordance with the legal rights of shareholders of Gold Fields. In particular, any class may be given preferential or special rights or may be partly or fully excluded.
Employee Share Scheme
The Companies Act permits the establishment of employee share schemes, whether by means of a trust or otherwise, for the purpose of offering participation therein solely to employees, including salaried directors, officers and other persons closely involved in the business of the company or a subsidiary of the company, either by means of the issue of shares in the company or by the grant of options for shares in the company.
Purchase of Shares
Gold Fields or any subsidiary of Gold Fields may, if authorized by special resolution by way of a general approval, acquire ordinary shares in the capital of Gold Fields in accordance with the Companies Act and the JSE Listings Requirements, provided among other things that:
the number of its own ordinary shares acquired by Gold Fields in any one financial year shall not exceed 20% of the ordinary shares in issue at the date on which this resolution is passed;
this authority shall lapse on the earlier of the date of the next annual general meeting or the date 15 months after the date on which the special resolution is passed;
the Board has resolved to authorize the acquisition and that Gold Fields and its subsidiaries, or the Group, will satisfy the solvency and liquidity test immediately after the acquisition and that since the test was done there have been no material changes to the financial position of the Group;
the price paid per ordinary share may not be greater than 10% above the weighted average of the market value of the ordinary shares for the five business days immediately preceding the date on which an acquisition is made;
the number of shares acquired by subsidiaries of Gold Fields shall not exceed 10% in the aggregate of the number of issued shares in Gold Fields.
Borrowing Powers
In terms of the provisions of Section 19(1) of the Companies Act, read together with Clause 4 of the Gold Fields MOI, the borrowing powers of the Company are unlimited.
Non-South African Shareholders
There are no limitations imposed by South African law or by the Memorandum of Incorporation of Gold Fields on the rights ofnon-South African shareholders to hold or vote Gold Fields’ ordinary shares.
Rights of Minority Shareholders and Directors’ Duties
The Companies Act provides instances in which a minority shareholder may seek relief from the courts if he, she or it has been unfairly prejudiced by the company.
In South Africa, a director of a company, when acting in that capacity, must exercise the powers and perform the functions of a director:
in good faith and for a proper purpose;
in the best interests of the company; and
with the degree of care, skill and diligence that may reasonably be expected of a person:
carrying out the same functions in relation to the company as those carried out by that director; and
having the general knowledge, skill and experience of that director.
Material Contracts
Additional Black Economic Empowerment Transactions
On August 5, 2010, Gold Fields announced a series of empowerment transactions to meet its 2014 Black Economic Empowerment equity ownership requirements. On November 2, 2010, the shareholders of Gold Fields approved these transactions at the General Meeting which included the establishment of an ESOP, the issue of approximately 600,000 Gold Fields shares to a BBBEE consortium, or BEECO, and BEECO’s subscription for a 10% holding in South Deep with a phase in participation over 20 years. On November 19, 2010, Gold Fields issued 13,525,394 shares to the ESOP, housed and administered by the Gold Fields Thusano Share Trust, thereby commencing the implementation of the ESOP transaction. The remaining empowerment transactions have been completed.
U.S.$70 million Ghana Credit Facility
Gold Fields Ghana and Abosso entered into a senior secured revolving credit facility agreement dated December 22, 2010, as amended and restated on May 6, 2014, pursuant to which The Standard Bank of South Africa Limited, or Standard Bank, agreed to make available to Gold Fields Ghana and Abosso, or the Ghana Borrowers, a senior secured revolving credit facility in a maximum aggregate principal amount of US$70,000,000, or the Original Ghana Facility.
With effect from October 28, 2016, the Original Ghana Facility was again amended and restated, or the U.S.$70 million Ghana Credit Facility. Under the facility each Ghana Borrower must apply all amounts borrowed by it under the facility towards general corporate purposes, working capital purposes and/or capital expenditure purposes, including the purchase of a yellow metal fleet.
Borrowings under this facility are guaranteed by the Ghana Borrowers. Borrowings under this facility are also secured by the registration of security over certain fleet vehicles owned by Gold Fields Ghana, or the Secured Assets. In addition, the lenders are noted as first loss payees under the insurance contracts in respect of the Secured Assets and are assigned the rights under the maintenance contracts between certain suppliers of the Secured Assets. This facility isnon-recourse to the rest of the Gold Fields group.
The facility bears interest at LIBOR plus a margin of 2.40% per annum. The Ghana Borrowers are required to pay a quarterly commitment fee of 1.00% per annum.
The final maturity date of the U.S.$70 million Ghana Credit Facility is May 6, 2017. The Ghana Borrowers intend to refinance the U.S.$70 million Ghana Credit Facility prior to the final maturity date.
The outstanding borrowings under this facility on December 31, 2016 and December 31, 2015 were U.S.$45.0 million and U.S.$45.0 million, respectively.
U.S.$200 million La Cima Credit Facility
On December 16, 2014, La Cima, entered into a revolving senior secured credit facility for up to U.S.$200 million, or the U.S.$200 million La Cima Credit Facility. Under this facility, the borrower must apply all amounts borrowed by it under the facility to refinance a then existing U.S.$200 millionnon-revolving senior secured term loan, to finance its working capital requirements and for general corporate purposes. The final maturity date of this facility is three years from the agreement date. On the agreement date, the total commitments under this facility amounted to U.S.$75.0 million. On January 19, 2015, total commitments were increased by U.S.$75.0 million to U.S.$150.0 million.
The loan bears interest at LIBOR plus a margin of 1.625% per annum. Where the utilization under this facility is less than or equal to U.S.$66,666,666, a utilization fee of 0.075% per annum will be payable on the amount of utilizations. Where the utilization under this facility is greater than U.S.$66,666,666 and less than or equal to U.S.$133,333,333, a utilization fee of 0.15% per annum will be payable on the amount of utilizations. Where the utilization under this facility is greater than U.S.$133,333,333, a utilization fee of 0.25% per annum will be payable on the amount of utilizations. Such utilization fee is payable quarterly in arrears.
The borrower is required to pay a quarterly commitment fee of 0.65% per annum on the undrawn amount.
Borrowings under the U.S.$200 million La Cima Credit Facility are secured by first-ranking assignments of all rights, title and interest in all of La Cima’s concentrate sale agreements. In addition, the offshore and onshore collection accounts of La Cima are subject to an account control agreement and a first-ranking charge in favor of the lenders. This facility isnon-recourse to the rest of the Gold Fields Group.
The outstanding balance under U.S.$200 million La Cima Credit Facility at December 31, 2016 was U.S.$82.0 million, compared to U.S.$42.0 million on December 31, 2015.
At December 31, 2015, La Cima did not meet certain covenants specified in the revolving senior secured credit facility agreement. The lenders subsequently waived their rights and entitlements arising from the failure of La Cima to meet the specific covenants.
R1.0 billion Rand Revolving Credit Facilities
In 2013, GFO and GFIJVH entered into two revolving credit facilities with Standard Bank and RMB, respectively. The Group utilized uncommitted loanpurpose of these facilities from some of the major banksis to fund the capital expenditure and general corporate and working capital requirements of the South African operations.
These facilities have no fixedThe salient terms are short-term in nature and interest rates are market related. Borrowings underof these facilities are guaranteed by Gold Fields.could be summarized as follows:
The outstanding borrowings of Gold Fields under these facilities at December 31, 2014 were U.S.$65.2
a R500.0 million (December 31, 2013: U.S.(U.S.$46.533.1 million).
R1.0 billion Long-Term Revolving Credit Facilities
GFO and GFIJVH, or the Borrowers, revolving credit facility entered into various revolving credit facilitiesby the borrowers and Standard Bank on December 20, 2013, bearing interest at JIBAR plus a margin of 2.75% per annum, with some of the major banks with three-year tenors. The purpose of the facilities is to finance capital expenditure, general corporate and working capital requirements.
The Borrowers are required to pay a semi-annual commitment fee of between 1% and 1.05% per annum on the undrawn and uncanceled amounts of the facilities, calculated and payable semi-annually in arrears.
In summary, the facilities are:
a R500.0 million (U.S.$43.3 million) revolving credit facility, entered into on June 19, 2013 and maturing on June 19, 2016 at JIBAR plus 2.5%, or the RMBStandard Bank RCF; and
a R500.0 million (U.S.$43.333.1 million) revolving credit facility entered into by the borrowers and RMB on December 20,June 19, 2013, and maturing on December 20, 2016bearing interest at JIBAR plus 2.75%,a margin of 2.50% per annum, with a semi-annual commitment fee of 1% per annum on the undrawn and uncanceled amounts of the facility, or the Standard Bank Facility.RMB RCF.
Borrowings under these facilities arewere guaranteed by Gold Fields, GFO, GFH,GFIJVH, Orogen, and GFIJVH.
These facilities were unutilised during the year ended December 31, 2013.Gold Fields Holdings Company (BVI) Limited, or GF Holdings.
The outstanding balance underRMB RCF and the facilities atStandard Bank RCF matured on June 19, 2016 and December 31, 2014 was R250.0 million (US$21.6 million).20, 2016 respectively.
U.S.$1 billion Notes Issue
On September 30, 2010, Orogen announced the issue of U.S.$1,000,000,000 4.875% guaranteed Notesnotes due October 7, 2020, issued October 7, 2010. TheGold Fields, GFO, GF Holdings and Sibanye Gold, or the Guarantors, on a joint and several basis, unconditionally and irrevocably guaranteed the payment of all amounts due in respect of the Notes was unconditionally and irrevocably guaranteed by the Guarantors on a joint and several basis.U.S.$1 billion Notes. The U.S.$1 billion Notes and guarantees constitute direct, unsubordinated and unsecured obligations of Orogen and the Guarantors, respectively, and rank equally in right of payment among themselves and with all other existing and future unsubordinated and unsecured obligations of Orogen and the Guarantors, respectively. With effect from April 24, 2015, the noteholders released Sibanye Gold as a Guarantor pursuant to a consent solicitation process.
Gold Fields used the net proceeds of the offering of the U.S.$1 billion Notes to repay certain existing indebtedness of the Group and for general corporate purposes.
EachOn February 19, 2016, GFA, a wholly-owned subsidiary of Gold Fields, and the other Guarantors have entered intoannounced an indemnity agreement (“the Indemnity Agreement”) in favor of Sibanye Gold in orderoffer to indemnify Sibanye Gold, with effect from the Spin-off Date, against any loss caused to Sibanye Gold in circumstances where Sibanye Gold is required to make a payment to noteholders or the trusteepurchase U.S.$200.0 million of the U.S.$1 billion Notes by virtueat discounts of its guarantee17% to the original value. Gold Fields accepted for purchase an aggregate principal amount of the U.S.$1 billion Notes (whether such loss is made priorequal to or after the Spin-off Date or whether the circumstances giving rise to such loss arose prior to or after such date). The Indemnity Agreement will remainU.S.$147.6 million at a purchase price of U.S.$880 per U.S.$1,000 in place for as long as Sibanye Gold’s guarantee obligations under the Notes remain in place, which is the redemption dateprincipal amount of the U.S.$1 billion Notes. Gold Fields intends to hold the U.S.$1 billion Notes unless Sibanye Gold is released as a guarantor by the trustee of the Notes.
On March 12, 2015, Orogen launched the Consent Solicitation. A meeting of Note holders seeking to approve the Consent Solicitationacquired until their maturity date on October 7, 2020. The outstanding balance under this facility on December 31, 2016 was held on April 7, 2015 and was adjourned due to lack of a quorum to April 22, 2015. There can be no guarantee that the Consent Solicitation will be approved and that Sibanye Gold will be released as Guarantor of the Notes. If the Consent Solicitation is not approved, Sibanye Gold wlil continue to be a Guarantor of the Notes and the Indemnity Agreement will remain in place.U.S.$846.4 million.
U.S.$1,510 million Term Loan and Revolving Credit Facility
OnOrogen, GFO and GFIJVH entered into a term loan and revolving credit facility agreement dated November 28, 2012, Orogen, GFOas amended and GFI Joint Venture Holdings Proprietary Limited,restated on January 30, 2013 and as further amended and restated on July 22, 2013, or GFIJVH,the Original U.S.$ Facility. Pursuant to the Original U.S.$ Facility a syndicated bank group, agreed to make available to the borrowers certain credit facilities in the aggregate amount of U.S.$1.44 billion.
On June 18, 2014, the Original U.S.$ Facility was again amended and restated, or together the Borrowers, entered intoU.S.$1,510 million Term Loan and Revolving Credit Facility. Under this facility, the lenders have made a US$120 million term loan (Facility A) and two revolving credit facilities of US$720 million (Facility B) and US$670 million (Facility C) each available to the borrowers.
The outstanding balance under the U.S.$9001,510 million Term Loan and Revolving Credit Facility or the U.S.$900 million facility. The U.S.$900 million facility comprises a U.S.$450 million three-year term loan tranche, or Facility A, and a U.S.$450 million five-year revolving tranche, or Facility B. In addition to the U.S.$900 million facility, the Borrowers entered into a U.S.$600 million bridge loan facility, or the U.S. Dollar Bridge Facility. The U.S. Dollar Bridge Facility had a 21-month maturity.
The purpose of the U.S.$900 million facility was to refinance the U.S.$1 billion syndicated revolving credit facility and the U.S.$500 million syndicated revolving credit facility on the Spin-off date and for general corporate and working capital purposes. The final maturity dates of Facility A and Facility B are November 28, 2015 and November 28, 2017, respectively, with the U.S. Dollar Bridge Facility maturing on August 28, 2014.
Subsequent to entering into the U.S.$900 million facility, the facility was syndicated to a wider bank group and received an oversubscription which allowed the Borrowers to increase the facility amount to U.S.$1,440 million on January 30, 2013, or the U.S.$1,440 million facility. Accordingly, the amounts of Facility A and Facility B both equaled U.S.$720 million. As a result of this oversubscription, the Borrowers canceled the U.S. Dollar Bridge Facility on January 30, 2013.
On July 22, 2013, the agreement was amended and Facility A was decreased to U.S.$100 million while a third U.S.$620 million revolving tranche, or Facility C, was added. Facility C matures on November 28, 2015.
On June 18, 2014, the agreement was amended and Facility A was increased to U.S.$120 million while Facility C was increased to U.S.$670 million. US$75 million of Facility A matures on November 28, 2015 and the remaining portion of U.S.$45 million matures on November 28, 2017. Facility C matures on November 28, 2017.
Borrowings under Facility A bear interest at LIBOR plus an initial margin of 2.45% per annum, Facility B at LIBOR plus an initial margin of 2.25% per annum and borrowings under Facility C at LIBOR plus an initial margin of 2.00%. The initial margins detailed above are based on the current long term credit rating assigned to Gold Fields and could either increase or decrease depending on changes in the long term credit rating of Gold Fields.
Where the utilization under Facility B is less than or equal to 33 1/3%, a utilization fee of 0.20% per annum will be payable on the amount of utilizations. Where the utilization under Facility C is greater than 33 1/3% and less than or equal to 66 2/3%, a utilization fee of 0.40% per annum will be payable on the amount of utilizations. Where the utilization under Facility C is greater than 66 2/3%, a utilization fee of 0.60% per annum will be payable on the amount of utilizations. Such utilization fee is payable quarterly in arrears. The borrowers are required to pay a quarterly commitment fee of 0.90% per annum under Facility B on the undrawn amount.
Where the utilization under Facility C is less than or equal to 33 1/3%, a utilization fee of 0.15% per annum will be payable on the amount of utilizations. Where the utilization under Facility B is greater than 33 1/3% and less than or equal to 66 2/3%, a utilization fee of 0.30% per annum will be payable on the amount of utilizations. Where the utilization under Facility B is greater than 66 2/3%, a utilization fee of 0.45% per annum will be payable on the amount of utilizations. Such utilization fee is payable quarterly in arrears. The borrowers are required to pay a quarterly commitment fee of 0.80% per annum under Facility C on the undrawn amount.
The outstanding balance under this facility at December 31, 20142015 was $626.0 million (December 31, 2013: $773.5U.S.$724.0 million.)
Borrowings under the U.S.$1,510 million facility areTerm Loan and Revolving Credit Facility were guaranteed by Gold Fields, GF Holdings, Orogen, GFO and GFIJVH.
On June 13, 2016, the outstanding balance of U.S.$630.0 million under the U.S.$1,510 million Term Loan and Revolving Credit Facility was refinanced by the US$1,290,000,000 Credit Facilities Agreement, as detailed below. The U.S.$1,510 million Term Loan and Revolving Credit Facility was also canceled on June 13, 2016.
R1,500 million Nedbank Revolving Credit Facility
On March 1, 2013, Nedbank, GFIJVH and GFO entered into a R1,500 million Revolving Credit Facility. The purpose of the facility is to fund Gold Fields’ capital expenditure and general corporate and working capital requirements.requirements of the Gold Fields group. The tenor of the facility is five years. The final maturity date of this facility is March 7, 2018.
The facility bears interest at JIBAR plus a margin of 2.50% per annum. The borrowers are required to pay a commitment fee of 0.85% per annum every six months.
The outstanding balance under this facility at December 31, 2014 was $129.8 million (December 31, 2013: $145.1 million).
Borrowings under the facility are guaranteed by Gold Fields, GFO, GFH, Orogen and GFIJVH.
Contractual obligations and commitments asThe outstanding borrowings under this facility at December 31, 20142016 and December 31, 2015 were nil and nil, respectively.
U.S.$1,290 million Credit Facilities Agreement
On June 6, 2016, The Bank of Tokyo-Mitsubishi UFJ, Ltd., GFIJVH, GFO, Orogen, Gold Fields Ghana Holdings (BVI) Limited, or GF Ghana, and certain wholly owned subsidiaries of Gold Fields entered into a U.S.$1,290 million Credit Facilities Agreement, or the U.S.$1,290 million Credit Facilities Agreement. The U.S.$1,290 million Credit Facilities Agreement comprises of a:
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| Total | Less than 12 months | 12-36 months | 36-60 months | After 60 months | ||||||||||||||||
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Long-term debt | ||||||||||||||||||||
Notes Issue | ||||||||||||||||||||
Capital | 1,000.0 | — | — | — | 1,000.0 | |||||||||||||||
Interest | 281.8 | 48.8 | 97.5 | 97.5 | 38.0 | |||||||||||||||
La Cima revolving senior secured credit facility | ||||||||||||||||||||
Capital | 42.0 | — | 42.0 | — | — | |||||||||||||||
Interest | 2.3 | 0.8 | 1.5 | — | — | |||||||||||||||
U.S.$1,510 million term loan and revolving credit facility | ||||||||||||||||||||
Capital | 626.0 | 75.0 | 551.0 | — | — | |||||||||||||||
Interest | 43.9 | 16.2 | 27.7 | — | — | |||||||||||||||
U.S.$70 million senior secured revolving credit facility | ||||||||||||||||||||
Capital | 35.0 | — | 35.0 | — | — | |||||||||||||||
Interest | 2.1 | 0.9 | 1.2 | — | — | |||||||||||||||
R1,500 million Nedbank revolving credit facility | ||||||||||||||||||||
Capital | 129.8 | — | — | 129.8 | — | |||||||||||||||
Interest | 35.3 | 11.1 | 22.2 | 2.0 | — | |||||||||||||||
R500 million Rand Merchant Bank revolving credit facility | ||||||||||||||||||||
Capital | 21.6 | — | 21.6 | — | — | |||||||||||||||
Interest | 2.8 | 1.9 | 0.9 | — | — | |||||||||||||||
Short term Rand credit facilities | ||||||||||||||||||||
Capital | 65.2 | 65.2 | — | — | — | |||||||||||||||
Interest | 4.9 | 4.9 | — | — | — | |||||||||||||||
Operating lease obligations—building | 7.4 | 3.1 | 3.5 | 0.8 | — | |||||||||||||||
Other long-term obligations | ||||||||||||||||||||
Environmental obligations—undiscounted(1) | 390.8 | — | 5.3 | 23.8 | 361.7 | |||||||||||||||
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Total contractual obligations | 2,690.9 | 227.9 | 809.4 | 253.9 | 1,399.7 | |||||||||||||||
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U.S.$380 million Term Loan (Facility A) maturing June 2019;
U.S.$360 million RCF (Facility B) maturing June 2019; and
Note:U.S.$550 million RCF (Facility C) maturing June 2021;
The facility bears interest at LIBOR plus a margin as follows:
the margin in relation to each Facility A Loan is 2.50 per cent. per annum;
the margin in relation to each Facility B Loan is 2.20 per cent. per annum; and
the margin in relation to each Facility C Loan is 2.45 per cent. per annum;
based on the current long-term credit rating of Gold Fields. The margin shall be adjusted to the following percentages dependent on the long-term credit rating assigned from to time to Gold Fields by either Moody’s or Standard & Poor’s:
Rating (Standard & | Rating (Moody’s) | Facility A Margin p.a. | Facility B Margin p.a. | Facility C Margin p.a. | ||||
BBB | Baa2 | 1.75% | 1.45% | 1.70% | ||||
BBB- | Baa3 | 2.00% | 1.70% | 1.95% | ||||
BB+ | Ba1 | 2.50% | 2.20% | 2.45% | ||||
BB | Ba2 | 3.00% | 2.70% | 2.95% | ||||
BB- | Ba3 | 3.50% | 3.20% | 3.45% |
The borrowers are required to pay a quarterly commitment fee of 35% of the applicable margin per annum on the undrawn and uncanceled amounts of the facilities.
The borrowers must apply all amounts borrowed by them under the U.S.$1,290 million Credit Facilities Agreement towards, firstly, (i) repayment of the U.S.$1,510 million Term Loan and Revolving Credit Facility and thereafter (ii) their general corporate and working capital purposes.
Borrowings under the U.S.$1,290 million Credit Facilities Agreement are guaranteed by Gold Fields, Orogen, GF Holdings, GF Ghana, Gruyere Holdings Pty Ltd, or Gruyere Holdings, GFO and GFIJVH.
The outstanding borrowings under U.S.$1,290 million Credit Facilities Agreement at December 31, 2016 was U.S.$658.5 million.
R500 million ABSA Bank Revolving Credit Facility
Effective March 31, 2017, ABSA Bank Limited, GFIJVH, GFO and certain wholly owned subsidiaries of Gold Fields entered into a R500 million Revolving Credit Facility. The purpose of the facility is to fund capital expenditure and general corporate and working capital requirements of the Gold Fields group. The tenor of the facility is six years. The final maturity date of this facility is March 31, 2020.
The facility bears interest at JIBAR plus a margin of 2.55% per annum based on the current long-term credit rating of Gold Fields.
The margin shall be adjusted to the following percentages dependent on the long-term credit rating assigned from to time to Gold Fields by either Moody’s or Standard & Poor’s:
Rating | Margin | |||
| (%) | ||||
BBB-/Baa3 | 2.05 | |||
BB+/Ba1 | 2.55 | |||
BB/Ba2 | 3.05 | |||
Other commercial commitments Guarantees(1) Capital expenditure Total commercial commitments Amounts of commitments expiring by period Total Less than
12 months 12-36
months 36-60
months After 60
months ($ millions) 0.1 0.1 — — — 120.5 120.5 — — — 120.6 120.6 — — —
The borrowers are required to pay a commitment fee of 35% of the applicable margin per annum on the undrawn portion of the facility every six months.
Notes:Borrowings under the facility are guaranteed by Gold Fields, Orogen, GF Holdings, GF Ghana, Gruyere Holdings, GFO and GFIJVH.
Working capitalR500 million Standard Bank Revolving Credit Facility
Management believes thatEffective March 31, 2017, Standard Bank, GFIJVH, GFO and certain wholly owned subsidiaries of Gold Fields’Fields entered into a R500 million Revolving Credit Facility. The purpose of the facility is to fund capital expenditure and general corporate and working capital resources, by wayrequirements of internal sources and banking facilities, are sufficient to fund Gold Fields’ currently foreseeable future business requirements.
Off balance sheet items
At December 31, 2014,the Gold Fields had no material off balance sheet items.group. The tenor of the facility is six years. The final maturity date of this facility is March 31, 2020.
The facility bears interest at JIBAR plus a margin of 2.75% per annum.
The borrowers are required to pay a commitment fee of 1.05% per annum on the undrawn portion of the facility every six months.
Borrowings under the facility are guaranteed by Gold Fields, Orogen, GF Holdings, GF Ghana, Gruyere Holdings, GFO and GFIJVH.
Recent Developments See “Information on the Company— Trend and Outlook Theall-in-sustaining cost for the Group is Gold Fields plans to embark on a year of reinvestment in fiscal 2017 with the focus on new growth and development projects, and to target both sustaining and growing free cash flow. Apart from the growth invested in South Deep, three other major projects namely the Damang Reinvestment Plan, the Gruyere Gold Project and the Salares Norte project require significant investment. Growth expenditure at South Deep is As a result of the above, AIC for the Group is planned to increase significantly to between U.S.$1,170 per ounce to U.S.$1,190 per ounce. Group capital expenditure for the year is planned at U.S.$Overview—Developments since December 31, 2013”2015”.In fiscal 2015, Gold Fields expects the trends discussed in “—Overview” to continue to have an impact on the business going forward.The trend and outlook below are based on management accounts, which are prepared in accordance with International Financial Reporting Standards.GoldAttributable equivalent gold production for the Group for fiscal year ending December 31, 20152017 is expected to be approximately 2.2between 2.10 million attributableounces and 2.15 million ounces, unchanged from the updated guidance provided in fiscal 2016. The Australian operations are expected to produce around 910,000 ounces. Cerro Corona’s gold equivalent ounces. production of around 290,000 ounces is higher than 2016 with the increase mainly due to the positive impact of the higher copper/gold price ratio. Lower production is expected at Damang given the reinvestment currently underway and South Deep is expected to increase production to around 9,800 kilograms (315,000 ounces).estimated atexpected to be between U.S.$1,0551,010 per ounce and total all-in costU.S.$1,030 per ounce.estimatedplanned to increase to R287 million (U.S.$20 million) in fiscal 2017 (2016: R115 million/U.S.$8 million). In fiscal 2017, U.S.$120 million will be invested in future growth at Damang, while the A$153 million (U.S.$112 million) is planned to be spent on the development of Gruyere. In Chile, Salares Norte received water rights and the project is on track to complete a prefeasibility study in the second half of fiscal 2017. The plan is to increase expenditure to U.S.$64 million at Salares Norte in fiscal 2017 (2016: U.S.$39 million).1,075 per ounce.870 million. It includes U.S.$120 million at Damang and A$153 million (U.S.$112 million) for Gruyere, as well as R287 million (U.S.$20 million) at South Deep. These estimates are based on an averageexpectations assume exchange raterates of R11.50 per R/U.S.$1.00: 14.14 and A$/U.S.$0.80 per A$1.00.The above is an estimate subject to change based on a number of factors. For further information on these factors, see “Forward-looking Statements” and “Risk Factors”. The estimated financial information has not been reviewed and reported on by Gold Fields’ auditors.: 0.73.
ITEM 6: DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES
Directors
Gold Fields’ directors and their ages and positions are:
Name | Age | Position | Term Expires(1) | |||||||
Cheryl A. Carolus | Non-executive Chair | May | ||||||||
Nicholas J. Holland | Executive Director and Chief Executive Officer | May 2017 | ||||||||
Paul A. Schmidt | Executive Director and Chief Financial Officer | May 2017 | ||||||||
| Non-executive Director | May 2017 | ||||||||
| Non-executive Director | May | ||||||||
Terence P. Goodlace(4) | 57 | Non-executive Director | May 2017 | |||||||
Carmen Letton(5) | 51 | Non-executive Director | May 2017 | |||||||
Richard P. Menell | Non-executive Director and Deputy Chair | May | ||||||||
| ||||||||||
Donald M. J. Ncube | Non-executive Director | May | ||||||||
| Non-executive Director | May | ||||||||
Yunus G.H. Suleman(7) | 59 | Non-executive Director | May 2017 | |||||||
Gayle M. Wilson(8) | 72 | Non-executive Director | May 2019 | |||||||
Note:Notes:
| (1) | Terms expire on the date of the annual general meeting in that |
| (2) | Appointed asNon-executive Director on August 1, 2016. |
| (3) | Appointed asNon- executive Director on September 1, 2016. |
| (4) | Appointed asNon-executive Director on July 1, 2016. |
| (5) | Appointed asNon-executive Director on May 1, 2017. |
| (6) | Appointed as aNon-executive Director on February 1, 2016. |
| (7) | Appointed asNon-executive Director on September 1, 2016. |
| (8) | Scheduled to retire on May 24, 2017. |
Directors and Executive Officers
The Memorandum of Incorporation of Gold Fields provides that the Board must consist of no less than four and no more than 15 directors at any time. The Board currently consists of two executive directors and seventen non-executive directors, all of whom are independent.
The Memorandum of Incorporation of Gold Fields provides that the longest serving one-third of all directors (including executive directors) must retire from office at each annual general meeting of Gold Fields. The first to retire are those directors appointed as additional members of the Board during the year, followed by the longest serving members. Retiring directors normally make themselves available forre-election and arere-elected at the annual general meeting at which they retire. The number of directors serving must at all times be less thanone-half of the total number of directors in office. Gold Fields’ current executive directors are appointed to their positions as directors by contract.
According to the Memorandum of Incorporation, the Board is required to meet at least four times a year and beyond that, may meet as it sees fit and setfit. The Board sets its own policies for adjourning and otherwise regulating meetings. Any director may call a meeting at any time by requesting the company secretary to convene a meeting. The Memorandum of Incorporation further provides for the following:
if a Director has a personal financial interest in a matter to be considered at a meeting of the Board, that Director is obliged to disclose that interest, must leave the meeting after making that disclosure and must not take part in the consideration of the matter. While absent from such meeting, the interested Director will nevertheless be regarded as being present for the purposes of determining a quorum, but will not be regarded as being present for the purpose of determining whether a resolution has sufficient support to be adopted. However, a Director who owns ordinary shares may vote his ordinary shares at a general meeting of shareholders in a transaction in which the Director is interested;
must not take part in the consideration of the matter. While absent from such meeting, the interested Director will nevertheless be regarded as being present for the purposes of determining a quorum, but will not be regarded as being present for the purpose of determining whether a resolution has sufficient support to be adopted. However, a Director who owns ordinary shares may vote his ordinary shares at a general meeting of shareholders in a transaction in which the Director is interested; |
a director may not vote as a director to determine his own compensation. The shareholders in a general meeting determine the fees fornon-executive directors from time to time. Any additional compensation, including compensation for additional services performed by the director for Gold Fields’ business or for other positions in Gold Fields or its subsidiaries, must be determined by a quorum of directors whose compensation would not be affected by the decision; and
the directors are not required to hold shares in Gold Fields, although a shareholding qualification may be imposed at any meeting of the shareholders.
The Memorandum of Incorporation does not provide for a mandatory retirement age for directors. However, Gold Fields’ Board charter specifies the retirement age to be 72 years with ana discretionary extension of 12 months in the year a director turns 72 years of age.
Some of Gold Fields’ executive officers, executive directors and executivenon-executive directors are members of the boards of directors of various of its subsidiaries.
Under Section 303A.11 of the New York Stock ExchangeNYSE Company Manual, or the NYSE Listing Standards, foreign private issuers such as Gold Fields must disclose any significant ways in which their corporate governance practices differ from those followed by U.S. listed companies under the NYSE Listing Standards. Disclosure of the significant ways in which Gold Fields’ corporate governance practices differ from practices followed by U.S. companies listed on the NYSE can be found in Item 16G of this report.
The business address of all the directors and executive officers of Gold Fields is 150 Helen Road, Sandown, Sandton, 2196 South Africa, the address of Gold Fields’ head office.
Executive Directors
Nicholas J. HollandBCom, BAcc, Witwatersrand; CA (SA)
Executive Director and Chief Executive Officer. Mr. Holland has been an Executive Director of Gold Fields since April 14, 1998 and became Chief Executive Officer on May 1, 2008. He served as Executive Director of Finance from April 1997. On April 15, 2002, his title changed to Chief Financial Officer until April 30, 2008. Mr. Holland has more than 3537 years’ experience in financial management and over 2527 years of experience in the mining industry. Prior to joining Gold Fields, he was Financial Director and Senior Manager of Corporate Finance of Gencor Limited and a Director of Rand Refinery from July 12, 2000 until September 30, 2008. He remained an alternate director until February 2013.
Paul A. SchmidtBCom,Witwatersrand; BCompt (Hons), UNISA; CA (SA)
Executive Director and Chief Financial Officer. Mr. Schmidt was appointed Chief Financial Officer on January 1, 2009 and joined the Board on November 6, 2009. Prior to this, Mr. Schmidt was acting Chief Financial Officer from May 1, 2008. Prior to this appointment, MrMr. Schmidt was financial controller for Gold Fields from April 1, 2003. He has more than 1921 years’ experience in the mining industry. Mr. Schmidt holds no other directorships.
Non-executive Directors
Cheryl A. CarolusBA Law; Bachelor of Education, University of the Western Cape; Honorary Doctorate in Law, University of Cape Town
Chair of the Board. Ms. Carolus has been a director of Gold Fields since March 10, 2009. She was appointedNon-executive Chair effective February 14, 2013. Ms. Carolus is an Executive Chairperson of Peotona Group Holdings, which has diverse interests in mining. In 2009, she was appointed Chairperson of the Board of South African Airways and served on a number of listed and unlisted companies. Ms. Carolus has previously held senior leadership positions in the liberation movement in South Africa and in the ANC. She has served as Deputy Secretary General under Nelson Mandela, and helped to negotiate the new South African constitution and coordinate the drafting of post-apartheid ANC policy. She served as South Africa’s High Commissioner to the United Kingdom from 1998 to 2001 and was the CEO of SA Tourism from 2001 to 2004. She was Chairperson of South African National Parks Board for six years and currently serves on the boards of other public and private companies andnot-for-profit organizations, including the International Crisis Group, Soul City, World Wildlife Fund Investec Limited, Investec plc(South Africa and De Beers Consolidated Mines Ltd.internationally), The British Museum (appointed by HM Queen Elizabeth), and is Chair Person of the SA Constitution Hill Education Trust. She also works with NGOs focused on young people at risk and conflict prevention. She was awarded an honorary doctorate in law from the University of Cape Town in 2004 for her contribution to freedom and human rights. She was awarded the French National Order of Merit by Elisabeth Barbier, the French Ambassador to South Africa, on March 8, 2014.
Alhassan AndaniBSc Agriculture, University of Ghana; MA Banking and Finance, Finafrica Institute, Italy
Mr. Andani was appointed as a director of Gold Fields on August 1, 2016. He is currently Chief Executive and Executive Director of Stanbic Bank Ghana; the Board Chairman of the Ghana CSIR (Council for Scientific & Industrial Research) and a director of SOS Villages Ghana and has held other corporate directorships in the past.
Peter J. BacchusMA Economics, Cambridge University
Mr. Bacchus was appointed as a director of Gold Fields with effect from September 1, 2016. Mr. Bacchus is chairman of the independent merchant banking boutique, Bacchus Capital Advisers. He has acted as the global head of Mining and Metals, and is joint head of European Investment Banking at Investment Bank Jefferies, a position he held until 2016. Before this he served as global head of Mining and Metals at Morgan Stanley, and prior to that, he was head of Investment Banking, Industrials and Natural Resources at Citigroup. Mr. Bacchus has spent 25 years in investment and corporate banking with a focus on the global natural resources sector and is a member of the Institute of Chartered Accountants, England and Wales. He is also anon-executive director ofUK-listed mining group NordGold and a trustee of Space for Giants, an African-focused conservation charity.
Terence P. GoodlaceMA Business Administration, University of Wales; BCom, University of South Africa; NDip Witwatersrand Technikon
Mr. Goodlace was appointed as a director of Gold Fields with effect from July 1, 2016. Mr. Goodlace’s mining career commenced in 1977, spanning nearly 40 years of working with different organizations. He has previously served as both an Executive Vice-President and the Chief Operating Officer for Gold Fields, returning now to the Company to serve as an independentnon-executive director. He has experience serving as chief executive officer at Impala Platinum Holdings Limited and Metorex Limited. He served on the Impala Platinum Holdings Limited board for two years as an independentnon-executive director and four and a half years as an executive director. He spent three years as an executive director of Metorex Limited. Mr. Goodlace was also appointed as a non-executive director at Kumba Iron Ore on March 24, 2017.
Carmen Letton PhD in Mineral Economics (UQ) and Degree in Engineering (Mining—WASM)
Dr. Letton’s has been appointed to the Board effective May 1, 2017. She is a mining engineer and mineral economist (PhD) with 30 years of global mining exposure, working for major andmid-tier mining houses in senior management and leadership roles, with experience in operations, corporate strategy development,
engineering, asset and business development, continuous improvement, mergers and acquisitions. Currently, Dr. Letton is the Head—Open Pit Mining for the Technical and Sustainability Group in Anglo American. Dr. Letton has experience in large and medium sized projects in both the Australian and International mining environment; challenging operations leadership, complex technical roles; expertise in due diligence, corporate governance, risk management, corporate strategy and asset development. Core skills and accountabilities include operations executive general management and leadership of all key mine engineering faculties and associated technical services areas (Mine Engineering, Metallurgy, Geology).
Richard P. MenellBA (Hons), MA (Natural Sciences, Geology), Trinity College, Cambridge, United Kingdom; M.Sc. (Mineral Exploration and Management), Stanford University, California, United States of America
Mr. Menell was appointed Deputy Chair of the Board in August 2015 and has been a Director of Gold Fields since October 8, 2008. He has over 37 years’ experience in the mining industry. Previously, he has been the President and Member of the Chamber of Mines of South Africa, President and Chief Executive Officer of TEAL Exploration & Mining Inc., Executive Chairman of Anglovaal Mining Limited and Avgold Limited, Chairman of Bateman Engineering and Deputy Chairman of Harmony Gold Limited and African Rainbow Minerals. He is currently a director of Weir Group Plc and Rockwell Diamonds Inc., and Senior Advisor to Credit Suisse Securities Johannesburg, a director of Rockwell Diamonds Inc., the National Business Initiative and the Tourism Enterprise Partnership. Mr. Menell is a Trustee of Brand South Africa and a Council Member of Business Leadership South Africa. He is also Chairman of the City Year South Africa Citizen Service Organization, the Carrick Foundation and the Palaeontological Scientific Trust. Mr. Menell became a director of Sibanye Gold with effect from January 1, 2013.
Donald M. J. NcubeBA Economics and Political Science, Fort Hare University; Post Graduate Diploma in Labor Relations, Strathclyde University, Scotland; Graduate MSc Manpower Studies, University of Manchester, United Kingdom; Diploma in Financial Management; Honorary Doctorate in Commerce, University of the Transkei
Mr. Ncube was appointed a Director of Gold Fields on February 15, 2006. Previously, he was an alternate director of Anglo American Industrial Corporation Limited and Anglo American Corporation of South Africa Limited, a Director of AngloGold Ashanti Limited, as well asnon-executive chairman of South African Airways. He is currently the executive chairman of Badimo Gas (Pty) Ltd and Afro Energy.
Steven P. ReidBachelor of Applied Science in Mineral Engineering (Mining), South Australian Institute of Technology; MBA, Trium Global Executive NYU/LSE/HEC; Directors’ Education Program, Institute of Corporate Directors
Mr. Reid was appointed as a director of Gold Fields on February 1, 2016. He has over 40 years’ international mining experience and has held senior leadership roles in numerous countries. He has served as a director of Silver Standard Resources since January 2013 and a director of Eldorado Gold since May 2013. He served as chief operating officer of Goldcorp from January 2007 until his retirement in September 2012, and was Goldcorp’s executive vice president in Canada and the USA. Before joining Goldcorp, Steven spent 13 years at Placer Dome in numerous corporate, mine-management and operating roles. He also held leadership positions at Kingsgate Consolidated and Newcrest Mining, where he was responsible for the Asian and Australian operations.
Yunus G.H. SulemanBCom, University ofKwa-Zulu Natal; BCompt (Hons), University of South Africa,CA (SA)
Mr. Suleman was appointed as a director of Gold Fields with effect from September 1, 2016. Mr. Suleman serves as an independentnon-executive director of Liberty Holdings Ltd, Tiger Brands Ltd, Enactus SA (Chairman) and Albaraka Bank Ltd, and is the Global Treasurer of the World Memon Organization. He was previously Chair of KPMG South Africa.
Gayle M. WilsonBCom, BCompt (Hons), UNISA; CA (SA)
Mrs. Wilson was appointed a Director on August 1, 2008. She was previously an audit partner at Ernst & Young for 16 years where her main focus was on gold and platinum mining clients. In 1998, she was involved in AngloGold Ashanti Limited’s listing on the NYSE and in 2001 she took over as the lead partner on the global audit. Other mining clients during her career include Northam Platinum Limited, Aquarius Platinum Limited, Avmin (now African Rainbow Minerals Limited) and certain Anglo Platinum operations.
Former Officers
Kofi AnsahBSc (Mechanical Engineering) UST Ghana; MSc (Metallurgy) Georgia Institute of Technology, United States of America
Mr. Ansah was appointed a Director of Gold Fields in April 2004. He also serves as a Director of Ecobank (Ghana) Limited. From 1984 to 1999, Mr. Ansah was the Chief Executive of the Minerals Commission Accra in Ghana where his key responsibilities included advising on matters relating to the exploration and exploitation of all mineral resources in Ghana. Mr. Ansah is currently a Mining & Energy Consultant, in which capacity he provides general advice to mining and power companies and negotiates with service providers as well as regulatory authorities. Mr. Ansah retired from the Board with effect from December 31, 2016.
Alan R. HillB.Sc (Hons), M. Phil (Rock Mechanics), Leeds University, United Kingdom
MrMr. Hill joined the Board on August 21, 2009. From 2004 to 2007, MrMr. Hill was thenon-executive chairman of Alamos Gold Limited and, from 2005 to 2009, he held the position of President and CEO of Gabriel Resources Limited. Both companies are involved in gold exploration and development. MrMr. Hill’s mining career started on the Zambian Copperbelt, following which he joined Noranda, Inc. where he managed gold and nickel mines. He worked as a consultant for a short period, before joining Camflo Mines in 1981, which merged with Barrick Gold in 1984. MrMr. Hill joined Barrick as part of the merger and spent 19 years with Barrick and was instrumental in its considerable growth, having played a pivotal role in its various merger and acquisition initiatives through the years. He retired from Barrick in 2003 as its Executive Vice President, Development. He has served asNon-Executive Chairman of Teranga Gold Corporation since April 20, 2013, having previously served as its Executive Chairman since September 2012 as well as Chairman and CEO since the company was founded in October 2010.
Richard P. MenellBA (Hons), MA (Natural Sciences, Geology), Trinity College, Cambridge, United Kingdom; M.Sc. (Mineral Exploration and Management), Stanford University, California, United States of America
Mr. Menell has been a Director of Gold Fields since October 8, 2008. He has over 36 years’ experience inHill retired from the mining industry. Previously, he has been the President and Member of the Chamber of Mines of South Africa, President and Chief Executive Officer of TEAL Exploration & Mining Inc., Chairman of Anglovaal Mining Limited and Avgold Limited, Chairman of Bateman Engineering, Deputy Chairman of Harmony Gold Limited and African Rainbow Minerals and Executive Chairman of Anglovaal Mining Limited and Avgold Limited. He is currently a director of Weir Group Plc and Senior Advisor to Credit Suisse Securities Johannesburg, a director of Rockwell Diamonds Inc., the National Business Initiative and the Tourism Enterprise Partnership. Mr. Menell is a Trustee of Brand South Africa and a Council Member of Business Leadership South Africa. He is also Chairman of the City Year South Africa Citizen Service Organization, the Carrick Foundation and the Palaeontological Scientific Trust. Mr. Menell became a director of Sibanye GoldBoard with effect from January 1, 2013.December 31, 2016.
David N. MurrayBA Hons Econ; MBA (UCT)
Mr. Murray joined the Board on January 1, 2008. He has more than 3940 years’ experience in the mining industry and has been Chief Executive Officer of Rio Tinto Portugal, Rio Tinto Brazil, TVX Gold Inc., Avgold Limited and Avmin Limited. He also served as anon-executive Director of Ivernia, Inc.
Donald M. J. NcubeBA Economics and Political Science, Fort Hare University; Post Graduate Diploma in Labor Relations, Strathclyde University, Scotland; Graduate MSc Manpower Studies, University of Manchester, United Kingdom, Diploma in Financial Management; Honorary Doctorate in Commerce, University of Transkei
Mr. Ncube was appointed a Director of Gold Fields on February 15, 2006. Previously, he was an alternate Director of Anglo American Industrial Corporation Limited and Anglo American Corporation of South Africa Limited, a Director of AngloGold Ashanti Limited, as well as Non-Executive Chairman of South African Airways. He is currentlyMurray retired from the Executive Chairman of Badimo Gas (Pty) Ltd and the Managing Director of Vula Mining Supplies (Pty) Ltd.
Gayle M. Wilson BCom, BCompt (Hons); CA (SA)
Mrs. Wilson was appointed a Director on AugustBoard with effect from June 1, 2008. She was previously an audit partner at Ernst & Young for 16 years where her main focus was on mining clients. In 1998, she was involved in AngloGold Ashanti Limited’s listing on the NYSE and in 2001 she took over as the lead partner on the global audit. Other mining clients during her career include Northam Platinum Limited, Aquarius Platinum Limited, Anglovaal Mining Limited (now African Rainbow Minerals Limited) and certain Anglo Platinum operations.2016.
Executive Officers
Alfred Baku(48)(50) MSc (Mining Engineering), University of Mines and Technology, Statutory Mines Manager certificate, Ghana Mines Department of Minerals Commission, Executive Education, University of Virginia, Darden School of Business, USA and member of the Australian Institute of Mining Metallurgy (AusIMM)
Executive Vice President: West Africa. Mr. Baku has over two decades of mining experience, mostly in senior management positions at Gold Fields. Prior to joining Gold Fields, Alfred worked in Australia for Billiton and Ranger Minerals in production and mine planning engineering capacities. He joined the Damang Mine in 2002 as mine manager and a member of the senior management team. Alfred was appointed ExecutiveGeneral Manager of the Damang Mine in 2008, General Manager of the Tarkwa Mine in 2010, and subsequently, Vice President: West Africa effective March 1, 2013. PriorPresident of Operations for both mines. In 2013, Alfred was promoted to this appointment, Mr. Baku was Senior Vice President for Gold Fields West Africa, since August 1, 2013. He wasbecoming a member of the Vice President: Operations for Gold Fields Ghana from July 1, 2011 until August 1, 2013.Group’s Executive Committee. In 2008,February 2014, he became Executive Vice President and head of West Africa. As the first Ghanaian to be appointedVice
President of the General ManagerGhana Chamber of Damang OperationsMines’ Executive Council, Mr. Baku serves on the Advisory Board of the Ministry of Lands and subsequentlyNatural Resources. He is also a member of the Tarkwa mine’s General Manager in 2010.Australasian Institute of Mining and Metallurgy.
Ernesto BalarezoRichard J Butcher(47)(52) Diploma Coal Mining Engineering Advanced Rock Engineering Certificate Graduate Diploma in Mining Engineering (Mineral economics) MSc Industrial Management, BSc Industrial(Eng) Mining Engineering Texas A&M University, Management Studies, Wharton School of Business, Management Studies, Harvard University& CEng (UK) / FAusIMM (CP) WA First Class (Mine Managers) Cert No: 766 General Managers Course Cert—AGSM / UNSW
Executive Vice President: America.Technical. Mr. Balarezo joined Gold Fields effective March 11, 2013 as Executive Vice President: America. HeButcher has 22 years of professional30 years’ experience at industrial and mining companies with a focus on finance and operations. Prior to joining Gold Fields, Mr. Balarezo was the Vice-President: Operations of Hochschild Mining plc, or Hochschild. In this capacity, he was responsible for overseeing the Hochschild group’s six silver andin gold mining, obtained globally in companies that include Gencor, Anglo-American and Barrick. He was previously Head of Technical Services at MMG, the overseas arm of the Chinese CMC/CMN Corporation. This position involves being discipline head for all Technical functions, long-term planning and closure for the Group’s operations in Peru, ArgentinaAustralasia, Africa and Mexico, as well as its growth projects. He had 9,000 employees under his management. He joined Hochschild in 2007 as General Manager of the Mexican operation before being promoted to General Manager for Peru in 2008 and Vice President of Operations in 2010. Prior to Hochschild, Ernesto worked at other subsidiaries of the Hochschild group since 1997, including at Hochschild’s cement subsidiary, Cementos Pacasmayo, as deputy CEO.South America.
Naseem A. Chohan(54)(55) BE (Electronic), University of Limerick
Executive Vice President: Sustainable Development. Mr. Chohan was appointed to the position of Senior Vice President: Sustainable Development on September 13, 2010. Mr. Chohan was previously self-employed as a consultant to various companies and, prior to that, spent 25 years at De Beers. When he left DeBeersDe Beers in 2009, he was acting as Group Consultant, Sustainability and ECOHS (Environment, Community, Occupational Health and Hygiene and Safety).
Taryn L. Harmse(42)(44) BCom & LLB, University of Johannesburg, Advanced Corporate Law, I & II Certificate, University of Witwatersrand
Executive Vice-President: Group General Counsel. Ms. Harmse was appointed Executive Vice-President: Group General Counsel on May 1, 2014. Ms. Harmse was appointed as Assistant General Counsel and Company Secretary on August 1, 2013, and resigned from the position of Company Secretary on September 15, 2014. She previously served as Assistant General Counsel and Vice President, Group Legal. Before joining Gold Fields, Ms. Harmse was an Associate withworked at Linklaters LLP in London for a number of years having completed her articles at Hofmeyr Herbstein Gihwala (now DLA Cliffe Dekker Hofmeyr). She was admitted as an attorney to the High Court of South Africa in 2000.
Stuart J. Mathews (56),Master of Science (Geology) from University of Canterbury, New Zealand
Executive Vice-President: Australasia. Stuart Mathews is an international mining professional with 25 years’ experience having worked in Australia (Queensland, NSW, WA), Mexico and New Zealand. He has progressed through geology ranks to Geology Manager level and in the last 12 years worked in project development and general operations management to COO level. Stuart joined Gold Fields inmid-2013 initially at St. Ives, as then General Manager at Granny Smith Mine after which he became Vice President Operations: Australia. From February 1, 2017 Stuart took over the position of Executive Vice President: Australasia.
Brett J. Mattison(36)(39) BComm (Hons) Law, BAcc, University of Stellenbosch; Masters in Law, Higher Tax Diploma, University of Johannesburg; Exec. MBA (PLD), Harvard Business School
Executive Vice-President: Strategy, Planning and Corporate Development. Mr. Mattison was appointed Executive Vice-President: Strategy, Planning and Corporate Development effective May 1, 2013. He began his career with Gold Fields in 2001 as part of the Global Legal team providing commercial, legal and tax structuring advice in relation to various global transactions. He subsequently joined the Corporate Development team in 2005 where he worked for six years in South Africa, Peru and Australia until 2010. In late 2010, Mr. Mattison was appointed as the Country Manager of the Philippines tasked with the mandate of setting up Gold Fields’ activities in the Philippines. Most recently, he has been in the role of Vice President of Special Projects tasked with setting out the groundwork for the Gold Fields strategy sessions.
Nico Muller(48), BSC Mining Engineering, University of Pretoria
Executive Vice President: South Africa. Mr Muller joined Gold Fields as Executive Vice President: South Africa on October 1, 2014. Prior to joining Gold Fields, he was with Royal Bafokeng Platinum where he held the position of Chief Operating Officer since January 2009. He has extensive technical mechanized mining experience, having held various positions in the mining industry while employed at De Beers, Avgold and Two Rivers Platinum.
Avishkar Nagaser(31)(33), BBusSc Finance and Economics, University of KwaZulu-Natal
Executive Vice President: Investor Relations and Corporate Affairs. Mr. Nagaser joined Gold Fields as Executive Vice President: Investor Relations and Corporate Affairs in January 2015. Before joining Gold Fields, he was with Merrill Lynch from 2012 to 2014 and Macquarie from 2007 to 2012, where he held the position of gold and platinum equity research analyst.
Luis A. Rivera(51), Bachelor Degree in Geology, the Title of Geological Engineer, both by the Universidad de San Marcos and MBA studies at the Universidad Politecnica de Madrid, Spain
Executive Vice-President of the Americas Region for La Cima. Mr. Rivera joined Gold Fields in October 2016. Prior to joining Gold Fields, Mr. Rivera was, since 2014, the Vice-President of Operations for Las Bambas and before that, since 2013, was the General Manager of Copper Operations for Glencore Peru and, since 2012, Executive General Manager for all Xstrata Copper Operations in Peru. His career also includes 5 years as General Manager of the large Copper Tintaya and Antapaccay operations, as well as 11 year experience in the Xstrata Copper Operations of Minera Alumbrera, a large gold – copper operation in North Argentina, where he became Tech Services Manager after servicing as Chief Engineer and Senior Geologist. Mr. Rivera has over 28 years’ experience in the copper and gold mining industry, in large open pit copper project and operations in Peru and Argentina, including his direct involvement and leadership in the merge & acquisition of Falconbridge Inc. and BHP Tintaya S.A. by Xstrata Copper as well as the sale of Las Bambas Project by Glencore.
Lee-Ann N. Samuel(37)(39) BA Psychology and Honors Political Science, University of Johannesburg, Global Remuneration Practitioner (GRP), WorldatWork, USA
Executive Vice President: People and Organizational Effectiveness. Mrs. Samuel joined Gold Fields in 2009 as Vice President, Group Remuneration and Employee Benefits, and, effective March 1, 2013, she was promoted to Executive Vice President: People and Organizational Effectiveness. Lee-AnnMrs. Samuel has 1516 years of Human Resources experience in financial services, mining and telecommunications. Prior to joining Gold Fields, Mrs. Samuel worked as Head of People Development at Telkom Media, a subsidiary of Telkom, for three years. Her overall responsibility is to provide strategic direction for the Human Resources discipline at Gold Fields, including the development of Human Resource policies to ensure alignment with the strategy for the Group, as well as external trends and demands impacting on HR.
Former Executive Officers
Ernesto Balarezo(49) MSc Industrial Management, BSc Industrial Engineering, Texas A&M University, Management Studies, Wharton School of Business, Management Studies, Harvard University
Executive Vice President: America. Mr. Balarezo joined Gold Fields effective March 11, 2013 as Executive Vice President: America. He has 23 years of professional experience at industrial and mining companies with a focus on finance and operations. Prior to joining Gold Fields, Mr. Balarezo was the Vice-President: Operations of Hochschild Mining plc, or Hochschild. In this capacity, he was responsible for overseeing the Hochschild group’s six silver and gold mining operations in Peru, Argentina and Mexico, as well as its growth projects. He had 9,000 employees under his management. He joined Hochschild in 2007 as General Manager of the Mexican operation before being promoted to General Manager for Peru in 2008 and Vice President of Operations in 2010. Prior to Hochschild, Ernesto worked at other subsidiaries of the Hochschild group since 1997, including at Hochschild’s cement subsidiary, Cementos Pacasmayo, as deputy CEO. Mr. Balarezo resigned from Gold Fields with effect from June 30, 2016.
Nico J. Muller(49), BSC Mining Engineering, University of Pretoria
Executive Vice President: South Africa. Mr. Muller joined Gold Fields as Executive Vice President: South Africa on October 1, 2014. Prior to joining Gold Fields, he was with Royal Bafokeng Platinum where he held the
position of Chief Operating Officer since January 2009. He has extensive technical mechanized mining experience, having held various positions in the mining industry while employed at De Beers, Avgold and Two Rivers Platinum. Mr. Muller resigned from Gold Fields with effect from March 3, 2017.
Richard M. Weston(63)(64) FAIMM, CPEng, IEA. MSc Mining Geomechanics, UNSW; GDM, UCQ; BE (Civil), Sydney University
Executive Vice President: Head of Australasia. Mr. Weston was appointed to the position of Executive Vice President, Head of Australasia on May 1, 2010. He was formerly Senior Vice-President, Operations for Coeur d’Alene Mines Corporation, a gold and silver mining company based in Idaho in the United States. Before joining Coeur, he led the site team responsible for the development of Barrick Australia’s Cowal gold project and, prior to that, he headed operations at Rio Tinto Australia’s ERA Ranger and Jabiluka uranium mines in the Northern Territory.
Former Executive Officers
Michael D. Fleischer(54) BProc, University of Witwatersrand
Admitted as attorney of the High Court of South Africa in 1991, Advanced Taxation Certificate, University of South Africa. Executive Vice President, General Counsel. Mr. Fleischer was appointed to his current position
of Executive Vice President, General Counsel on November 1, 2006. Prior to his appointment, Mr. Fleischer was a partner in the corporate services department at Webber Wentzel, one of the leading South African law firms. Mr. Fleischer has a wide range of experience in mergers and acquisitions, commercial transactions, mining law and stock exchange transactions. In 2005, he was ranked as one of South Africa’s leading commercial lawyers by Chambers Global. Mr Fleischer resignedWeston retired from Gold Fields effective January 31, 2014.
Jan W. Jacobsz(53) BA, University of Johannesburg (previously Rand Afrikaans University)
Senior Vice President: Investor Relations and Corporate Affairs. Mr. Jacobsz was appointed Senior Vice President: Investor Relations & Corporate Affairs, as well as a member of the Group executive committee, on April 15, 2002. In addition Mr. Jacobsz held the portfolio of Group Sustainable Developmentwith effect from 2002 to 2005. Prior to that, Mr. Jacobsz was Senior Manager: Investor Relations & Corporate Affairs; Program Manager of Gold Fields’ Group Transformation Program at Gold Fields of South Africa Limited, and Administrator of the Gold Fields Foundation. Mr Jacobsz returned to North America effective December 1, 2014 to focus on and strengthen Gold Fields’ North American investor base.
Kgabo F. L. Moabelo(44) B.Admin (Honors) in Industrial Psychology, University of South Africa, MSc in Engineering Business Management, University of Warwick
Managing Executive: South Africa. Mr. Kgabo Moabelo was appointed Managing Executive: South Africa effective March 1, 2013. Prior to that, Mr. Moabelo had served as Executive Vice President, People and Organizational Effectiveness since August 1, 2011 after having joined Gold Fields on October 1, 2010 as Senior Vice President, Human Resources. Before joining Gold Fields, he was the HR Director for Africa and Levant at Cisco Systems, the IT Group from 2008 to 2010. Prior to Cisco Systems, he was the Human Resources Director for Standard Bank overseeing the Global Personal and Business Banking, Credit and Support Services from 2005 to 2008. Mr Moabelo has extensive HR experience within the mining and energy industries, having also worked for Anglo Platinum between 1992 and 2005 and Eskom, respectively. Mr Moabelo resigned from Gold Fields on July 31, 2014.February 28, 2017.
Company Secretary
Lucy M. M. Mokoka(43)(45) BJuris, University of Durban-Westville and LLB degree, University of Pretoria
Company Secretary. Ms. Lucy Mokoka was appointed Company Secretary of Gold Fields Limited on September 16, 2014. Prior to joining Gold Fields, Ms. Mokoka was General Manager: Company Secretary, for MTN South Africa (Pty) Ltd from October 1, 2010 to September 15, 2014 and Director: Company Secretarial at the Standard Bank between January 2009 and December 2009. Ms. Mokoka is an admitted attorney and has held various roles as a Company Secretary and Legal Advisor. Her career includes roles as Company Secretary for Ithala Limited, Tongaat-Hulett and Standard Bank. She has also acted as legal advisor to the South African Revenue Service and the State Attorney’s office.
Board of Directors’ Committees
In order to ensure good corporate governance, the Board has formed an Audit Committee, a Risk Committee, a Remuneration Committee, a Nominating and Governance Committee, a Safety, Health and Sustainable Development Committee, a Capital Projects Control and Review Committee and a Social, & Ethics and Transformation Committee. All the committees are composed exclusively of independentNon-executive Directors. All committees are chaired by an independentNon-executive Director. The remuneration ofNon-executive Directors for their service on the various committees has beenwas approved byat the shareholders.annual general meeting in May 2016.
The Audit Committee monitors and reviews Gold Fields’ accounting controls and procedures, including the effectiveness of the Group’s information systems and other systems of internal control; the effectiveness of the internal audit function; reports of both external and internal auditors; quarterly reports, the Form20-F, annual report and the annual financial statements; the accounting policies of the Group and any proposed revisions
thereto; external audit findings, reports and fees, and the approval thereof;of fees; and compliance with applicable legislation and requirements of regulatory authorities and Gold Fields’ Code of Ethics.Conduct. The current membership of the Audit Committee is as follows:
Gayle M. Wilson (chair)
Alhassan Andani
Peter J. Bacchus
Richard P. Menell
Donald M. J. Ncube
Richard
Yunus G. H. Suleman
The Risk Committee oversees the integrity and effectiveness of risk management processes as they relate to the Board and the boards of Gold Fields’ subsidiaries. The Risk Committee ensures that management identifies and implements appropriate risk management controls, including guidelines and policies that govern management’s assessments and risk. The Risk Committee also reviews the effectiveness and efficiency of the Enterprise Risk Management system within the Company and obtains assurance that material risks are identified and that appropriate risk management processes are in place, including the formulation and subsequent updating of appropriate Company policies. The implementation of operational and corporate risk management plans is also monitored on an ongoing basis, and the Risk Committee ensures that appropriate resources are directed towards areas of high risk. The current membership of the Risk Committee is as follows:
Peter J. Bacchus (chair)
Alhassan Andani
Terence P. MenellGoodlace
Alan R. Hill (retired December 31, 2016)
Steven P. Reid
Yunus G.H. Suleman
Gayle M. Wilson
The Remuneration Committee establishes the compensation philosophy of Gold Fields and the terms and conditions of employment of Executive Directors and other executive officers.officers, and reviews the remuneration policies on a regular basis. The current membership of the Remuneration Committee is as follows:
Alan R. HillSteven P. Reid (chair)
Alhassan Andani
Peter J. Bacchus
Cheryl A. Carolus
Donald M. J. Ncube
Gayle M. Wilson
The Safety, Health and Sustainable Development Committee reviews adherence to occupational health, safety and environmental standards by Gold Fields. The Safety, Health and Sustainable Development Committee seeks to minimize mining-relatedhealth, safety and environment-related accidents, to ensure that the Company’s operations are in compliance with all environmentalrelevant regulations around health, safety and the environment, and to establish policy in respect of HIV/AIDS and health matters. The current membership of the Safety, Health and Sustainable Development Committee is as follows:
David N. MurrayTerence P. Goodlace (chair)
Kofi AnsahAlhassan Andani
Cheryl A. Carolus
Alan R Hill
Richard P. Menell
Donald M.J. Ncube (by invitation)
Steven P. Reid
Yunus G.H. Suleman
The Nominating and Governance Committee develops and implements policy on corporate governance issues, develops the policy and process for evaluating nominations to the Board of Directors, identifies successors to the Chairman and Chief Executive Officer, and considers selection and rotation of the Board committee members.members and evaluate the effectiveness of the Board and report the findings of this evaluation to the Board. The current membership of the Nominating and Governance Committee is as follows:
Cheryl A. Carolus (chair)
Kofi Ansah
Donald M.J. Ncube
Richard P. Menell (by invitation)
Steven P. Reid
The Capital Projects Control and Review Committee was established on May 1, 2009 as asub-committee to satisfy the Board that Gold Fields has used appropriate and efficient methodologies and has adequate controls in place in respect of new capital projects proposed by management in excess of R1.5 billion or U.S.$200 million.
These projects are reviewed from inception to completion and the committee makes recommendations to management as it considers appropriate. The current membership of the Capital Projects Control and Review Committee is as follows:
Richard P. Menell (chair)
David N. MurrayPeter. J. Bacchus
Cheryl A. Carolus (by invitation)
Terence P. Goodlace
Steven P. Reid
Yunus G.H Suleman (by invitation)
Gayle M. Wilson
The Social, & Ethics and Transformation Committee was established on November 29, 2011 and is responsible for ensuring, among other things, that Gold Fields discharges its statutory duties in respect of section 72 of Companies Act 71 of 2008 (as amended) and its applicable regulations, which include monitoring Gold Fields’ activities in relation to relevant legislation, other legal requirements and prevailing codes of best practice regarding: (i) social and economic development; (ii) good corporate citizenship; (iii) the environment, health and public safety and their impact on Gold Fields’ activities, products and services; (iv) consumer relations; and (v) labor and employment legislation. The Social and Ethics Committee must bring any matters relating to this monitoring to
the attention of the Board and report to shareholders at the annual general meeting. The Board seeks the assistance of the Social and Ethics Committee in ensuring that Gold Fields complies with best practice recommendations in respect of social and ethical management. The current members of the committee include the chairs of the Audit Committee, Remuneration Committee, the Safety, Health and Sustainable Development Committee, and the Nominating and Governance Committee and the Capital Projects Committee, as follows:
Donald M. J. Ncube (chair)
Cheryl A. Carolus
Alan R. HillTerence P. Goodlace
Richard P. Menell
David N. MurrayYunus G.H. Suleman
Gayle M. Wilson
Executive Committee
Gold Fields’ Executive Committee meets on a regular basis to discussreview Company performance against set objectives and make decisions on strategicdevelop Company strategy and operating issues facing Gold Fields.policy proposals for consideration by the Board. The Executive Committee also assists the Board in the execution of the Company’s disclosure obligations. The current composition of the Executive Committee is as follows:
Name | Position | |
Nicholas J. Holland | Chief Executive Officer | |
Paul A. Schmidt | Chief Financial Officer | |
Brett J. Mattison | Executive Vice President: Strategy, Planning and Corporate Development | |
| Executive Vice President: People and Organizational Effectiveness | |
Taryn L. Harmse | Executive Vice President: Group General Counsel | |
Adrian De Beer | Acting Executive Vice President: South Africa | |
Alfred Baku | Executive Vice President: West Africa | |
| Executive Vice President: Americas | |
Avishkar Nagaser | Executive Vice President: Investor Relations and Corporate Affairs | |
| Executive Vice President: Australasia | |
Naseem A. Chohan | Executive Vice President: Sustainable Development | |
| Executive Vice President: | |
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Regional Executive Management Committees
Each of Gold Fields’ four operating regions (South Africa, Australasia, West Africa and South America) has a Regional Executive Management Committee.
South African Regional Executive Management Committee composition:
| Position | |
Adrian De Beer | Acting Executive Vice President: South Africa | |
| Acting Vice President and Head of | |
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| Vice | |
Bonny Sebola | ||
| Head of | |
| Head | |
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Australasian Regional Executive Management Committee composition:
| Position | |
Stuart J. Mathews | Executive Vice President: Australasia Region | |
| General Manager: St. Ives Gold | |
Jason Sander | General Manager: Agnew Gold | |
Wimpie Du Toit | Vice President and Regional Head of Human Resources: Australasia | |
Alex Munt | Vice President and Regional Head of Finance: Australasia | |
Philip Woodhouse | Vice President and Regional Head of Sustainable Development: Australasia | |
Ian Suckling | ||
| Vice | |
Andrew Bywater | General Manager: | |
| Vice President of Legal & Australasia Compliance | |
Gary Snow | Vice President: Exploration | |
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Mark Dominy | Manager: Supply Chain | |
Malcolm Jolly | General Manager: Darlot Gold Mine | |
West Africa Regional Executive Management Committee composition:
Name | Position | |
Alfred Baku | Executive Vice | |
Lindley Witbooi | Vice President and Head of Finance: West Africa | |
| Vice President and Head of Human Resources: West Africa | |
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David Johnson | Vice President and Head of Stakeholder Relations | |
Michiel van der Merwe | General Manager: | |
| General Manager: | |
Serge Ntiema | Vice President and Head of Exploration | |
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Johannes de Beer | Vice | |
Michael Akafia | ||
Chris Turek | Vice President: Technical | |
Americas Regional Executive Management Committee composition:
| Position | |
Luis A. Rivera | Executive Vice President: The Americas | |
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Alberto Cardenas | Vice President: | |
Jorge Redhead | Vice President: Head of Finance | |
Miguel Inchaustegui | Vice President: Head of Corporate Affairs | |
Veronica Valderrama | Vice President: Head of Human Resources | |
Juan Jose Granda | Vice President: Head of Legal | |
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Compensation of Directors and Senior Management
During fiscal 2014,2016, the aggregate compensation paid or payable to directors and senior management of Gold Fields as a group was approximately U.S.$16.2717.0 million (R176.0(R249.9 million), including all salaries, fees, bonuses and contributions during such period to provide pension, retirement or similar benefits for directors and senior management of Gold Fields, of which U.S.$0.670.5 million (R7.2(R7.4 million) was due to pension scheme contributions and life insurance, U.S.$7.217.5 million (R78.0(R110.9 million) was due to bonus and performance-related share payments, U.S.$0.890.7 million (9.7(R10.3 million) was expenses,expenses/special bonus, U.S.$6.616.6 million (R71.6(R97.1 million) was due to salary payments, directors’ fees and committee fees and U.S.$0.891.6 million (R9.6(R24.2 million) was due to severance payments.
The following table presents information regarding the compensation paid by Gold Fields for fiscal 20142016 to its directors and executiveprescribed officers. The remuneration paid to directors and prescribed officers excludes the value of deferred remuneration in the form of restricted shares, or Restricted Shares (see “Introduction of a MSR for members of the Group Executive Committee”), for fiscal 2016. Details of deferred remuneration are included in note 4 below. Average exchange rates were R10.82R14.70 per U.S.$1 for fiscal 20142016 and R9.60R12.68 per U.S.$1 for fiscal 2013:2015.
| Directors’ fees | Committee fees | Salary(1) | Annual Bonus(2) | Pre-tax Share Proceeds for shares awarded in previous years | Severance | Pension Scheme Contribution | Sundry(3) | Total for fiscal 2014(4) | Total for fiscal 2013 | |||||||||||||||||||||||||||||||
| (U.S.$’000) | ||||||||||||||||||||||||||||||||||||||||
Executive Directors | ||||||||||||||||||||||||||||||||||||||||
Nicholas J. Holland | — | — | 986.0 | 1,052.2 | 399.3 | — | 160.0 | 6.0 | 2,603.5 | 2,597.2 | ||||||||||||||||||||||||||||||
Paul A. Schmidt | — | — | 534.7 | 588.1 | 411.2 | — | 63.0 | 5.7 | 1,602.7 | 1,704.4 | ||||||||||||||||||||||||||||||
Executive Officers | ||||||||||||||||||||||||||||||||||||||||
Ernesto Balarezo | — | — | 695.1 | 716.6 | 158.7 | — | — | 400.0 | 1,970.4 | 1,875.9 | ||||||||||||||||||||||||||||||
Alfred Baku | — | — | 736.3 | 597.6 | 167.0 | — | 138.3 | 250.0 | 1,889.2 | 785.3 | ||||||||||||||||||||||||||||||
Richard Weston | — | — | 649.6 | 579.0 | 203.4 | — | 74.2 | — | 1,506.2 | 1,524.5 | ||||||||||||||||||||||||||||||
Willie Jacobsz | — | — | 472.1 | 347.4 | 214.9 | — | — | — | 1,034.4 | 1,099.9 | ||||||||||||||||||||||||||||||
Naseem A. Chohan | — | — | 292.1 | 277.8 | 102.2 | — | 54.5 | — | 726.6 | 584.3 | ||||||||||||||||||||||||||||||
Brett Mattison | — | — | 337.9 | 343.2 | 132.7 | — | 37.5 | — | 851.3 | 783.8 | ||||||||||||||||||||||||||||||
Lee-Ann Samuel | — | — | 318.9 | 340.6 | 112.2 | — | 35.4 | — | 807.1 | 554.3 | ||||||||||||||||||||||||||||||
Taryn Harmse | — | — | 255.4 | 278.3 | 79.0 | — | 61.0 | 0.1 | 673.8 | 349.8 | ||||||||||||||||||||||||||||||
Nico Muller(5) | — | — | 109.2 | 51.2 | — | — | 12.1 | 231.1 | 403.6 | — | ||||||||||||||||||||||||||||||
Michael D. Fleischer(6) | — | — | 36.8 | — | — | 468.1 | 5.8 | — | 510.7 | 1,476.2 | ||||||||||||||||||||||||||||||
Kgabo F. L. Moabelo(7) | — | — | 221.1 | — | 57.5 | 418.4 | 30.1 | — | 727.1 | 804.1 | ||||||||||||||||||||||||||||||
Juan L. Kruger(8) | — | — | — | — | — | — | — | — | — | 600.0 | ||||||||||||||||||||||||||||||
Tommy McKeith(8) | — | — | — | — | — | — | — | — | — | 2,308.0 | ||||||||||||||||||||||||||||||
Tim W. Rowland(8) | — | — | — | — | — | — | — | — | — | 403.4 | ||||||||||||||||||||||||||||||
Peet van Schalkwyk(9) | — | — | — | — | — | — | — | — | — | 1,158.5 | ||||||||||||||||||||||||||||||
Peter Turner(10) | — | — | — | — | — | — | — | — | — | 649.8 | ||||||||||||||||||||||||||||||
Jimmy Dowsley(11) | — | — | — | — | — | — | — | — | — | 780.8 | ||||||||||||||||||||||||||||||
Non-executive Directors | ||||||||||||||||||||||||||||||||||||||||
Cheryl A. Carolus | 232.3 | — | — | — | — | — | — | — | 232.3 | 250.3 | ||||||||||||||||||||||||||||||
Alan R. Hill | 76.3 | 49.3 | — | — | — | — | — | — | 125.6 | 126.4 | ||||||||||||||||||||||||||||||
David N. Murray | 76.3 | 38.6 | — | — | — | — | — | — | 114.9 | 138.0 | ||||||||||||||||||||||||||||||
Richard P. Menell | 76.3 | 51.2 | — | — | — | — | — | — | 127.5 | 159.5 | ||||||||||||||||||||||||||||||
Gayle M. Wilson | 76.3 | 59.9 | — | — | — | — | — | — | 136.2 | 147.5 | ||||||||||||||||||||||||||||||
Donald M. J. Ncube | 76.3 | 52.9 | — | — | — | — | — | — | 129.2 | 119.8 | ||||||||||||||||||||||||||||||
Kofi Ansah | 76.3 | 21.5 | — | — | — | — | — | — | 97.8 | 105.9 | ||||||||||||||||||||||||||||||
Mamphela Ramphele(12) | — | — | — | — | — | — | — | — | — | 42.0 | ||||||||||||||||||||||||||||||
Robert Danino(13) | — | — | — | — | — | — | — | — | — | 113.3 | ||||||||||||||||||||||||||||||
Rupert Pennant-Rea(13) | — | — | — | — | — | — | — | — | — | 116.0 | ||||||||||||||||||||||||||||||
Delfin Lazaro(13) | — | — | — | — | — | — | — | — | — | 64.4 | ||||||||||||||||||||||||||||||
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Total | 690.1 | 273.4 | 5,645.2 | 5,172.0 | 2,038.1 | 886.5 | 671.9 | 892.9 | 16,270.1 | 21,422.9 | ||||||||||||||||||||||||||||||
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| Directors’ fees | Committee fees | Salary(1) | Pension Scheme Contribution | Annual Bonus(2) | Sundry | Severance | Sub-total | Pre-tax Share Proceeds for shares awarded in previous years | Total realized earnings for fiscal 2016(3) | Total for fiscal 2015 | ||||||||||||||||||||||||||||||||||
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Executive Directors | ||||||||||||||||||||||||||||||||||||||||||||
Nicholas J. Holland(4) | — | — | 1,030.0 | 40.9 | 677.6 | — | — | 1,748.5 | 18.1 | 1,766.6 | 2,832.4 | |||||||||||||||||||||||||||||||||
Paul A. Schmidt | — | — | 496.7 | 54.4 | 648.6 | 4 | — | 1,203.7 | 547.8 | 1,751.5 | 1,755.3 | |||||||||||||||||||||||||||||||||
Prescribed Officers | ||||||||||||||||||||||||||||||||||||||||||||
Ernesto Balarezo(5) | — | — | 332.5 | — | — | — | 1,644.4 | 1,976.9 | 338.8 | 2,315.7 | 1,572.4 | |||||||||||||||||||||||||||||||||
Luis A. Rivera(6) | — | — | 154.5 | — | 111.0 | 246.4 | — | 511.9 | — | 511.9 | — | |||||||||||||||||||||||||||||||||
Alfred Baku(7) | — | — | 746.1 | 156.4 | 620.2 | 314.5 | — | 1,837.2 | 96.8 | 1,934.0 | 1,938.7 | |||||||||||||||||||||||||||||||||
Richard M. Weston | — | — | 576.4 | 64.2 | 570.7 | 7.4 | — | 1,218.7 | 562.2 | 1,780.9 | 1,796.0 | |||||||||||||||||||||||||||||||||
Richard J. Butcher(8) | — | — | 275.1 | 27.5 | 323.2 | 110.7 | — | 736.5 | — | 736.5 | — | |||||||||||||||||||||||||||||||||
Naseem A. Chohan | — | — | 284.0 | 27.7 | 328.6 | 2.9 | — | 643.2 | 198.1 | 841.3 | 864.4 | |||||||||||||||||||||||||||||||||
Brett J. Mattison | — | — | 362.4 | 25.5 | 429.7 | 0.6 | — | 818.2 | 245.3 | 1,063.5 | 972.6 | |||||||||||||||||||||||||||||||||
Lee-Ann N. Samuel | — | — | 288.4 | 24.8 | 339.9 | 3.7 | — | 656.8 | 345.1 | 1,001.9 | 839.0 | |||||||||||||||||||||||||||||||||
Taryn L. Harmse | — | — | 282.3 | 29.5 | 345.7 | 4.3 | — | 661.8 | 100.1 | 761.9 | 759.6 | |||||||||||||||||||||||||||||||||
Nico J. Muller | — | — | 450.4 | 26.4 | 477.0 | 2.4 | — | 956.2 | — | 956.2 | 1,078.5 | |||||||||||||||||||||||||||||||||
Avishkar Nagaser | — | — | 193.9 | 21.5 | 221.1 | 0.3 | — | 436.8 | — | 436.8 | 442.5 | |||||||||||||||||||||||||||||||||
Manuel Diaz(9) | — | — | 136.1 | — | 1.2 | — | — | 137.3 | — | 137.3 | — | |||||||||||||||||||||||||||||||||
Non-Executive Directors | ||||||||||||||||||||||||||||||||||||||||||||
Cheryl A. Carolus | 183.0 | — | — | — | — | — | — | 183.0 | — | 183.0 | 203.8 | |||||||||||||||||||||||||||||||||
Alan R. Hill(10) | 64.5 | 49.9 | — | — | — | — | — | 114.4 | — | 114.4 | 110.2 | |||||||||||||||||||||||||||||||||
David N. Murray(11) | 24.1 | 12.2 | — | — | — | — | — | 36.3 | — | 36.3 | 100.8 | |||||||||||||||||||||||||||||||||
Richard P. Menell(12) | 95.5 | 16.7 | — | — | — | — | — | 112.2 | — | 112.2 | 113.3 | |||||||||||||||||||||||||||||||||
Gayle M. Wilson | 60.1 | 54.6 | — | — | — | — | — | 114.7 | — | 114.7 | 119.5 | |||||||||||||||||||||||||||||||||
Donald M. J. Ncube | 60.1 | 41.6 | — | — | — | — | — | 101.7 | — | 101.7 | 113.3 | |||||||||||||||||||||||||||||||||
Yunus G.H. Suleman(13) | 20.6 | 12.6 | — | — | — | — | — | 33.2 | — | 33.2 | — | |||||||||||||||||||||||||||||||||
Peter J. Bacchus(14) | 23.1 | 14.2 | — | — | — | — | — | 37.3 | — | 37.3 | — | |||||||||||||||||||||||||||||||||
Steve Reid(15) | 59.7 | 29.6 | — | — | — | — | — | 89.3 | — | 89.3 | — | |||||||||||||||||||||||||||||||||
Terence P. Goodlace(16) | 30.9 | 15.1 | — | — | — | — | — | 46.0 | — | 46.0 | — | |||||||||||||||||||||||||||||||||
Alhassan Andani(17) | 28.9 | 14.2 | — | — | — | — | — | 43.1 | — | 43.1 | — | |||||||||||||||||||||||||||||||||
Kofi Ansah(10) | 64.5 | 18.2 | — | — | — | — | — | 82.7 | — | 82.7 | 85.8 | |||||||||||||||||||||||||||||||||
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Total | 715.0 | 278.9 | 5,608.8 | 498.8 | 5,094.5 | 697.2 | 1,644.4 | 14,537.6 | 2,452.3 | 16,989,9 | 15,698.1 | |||||||||||||||||||||||||||||||||
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Notes:
| (1) | The total U.S. dollar amounts paid for fiscal |
| (2) | The annual bonus accruals for |
| (3) |
| These amounts reflect the full directors’ emoluments for comparative purposes. The portion of executive directors’ |
| (4) | Nick Holland elected prior to the determination of the annual performance bonus for fiscal 2016, and in line with the rules of the minimum shareholding requirement, or MSR, policy, to defer 50% of his annual performance bonus (U.S.$677,600) into Restricted Shares. A similar election was made in fiscal 2015 to defer 50% of his annual performance bonus (U.S.$618,900) into Restricted Shares. The aggregate of his total realized earnings of U.S.$1,766,600 (fiscal 2015: U.S.$2,832,400), as reflected in the table above, and |
| the deferred remuneration of U.S.$677,600 (fiscal 2015: U.S.$618,900) in the form of Restricted Shares amounts to U.S.$2,444,200 (fiscal 2015: U.S.$3,451,300). |
| (5) |
| (6) |
| (7) |
| (8) |
| (9) |
| (10) |
| (11) |
| (12) |
| (13) |
| (14) | Peter J. Bacchus was appointed to the Board on September 1, 2016. |
| (15) | Steven P. Reid was appointed to the Board on February 1, 2016. |
| (16) | Terence P. Goodlace was appointed to the Board on July 1, 2016. |
| (17) | Alhassan Andani was appointed to the Board on August |
Share optionsThe directors and restricted shares outstanding andprescribed officers held by directors, former directors, executive officers and former executive officers as of December 31, 2014 were, to the knowledge of Gold Fields’ management, as follows:following equity settled instruments on March 20, 2017:
Name | Options to purchase ordinary shares | Share Appreciation Rights (SARS) | Restricted Shares | Option/ SARS exercise price | Spin-off Adjustment(1) | Adjusted Exercise Price(1) | Expiration/ Settlement Date(2) | |||||||||||||||||||
| (Rand) | ||||||||||||||||||||||||||
Executive Directors | ||||||||||||||||||||||||||
Nicholas J. Holland | — | 49,000 | — | 109.66 | 7,383 | 95.31 | June 4, 2015 | |||||||||||||||||||
| — | 59,000 | — | 89.76 | 6,045 | 75.89 | April 17, 2016 | ||||||||||||||||||||
| — | 38,250 | — | 119.15 | 5,762 | 103.55 | March 1, 2017 | ||||||||||||||||||||
| — | — | 116,415 | — | 17,536 | — | March 1, 2015 | ||||||||||||||||||||
| — | — | 187,498 | — | — | — | March 1, 2016 | ||||||||||||||||||||
Paul A. Schmidt | — | 14,390 | — | 109.66 | 2,168 | 95.31 | June 4, 2015 | |||||||||||||||||||
| — | 8,220 | — | 103.78 | 1,173 | 89.91 | September 3, 2015 | ||||||||||||||||||||
| — | 22,350 | — | 89.76 | 2,290 | 75.89 | April 17, 2016 | ||||||||||||||||||||
| — | 25,800 | — | 119.15 | 3,886 | 103.55 | March 1, 2017 | ||||||||||||||||||||
| — | — | 43,743 | — | 6,589 | — | March 1, 2015 | ||||||||||||||||||||
| — | — | 69,326 | — | — | — | March 1, 2016 | ||||||||||||||||||||
| — | — | 47,311 | — | — | — | September 1, 2015 | ||||||||||||||||||||
Executive Officers | ||||||||||||||||||||||||||
Richard M. Weston | — | 10,840 | — | 101.48 | 1,493 | 87.61 | June 1, 2016 | |||||||||||||||||||
| — | 18,225 | — | 119.15 | 2,744 | 103.55 | March 1, 2017 | ||||||||||||||||||||
| — | — | 36,195 | — | 5,452 | — | March 1, 2015 | ||||||||||||||||||||
| — | — | 62,466 | — | — | — | March 1, 2016 | ||||||||||||||||||||
| — | — | 95,408 | — | — | — | September 1, 2015 | ||||||||||||||||||||
Naseem A. Chohan | — | 4,130 | — | 118.35 | 622 | 102.86 | December 1, 2016 | |||||||||||||||||||
| — | 12,975 | — | 119.15 | 1,954 | 103.55 | March 1, 2017 | ||||||||||||||||||||
| — | — | 16,961 | — | 2,554 | — | March 1, 2015 | ||||||||||||||||||||
| — | — | 26,452 | — | — | — | March 1, 2016 | ||||||||||||||||||||
| — | — | 18,168 | — | — | — | September 1, 2015 | ||||||||||||||||||||
Name Jan W. Jacobsz Lee-Ann Samuel Brett Mattison Alfred Baku Taryn Harmse Ernesto Balazero Former Executive Officers Michael D. Fleischer Kgabo F.L. Moabelo Director Nicholas J. Holland(2) Paul A. Schmidt Prescribed Officer Richard M. Weston Ernesto Balarezo Alfred Baku Taryn L. Harmse Lee-Ann N. Samuel Brett J. Mattison Naseem A. Chohan Nico J. Muller Richard J. Butcher Avishkar Nagaser Options to
purchase
ordinary
shares Share
Appreciation
Rights
(SARS) Restricted
Shares Option/
SARS
exercise
price Spin-off
Adjustment(1) Adjusted
Exercise
Price(1) Expiration/
Settlement Date(2) (Rand) — 9,950 — — 1,499 95.31 May 26, 2015 — 18,000 — 89.76 1,844 75.89 April 17, 2016 — 12,975 — 119.15 1,954 103.55 March 1, 2017 — — 19,173 — 2,888 — June 1, 2015 — — 5,448 — 820 — September 1, 2015 — — 39,276 — — — March 1, 2016 — — 29,421 — — — September 1, 2015 — 3,333 — 109.66 502 95.31 June 1, 2017 — — 39,113 — — — March 1, 2015 — — 11,540 — 1,738 — March 1, 2016 — — 19,147 — — — September 1, 2015 — 10,200 — 119.15 1,536 103.55 March 1, 2017 — 7,130 — 109.66 1,074 95.31 May 13, 2015 — 12,800 — 89.76 1,311 75.89 April 17, 2016 — — 30,601 — — — March 1, 2015 — — 13,911 — 2,095 — March 1, 2016 — — 21,954 — — — September 1, 2015 — 4,730 — 109.66 712 95.31 March 2, 2015 — 7,013 — 119.15 1,056 103.55 March 1, 2017 — 8,775 — 89.76 899 75.89 March 1, 2016 — — 17,559 — — — March 1, 2015 — — 15,429 — 2,324 — March 1, 2016 — — 27,235 — — — September 1, 2015 — 6,750 — 89.76 691 75.89 April 17, 2016 — 5,400 — 119.15 812 103.55 March 1, 2017 — 2,675 — 114.64 402 99.63 September 1, 2017 — 5,100 — 109.66 768 95.31 May 23, 2015 — — 7,395 — 1,113 — March 1, 2015 — — 12,662 — — — March 1, 2016 — — 11,610 — — — September 1, 2015 — — 39,182 — — — March 1, 2016 — — 38,137 — — — September 1, 2015 — 20,400 — 109.66 3,073 95.31 July 31, 2015 — 22,350 — 89.76 2,290 75.89 July 31, 2015 — 18,225 — 119.15 2,744 103.55 July 31, 2015 — 3,440 — 118.35 518 102.86 July 31, 2015 — 12,975 — 119.15 1,954 103.55 July 31, 2015 — 4,156 — 114.64 626 99.63 July 31, 2015 Equity-settled
instruments at
31 December
2015 Equity-
settled
instruments
granted
during the
year Equity-
settled
instruments
forfeited
during the
year Equity-settled
instruments exercised
during the year Equity-
settled
instruments
transferred
to
Restricted
Shares(2) Equity-settled
instruments at
31 December 2016 Expiration date Number Average
strike
price
(US$) Granted Number Number Average
market
price of
vested
shares Benefit
arising
(US$) Number Number Weighted
Average
strike
price
(US$)(1) Last date of
expiration 296,555 7.46 460,233 65,045 — — — 374,966 316,747 7.04 December 31, 2020 123,652 7.38 240,945 24,640 138,652 3.94 545,836 — 201,305 7.04 March 1, 2019 95,768 7.38 221,379 12,333 124,932 4.50 562,194 — 179,882 7.04 May 31, 2017 39,182 — 39,182 — 78,364 4.32 338,831 — — — 35,302 7.44 182,682 9,674 35,118 4.41 154,925 — 173,192 5.16 March 1, 2019 29,392 7.54 100,710 7,441 25,324 3.94 99,694 — 97,337 6.91 March 1, 2019 42,948 7.52 105,205 — 78,226 4.41 345,099 — 69,927 6.48 March 1, 2019 56,448 7.46 139,478 14,111 61,202 3.94 240,936 — 120,613 7.04 March 1, 2019 46,133 8.15 92,487 4,752 52,904 4.41 233,389 — 80,964 7.04 March 1, 2019 245,208 — 137,280 — — — — — 382,488 — March 31, 2017 — — 23,964 — — — — — 23,964 — March 1, 2019 — — 33,136 — — — — — 33,136 — March 1, 2019
Notes:
| (1) |
| (2) | Nick Holland elected to defer vesting of 100% of the |
| 31 December 2016, which will vest after the |
Share Ownership of Directors and ExecutivePrescribed Officers
The following sets forth, to the knowledge of Gold Fields’ management, the total amount of ordinary shares directly or indirectly owned by the directors and executive officers of Gold Fields and excludes shares held in escrow for Mr. Holland as of March 16, 2015:20, 2017:
Holder | Ordinary shares | Percentage | ||||||||
Nicholas J. Holland | 610,877 | 0.0788 | % | |||||||
Paul A. Schmidt | 95,109 | 0.0123 | % | |||||||
Cheryl Carolus | 3,129 | 0.0004 | % | |||||||
Richard Menell | 5,850 | 0.0008 | % | |||||||
Donald M. J. Ncube | 11,252 | 0.0015 | % | |||||||
Gayle Wilson | 2,378 | 0.0003 | % | |||||||
Naseem A. Chohan | 62,485 | 0.0081 | % | |||||||
Brett Mattison | 7,601 | 0.0010 | % | |||||||
Lee-Ann Samuel | 3,652 | 0.0005 | % | |||||||
Jan W. Jacobsz | 80,328 | 0.0104 | % | |||||||
Taryn L. Harmse | 2,102 | 0.0003 | % | |||||||
Total Directors (6 persons) | 728,595 | 0.0940 | % | |||||||
Total Non-Director Executive Officers (5 persons) | 156,168 | 0.0201 | % | |||||||
Total Directors and Executive Officers (11 persons) | 884,763 | 0.1141 | % | |||||||
Holder | Ordinary shares | Percentage | ||||||
Director | ||||||||
Nicholas J. Holland(1) | 1,526,967 | 0.1860 | % | |||||
Paul A. Schmidt | 122,549 | 0.0149 | % | |||||
Cheryl A. Carolus | 3,129 | 0.0004 | % | |||||
Richard P. Menell | 5,850 | 0.0007 | % | |||||
Gayle M. Wilson | 2,378 | 0.0003 | % | |||||
Prescribed Officer | ||||||||
Richard M. Weston | 204,636 | 0.0249 | % | |||||
Naseem A. Chohan | 82,023 | 0.0100 | % | |||||
Brett J. Mattison | 43,103 | 0.0052 | % | |||||
Lee-Ann N. Samuel | 76,525 | 0.0093 | % | |||||
Taryn L. Harmse | 7,777 | 0.0009 | % | |||||
Alfred Baku | 40,404 | 0.0049 | % | |||||
Total Directors (5 persons) | 1,660,873 | 0.2024 | % | |||||
Total Prescribed Officers (6 persons) | 454,468 | 0.0554 | % | |||||
Total Directors and Prescribed Officers (11 persons) | 2,115,341 | 0.2578 | % | |||||
| Note: |
| (1) | The 1,526,967 comprises 610,877 shares directly held by Mr. Holland and 916,090 Restricted Shares indirectly held by Mr. Holland. See “Introduction of a MSR for members of the Group Executive Committee”. |
Long-term Cash Incentive Plan
A Long-term Cash Incentive Plan, or LTIP was implemented on March 1, 2014. The key objectives of the LTIP are to reinforce a high performance culture and create stronger alignment between executive compensation and shareholder value.
At the annual general meeting in May 2016 approval was obtained to make certain amendments to the 2012 Share Plan and the Plan wasre-introduced following the approval, no new awards will be made under the LTIP.
Salient features ofAwards made under the Long-term Cash Incentive Plan:Plan
Award | TSR – 50% | FCF Margin – 50% | Total Potential Vesting % of initial awards | |||||||||||||||||
| (Achieved) | (Vesting) | (Achieved) | (Vesting) | (%) | ||||||||||||||||
2014 LTIP Award | ||||||||||||||||||||
Performance period—January 1, 2014 to Dec 31, 2016 | 0 | % | 0 | % | 12.7 | % | 77 | % | 38.5 | |||||||||||
2015 LTIP Award | ||||||||||||||||||||
Performance period—January 1, 2015 to Dec 31, 2017 | 0 | % | 0 | % | 12.5 | % | 75.0 | % | 37.5 | |||||||||||
The purpose oftable below reflects the indicative vesting quantum for the Group Executive Committee for the 2014 LTIP is twofold: (1) to reward key senior managers for their performance and contribution to long-term sustainable financial results that drive shareholder value, and (2) to increase the alignment of executives and shareholdersaward, which was paid on February 28, 2017 but does not reflect in the future growth and profitability of Gold Fields Limited.
The LTIP is a three-year performance plan. Each performance cycle starts on January 1 of the first year and ends on December 31 of the third year.
Annual awards will be made to eligible participants.
Allocations will be based on a formula of annual salary x applicable percentage by grade x personal performance.
Vesting will be based on two corporate performance conditions equally being met:
Free cash flow margin (FCFM) 50% weighted; and
Total Shareholder Return (TSR) 50% weighted.
Threshold must be achieved for pay-out of any portion of the award to be triggered.
Free Cash Flow Margin (FCFM) vesting criteria:remuneration table above:
Target | FCFM | % Vesting | ||
Threshold | 5% | 0% | ||
Target | 15% | 100% | ||
Stretch | 20% | 200% | ||
Above stretch | The award will be uncapped above stretch and every additional 5% FCFM will result in an additional 50% vesting e.g. an average FCFM of 25% will result in a vesting of 250% | Every additional 5% FCFM will result in an additional 50 % vesting |
Total Shareholder Return (TSR) vesting criteria:
Name | Designation | U.S.$ Value of Initial LTIP Award | U.S.$ Value of Awards Vested on 28 February 2017 | |||||||
| (U.S.$ million) | ||||||||||
N.J. Holland(1) | Chief Executive Officer | 1.30 | 0 | |||||||
P.A. Schmidt | Chief Financial Officer | 0.63 | 0.24 | |||||||
R. Weston | EVP: Australasia | 0.91 | 0.35 | |||||||
A. Baku | EVP: West Africa | 0.79 | 0.30 | |||||||
L.N. Samuel | EVP: People and Organizational Effectiveness | 0.47 | 0.18 | |||||||
B.J. Mattison | EVP: Strategy Planning and Corporate | 0.50 | 0.19 | |||||||
N.A. Chohan | EVP: Sustainable Development | 0.23 | 0.09 | |||||||
T.L. Harmse | EVP: Group General Counsel | 0.36 | 0.14 | |||||||
N.J. Muller | EVP: South Africa | 0.06 | 0.02 | |||||||
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| 5.25 | 1.52 | |||||||||
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| Note: |
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The Gold Fields Limited 2012 Share Plan
At Gold Fields’ annual general meeting held on May 14, 2012,table below reflects the shareholders approvedindicative vesting quantum for the Gold Fields Limited 2012 Share Plan, or The 2012 Plan, under which employees, including executive directors but excluding non-executive directors, are compensated. With the approval of The 2012 Plan, no further awards will be made to participants under The 2005 Plan (as defined below). The 2012 Plan was subsequently replaced with the Gold Fields Limited Long Term Cash Incentive Plan.
The 2012 Plan contains two equity instruments: conditional shares, or the Performance Shares, and forfeitable shares, or the Bonus Shares.
The Performance Shares share similar features with the PVRSs (as defined below) under The 2005 Plan. The Performance Shares will settle subsequent to the vesting date. The employee’s annual salary, grade, performance, retention and attraction requirements and market benchmarks determine the number of Performance Shares to be awarded. The actual number of Performance Shares which would be settled to a participant after the original award date is determined by the company’s performance measured against the performance of a peer group (made up of AngloGold Ashanti, Barrick, Goldcorp, Harmony, Newmont, Newcrest and Kinross)Group Executive Committee based on the relative change in Gold Fields’ share price compared to the respective U.S. dollar share prices of its peer group. Furthermore, for performance share awards to be settled to executives, an internal company performance target is required to be met before the external relative measure is applied. As in The 2005 Plan, the target performance criterion has been set at 85%current tracking of the company’s expected gold production over the three-year measurement period as set out in the Business Plans of the company approved by the Board. In the event that the target performance criterion is met, the full initial target award shall be settledconditions based on the settlement
date. The Remuneration Committee has determined that the number of Performance Shares to be settled may only be increased by up to 200%, as opposed to 300% in terms of The 2005 Plan, of the number of the initial target number of Performance Shares conditionally awarded.
The 2012 Plan discontinued SARS (as defined below) and replaced them with Bonus Shares. The Bonus Shares vest over a nine-month and 18-month period from the award date in equal parts. The size of the award of Bonus Shares is dependent on the employee’s annual cash bonus calculated with reference to actual performance against predetermined targets for the financial year ending immediately preceding the award date. The aggregate number of shares which may at one time be allocated under the 2012 Plan, when added to the 2005 Plan and the GF Management Initiative Scheme, may not exceed 35,309,593 shares (which represents approximately 5% of the number of ordinary shares of the company currently in issue). The maximum number of shares which may be allocated to an individual may not exceed 3,530,956. As of December 31, 2014, Gold Fields had 4,316,657 Performance Shares and 2,161,922 Bonus Shares outstanding under the 2012 Plan.
No Performance Share Awards under the Gold Fields Limited 2012 Share Plan were made in fiscal 2014. Final Bonus Shares were awarded under the Gold Fields Limited 2012 Share Plan rules in fiscal 2014 which were linked to fiscal 2013 bonus payments. No further Performance and Bonus shares will be awarded. The last allocation of Bonus Shares vests on September 1, 2015 and the last allocation of Performance Shares vests on December 1, 2016, after which the Plan will be closed.
Name | Designation | U.S.$ Value of Initial LTIP Award | U.S.$ Value of Awards | |||||||
| (U.S.$ million) | ||||||||||
N.J. Holland | Chief Executive Officer | 0.93 | 0.35 | |||||||
P.A. Schmidt | Chief Financial Officer | 0.92 | 0.34 | |||||||
R. Weston | EVP: Australasia | 0.70 | 0.26 | |||||||
A. Baku | EVP: West Africa | 1.20 | 0.45 | |||||||
L.N. Samuel | EVP: People and Organizational Effectiveness | 0.52 | 0.19 | |||||||
B.J. Mattison | EVP: Strategy Planning and Corporate | 0.60 | 0.22 | |||||||
N.A. Chohan | EVP: Sustainable Development | 0.25 | 0.09 | |||||||
T.L. Harmse | EVP: Group General Counsel | 0.51 | 0.19 | |||||||
N.J. Muller | EVP: South Africa | 0.34 | 0.13 | |||||||
A. Nagaser | EVP: Investor Relations and Corporate Affairs | 0.18 | 0.07 | |||||||
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| 6.15 | 2.29 | |||||||||
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The Gold Fields Limited 2005 Share Plan
At Gold Fields’ annual general meeting held on November 17, 2005, the shareholders approved The Gold Fields Limited 2005 Share Plan, or The 2005 Plan, under which employees, including executive directors, were compensated. With the approval of the 2012 Plan, no further awards will be made to participants under the 2005 Plan.
The 2005 Plan provided for two types of awards: performance vesting restricted shares, or PVRS, and performance allocated share appreciation rights, or SARS. TheAll PVRS are settled three yearshave previously settled. SARS have a three-year vesting after being awarded and the SARS vest three years after being allocated, with a further three years before expiration. Remaining SARS are all currently under water and expired on March 1, 2017 upon which the 2005 Plan was closed.
Introduction of a MSR for members of the Group Executive Committee
In line with best practice and in response to shareholder input, the Company has adopted a MSR policy, which was approved by shareholders on May 18, 2016 and which is mandatory for executives. The sizepolicy requires executives to hold a specific percentage of shares in the Company. The proposed target shareholdings of vested and unencumbered shares for the relevant executives are:
CEO: 200% of the annual guaranteed remuneration package; and
CFO and other executives: 100% of the annual guaranteed remuneration package.
Executives may use the following shares to meet the MSR:
Personal investments in the Company’s shares through the use ofafter-tax income; and
Executives will be given the opportunity to elect, prior to the cash bonus being communicated or the vesting of the LTIP, to receive all or a portion of the cash bonus/LTIP in Restricted Shares which will be subject to a further time period (holding period) during which executives will be required to hold the Restricted Shares. In addition, executives will be given the opportunity to elect, prior to the relevant vesting dates, to convert all or a portion of their Retention Shares or Performance Shares awarded under the plan, in Restricted Shares, which will also be subject to the holding period, towards the fulfilment of the MSR. This holding period will mean that the Restricted Shares may not be sold or disposed of and that the beneficial interest must be retained therein until the earlier of:
Notice given by the executive, provided that such notice may only be given after the five years from the start of the holding period;
Termination of employment of that employee, ie retirement, retrenchment, ill health, death, resignation or dismissal;
Abolishment of the MSR; or
In special circumstances such as proven financial hardship or compliance with the MSR, upon application by the employee and approval by the Remuneration Committee.
The Restricted Shares will be held in escrow for the holding period, which commenced on June 1, 2016. The Restricted Shares will, however, not be subject to any further forfeiture provisions post the original restricted period (performance shares and cash LTIP) or communication of the cash bonus.
To facilitate the introduction of the MSR policy and to compensate executives for locking in their vested shares for an additional five years, thus exposing themselves to further market volatility, the Company will grant a matching share award. This is intended to entail a conditional award of shares of one share for every three shares committed towards the MSR (matching shares). The matching shares will vest on a date that corresponds with the end of the holding period of the shares committed towards the MSR provided the executive is still in the employment of the Company, has met the MSR as per the requirements of the MSR policy, including having sustainably accumulated shares to reach the MSR over the five-year holding period, ie the Company aims to guard against a situation where an executive only accumulates the shares in year four of the five-year period. In the event ofno-fault termination (retirement, death, disability, retrenchment or allocationcorporate action), the matching shares will be apportioned based on time.
The MSR is expected to encourage executive share ownership within the Company and reinforce the creation of shareholder value over the long term through executives becoming shareholders.
Mr. Nicholas J. Holland elected, prior to the accrual or vesting and determination of the respective incentive, to defer:
50% of his 2015 short-term incentive;
50% of his 2016 short-term incentive; and
100% of the 2014 LTIP award which was dependentdue to vest on February 28, 2017
towards achieving the MSR, which will be held in escrow in the form of Restricted Shares for a five-year restricted period.
In addition, he elected to defer vesting of 100% of the 2013 Performance Share award which was due to vest on March 1, 2016.
Effective March 20, 2017, Mr. Holland committed a total of 916,090 shares towards the fulfilment of the MSR comprising:
507,473 Restricted Shares held in escrow as at December 31, 2016; and
408,617 Restricted Shares acquired in March 2017 held in escrow.
The total US dollar value of the Restricted Shares held in escrow, based on the performanceMarch 15, 2017 Gold Fields share price of R40 (U.S.$3.08), is U.S.$2,821,557. Mr Holland now holds in excess of the participant200% of annual GRP in terms of the MSR. No other executive has elected to receive any Restricted Shares and no executive has committed any personal investments to meet the MSR.
The Revised Gold Fields Limited 2012 Share Plan
The revised Gold Fields Limited 2012 Share Plan was approved by shareholders at the timeannual general meeting in May 2016, which has replaced the 2014 LTIP.
Nature of Instruments
Retention Shares
For high performance outcomes and on anad-hoc basis, selected Participants will be awarded conditional rights to receive shares at the end of the Vesting Period. The award will only be settled after the vesting date and the Participant will not have any shareholder or voting rights prior to the vesting date. The vesting of the award will be subject to the Vesting Condition being met and may not have performance conditions attached.
Performance Shares
Participants will be awarded conditional rights to receive shares at the end of the Vesting Period. The award will only be settled after the vesting date and the Participant will not be entitled to any shareholder rights (including voting rights and distribution rights) prior to the vesting date. The vesting of the award will be subject to the Vesting Condition and applicable Performance Conditions being met.
Restricted Shares
As stated above, executives will be given the opportunity, prior to the annual bonus being communicated or allocation,the upcoming vesting date of the LTIP award or Performance Shares, to elect to receive a portion of the annual bonus or cash LTIP in Restricted Shares or convert a portion of the unvested Performance Shares into Restricted Shares towards fulfilment of the MSR. These shares are subject to a five-year Holding Period, however, all shareholders’ rights will accrue in respect of the Restricted Shares.
Matching Shares
In recognition of compliance with the MSR and the risk associated with holding shares in the Company, executives will receive conditional rights to receive shares and will not be entitled to any shareholder rights prior to settlement. Settlement will take place after the vesting date which was usually in March. As of December 31, 2014, Gold Fields had 1,818,261 SARS and no PVRS outstanding under The 2005 Plan.
All PVRS allocations made from March 1, 2006 to December 1, 2011 were conditionally awarded to participants. Basedwill be on the rulesfulfilment of The 2005 Plan, the actualMSR over the five-year holding period and the vesting condition, provided that they have sustainably accumulated shares to reach the MSR over the holding period. The number of PVRS which wouldmatching shares subject to an award made to an Executive will be settled to a participant three years after the original award date is determined by the company’s performance measured against the individual performance of five other major gold mining companies (referred to as the peer group and made up of AngloGold Ashanti, Barrick, Goldcorp, Harmony and Newmont) based on the MSR policy as set out above.
Corporate Performance Conditions Relating to Performance Shares
Performance Shares are intended to be subject to the following performance conditions, which are similar to the existing LTIP’s performance condition except for the addition of the relative changeTSR measure:
Vesting conditions of the Long-Term Incentive
Performance condition | Weighting | Threshold | Target | Stretch | ||||||
Absolute TSR | 33 | % | N/A—No vesting below target | Compounded cost of equity in real terms over the three-year performance period | Compounded cost of equity in real terms over the three-year performance period + 6% per annum | |||||
Relative TSR | 33 | % | Median of the peer group | Linear vesting to apply between above-median and upper quartile performance and capped at upper quartile performance | ||||||
FCF Margin | 34 | % | Average FCF Margin over performance period of 5% at a gold price of U.S.$1,300/oz—margin to be adjusted relative to the actual gold price for the three-year period | Average FCF Margin over performance period of 15% at a gold price of U.S.$1,300/oz—margin to be adjusted relative to the actual gold price for the three-year period | Average FCF Margin over performance period of 20% at a gold price of U.S.$1,300/oz—margin to be adjusted relative to the actual gold price for the three-year period | |||||
The vesting profile is intended to be as follows:
Performance condition | Threshold | Target | Stretch and cap | |||||||||
| (%) | ||||||||||||
Absolute TSR(1) | 0 | 100 | 200 | |||||||||
Relative TSR(1)(3)(4) | 0 | 100 | 200 | |||||||||
FCF Margin(2) | 0 | 100 | 200 | |||||||||
| Notes: |
| (1) | Absolute TSR and relative TSR: Linear vesting will occur between target and stretch (no vesting occurs for performance below target). |
| (2) | FCF Margin: Linear vesting will occur between threshold, target and stretch. |
| (3) | The peer group will consist of ten companies: AngloGold Ashanti, Goldcorp, Barrick, Eldorado Gold, Randgold, Yamana, Agnico Eagle, Kinross, Newmont and Newcrest. |
| (4) | TSR will be calculated as the Compounded Annual Growth Rate, or CAGR, of the TSR index between the average of the 60 trading days up to the first day of the performance period and the average of the 60 trading days up to the last day of the performance period. TSR will be defined as the return on investing in ordinary shares in the Company at the start of the performance period, holding the shares and reinvesting the dividends received on the portfolio in Gold Fields shares over the performance period. The USD TSR index, provided by external service providers will be used based on the USD share price. The above Performance Conditions will be measured over three years which will coincide with the Company’s financial years (i.e. performance period). |
Vesting of the 2013 Performance Share Award
According to the Performance Criteria set by the Remuneration Committee, the number of Performance Shares awarded was modified according to the Gold Fields share price comparedperformance, measured against seven other gold companies, namely AngloGold Ashanti, Goldcorp, Barrick, Harmony, Kinross, Newmont, and Newcrest. The share price performance was measured over the 36 month period from March 1, 2013 to February 11, 2016.
Gold Fields has been positioned within the respective U.S. dollar share pricesupper quartile of the individual companies within the peer group. For PVRS awards to be settled to executives, an internal company performance target is required to be met before the external relative measure is applied. Effective June 1, 2008, the rules were modified so that two performance measures apply, as permitted under the existing rules approved by the shareholders at the annual general meeting. The target performance criterion has been set at 85%group, resulting in a settlement of 200% of the company’s expected gold productionshares initially awarded.
The table below depicts the long-term share vesting percentages over the three-year measurement period as set out in the Business Plans of the company approved by the Board. In the event that the target performance criterion was met, the full initial target award was settled on the settlement date. In addition, the Remuneration Committee determined that the number of PVRS to be settled may be increased by up to 300% of the number of the initial target number of PVRS conditionally awarded, depending on the performance of the company relative to the performance of five other major gold mining companies (the peer group) based on the relative change in the Gold Fields share price compared to the respective U.S. dollar share prices of the individual companies within the peer group.
Shares Set Aside for Share Plans
As at December 31, 2014, the number of shares in issue under the share schemes was 29,961,190.
The rules of the share plans make provision for an adjustment to the number of shares in the event there is a variation in the issued share capital as a result of corporate action. The share plans require that the fair market value of an employee’s share portfolio pre- and post-corporate action remain the same. Good leavers are entitled to the vested portion of their awards based on the period that the awards were held up to vesting date. The unvested portion was forfeitedprevious seven years in terms of the rules of the share plans.
The aggregate number of shares which may at one time be allocated under2005 Plan and the 2012 Plan, when added to the 2005 Plan, may not exceed 35,309,593 shares (which represents approximately 5% of the number of ordinary shares of the company currently in issue). The maximum number of shares which may be allocated to an individual may not exceed 3,530,956. The remaining shares set aside for the Share Plan amounts to 5,348,403.Plan.
Employee Share Option Scheme
An ESOP in respect of an effective 10.75% stake in GFIMSA was registered on December 1, 2010. The ESOP is housed and administered through the Thusano Share Trust. The effective holding in GFIMSA was equivalent to about 13.5 million unencumbered Gold Fields shares with full voting rights, which were issued to and held by the trust at par value of R0.50 which represented a 99.5% discount to the 30 days volume-weighted average price at July 30, 2010. This represents approximately 1.75% of the current Gold Fields shares in issue. See “Additional Information—Material Contracts—Additional Black Economic Empowerment Transactions”.
Long-Term Share vesting based on corporate performance conditions | ||||||||||||||||||||||||||||
2010 | 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | Average | |||||||||||||||||||||
| (%) | ||||||||||||||||||||||||||||
24 | 144 | 300 | 186 | 100 | 198 | 200 | 165 | |||||||||||||||||||||
Executive Directors’ Terms of Employment
Nicholas J. Holland (Executive Director and Chief Executive Officer) and Paul A. Schmidt (Executive Director and Chief Financial Officer) are party to employment agreements with Gold Fields Ghana Holdings, Gold Fields Orogen, or Orogen, and Gold Fields Group Services (Pty) Limited, or GFGS.
The terms and conditions of employment for each executive director are substantially similar, except where otherwise indicated below. The annual gross remuneration packages, or GRP, payable to each of Mr. Holland and Mr. Schmidt for 20142017 were determined by the Remuneration Committee and were as follows:
Nicholas J. Holland: R8,757,442R11,006,700 plus U.S.$348,000;397,800; and
Paul A. Schmidt: R5,524,238R6,954,800 plus U.S.$94,000.121,400.
The split between the three companies is determined by the amount of time spent by the executive directors with each company.
The GFGSSouth African Contracts
Under the GFGSSouth African contracts, the employment of an executive director will continue until terminated upon (i) 24 or 12 months’ notice by either party for the Chief Executive OfficerCEO and Chief Financial Officer,CFO, respectively or (ii) retirement of the relevant executive director (currently provided for at age 60)63). The notice period for members of the Group Executive Committee is six months.
Gold Fields can also terminate the executive director’s employment summarily for any reason recognized by law as justifying summary termination.
Should the Company require the Executive Director not to work the notice period (albeit Company or employee initiated), or any part thereof, the Executive Director shall be entitled to his GRP up to the last day of the notice period. In addition, the Executive Director shall be entitled to the following benefits:
The Executive Director shall be entitled toTo receive the Annual Performance Bonus annual performance bonuspro-rated up to the last day of the notice period based on the average percentage annual performance bonus received over the pastprevious two years.years;
The Executive Director shall be entitled toTo exercise all Share Appreciation Rightsshare appreciation rights in terms of the Gold Fields Limited 2005 Share Plan, which have vested prior to or on the last day of the notice period and will have 12 (twelve) months in which to do so.so;
The Executive Director shall be entitled to exercise all pro-rated Performance Shares, Bonus Shares and PVRS in terms of the Gold Fields Limited 2012 Share Plan and the Gold Fields Limited 2005 Share Plan, which have settled prior to or on the last day of the notice period and will have 20 days in which to do so.
| • | To exercise allpro-rata performance shares and long-term cash incentive awards in terms of the amended 2012 Plan, and the LTIP, which have settled prior to or on the last day of the notice period and will have 20 (twenty) days in which to do so; and |
The Executive Director shall be entitled to pro rata Long Term Cash Incentive Plan subject to scheme rules and payment at the end of the performance cycle.
The Executive Director shall be entitled toTo be compensated for any business travel and cell phone reimbursement up to the last day worked.
The value of the GRP payable in terms of the GFGS contractSouth African contracts is to be allocated among the following benefits: (i) salary; (ii) compulsory retirement fund contribution (with contributions set at 20% of “pensionable emoluments);contribution; (iii) voluntary participation in a vehicle scheme; (iv) compulsory medical coverage; and (v) compulsory Group Personal Accident Policy coverage. Furthermore, the requirement that the executive director will contribute a compulsory 1% of his GRP to the Unemployment Insurance Fund is subject to any legislated contribution maximum at the time.
The Offshore Contracts
Under the agreements with Gold Fields Ghana Holdings and Orogen, or the Offshore Contracts, the executive director is paid offshore in the appropriate currency. The portion of the GRP paid relates to the amount of time spent performing duties offshore for the companies. No benefits other than annual leave accrue to each executive director underin terms of the Offshore Contracts.offshore contracts.
The employment of an executive director will continue until terminated (i) 24 or 12 months’ notice by either party for the CEO and CFO respectively, or (ii) retirement of the relevant executive director (currently provided for at age 63).
Other Remuneration
In addition to the gross guaranteed remuneration payable, each executive director is entitled, among other things, to the following benefits under their employment contracts:
Participation in the Gold Fields Limited 2005 Plan, the 2012 Share PlansPlan and the Long Term Cash Incentive Plan;LTIP;
Consideration of an annual (financial year) incentive bonus based upon the fulfillment of certain targets set by the Board of Directors; and
An expense allowance.allowance; and
Matching Shares in terms of the MSR policy.
As of January 1, 2015,2017, the basisrules of the amount and manner of anyannual performance bonus payments for the CEO and CFO remained unchanged for 2015.2017.
The employment contracts also provide that, in the event of the relevant executive director’s employment being terminated solely as a result of a “change of control” as defined below, such termination occurring within 12 months of the change of control, the director is entitled to:
Payment of an amount equal totwo-and-a-half times GRP in the case of the CEO and two times GRP in the case of the CFO;
Payment of an amount equal to the average percentage of the incentive bonuses paid to the executive director during the previous two completed financial years;
Any other payments and/or benefits due under the contracts;
Payment of any annual incentive bonus he/she has earned during the financial year notwithstanding that the financial year is incomplete; and
The Executive Director shall be entitled to pro rata Long Term Cash Incentive Plan subject to scheme rules and payment at the endFull vesting of the performance cycle;all long-term incentive awards.
An entitlement to be settled with the full amount of the SARS and Restricted Shares allocated and awarded to him/her, and, in the case of the SARS, to have a further period of one year in which to exercise such SARS.
The employment contracts further provide that these payments cover any compensation or damages the executive director may have under any applicable employment legislation.
A “changechange of control”control for the above is defined as the acquisition by a third-party or concert parties of 30% or more of Gold Fields’ ordinary shares.
In the event of the consummation of an acquisition, merger, consolidation, scheme of arrangement or other reorganization, whether or not there is a change of control, if the executive director’s services are terminated, the “change of control” provisions summarized above also apply.
The committeeRemuneration Committee resolved to discontinue the compensation entitlement in the event of change of control for senior executives appointed from January 1, 2013. The senior executives who are currently entitled to the change of control compensation benefits will retain their rights under the previous policy.
Non-executive Director Fees
Gold Fields has no service contracts with its An independent advisor was commissioned to benchmark thenon-executive directors. directors’ fees to that of the South African and international markets.
On the basis of the independent advisor’s report, approval of a 7% increase tonon-executive directors’ fees, effective June 1, 2017 and a 3% increase to the fees ofnon-residentnon-executive directors, will be sought.
The Board has considered market conditions and in light thereof, have taken a decision not to increase the non-directors’proposednon-executive director fees for fiscal 2015. The fees applicable in fiscal 2014 will apply in fiscal 2015.2017, excluding value added taxes, are as follows:
| Per Annum 2016 Current Fees | Proposed Fees for Fiscal 2017 | |||||||||||||||
| (Rand) | (U.S.$) | (Rand) | (U.S.$) | |||||||||||||
The Chair of the Board(all-inclusive fee) | 2,765,000 | — | 2,960,000 | — | ||||||||||||
The Deputy Chair of the Board(all-inclusive fee) | 1,800,000 | — | 1,926,000 | — | ||||||||||||
The Chair of the Audit Committee | 329,000 | — | 352,000 | — | ||||||||||||
The Chairs of the Capital Projects Control and Review Committee, Nominating and Governance Committee, Remuneration Committee, Risk Committee, Social, Ethics and Transformation Committee and Safety and Health and Sustainable Development Committee (excluding the Chair of the board and the Deputy Chair of the Board) | 203,000 | 16,700 | 217,200 | 17,200 | ||||||||||||
Members of the Board (excluding the Chair and the Deputy Chair of the Board) | 907,900 | 74,900 | 971,500 | 77,200 | ||||||||||||
Members of the Audit Committee (excluding the chair of the audit committee and the deputy chair of the board) | 170,000 | 14,100 | 182,000 | 14,500 | ||||||||||||
Members of the Capital Projects Control and Review Committee, Nominating and Governance Committee, Remuneration Committee, Risk Committee, Social, Ethics and Transformation Committee and Safety and the Health and Sustainable Development Committee (excluding the Chairs of the relevant committees, Chair of the Board and the Deputy Chair of the Board) | 128,000 | 10,600 | 137,000 | 11,000 | ||||||||||||
Employees
The gold mining industry, particularly in South Africa, is labor-intensive. The total number of employees, excluding employees of outside contractors who are not on Gold Fields’ payroll, as of the end of the last three fiscal years at each of the operations owned by Gold Fields as of those dates was:
| As of(1)(2) | ||||||||||||||||
| December 31, | December 31, | December 31, 2014 | ||||||||||||||
South Africa | ||||||||||||||||
| ||||||||||||||||
| ||||||||||||||||
South Deep | 3,700 | (3) | 3,500 | |||||||||||||
Ghana | ||||||||||||||||
Tarkwa | 2,500 | 2,500 | (3) | |||||||||||||
Damang | 900 | 900 | (3) | |||||||||||||
Australia | ||||||||||||||||
St. Ives | 520 | (4) | ||||||||||||||
Agnew/Lawlers | ||||||||||||||||
| ||||||||||||||||
Darlot | 200 | (4) | 210 | (4) | 220 | |||||||||||
Granny Smith | 460 | (4) | 420 | |||||||||||||
Perth | (4) | 110 | ||||||||||||||
Peru | ||||||||||||||||
Cerro Corona | 450 | |||||||||||||||
Corporate | 80 | |||||||||||||||
|
|
|
|
|
| |||||||||||
Total | 9,000 | |||||||||||||||
|
|
|
|
|
| |||||||||||
Notes:
| (1) | The employee numbers presented do not include contractors who are not on the payroll. As at December 31, |
| (2) |
| (3) |
| (4) | Rounded to the nearest |
Labor Relations
South Africa
Approximately 91.82%91% of the labor force at Gold Fields’ South African operations is unionized, with the major portion of its South African workforce being members of the NUM and the other recognized union being UASA. Gold Fields attempts to balance union demands with the need to contain and reduce all-in costsAIC in order to ensure the long-term viability of its operations. For the Group’s South Africa operations, labor costs constituted approximately 43%47% of operating costs excluding amortisationamortization and depreciation.
There were no labor-related work stoppages at South Deep in fiscal 2014. One work stoppage was self-imposed for maintenance. Gold Fields has actively engaged with the DMR on the protocols applied to safety-related mine closures.2016. Gold Fields continues to promote health and safety in South Africa as part of a comprehensive effort to improve mine safety. Since December 31, 2014,In fiscal 2016, there have been threefive work stoppages to address safety issues.
Wage Agreements
In September 2013, Gold Fields reached a two-year wage agreement as part of the Chamber of Mines negotiation with UASA and NUM. This was preceded by members of the NUM returning to work at the South Deep mine following three days of wage-related industrial action. Under the agreement, employees received pay increases of between 7.5% and 8% – with further inflation-linked pay increases in the second year. In addition, it was agreed that the monthly living out allowance would rise from R1,640 (US$200) to R2,000 (US$210) by September 1, 2014. Currently, approximately 40% of Gold Fields’ South African labor force (excluding employees of outside contractors) receive living out allowances. The net impact of the deal was that it guaranteed that basic pay for employees at South Deep would rise by an average of 7.8%. This compared to original NUM demands for a general 15% increase, as well as a 60% increase for the most junior employees.
In total, labor costs in South Africa decreased by 12%increased from 46% in fiscal 2014 compared2015 to 47% of operating costs in fiscal 2013.2016. The decreaseincrease was primarily due to changes in the restructuring ofemployee profile, a three year wage agreement and incentives to align to the mine to create a fit-for-purpose operation.new business objectives.
At the wage talks with organized labor which commenced on March 19, 2015, Gold Fields offered an all-inclusive package which included a scarce skills allowance and a housing allowance.
On April 10, 2015, the Group signed a three-yearthree year wage and other conditions of employment agreement with the NUM and UASA, the registered trade unions at South Deep. The agreement will resultresulted in average annual wage increases of 10% over the three-yearthree year period of the deal. The first increase took effect on April 1, 2015.
A scarce skills allowance of R4,000 per month in the first year, escalating by R500 per annum over the next two years, for certain artisans and machine operators;
A retention allowance of R1,000 per month for other machine operators and artisans in the plant, backfill, shafts as well as tramming and recovery areas, for each of the three years covered by the agreement;
An increase of 20.96%, 14.29% and 12.5%, respectively in each of the three years, for Category4-8 (A and B Band or entry level employees) and an increase of 8% in fiscal 2015, 8% in fiscal 2016 and 9% in fiscal 2017 for miners, artisans and officials; and
A housing allowance to replace the current living out allowance over the three year period.
Ghana
In total, labor costs in Ghana remained at 22% in fiscal 2016. Of the Ghanaian employees at Tarkwa, Damang and the Accra office, the majority are members of the GMWU whose employment is governed by a collective bargaining agreement originally concluded in 19962000 and revised in 2000, 2003, 2004, 2006, 2010 and 2010. Wages are revised annually by negotiation with the GMWU. On November 6, 2013,2013. In January 2016, a two-year wage deal was reached with the GMWU for 2013 and 2014.fiscal 2015. Under the agreement, employees receivereceived a 12%5% increase on monthly basic pay for all union categories; a one off payment of 1,000 Ghana Cedis for employees to invest in development and 13%a rental allowance increase from 25% to 30% of salary for fiscal 20132016 for employees who are not in mine accommodation. In January 2017, atwo-year wage agreement was reached with the GMWU for fiscal 2016 and 2014, respectively, as well as 3%fiscal 2017. Under the agreement, employees received a 10% increase on monthly basic pay and aone-off payment of the accrued production bonus to be added to the1000 Ghana Cedis for fiscal 2016 and a 6% increase on monthly basic salarypay for 2013.fiscal 2017.
In order to reduce AIC in West Africa, management restructuredis focusing on restructuring the two minesDamang operations in fiscal 2014. Approximately 439 employees were affected at Tarkwa dueline with the business plan.
In this regard, Management and GMWU are committed to the closureRegion’s efforts to rebase its existing business operating models through productivity improvements and efficiency mechanisms in order to optimize all areas of the North Heap Leachbusiness value chain. This shall include ensuring optimal utilization of labor and 189 employees were affected at Damang due to the 3rd shift being dropped.
In the context of the restructuring at Tarkwa and Damang, wage inflation, as well as energy prices and heavier government imposts, remain an ongoing concern in Ghana.
The next round of wage negotiations is expected to take place in May 2015.timeously addressing any inherent operational deficiencies that may exist.
Australia
In total, labor costs in Australia remained at 26% in fiscal 2016. In Western Australia, where Gold Fields’ Australian operations are located, labor is now primarily regulated by the Fair Work Act (2009), or the Fair Work Act, and the federal industrial relations system created thereby. The Fair Work Actwhich came into effect on July 1, 2009 replacingand the previousassociated federal industrial relations system created byregulations and minimum National Employment Standards.
The commencement of the Workplace RelationsFair Work Act 1996 (Cth.), or the Workplace Relations Act.means that unions may potentially have an increased role in negotiating collective agreements for pay and working conditions which may lead to an increased union presence in Western Australia’s mining industry, including at Gold Fields’ mining operations in Australia.
With the exception of a range of state statutes limited to health and safety, long-service leave, discrimination and workers’ compensation, Gold Fields and its employeesemployees’ conditions of employment are not subject to state industrial or employment laws.
However, the Fair Work Act has made significant changes to the previous federal industrial relations system under the Workplace Relations Actregulated by enhancingan employee collective bargaining rights and increasing the role of unionsagreement.
In April 2015, in the collective bargaining process.
The commencement of the Fair Work Act means that unions have an increased role in negotiating collective agreements for pay and working conditions and may lead to an increased union presence in Western Australia’s mining industry, potentially including at Gold Fields’ mining operations in Australia. In order to mitigate potentialmanage labor risks, Gold Fields implemented a four year Companies Enterprise Agreement, or the Gold Fields Companies Enterprise Agreement,CEA, with employee representatives and representatives of a union representatives in February 2014, which took effect in April 2014 and lasts until April 2018. During the term of this agreement, protected industrial actions such as strikes and bans will be regarded as a breach of contract. The terms of the Gold Fields Companies Enterprise Agreement havehas been endorsed by the Fair Work Commission and provideCommission. The CEA provides for standardized conditions of employment across Gold Fields’ mining operations in Australia for all of its employees including minimum ‘safety net’ rates of pay, work hours, redundancy provisions, discretionary market-based annual wage reviews and general ‘best practice’ employer and employee obligations, such asobligations. Also contained in the agreement is a dispute settlement procedure that includes an internal ‘up the line’ escalation process as well as provision (by mutual agreement) for external arbitration.arbitration and provides that during the four year term of this agreement protected industrial actions such as strikes and bans will be regarded as illegal. The CEA will come up for review early in fiscal 2018.
Peru
In total, labor costs in Peru increased from 23% in fiscal 2015 to 28% in fiscal 2016. Prior to 2011, the employees at Cerro Corona were not unionized and had no collective bargaining agreement. However, Peruvian labor regulations provide that a collective negotiation process may be commenced by a union or by workers’ representatives elected by the majority thereof.
In June 2011, operational employees at Cerro Corona formed a labor union and negotiated a five-yearfive year collective bargaining agreement with the Group.Group up to June 2016. In January 2017, a new agreement was signed for a 3 year period, up to fiscal 2019. Currently 11.7%17% of the Group’s South AmericanPeruvian employees are unionized. This agreement provides for a S/. 200220 annual wage increase in fiscal 2017 which is equivalent to a 6%5.3% annual wage increase on average for this group of employees.employees, 5.5% increase in fiscal 2018 and 5.8% increase in fiscal 2019. In addition, eligible employees are entitled to a special bonus payment, education expenses and other benefits. Though not required by law, Gold Fields provides to certain management staff a flat amount to cover housing and utility expenses in the city of Cajamarca in accordance with the Group’s internal policy.
Also, Gold Fields provides to its workers, as a working condition, free transportation between the mine site and the city of Cajamarca.
Over the last few years, Peru has seen many cases of conflicts and dissention between local communities and mining operations and mining projects, stemming largely from the communities’ desire for greater participation in the economic benefits of these mining projects. Cerro Corona has undertaken extensive community consultation and negotiation since 2003 through the land purchase and permitting process to achieve agreement with local communities on various aspects of community involvement. A comprehensive strategy to work with the communities has been implemented through the operations stages. The main focus of this strategy relies on three pillars, which are (i) promoting the development of basic local infrastructure such as, for example, improvements to local drinking water, (ii) training and employing the local communities and (iii) developing economically self-sustaining projects and suppliers. Gold Fields believes its social strategy has created goodwill with the local communities.
Benefits
Gold Fields provides benefits to its employees, generally including pension, medical and accommodation benefits. Employees are also entitled to a severance package if they are laid off. Gold Fields’ own employees are generally provided with medical and retirement benefits. In Australia, benefits for contractors’ employees are the responsibility of each contractor and Gold Fields’ own employees are generally responsible for their own medical costs and other benefits, except that Gold Fields contributes to a third-party pension plan.
In South Africa, Gold Fields attempts to attract and retain motivated high caliber employees through a mix of guaranteed and performance-based remuneration, as well as short-term and long-term incentives, andnon-financial rewards relating to work experience. Gold Fields has also implemented company pay structuring for management employees and also for supervisory employees in South Africa, known as the Gross Remuneration Package.
Furthermore, in order to maintain competitiveness in the South African labor market, regular industry market surveys are conducted, to benchmark remuneration practices and to keep abreast of industry movements regarding employee benefits andnon-financial employee reward and recognition programs. Gold Fields was actively involved in an industry task team working with the Institute of Directors in formulating industry standards for remuneration practices based on labor market dynamics.
Bonus Schemes
Gold Fields offers appropriate bonus schemes for employees at all levels. The focus of Gold Fields’ bonus schemes is based on specific production, safety, cost and development at management levels.
Employee Share Option Scheme
With respect to Gold Fields’ South African operations, an Employee Share Option Scheme, or ESOP, in respect of an effective 10.75% stake in GFIMSA was registered on December 1, 2010. The ESOP is housed and administered through the Thusano Share Trust. The effective holding in GFIMSA was equivalent to about 13.5 million unencumbered Gold Fields shares with full voting rights, which were issued to and held by the trust at par value of R0.50 which represented a 99.5% discount to the 30 days volume-weighted average price at July 30, 2010. This represents 1.75% of the current Gold Fields shares in issue. See “Additional Information—Material Contracts—Additional Black Economic Empowerment Transactions”.
Employment Equity
Under the South African Employment Equity Act, or the Employment Equity Act, Gold Fields has a responsibility to: (1) promote equal opportunity and fair treatment in employment by eliminating unfair discrimination; and (2) implement affirmative action measures to redress the disadvantages in employment
experienced by certain groups, in order to ensure their equitable representation in all occupational categories and levels in the workforce. As required by the Employment Equity Act, Gold Fields had a formal employment equity plan, which has been approved by its unions and submitted as part of its report to South African regulatory officials. The plan includes numerical targets to be achieved over a five-yearfive year period, with regular meetings of employment equity forums involving management and employee representatives to monitor progress against the plan. Management believes that Gold Fields is currently making adequate progress toward the targets under its plan and is in compliance with legal and regulatory requirements regarding employment equity.
Training
Gold Fields continues to provide comprehensive training to its employees, in full compliance with the regulatory requirements at the sites at which it operates. The training provided in South Africa is aligned with South Africa’s National Qualifications Framework, and is carried out within the ambit of Gold Fields’ education, training and development, or ETD, establishment, in partnership with other institutions to provide accreditation. In order to secure optimal workplace safety and productive work performance, Gold Fields exposes its employees to ETD interventions which significantly exceed compliance to minimum standards, in the form of additional mining and safety skills training, team-based behavioral training, andnon-mining related life and social skills training.
In addition, Gold Fields continues to focus systematically on managerial, leadership, and professional development through the provision of “Management Development Leadership” programs in association with Duke University, as well as its Leadership and Professional Talent Pipeline program, by means of a process known as the Talent Review, which is integrated with its performance management system.
In South Africa, Gold Fields has maintained its enrollment of University Bursars and entry-level scholarships across the technical disciplines. At South Deep, the mechanized training center has now been established and provides essential mechanized training required for our South Deep operations.
Gold Fields continues to review the performance of its human resource development, which seeks to identify further opportunities to improve the training and development initiatives. This new focus has resulted in changes in the approach of human resource development, with a conscious departure from the traditional training-only approach, towards a holistic talent and change management approach. Gold Fields believes that this approach will facilitate the cultural and behavioral changes required for the organization to achieve its Safe Production performance objectives. This includes theroll-out of the Gold Fields Foundational program which almost all employees have already completedare required to complete across the Group, and which provides a foundation of company knowledge, key business concepts and company strategy.
Gold Fields continues to subscribe to initiatives concerning national critical skills formation, operating through various private sector collaborative initiatives. In addition, Gold Fields continues to work closely with local and national government forums towards the development of business initiatives aimed at addressing youth development.
All of Gold Fields’ employee training activities in South Africa take account of the human resources development requirements of the Mining Charter, and are fully described in the Social and Labor PlanSLP submitted by Gold Fields to the Department of Minerals and Energy. See “Information on the Company—Environmental and Regulatory Matters—South Africa—Mineral Rights”.
Gold Fields has initiated training and development programs internationally that are appropriate to the specific regions, commensurate with regional and site-specific objectives and constraints. A comprehensive leadership development program at Gold Fields’ operations has been developed to further the growth of high-potential individuals, including management, specialists, and other high performers.
HealthSafety and SafetyWellness
Gold Fields strivescontinues to uphold its promise, that “if we cannot mine safely, we will not mine”. This reflects the Group’s emphasis on the need to minimize any potential human impacts,negative impact on our employees and contractors, maintain operational continuity and protect itsthe Company’s reputation. The Group’s annual performance bonus contains a significant safety component. Furthermore, maintaining safe and healthy working conditions is a key compliance issue for the Group.Company.
As stated in its Occupational Health and Safety Policy, Gold Fields strives for ‘zero harm’“Zero Harm” at all of its operations and to minimize occupational health and safety hazards. All of the Group’s operations are now certified to the OHSAS 18001 international health and safety management system standard. This follows the certification of Granny Smith
The work on safety and Darlot in fiscal 2014, both of which were acquired from Barrick Gold in October 2013. The Lawlers mine, also acquired from Barrick Gold, was certified through its merger with Agnew. In addition, all of the Group’s operations are now fully compliant with the requirements of the International Cyanide Management Code.
All ofwellness is integral to Gold Fields’ regional operations are required to implement Health, Safetyoperational discipline and Wellness Strategies, together with associated action plans, that address occupationalis widely accepted as the foundation for improved operational performance. As such, there is no conflict between pursuing safety occupational health, employee wellness and community health and wellbeing. In addition, these strategies and action plans define relevant management structures, resource allocations and reporting requirements. Gold Fields’ South African operation is also required to take into account various occupational health and safety milestones that were adoptedproductivity at the national Mine Health and Safety Council of South Africa, or MHSC, summit in November 2014.same time.
Safety Management
Overview
In fiscal 2014, Gold Fields continuedremains vigilant and continues to focusintroduce and monitor proactive measures to build on implementing its Group Safety Reporting Guideline, which is based on International Council on Mining and Metals, or ICMM, guidelines. Gold Fields’progress made in our safety performance.
Tragically, one fatality occurred during fiscal 2016 when Vakele Thafeni, an employee learner miner, was killed after a 1.5 magnitude seismic event caused an underground rock burst at our South African operation also takes into account the safety targets set by the MHSC in November 2014 of a 20% reduction in serious injuries per year by December 2015, 20% reduction in lost time injuries from January 2017 and zero fatalities by December 2020.
Since fiscal 2013,Deep mine. Subsequent toyear-end, Gold Fields has aligned its healthhad two further fatalities at South Deep. Thankslord Bekwayo, a dump truck operator,
was killed in an underground accident on January 1, 2017 involving the truck he was driving, while Nceba Mehlwana, a locomotive driver, was fatally injured during a tramming accident on February 16, 2017. Our heartfelt condolences go out to the families, friends and colleagues of Messrs Thafeni, Bekwayo and Mehlwana. The Group’s safety metrics with those of the ICMM, headed by the TRIFR. Gold Fields peer companies tend to useperformance showed a 33% improvement in the TRIFR metric, which assists benchmarking of Group performance against the wider sector.
During fiscal 2014, the Group’s overall TRIFR improved by 3%, to 4.04with 2.27 incidents per million man hours worked, compared to 4.14 per million man hours worked in fiscal 2013.2016 compared to 3.40 in fiscal 2015. This reflected:is a significant achievement and is the lowest TRIFR rate at Gold Fields since fiscal 2013 when the ICMM adopted the measure as the gauge of safety performance. The Group’s TRIFR rate in fiscal 2013 was 4.14, while the number of recordable injuries since then has declined from 181 in fiscal 2013 to 124 in fiscal 2016. Of the 124 injuries, 76 were employee injuries (2015: 100) and 48 were contractor injuries (2015: 74).
During fiscal 2016, each of Gold Fields’ eight operations reported an improvement in their TRIFR rate, a tribute to the behavior-based safety programs in place across the Group. Gold Fields’ work at embedding these into our day-to-day performance, along with visible management leadership on the ground, continues.
Group safety performance
Improved safety performance at South Deep, albeit partly linked to the four-month remedial program, during which production slowed down;
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014 | Fiscal 2013 | |||||||||||||
TRIFR(1) | 2.27 | 3.40 | 4.04 | 4.14 | ||||||||||||
Fatalities | 1 | 4 | (5) | 3 | 2 | |||||||||||
Lost time injuries(2) | 39 | 68 | 75 | 52 | ||||||||||||
Restricted work injuries(3) | 59 | 68 | 84 | 73 | ||||||||||||
Medically treated injuries(4) | 25 | 35 | 38 | 54 | ||||||||||||
Total recordable injuries | 124 | 174 | 200 | 181 | ||||||||||||
Improved safety performance in Australia following the implementation of a behavioral health and safety strategy; andNotes:
| (1) | TRIFR Group safety metric was introduced in 2013. TRIFR = (Fatalities + Lost Time Injuries + Restricted Work Injuries + Medically Treated Injuries) x 1,000,000/number ofman-hours worked. |
| (2) | A LTI is a work-related injury resulting in the employee or contractor being unable to attend work for a period of one or more days after the day of the injury. The employee or contractor is unable to perform any of his/her duties. |
| (3) | A RWI is a work-related injury sustained by an employee or contractor which results in the employee or contractor being unable to perform one or more of their routine functions for a full working day, from the day after the injury occurred. The employee or contractor can still perform some of his/her duties. |
| (4) | A Medically Treated Injury, or MTI, is a work-related injury sustained by an employee or contractor which does not incapacitate that employee and who, after having received medical treatment, is deemed fit to immediately resume his/her normal duties on the next calendar day, immediately following the treatment orre-treatment. |
| (5) | Three of the four fatalities in 2015 were workplace accidents. A fourth fatality was a member of the protection services team at South Deep who was shot and killed during a robbery at the mine. |
Regional Performance
Improved safety performance in West Africa, following the implementation of a range of interventions.
Details aroundof specific regional safety initiatives implemented at the Group’s operationsin fiscal 2016 are set out below.
Americas
After slipping in fiscal 2015 to 1.09 from 0.38 in fiscal 2014, the TRIFR at the Cerro Corona mine improved by 69% to 0.34 in fiscal 2016, with the operation only reporting one lost time and one MTI during the year. Following the relatively poor performance in fiscal 2015 the mine intensified its safety campaign, containing 10 rules that every employee and contractor has to sign up to. It also focused on improving the leadership skills of safety supervisors, as part of visible safety leadership. Furthermore, 190 employees and contractors have been tasked with driving safe behavior by highlighting good working practices.
Australia
During fiscal 2016, the TRIFR for Gold Fields Australia improved by 42% to 9.43 from the fiscal 2015 rate of 16.27. This is the lowest rate since the acquisition of the Yilgarn South Assets in fiscal 2013, when the region’s integrated safety strategy was first launched. The TRIFR has been reduced by 73% since then. Three of the mines, St. Ives, Darlot and Granny Smith, showed improvements ranging from 47% to 55% during fiscal 2016 and all three recorded their lowest TRIFR rate since fiscal 2013. Agnew/Lawlers’ improvement was lower at 13% after a number of safety related incidents with a contracting firm early in fiscal 2016. Targeted interventions managed to address their performance.
At the heart of Gold Fields Australia’s safety efforts are settwo programs: the ongoing Visible Felt Leadership and Vital Behaviors programs, both of which were introduced in fiscal 2014. Risk assessments undertaken on all recordable injuries since fiscal 2012 indicate that the risk of incidences that result in recordable injuries is steadily declining with no high-risk events having occurred since fiscal 2014.
During fiscal 2016, all mines in the region revitalized their safety programs as well as safety discipline. A particular focus has been on new employees and contractors, where there was evidence of a greater risk of injury. The findings of an anonymous survey among employees about the safety programs and standards, carried out below:
South Africaannually over the past three years, will feed into the region’s safety strategy for the next three years.
In addition, the St. Ives mine is currently in the process of re-certification following an initial negative finding by the International Cyanide Management Institute, or ICMI. The external certification auditors have recommended re-certification and the ICMI is currently evaluating their findings.
South Africa
South Deep’s safety performance showed a significant improvement with the TRIFR falling by 17% from 2.91 in fiscal 2014,2015 to 2.42 in fiscal 2016. However, this overall improvement was overshadowed by the fatalfall-of-ground accident experienced by the mine in September. In fiscal 2015, South Deep reported two employeesmining-related fatalities and one contractorfatal shooting. As a result of the fatal accident, the Department of Mineral Resources issued two Section 54 work-safety related stoppages. A further 13 Section 54 stoppages were issued during fiscal 2016 following visits by the DMR due to either perceived or actual unsafe working conditions, inadequate safety procedures or untrained personnel. This brings the total number of Section 54s in fiscal 2016 to 15 (2015: 16). Gold Fields continues to work with the DMR in addressing safety and wellness related issues at South Deep.
The number of total injuries reported by the mine went up from 68 in fiscal 2015 to 75 in fiscal 2016 (the TRIFR for South Deep is lower due to more hours worked.). Three categories (Material & Equipment,Fall-of-Ground and Slip & Fall) accounting for 77% of these injuries.Fall-of-ground accidents had been on a steady decline to six in fiscal 2015 but picked up again in fiscal 2016 with 15 incidents, including the fatal accident. Gold Fields continues its efforts to move mineworkers away from potentially dangerous areas and has installed extensive secondary support throughout the mine to limit the impact of rock bursts. The number of seismic events at South Deep registering above one on the Richter scale increased from 73 in fiscal 2015 to 101 in fiscal 2016 (of which six were tragically killed in workplace accidents. These deaths, allover two on the scale) as the mine accelerated its ramp-up. Despite the fact that the average energy released per seismic event has dropped, the mine has intensified its efforts at improving its forecasting abilities. It is working with 12 consultancies and institutions, including the Institute of Mine Seismology and the Council for Geoscience, to monitor, understand and mitigate against seismic underground events.
Behavior-based incident management and strict enforcement of safety standards continue to be the pillars on which all occurred underground, relatedthe mine relies to two workshop accidentsimprove working place physical conditions and a machinery incident. On May 27, 2014, following a reviewaddress risky behavior. In addition, 30% of bonuses, on average, are linked to safety-related performance. During fiscal 2016, South Deep rolled out four programs to improve its safety performance, includingback-to-basics training, hazard identification and risk assessments as well as artisan upskilling. Testing for alcohol and cannabis is also carried out as part of the circumstances surrounding the first two fatalities, the DMR imposed a moratorium on all workshop-related activities via a “Section 54 notice”,mine’s zero tolerance policy.
effectively bringing production to a halt. The moratorium was lifted on May 30, 2014 after Gold Fields filed a report to the DMR confirming its compliance with Section 11(5) of the Mines Health and Safety Act. A fatality in July 2014 also led to a Section 54 stoppage being imposed for about a week in the affected areas, before being lifted. These accidents led to the deferral of about 16,000 ounces of production. Following the incidents, South Deep also implemented a wide range of safety-based remedial actions, including the completion of secondary support in older parts of the mine. The latter, which began late in May 2014, entailed an extensive safety-related ground support remediation intervention, effectively limiting access to 70% of the current mining areas, from which a significant proportion of current production is sourced. This intervention led to the deferral of approximately 48,225 ounces of production and is expected to have a knock-on effect for production in fiscal 2015. This secondary support work was completed in October 2014.
Beyond behavioral-based management, South Deep has had one fatalityalso intensified its effort to date in fiscal 2015. The death related to an accident at a station tip.
Gold Fields remains committed to eradicating residualengineer-out safety risks, at South Deep by instituting further safety management initiatives. In fiscal 2014, these included:
The integrationthrough pre-conditioning of working areas, as well as a focus on consumable material and equipment. As part of this, the installation of a health and safety managementrail-bound proximity detection system or the Health and Safety Management System, into new training processes introduced at South Deep, in addition to the standard induction process. The Health and Safety Management System is being audited on a quarterly basis, with the first auditwas completed in the first quarter of fiscal 2015;
The reversion of2016, with which all 56 locomotives at the mine’s operations to a 7-2-7-5 roster system,mine were fitted and relevant operators and artisans trained in part to address concerns about fatigue-related safety risks caused by the recently introduced 24/7, 12-hour shift system. This transition was supported by a five-day training program for each new roster cycle to ensure employees and contractors were sufficiently trained to work safely within the new roster system;
The provision of general refresher safety courses to workers as they returned to work following the safety shutdowns in fiscal 2014, as well as role-specific modules, including training on the new roster system;
its use. The installation of proximity detection systems, which help personnel avoid danger zones when working near heavy mining equipment; and
The installation of new rail-bound equipment, including the Rovic auto-coupler, which eliminates the need for personnel to manually couple and uncouple rolling stock.
In addition,fixed beacons at the mine continued to carry out regular substance testing for alcohol and cannabis overduring the courselatter part of fiscal 2014. A total of 5,127 employees2016 has helped to facilitate direct communication between the locomotives.
West Africa
Both Tarkwa and contractors were tested for the use of cannabis,Damang reported better TRIFR during fiscal 2016, with 99, or 2% of the total, of those tested foundTarkwa improving by 23% to be positive. A total of 51,500 alcohol tests were carried out among employees0.31 and contractors, of which 57 yielded positive results.Damang by 37% to 1.67. The positive cases were referred to Gold Fields Employee Assistance Program, or EAP, where first offenders received counseling and other assistance to stop substance use. Repeat offenders were dismissed due to the potential safety risks they posed to the workplace.
In fiscal 2014, South Deep’s TRIFR improved by 10% to 4.65 per million man hours worked, compared to 5.19 per million man hours workedregion reported no fatality in fiscal 2013.
West Africa
Despite already achieving some of the best safety performances across the Group, Gold Fields’ West Africa operations instituted a number of enhanced safety measures following a lost time incident in September 2014 at Tarkwa’s CIL plant. At Tarkwa, the Group continued its drive to reduce vehicle-related incidents by conducting random breathalyzer testing, and reenergized a 100 Injury Free Day Challenge safety campaign. Senior managers also conducted visits to selected working sites, to create safety awareness.
At Damang, the Group revised its Safety Referee Policy, which involves the issuance of color-coded cards to offenders of safety rules and is now being implemented, to boost the overall safety of the mine. Simulation drills were conducted2016 after recording one fatal accident during fiscal 2014 to test the readiness of the emergency response team, and the Group also conducted random alcohol testing.
The implementation of the safety initiatives described above helped to improve the TRIFR at the Group’s West Africa operations, which decreased by 20% to 0.75 per million man hours worked in fiscal 2014, from 0.94 per million man hours worked in fiscal 2013.
Australasia
During fiscal 2014, the Group’s implemented a safety strategy around best practice tools, programs and processes at its Australasia operations. It also focused on achieving OHSAS 18001 international2015. An external health and safety certification at its Yilgarn South Assets, which were acquired from Barrick Gold in October 2013. This resulted in the successful certification of both Granny Smith and Darlot to OHSAS 18001. Lawlers was certifiedaudit undertaken in the fourth quarter of fiscal 2014 under Agnew’s certification.2016 made no adverse finding and reported no high-risk events at either mine.
The Group also implemented an innovative behavior-based safety program at its Australasia Operations called ‘Vital Behaviors’, involving all employees and contractors. Vital Behaviors engages the workforce through participatory workshops aimed at promoting safe workplace behavior. Participants share experiences (onmines rely on a confidential basis), while analyzing and reflecting on past instancesnumber of their non-compliance with healthbehavioral-based and safety policies. In parallel withdiscipline awareness programs to entrench safe behavior and during fiscal 2016 this process, the Group also rolled out a ‘Visible Felt Leadership’ program in fiscal 2014. This involved trainingwas supported by more frequent walkabouts by senior managers to engage with their teams on safety issues.
Management believes that the implementation of these two strategies has played a role in the improvement of safety performance at the Group’s Australasia operations in fiscal 2014, with the TRIFR decreasing to 17.04 per million man-hours from 23.47 per million man hours worked in fiscal 2013. The relatively high TRIFR for Australasia is partly due to a higher number of restricted work injuries being reported relative to other regional operations. This reflects more conservative injury classifications being employed by local medical practitioners, who are concerned about the possibility of injury severity escalations.
The Americas
In fiscal 2014, Cerro Corona placed particular focus on improving contractor safety. This followed the death of a contracted worker at the mine in fiscal 2013. As a result, Cerro Corona extended its “Behavior Change Program” to include contractors. Relevant initiatives applied in fiscal 2014 included a review of contractors’ safety programs and improvementmanagement. A key part of the safety induction process for contractors.strategy is a zero tolerance approach to drug and alcohol use, which is applicable to all employees in the West Africa region. Over 130,000 sobriety tests were conducted during fiscal 2016 and 28 employees and contractors, who were found to be over the limit, were discharged immediately. The mine’s TRIFR rose slightly from 0.34 per million man hours worked in fiscal 2013 to 0.38 per million man hours worked in fiscal 2014.zero tolerance approach is supported by free counselling and educational sessions on drug and alcohol abuse.
Occupational healthEmployee Health and Wellness
Gold Fields is committed to reducing the exposure of its employees to occupational health risks, including those associated with air quality, silicosis, tuberculosis, diesel particulate matter and hearing loss. As such, the Groupeach region has implemented management plansoccupational health and hygiene monitoring for diesel particulates, respirable and silica dust, other airborne pollutants, radiation and noise at each of its regional operations. These plans provide for ongoing and regular monitoring of exposure levels at all operations.noise. Particular emphasis is placed on managing the underground working environments in Gold Fields’ AustralasiaAustralian and South AfricaAfrican operations, because ofdue to the heightened health risks that underground mining may poseposes to workers.
All operational employees are subject to entry and exit medical assessments, and in certain operations, employees also undergo annual medical assessments that aim to prevent, identify and treat occupational diseases. These assessments, which are, at a minimum, aligned with the legal requirements of each operating jurisdiction, focus on operation and role-specific health risks. Employees are also offered quantitative, confidential health risk assessments. These seek to address occupational diseases, but also general health and lifestyle issues such as hypertension, diabetes, cholesterol, diet and mental health.
In fiscal 2014, the number of recorded occupational health cases across the Group rose slightly. These included:
13 cases of NIHL (compared to 8 in fiscal 2013); and
15 cases of silicosis (compared to 12 in fiscal 2013).
The Group is awaiting the final outcome of the assessments that are conducted as a matter of course by the Medical Bureau for Occupational Disease and the Rand Mutual Association, which will determine the final number of cases accepted.
In fiscal 2014, 49 new cases of cardiorespiratory tuberculosis, or CRTB, were recorded, compared with 42 in fiscal 2013. This increase can be attributed to the fact that during the year, South Deep enhanced its efforts to identify CRTB cases. There was therefore an increase in the total number of patients screened and in the final number of CRTB cases identified.
Wellness is a material issue given the location of Gold Fields’ mines, the nature of employees’ working patterns and the lifestyle challenges associated with the sector in which the Group operates. All of Gold Fields’ regional operations implementregions run dedicated wellness programs, tailored to both the national and local context of each mining operation. This is aimed at identifyingThese programs aim to identify and managingmanage chronic medical conditions within the Group’s workforce, and atwhilst also maximizing the Group’sits productive capacity and reducing absenteeism.
NoiseOccupational disease at the South Deep mine (rate per 1,000 employees)
| Fiscal 2016 | Fiscal 2015 | Fiscal 2014(1) | Fiscal 2013(1) | |||||||||||||
Noise-induced hearing loss (NIHL)(1) | 0.80 | 0.68 | 1.52 | 0.62 | ||||||||||||
Cardio-respiratory tuberculosis (CRTB) | 5.26 | 6.16 | 9.15 | 6.5 | ||||||||||||
Silicosis(2) | 1.12 | 1.54 | 2.67 | 1.86 | ||||||||||||
Chronic obstructive airways disease (COAD)(1) | 0.64 | 0.17 | 0.76 | 0.00 | ||||||||||||
South Deep workforce | 6,277 | 5,837 | 5,246 | 6,466 | ||||||||||||
Notes:
| (1) | Numbers are now presented per 1,000 employees. Comparatives have been restated. |
| (2) | Based on the number of cases submitted for compensation. |
Noise
During fiscal 2016, Gold Fields remains committedFields’ South Deep mine reported a rise in the NIHL rate to further reducing noise levels at South Deep. New targets have been set by0.80 per 1,000 employees and contractors (fiscal 2015: 0.68), while the MHSC which require that noise-induced hearing loss be eliminated; total noise emitted by all mining equipment should not exceed 107 dBA by 2025; and that all employees’ Standard Threshold Shift should not exceed 25 dBnumber of NIHL cases submitted rose from four to five. During the baseline when averaged at 2000, 3000 and 4000 Hz in one or both ears by December 2016. In fiscal 2014,year, the mine met the currentMine Health and Safety Council, or MHSC, targetmilestone for equipment noise emissions by mining equipment, partly duenot to exceed 110(A-weighted) decibels (dB(A)), though 10% of samples were above the silencing2024 milestone of underground fans as well as the application of noise management measures107 dB(A).
It is important to its underground mining fleet.
To further reduce employee exposure to noise levels exceeding the statutory requirements of 85 dBA over an eight-hour shift, the mine piloted new molded hearing protection devices in fiscal 2014. These are custom-fitted for each employee’s ear and were distributed to all 500 identified high-risk employees. It should be notednote that the measurement of exposure levels above 85 dBAthese measurements do not take into accountincorporate the protection affordednoise reduction effect provided by hearing protection devices, which are issuedfreely available and are compulsory to all employees workingwear in high exposuredemarcated areas.
Silica dust exposure
South Deep continuedcontinues to implement improved dust control measures,a range of medical, educational and engineering interventions to improve its performance in accordance with the new MHSC milestones (which include the requirement that by December 2024, 95% of all individual exposure measurement readings in respect of respirable crystalline silica be below 0.05 mg/m³). Examples of actions taken in fiscal 2014this regard. These include:
Real-time dust monitoring;Early diagnosis and management of treatable lifestyle diseases;
The fittingPreventative counseling on NIHL;
Training on correct use of water mist sprays at dust sources;
Dust management controls on footwalls and internal tips;personal protection equipment, or PPE; and
The installationApplication of manually controlled water blasts in all working areas.noise management measures to the underground mining fleet.
DuringAt Gold Fields’ Australian operations only two vehicles and machinery equipment across our four operations recorded noise levels above 110dB(A) throughout 2016. Operators of this equipment use appropriate hearing protection to ensure noise levels experienced are below 85dB(A). Two new NIHL cases were reported during fiscal 2014, South Deep stayed within2016. NIHL mitigating strategies include implementation of engineering solutions to reduce exposure, the 5% limit set bycorrect use of PPE and ongoing monitoring.
In West Africa, the MHSC for the proportionnumber of individual silica dust measurements exceeding the occupational exposure limit set by the MHSC, or OEL, of 0.1 mg/m3. The average percentage sample above the OELNIHL cases remained at the minetwo new cases in fiscal 2014 was 4.9%, compared2016, amid the mandatory use of hearing protection devices (ear plugs and ear muffs) in areas with 3.8% in fiscal 2013.
In November 2014, Gold Fields, Sibanye Gold, Anglo American South Africa, AngloGold Ashanti and Harmony Gold formed an industry working group to address legacy issues relating to compensation and medical care for occupational lung disease innoise exposures above 85dB(A). Furthermore, continuous monitoring of the gold mining industry in South Africa. The five companies intend to engage with stakeholders to work together to design and implement a comprehensive solution that is both fair to present, past and future gold mining employees and also sustainable for the sector. The companies are already engaging withoperator workstations as well as a number of stakeholdersin-pit machines, including drill rigs, excavators, dump trucks and graders are undertaken every six months. Engineering controls, such as part of an intensive engagement process during fiscal 2015 intended to lead tosound proof seals for equipment operator cabins, are also having a comprehensive solution. See “Informationpositive impact on the Company—Legal Proceedings and Investigations—Silicosis”.noise levels.
The companies believe that fairness and sustainability are necessary to any comprehensive solution. The companies are among respondent companies in a number of lawsuits related to occupational lung disease. The five companies do not believe that they are liable in respect of the claims brought, and they are defending these. They do, however, believe that they should work together to seek a solution to this South African mining industry legacy issue.
Gold Fields is continuing its efforts to eliminate the incidence of silicosis and tuberculosisThere were no reported NIHL cases at its operations through improved underground dust management and a number of other measures.Cerro Corona.
Diesel particulate matterParticulate Matter
Gold Fields undertakes regular monitoring and analysis of the concentration of diesel particulate matterDPM at all of its operations. This issue is particularly material at Gold Fields’ underground mines in Australia and South Africa, due to the potential concentration of particulates in specific working areas.
AlthoughWhile there are no regulatory limits, the Australia region implemented a strategy in fiscal 2014 the Group’s Australasia Region implemented a strategy designed to reduce exposure to diesel particulate matter, or DPM with a focus on fitting filters to equipment, refining maintenance schedules, ensuring the correct levels of ventilation and providing appropriate procedural controls. Sampling programs during fiscal 2016 have indicated the success of this initiative with a sharp decline in DPM levels of DPM underground, to a point where only 2%0.5% of samples have exceeded the internal70µg/m3 target of 70 micrograms per cubic meter. This is in line with targets recommended by the Australian Institute for Occupational Hygienists.
In South Africa, the DMR has developed a draft regulatory framework, released in fiscal 2014, to establish a DPM OEL. This proposal, published in February 2014, recommendsplan recommended a four-year ‘step-in-approach’‘step-in- approach’ starting at 350 micrograms per cubic meter,350µg/m3 in fiscal 2015 and systematically decreasing to 160 micrograms per cubic meter160µg/m3 by January 2018. In response, Gold Fields carried outhas over the years introduced a studyrange of measures to establish currentimprove monitoring and bring down the DPM exposure levels atunderground. These include the acquisition of vehicles and machines with more advanced engine technology as well as use ofultra-low sulphur content diesel. As a result, the 160µg/m3 DPM OEL was only exceeded in 11% of samples during fiscal 2016 compared with 15% in 2015 and 19% in fiscal 2011.
In Ghana and Cerro Corona, the exposure levels and concentration of personal and area DPM samples are insignificant.
Silicosis and Tuberculosis
In fiscal 2015, the MHSC introduced new aspirational silica dust exposure targets for South African gold mines. These milestones require that personal exposure levels to silica dust be reduced from 0.1mg/m³ to <0.05mg/m3 by fiscal 2024. South Deep which foundis already using the fiscal 2024 level to guide its performance and in
fiscal 2016, 26% of the personal silica dust samples exceeded this level. South Deep has accelerated the implementation of a range of improved dust control measures to gradually reduce these levels, including:
Real-time dust monitoring;
Fitting water mist sprays at dust sources;
Dust management controls on footwalls and internal tips; and
Installation of manually controlled water blasts in all working areas.
During fiscal 2016, the silicosis rate per 1,000 employees improved by 28% to 1.12 from 1.54 in fiscal 2015 with the number of silicosis cases submitted to the relevant health authorities falling from nine to seven. Similarly, the CRTB rate improved by 15% in fiscal 2016 to 5.26 per 1,000 employees (fiscal 2015: 6.16) and the number of CRTB cases submitted fell to 33 in fiscal 2016 from 36 in fiscal 2015.
In 2014, an industry working group was formed to address issues relating to compensation and medical care for occupational lung disease in the South African gold mining industry. During fiscal 2016, the working group had extensive engagements with a wide range of stakeholders in fiscal 2016, including government, organized labor, other mining companies and legal representatives of claimants who have filed legal suits against the companies.
The companies, Anglo American South Africa, AngloGold Ashanti, African Rainbow Minerals, Gold Fields, Harmony and Sibanye, believe that fairness and sustainability are crucial elements of any solution and are working together with these stakeholders to design and implement a comprehensive solution that is both fair to past, present and future gold mining employees and also sustainable for the sector. The companies are among respondent companies in a number of areas,lawsuits related to occupational lung disease, but do not believe that they are liable in respect of the fiscal 2015 exposure levels were exceeded by 4.5%claims brought, and the 2018 levels by 26%. As such,they are defending these.
At Gold Fields recognizes that more work will be needed for South Deep to complyFields’ open pit operations in Ghana, Australia and Peru, contact with the proposed OEL for DPMs.
In the third quarter of fiscal 2014, the Group entered a new fuel supply contract with Sasol through which South Deep now receives only ultra-low sulfur content diesel. Sampling suggests this has helped the Group reduce airborne DPMs at its South Deep operation by up to 45%, depending on location.
Gold Fields will continue to research the benefits of exhaust treatments at South Deep, including diesel particulate filters. Furthermore, itsilica dust is likely that the mine’s DPM performance will improve with timelimited due to the ongoing acquisitionnature of more advanced engine technology. The introductionopen pit mining and the low silica content of ultra-low sulfur diesel is also expected to extend the rangeore bodies. In 2016, there were no new cases of engines that can be employedsilicosis and two CRTB cases at the mine.
Radiation
Underground mining, including that which isour Ghanaian operations. Despite this, regular gravimetric sampling of respirable silica dust samples are carried out at South Deep, has the potential to expose workers to latent radiation. South Africa’s ‘National Nuclear Regulator’ Act stipulates that the maximum permissible personal exposure from ionizing radiation is 100 mSV in aggregate per five consecutive years, and may not exceed 50 mSV in a single year over a five-year period. Occupational monitoring at South Deep showed that the annual exposure limit of 50 mSV was not exceeded at any point during fiscal 2014 and that average exposures were between 3 and 6 mSV between 2010 and 2014.evaluated.
HIV/AIDS and tuberculosis
MHSC targets in respect of HIV/AIDs and associated health issues such as tuberculosis include the requirement that tuberculosis incidence rates at mining operations be at or below the national incidence rate by December 2024, and that 100% of employees be offered annual HIV counseling and testing, with all eligible employees linked to an anti-retroviral program. At Gold Fields, HIV/AIDS management is integrated into Gold Fields’ mainstream health services to improve worker participation and minimize stigmatization. Voluntary Counselling and Testing, or VCT, takes place for example, during regular employee health assessments. This has the added benefit of directly addressing the interaction of HIV/AidsAIDS with related health issues such as tuberculosis, or TB, and other sexually transmitted infections.infections, or STIs.
Gold Fields’ workforce inIn South Africa faces a particular risk of exposure to HIV/AIDS, given that an estimated 19.1%19% of adults in South Africa aged(aged 15 to 4949) live with the disease, according to data from the United Nations.HIV/AIDS. Gold Fields is committed to lowering the HIV/AIDS prevalence at South Deep, where the prevalence rate at its operations(by percentage of the workforce living with HIV/AIDS) was 5% in South Africa, which is estimated to be 12% atDecember 2016. There was an increase in the timenumber of this annual report as 152 employees of 1,320 tested positive to 112 in fiscal 2014. The Group’s2016 from 69 in 2015. Since 2011, 3,440 employees have been tested of which 403 tested positive. South Deep’s integrated strategy for HIV/Aids, sexually transmitted infectionsAIDS, STI and tuberculosis at its South Africa operations, or HAST Strategy,TB strategy directly addresses interactions between these diseases. The HAST Strategy is based onIt has four key pillars:
Promotion: This includes regular publicity campaigns and condom distribution at all workplaces;
Prevention: VCT is provided to all employees, contractors, their partners and family members on a confidential basis. In 2014,2016, the Region’smine’s VCT participation rate was 25%, compared to 16% in fiscal 2013;around 23%;
Treatment: Free Highly Active Anti-RetroviralAnti-retroviral Treatment, or HAART, is provided toHIV-infected employees through onsite, clinics staffed with doctors.doctor-staffed medical clinics. In fiscal 2014, 582016, 53 employees at Gold Fields’ South Africa operations joined the HAART program compared with 53 in fiscal 2013.(2015: 50). This takes the total number of active participants to 262, compared to 253332 (2015: 296), with 533 cumulatively enrolled since the HAART program began in fiscal 2013.2004. Employees’ dependants arecan also eligible to receive HAART via the Group’sCompany’s medical aid schemes;schemes Gold Fields does not provide treatment to employees from contracting firms, which provide their own support to their staff; and
Support: This includes doctor-based primary healthcare, psychological counselling and social services for all employees and contractors.
In addition, South Deep also supports a number of community-basedcommunity based HIV/AIDS projects, in recognition of the potentially close relationship that HIV/AIDS in the workplace can have with local communities.projects.
Gold Fields’ workforce also faces exposure to HIV/AIDS inIn Ghana, where an estimated 1.3% of adults aged 15 to 49 live with the disease, according to data from the United Nations. All of Gold Fields’national HIV/AIDS rate is around 1.5%, employees and contractors have access to a confidential VCT program which employees receive free of charge. This program
had a participation rateDuring fiscal 2016, about 45% of 45% in fiscal 2014 among employees and contractors, and a participation rate among employees alone of 78%. Individuals who testthe Ghana operations’ workforce underwent the VCT program. Anyone testing positive for HIV areis provided with free treatment in line with the Government’sgovernment’s national HIVHIV/AIDS treatment program, which supplies drugs free of charge. Gold Fields also implements community-based HIV/AIDS programs inprogram. Byyear-end fiscal 2016 Ghana including public education (via radio and trained community health educators) and condom distribution.had 15 employees on HAART (fiscal 2015: 19).
Malaria
The workforce at Gold Fields’ West Africa operationsworkforce in Ghana faces a high risk of exposure to malaria. In fiscal 2012, for example, Ghana recorded 3.76 million cases, according to data frommalaria and the World Health Organization. Furthermore, Gold Fields’ West Africa operations are in an area of elevated malaria exposure (according to the Malaria Atlas Project). During fiscal 2014, there were 681 workplace malaria cases that tested positive at Gold Fields’ operations in West Africa (2013: 708), none of which proved to be fatal.
Gold FieldsCompany has a comprehensive malaria strategy in place, at its West Africa operations, based onwhich incorporates education, prevention, prophylaxis and treatment. ThisIt also includes the spraying of accommodation (both on-mine and within the community), the fitting of anti-mosquito screens in mine accommodation, provision of insectmosquito repellent sprays and creams to night shiftfor workers, larviciding of stagnant pools, support for community health facilities and rapid diagnosis and treatment.
Ebola
Although no EbolaIn fiscal 2016, 505 employees (fiscal 2015: 523) tested positive for malaria after 3,181 individuals (fiscal 2015: 3,104) were tested at both of our mines. None of the treated cases proved fatal. Employees and dependants who live in the mine villages have their company housing units sprayed as part of our Malaria Vector Control program. Under this programs a total of 195 company housing units at both mines were recorded in Ghanasprayed in fiscal 2014, Gold Fields took proactive steps to prepare for potential infection at its operations in West Africa. This included the development of a formal Ebola Management Strategy and Plan, which addresses:2016.
The monitoring of infections across West Africa;
Capability-building for members of the Employee Wellbeing Team, staff at the Tarkwa Mine Hospital and local volunteers;
Raising of Ebola awareness amongst the workforce;
Screening of all visitors and employees returning from leave at the mines’ points of entry to ensure that persons coming from the three Ebola-affected countries do not enter the mine until 22 days have passed; and
Additional resourcing to support potential control protocols – including screening, isolation and treatment.
TRIFR, Fatalities and Fatal Injury Frequency Rate
In fiscal 2014,2016, Gold Fields continued to focus on implementing its Group Safety Reporting Guideline, which is based on International Council on Mining and Metals, or ICMM guidelines. Since fiscal 2013, Gold Fields has aligned its health and safety metrics with those of the ICMM, headed by the TRIFR. As Gold Fields’ peer companies tend to use the TRIFR metric, this alignment assists with benchmarking of Group performance against the wider sector.
The information in the following tables for fiscal 2013 excludes the newly-acquired Yilgarn South Assets, unless otherwise indicated. The information in the following tables for fiscal 2014 is inclusive of the Yilgarn South Assets. The existing Agnew and newly-acquired Lawters operations were combined in the fourth quarter of fiscal 2013 and it is therefore not possible to separate out the data for Yilgarn South Assets in fiscal 2014 to allow for a year-on-year comparison with fiscal 2013.
The following tables set out the TRIFR data for Gold Fields’ mining operations for the last two calendar years.periods indicated. The tables also provide the number of fatalities and fatal injury frequency rate data for Gold Fields’ South African, West African, Australian and Americas operations.
South Africa
West Africa
Australia
South America
ITEM 7: MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS
Major Shareholders
To the knowledge of management: (1) Gold Fields is not directly or indirectly owned or controlled (a) by another corporation or (b) by any foreign government; and (2) there are no arrangements the operation of which may at a subsequent date result in a change in control of Gold Fields. To the knowledge of Gold Fields’ management, there is no controlling shareholder of Gold Fields.
As of December 31, 2014,2016, the issued share capital of Gold Fields consisted of 775,308,626820,606,945 ordinary shares.
A list of the individuals and organizations holding, to the knowledge of management, directly or indirectly, 5% or more of its issued share capital as of February 27, 201524, 2017 is set forth below.
Beneficial owner | Ordinary shares | Percentage | Ordinary shares | Percentage | ||||||||||||
Allan Gray | 62,532,579 | 7.61 | % | |||||||||||||
Public Investment Corporation Limited | 70,150,833 | 9.05 | % | 60,506,206 | 7.37 | % | ||||||||||
First Eagle Investment Management, L.L.C. | 62,756,265 | 8.09 | % | |||||||||||||
BlackRock Investment Management | 53,582,374 | 6.52 | %(1) | |||||||||||||
Van Eck Global | 55,741,650 | 7.19 | % | 52,874,536 | 6.44 | % | ||||||||||
Allan Gray | 49,772,260 | 6.42 | % | |||||||||||||
Investec Asset Management | 44,119,377 | 5.69 | % | |||||||||||||
BlackRock Investment Management | 39,969,798 | 5.16 | % | |||||||||||||
Note:
| (1) | On March 13, 2017, BlackRock Investment Management notified Gold Fields that its shareholding in the Company was 9.63%. |
To the knowledge of management, none of the above shareholders hold voting rights which are different from those held by Gold Fields’ other shareholders.
The table below shows the significant changes in the percentage of ownership by Gold Fields’ major shareholders, to the knowledge of Gold Fields’ management, during the past three fiscal years.
| Beneficial ownership as of | Beneficial ownership as of | |||||||||||||||||||||||
| December 31, 2012 | December 31, 2013 | December 31, 2014 | December 31, 2016 | December 31, 2015 | December 31, 2014 | |||||||||||||||||||
| (%) | (%) | |||||||||||||||||||||||
Beneficial owner | ||||||||||||||||||||||||
Investec Asset Management (Pty) Ltd. | 6.74 | 9.48 | 6.85 | |||||||||||||||||||||
Public Investment Corporation Limited | 4.20 | 8.14 | 8.97 | 7.37 | 8.09 | 8.97 | ||||||||||||||||||
First Eagle Investment Management, L.L.C | 6.92 | 7.81 | 8.18 | |||||||||||||||||||||
Allan Gray | 7.02 | 7.93 | 6.21 | |||||||||||||||||||||
Van Eck Global | 6.02 | 6.62 | 6.32 | |||||||||||||||||||||
BlackRock Investment Management | 7.30 | 3.07 | 4.76 | |||||||||||||||||||||
Related Party Transactions
None of the directors, officers or major shareholders of Gold Fields or, to the knowledge of Gold Fields’ management, their families, had any interest, direct or indirect, in any transaction during the last three fiscal years or in any proposed transaction which has affected or will materially affect Gold Fields or its investment interests or subsidiaries, other than as stated below.
Indemnity Agreement
Each of Gold Fields, GFO, Gold Fields Holdings Company (BVI) Limited and Sibanye Gold, orsubsidiaries. Refer note 40 to the Guarantors, have entered into the Indemnity Agreement in favor of Sibanye Gold, in order to indemnify Sibanye Gold, with effect from the date on which the Spin-off took place, against any loss caused to Sibanye Gold in circumstances where Sibanye Gold is required to make a payment to noteholders or the trustee of the Notes by virtue of its guarantee of the Notes (whether such loss is made prior to or after the date on which the Spin-off takes effect or whether the circumstances giving rise to such loss arose prior to or after such date). The Indemnity Agreement will remain in placeconsolidated financial statements for as long as Sibanye Gold’s guarantee obligations under the Notes remain in place, which is the redemption date of the Notes unless Sibanye Gold is released as a guarantor by the trustee of the Notes.
For further information on the Indemnity Agreement, see “Additional Information—Material Contracts—Indemnity Agreement”.
Gold Fields believes that the above transactions with related parties have been conducted on terms at least as favorable to it as arm’s length terms; however, in certain circumstances, such as related party loans, the transactions were not at arm’s lengthdisclosure as the loans were unsecured, interest-free and had no fixed terms of repayment.
None of the directors or officers of Gold Fields or any associate of such director or officer is currently or has been at any time during the past three fiscal years materially indebted to Gold Fields.required by IFRS.
Reference is made to Item 18 for a list of all financial statements filed as part of this annual report. For information on legal proceedings, please refer to “Information on the Company—Legal Proceedings and Investigations.”Investigations”.
Dividends and Dividend Policy
The following table sets forth the dividends announced and paid per share in respect of Gold Fields’ ordinary shares for the periods indicated:
| Year ended | Year ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| June 30, 2008 | June 30, 2009 | June 30, 2010 | December 31, 2010 | December 31, 2011 | December 31, 2012 | December 31, 2013 | December 31, 2014(1) | June 30, 2010 | December 31, 2010 | December 31, 2011 | December 31, 2012 | December 31, 2013 | December 31, 2014 | December 31, 2015 | December 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | ($) | (Rand) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Prior year’s final dividend | 0.13 | 0.95 | 0.16 | 1.20 | 0.10 | 0.80 | 0.10 | 0.70 | 0.10 | 0.70 | 0.30 | 2.30 | 0.08 | 0.75 | 0.02 | 0.22 | 0.10 | 0.80 | 0.10 | 0.70 | 0.10 | 0.70 | 0.30 | 2.30 | 0.08 | 0.75 | 0.02 | 0.22 | 0.02 | 0.20 | 0.01 | 0.21 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interim dividend | 0.09 | 0.65 | 0.03 | 0.30 | 0.07 | 0.50 | — | — | 0.14 | 1.00 | 0.20 | 1.60 | — | — | 0.02 | 0.20 | 0.07 | 0.50 | — | — | 0.14 | 1.00 | 0.20 | 1.60 | — | — | 0.02 | 0.20 | — | 0.04 | 0.04 | 0.50 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Total dividend | 0.22 | 1.60 | 0.19 | 1.50 | 0.17 | 1.30 | 0.10 | 0.70 | 0.24 | 1.70 | 0.50 | 3.90 | 0.08 | 0.75 | 0.04 | 0.42 | 0.17 | 1.30 | 0.10 | 0.70 | 0.24 | 1.70 | 0.50 | 3.90 | 0.08 | 0.75 | 0.04 | 0.42 | 0.02 | 0.24 | 0.05 | 0.71 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Note:
| (1) | A final dividend of |
Gold Fields’ dividend policy is to pay a dividend of between 25% and 35% of normalized earnings.
Significant Changes
Please refer to “Operating and Financial Review and Prospects—Recent Developments”.
Listing Details
TheAs of December 31, 2016, the principalnon-United States trading market for the ordinary shares of Gold Fields is the JSE on which they trade under the symbol “GFI.”“GFI”. The ordinary shares of Gold Fields are also listed on the SWX Swiss Exchange. Gold Fields’ International Depositary Shares are listed on Euronext Brussels. As of December 31, 2014, 14,6482016, 13,761 record holders of Gold Fields’ ordinary shares, holding an aggregate of 240,517,515190,670,781 ordinary shares (31.02%(23.21%), were listed as having addresses in South Africa. As of December 31, 2014, 4292016, 462 record holders of Gold Fields’ ordinary shares, holding an aggregate of 425,363,807461,915,963 ordinary shares (54.86%(56.23%), were listed as having addresses in the United States.
Gold Fields’ ADSs currently trade in the United States on the NYSE under the symbol “GFI.”“GFI”. ADRs representing the ADSs are issued by The Bank of New York Mellon, as Depositary. Each ADS represents one ordinary share. Gold Fields’ ADRs are also listed on the NASDAQ Dubai.
JSE Trading History
The tables below show the high and low closing prices in Rand and the average daily volume of trading activity on the JSE for Gold Fields’ ordinary shares for the last five fiscal years.
The following table sets out ordinary share trading information on a yearly basis for the last five fiscal years, as reported byI-Net Bridge, a South African financial information service:
Year ended | Ordinary share price | Average daily trading volume | Ordinary share price | Average daily trading volume | ||||||||||||||||||||
| High | Low | High | Low | |||||||||||||||||||||
(Rand per ordinary share) | (number of ordinary shares) | (Rand per share) | (number of ordinary shares) | |||||||||||||||||||||
June 30, 2010 | 114.74 | 83.30 | 2,678,274 | |||||||||||||||||||||
December 31, 2010 | 125.90 | 94.90 | 2,095,245 | |||||||||||||||||||||
December 31, 2011 | 143.00 | 95.60 | 2,172,942 | |||||||||||||||||||||
December 31, 2012 | 131.31 | 96.00 | 2,304,320 | 131.31 | 96.00 | 2,304,320 | ||||||||||||||||||
December 31, 2013 | 109.85 | 31.40 | 3,524,334 | 109.85 | 31.40 | 3,524,334 | ||||||||||||||||||
December 31, 2014 | 53.09 | 32.35 | 2,211,070 | 53.09 | 32.35 | 2,211,070 | ||||||||||||||||||
through April 7, 2015 | 67.45 | 44.30 | 2,366,330 | |||||||||||||||||||||
December 31, 2015 | 67.45 | 31.00 | 2,337,302 | |||||||||||||||||||||
December 31, 2016 | 91.30 | 38.78 | 3,378,480 | |||||||||||||||||||||
through April 3, 2017 | 49.75 | 38.03 | 3,458,524 | |||||||||||||||||||||
The following table sets out ordinary share trading information on a quarterly basis for the periods indicated, as reported byI-Net Bridge:
Quarter ended | Ordinary share price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
(Rand per ordinary share) | (number of ordinary shares) | |||||||||||
March 31, 2013 | 109.85 | 69.45 | 3,926,840 | |||||||||
June 30, 2013 | 70.14 | 47.61 | 4,568,471 | |||||||||
September 30, 2013 | 65.91 | 46.09 | 3,083,403 | |||||||||
December 31, 2013 | 48.86 | 31.40 | 2,554,967 | |||||||||
March 31, 2014 | 45.95 | 32.35 | 3,083,403 | |||||||||
June 30, 2014 | 44.85 | 36.90 | 1,960,297 | |||||||||
September 30, 2014 | 51.44 | 39.81 | 2,296,969 | |||||||||
December 31, 2014 | 53.09 | 35.99 | 2,260,043 | |||||||||
March 31, 2015 | 67.45 | 52.20 | 2,409,328 | |||||||||
Quarter ended | Ordinary share price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
(Rand per share) | (number of ordinary shares) | |||||||||||
March 31, 2015 | 67.45 | 52.20 | 2,409,328 | |||||||||
June 30, 2015 | 54.45 | 37.64 | 2,147,905 | |||||||||
September 30, 2015 | 47.40 | 31.41 | 2,504,830 | |||||||||
December 31, 2015 | 45.24 | 31.00 | 2,276,433 | |||||||||
March 31, 2016 | 69.50 | 43.50 | 3,438,054 | |||||||||
June 30, 2016 | 72.20 | 55.42 | 2,979,195 | |||||||||
September 30, 2016 | 91.30 | 67.87 | 3,086,390 | |||||||||
December 31, 2016 | 66.88 | 38.78 | 4,017,030 | |||||||||
March 31, 2017 | 49.75 | 38.03 | 3,477,821 | |||||||||
The following table sets out ordinary share trading information on a monthly basis for each of the last six months, as reported byI-Net Bridge:
Month ended | Ordinary share price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
(Rand per ordinary share) | (number of ordinary shares) | |||||||||||
October 31, 2014 | 45.43 | 36.40 | 1,844,956 | |||||||||
November 30, 2014 | 49.97 | 35.99 | 2,191,724 | |||||||||
December 31, 2014 | 53.09 | 46.17 | 2,805,712 | |||||||||
January 31, 2015 | 67.45 | 52.20 | 2,513,416 | |||||||||
February 28, 2015 | 67.40 | 49.94 | 2,239,973 | |||||||||
March 31, 2015 | 54.65 | 44.30 | 2,463,931 | |||||||||
Month ended | Ordinary share price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
(Rand per share) | (number of ordinary shares) | |||||||||||
October 31, 2016 | 66.88 | 56.39 | 3,395,978 | |||||||||
November 30, 2016 | 61.34 | 44.95 | 3,415,228 | |||||||||
December 31, 2016 | 44.29 | 38.78 | 5,400,310 | |||||||||
January 31, 2017 | 48.56 | 43.98 | 2,583,874 | |||||||||
February 28, 2017 | 50.04 | 40.25 | 3,894,261 | |||||||||
March 31, 2017 | 46.77 | 38.03 | 3,952,568 | |||||||||
On April 7, 2015,3, 2017, the closing price of the ordinary shares on the JSE was 51.84.R47.95.
New York Stock Exchange Trading History
The tables below show the high and low closing prices in U.S. dollars and the average daily volume of trading activity on the NYSE for the last five fiscal years.
The following table sets out ADS trading information on a yearly basis for the last five fiscal years, as reported by Bloomberg:
Year ended | ADS price | Average daily trading volume | ADS price | Average daily trading volume | ||||||||||||||||||||
| High | Low | High | Low | |||||||||||||||||||||
| ($ per ADS) | (number of ADSs) | ($ per ADS) | (number of ADSs) | |||||||||||||||||||||
June 30, 2010 | 15.82 | 10.99 | 5,907,096 | |||||||||||||||||||||
December 31, 2010 | 18.49 | 11.08 | 4,889,081 | |||||||||||||||||||||
December 31, 2011 | 18.55 | 13.80 | 4,007,009 | |||||||||||||||||||||
December 31, 2012 | 16.92 | 11.32 | 3,994,433 | 16.92 | 11.32 | 3,994,433 | ||||||||||||||||||
December 31, 2013 | 12.49 | 3.02 | 5,566,292 | 12.49 | 3.02 | 5,566,292 | ||||||||||||||||||
December 31, 2014 | 4.84 | 3.00 | 4,970,039 | 4.84 | 3.00 | 4,970,039 | ||||||||||||||||||
through April 7, 2015 | 4.47 | 4.22 | 2,882,459 | |||||||||||||||||||||
December 31, 2015 | 5.97 | 2.08 | 5,214,476 | |||||||||||||||||||||
December 31, 2016 | 6.45 | 2.64 | 6,421,988 | |||||||||||||||||||||
through April 3, 2017 | 3.67 | 2.95 | 7,221,965 | |||||||||||||||||||||
The following table sets out ADS trading information on a quarterly basis for the periods indicated, as reported by Bloomberg:
Quarter ended | ADS price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
| ($ per ADS) | (number of ADSs) | |||||||||||
March 31, 2013 | 12.49 | 7.75 | 4,550,302 | |||||||||
June 30, 2013 | 7.70 | 4.70 | 5,579,904 | |||||||||
September 30, 2013 | 6.52 | 4.57 | 6,697,829 | |||||||||
December 31, 2013 | 4.88 | 3.02 | 5,389,510 | |||||||||
March 31, 2014 | 4.36 | 3.00 | 5,916,167 | |||||||||
June 30, 2014 | 4.32 | 3.47 | 3,062,742 | |||||||||
September 30, 2014 | 4.84 | 3.62 | 5,025,206 | |||||||||
December 31, 2014 | 4.55 | 3.15 | 5,844,217 | |||||||||
March 31, 2015 | 5.97 | 3.66 | 5,642,608 | |||||||||
Quarter ended | ADS price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
| ($ per ADS) | (number of ADSs) | |||||||||||
March 31, 2015 | 5.97 | 3.66 | 5,642,608 | |||||||||
June 30, 2015 | 4.62 | 3.07 | 4,109,483 | |||||||||
September 30, 2015 | 3.55 | 2.42 | 5,520,601 | |||||||||
December 31, 2015 | 3.08 | 2.08 | 5,588,013 | |||||||||
March 31, 2016 | 4.56 | 2.86 | 7,257,014 | |||||||||
June 30, 2016 | 4.91 | 3.50 | 5,542,144 | |||||||||
September 30, 2016 | 6.45 | 4.75 | 5,548,086 | |||||||||
December 31, 2016 | 4.80 | 2.64 | 6,379,179 | |||||||||
March 31, 2017 | 3.67 | 2.95 | 7,263,275 | |||||||||
The following table sets out ADS trading information on a monthly basis for each of the last six months, as reported by Bloomberg:
Month ended | ADS price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
| ($ per ADS) | (number of ADSs) | |||||||||||
October 31, 2014 | 4.11 | 3.19 | 5,023,491 | |||||||||
November 30, 2014 | 4.55 | 3.15 | 6,244,746 | |||||||||
December 31, 2014 | 4.53 | 3.96 | 6,348,709 | |||||||||
January 31, 2015 | 5.96 | 4.65 | 7,692,315 | |||||||||
February 28, 2015 | 5.97 | 4.26 | 5,130,625 | |||||||||
March 31, 2015 | 4.39 | 3.66 | 4,221,405 | |||||||||
Month ended | ADS price | Average daily trading volume | ||||||||||
| High | Low | |||||||||||
| ($ per ADS) | (number of ADSs) | |||||||||||
October 31, 2016 | 4.80 | 4.01 | 5,214,481 | |||||||||
November 30, 2016 | 4.33 | 3.05 | 6,626,845 | |||||||||
December 31, 2016 | 3.19 | 2.64 | 7,296,212 | |||||||||
January 31, 2017 | 3.61 | 3.20 | 6,939,995 | |||||||||
February 28, 2017 | 3.67 | 2.97 | 8,068,630 | |||||||||
March 31, 2017 | 3.64 | 2.95 | 6,879,094 | |||||||||
On April 7, 2015,3, 2017, the closing price of Gold Fields’ ADSs quoted on the NYSE was U.S.$4.22.3.62.
JSE Limited
The JSE was formed in 1887. The JSE provides facilities for the buying and selling of a wide range of securities, including equity and corporate debt securities and warrants in respect of securities, as well as Krugerrands.
The JSE is a self-regulating organization operating under the ultimate supervision of the Ministry of Finance, through the Financial Services Board and its representative, the Registrar of Stock Exchanges. Following the introduction of the Stock Exchanges Control Amendment Act No. 54 of 1995, or the Stock Exchange Act, which provides the statutory framework for the deregulation of the JSE, the JSE’s rules were amended with effect from November 8, 1995. These amendments removed the restrictions on corporate membership and allowed stockbrokers to form limited liability corporate entities. Members were, for the first time, also required to keep client funds in trust accounts separate from members’ own funds. Further rules to complete the deregulation of the JSE, as envisaged by the Stock Exchange Act, were promulgated during 1996 to permit members of the JSE to trade either as agents or as principals in any transaction in equities and to allow members to negotiate freely the brokerage commissions payable on agency transactions in equities. With effect from 1996, screen trading commenced on the JSE. The Securities Services Act No. 36 of 2004 came into effect on January 18, 2005. This act consolidates and amends the laws relating to the regulation and control of exchanges and securities trading, the regulation and control of central securities depositories and the custody and administration of securities and the prohibition of insider trading.
The actual float available for public trading is significantly smaller than the aggregate market capitalization because of the large number of long-term holdings by listed holding companies in listed subsidiaries and associates, the existence of listed pyramid companies and cross-holdings between listed companies.
South Africa was included in the Morgan Stanley Capital International Emerging Markets Free Index and the International Finance Corporation Investable Index in March and April 1995, respectively. South Africa has a significant representation in these emerging market indices.
The JSE has established a project named Share Transactions Totally Electronic, or STRATE, which has involved the dematerialization of share certificates in a central securities depositary and the introduction of contractual, rolling, electronic settlement in order to increase the speed, certainty and efficiency of settlement and to fall into line with international practice. Gold Fields joined STRATE on October 1, 2001. Investors are given the choice of either holding their securities in dematerialized form in the central securities depositary or retaining their share certificates. Shareholders who elect to retain their share certificates are not able to trade their shares on the JSE, although they may trade their sharesoff-market. Settlement of dematerialized shares traded electronically on the JSE is made fivethree days after each trade (T+5)3).
ITEM 10: ADDITIONAL INFORMATION
General
Gold Fields is a public company registered in South Africa under the Companies Act, which limits the liability of its shareholders, and is governed by its memorandum of incorporation, the Companies Act and the JSE Listings Requirements. Gold Fields’ registration number is 1968/004880/06.
On April 8, 2009, South Africa passed the Companies Act, which came into force on May 1, 2011. At the annual general meeting held on May 14, 2012, Gold Fields adopted a new memorandum of incorporation, or the Gold Fields MOI, to replace its memorandum of association and articles of association adopted under the previous Companies Act.Act, or the Companies Act 61 of 1973. Gold Fields amended the Gold Fields MOI at its annual general meeting on May 9, 2013. The amended Gold Fields MOI conforms to the requirements of the Companies Act and the amended JSE Listings Requirements.
Clause 4 of the Gold Fields MOI provides that Gold Fields has the powers and capacity of a natural person and is not subject to any special conditions.
Dividends and Payments to Shareholders
Gold Fields may make distributions (including the payment of dividends) from time to time in accordance with provisions of the Companies Act, the JSE Listings Requirements and the Gold Fields MOI. In terms of the Companies Act, a company may only make a distribution (including the payment of any dividend) if:
it reasonably appears that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution;
the board of the company, by resolution, has acknowledged that it has applied the solvency and liquidity test and reasonably concluded that the company will satisfy the solvency and liquidity test immediately after completing the proposed distribution.
In terms of the Companies Act, a company satisfies the solvency and liquidity test at a particular time if, considering all reasonably foreseeable financial circumstances of the company at that time:
the assets of the company, fairly valued, equal or exceed the liabilities of the company, as fairly valued; and
it appears that the company will be able to pay its debts as they become due in the ordinary course of business for a period of:
12 months after the date on which the test is considered; or
in the case of a distribution (including the payment of dividends), 12 months following that distribution.
Subject to the above requirements, the directors of Gold Fields may from time to time declare a dividend or any other distribution to shareholders in proportion to the number of shares held by them.
The Company must hold all monies due to the shareholders in trust indefinitely, subject to the laws of prescription. The Company shall be entitled at any time to delegate its obligations in respect of unclaimed dividends, or other unclaimed distributions, to any one of the Company’s bankers.
Voting Rights
Every shareholder of Gold Fields, or representative of a shareholder, who is present at a shareholders meeting has one vote on a show of hands, irrespective of the number of shares he or she holds or represents,
provided that a representative of a shareholder shall, irrespective of the number of shareholders he or she represents, have only one vote. At a shareholders meeting, a resolution put to the vote shall be decided on a show of hands, unless a poll is demanded by not less than five persons having the right to vote on that matter, a person or persons entitled to exercise not less than one tenth of the total voting rights entitled to vote on that matter or the chairperson. Every Gold Fields shareholder is, on a poll, entitled to one vote per ordinary share held. Neither the Companies Act nor the Gold Fields MOI provide for cumulative voting.
A shareholder entitled to attend and vote at a shareholders meeting shall be entitled to appoint a proxy to attend, participate in, speak and vote at such shareholders meeting in the place of such shareholder. The proxy need not be a shareholder. However, the proxy may not delegate the authority granted to him or her as a proxy.
Issue of Additional Shares
In accordance with the provisions of the JSE Listings Requirements and the Gold Fields MOI, the Board shall not have the power to issue authorized shares other than:
the issue of capitalization shares or the offer of a cash payment in lieu of awarding capitalization shares;
issues in respect of a rights offer; and
issues which do not require the approval of shareholders in terms of the Companies Act or the JSE Listings Requirements
without shareholder approval.
In accordance with the provisions of the Companies Act:
an issue of shares must be approved by a special resolution of the shareholders of a company if the shares are issued to a director or officer of the company or any other person related or inter-related to the company, save for certain exceptions, including an issue pursuant to an employee share scheme; and
an issue of shares in a transaction requires approval of the shareholders by special resolution if the voting power of the shares that are issued as a result of the transaction will be equal to or exceed 30% of the voting power of all the shares held by shareholders immediately before the transaction.
Issues for Cash
In accordance with the provisions of the JSE Listings Requirements and the Gold Fields MOI, shareholders may either convey a:
special authority to issue shares for cash on terms that are specifically approved by shareholders in a shareholders meeting in respect of a particular issue, or a Specific Issue for Cash; or
general authority to issue shares for cash on terms generally approved by shareholders in a shareholders meeting by granting the Board the authority to issue a specified number of securities for cash, which authority will be valid until the next annual general meeting or for fifteen months from the date on which the resolution was passed, whichever period is shorter, or a General Issue for Cash.
In terms of the JSE Listings Requirements, a company may only undertake:
a Specific Issue for Cash or a General Issue for Cash on the basis that a 75% majority of votes cast by shareholders at a shareholders meeting must approve the granting of such authority to the directors;
a General Issue for Cash is subject to satisfactory compliance with certain requirements, including:
the shares that are the subject of a General Issue for Cash may not exceed 15% of the company’s listed shares; and
the maximum discount at which shares may be issued is 10% of the weighted average traded price of such shares measured over the 30 business days prior to the date that the price of the issue is agreed between the company and the party subscribing for the shares.
Pre-emptive Rights
The Companies Act, the JSE Listings Requirements and the Gold Fields MOI require that any new issue of shares by Gold Fields must first be offered to existing shareholders in proportion to their shareholding in the Company, unless, amongstamong other things, the issuance to new shareholders is:
the necessary shareholder approvals have been obtained;
a capitalization issue, an issue for an acquisition of assets (including another company) or an amalgamation or merger is to be undertaken; or
the shares are to be issued in terms of option or conversion rights.
Transfer of Shares
The transfer of any Gold Fields certificated shares will be implemented in accordance with the provisions of the Companies Act, using the then common form of transfer. Dematerialized shares, which have been traded on the JSE, are transferred on the STRATE system and delivered five business days after each trade. The transferor of any share is deemed to remain the holder of that share until the name of the transferee is entered in Gold Fields’ register for that share. Since Gold Fields shares are traded through STRATE, only shares that have been dematerialized may be traded on the JSE. Accordingly, Gold Fields shareholders who hold shares in certificated form will need to dematerialize their shares in order to trade on the JSE.
Disclosure of Beneficial Interest in Shares
The Companies Act requires a registered holder of Gold Fields shares who is not the beneficial owner of such shares to disclose to Gold Fields, within five business days of the end of every month during which a change has occurred in the beneficial ownership, the identity of the beneficial owner and the number and class of securities held on behalf of the beneficial owner. Moreover, Gold Fields may, by notice in writing, require a person who is a registered shareholder, or whom Gold Fields knows or has reasonable cause to believe has a beneficial interest in Gold Fields ordinary shares, to confirm or deny whether or not such person holds the ordinary shares or beneficial interest and, if the ordinary shares are held for another person, to disclose to Gold Fields the identity of the person on whose behalf the ordinary shares are held. Gold Fields may also require the person to give particulars of the extent of the beneficial interest held during the three years preceding the date of the notice. Gold Fields is obligated to establish and maintain a register of the disclosures described above and to publish in its annual financial statements a list of the persons who hold a beneficial interest equal to or in excess of 5% of the total number of ordinary shares issued by Gold Fields, together with the extent of those beneficial interests.
General Meetings of Shareholders
The shareholders and/or directors may convene Gold Fields shareholders meetings in accordance with the requirements of the Companies Act and the Gold Fields MOI. Gold Fields is obligated to hold an annual general meeting for each fiscal year prior to 15 months after the date of the last annual general meeting.
Shareholders meetings, including annual general meetings, require at least 15 business days’ notice in writing of the place, day and time of the meeting to shareholders.
Business may be transacted at any shareholders meeting only while a quorum of shareholders is present. The quorum for the commencement of a shareholders meeting shall be sufficient persons present to exercise, in aggregate, at least 25% of all the voting rights that are entitled to be exercised, but the shareholders meeting may not begin unless, in addition, at least three shareholders entitled to vote are present at the meeting.
The annual general meeting deals with and disposes of all matters prescribed by the Gold Fields MOI and the Companies Act, including:
the presentation of the directors’ report, the audited financial statements for the immediately preceding financial year and the audit committee report;
the election of directors; and
the appointment of an auditor and an audit committee.
Accounting Records and Financial Statements
Gold Fields is required to keep the accounting records and books of accounts as are necessary to present the state of affairs of the Company and to explain the financial position of the company as prescribed by the Companies Act.
The directors shall from time to time determine at what times and places and under what conditions, subject to the requirements of the Companies Act, shareholders are entitled to inspect and take copies of certain documents, including the Gold Fields MOI, accounting records required to be maintained by the Company and annual financial statements. Apart from the shareholders, no other person shall be entitled to inspect any of the documents of the Company (other than the share register) unless expressly authorized by the directors or in accordance with the Promotion of Access to Information Act, No 2 of 2000, as amended.
The directors of Gold Fields will cause to be prepared annual financial statements and an annual report as required by the Companies Act and the JSE Listings Requirements. Gold Fields will send by mail to the registered address of every shareholder a copy of the annual report and annual financial statements. Not later than three months after the first six months of its financial year, Gold Fields will mail to every shareholder an interim report for the previous six month period.
Amendments to Gold Fields’ Memorandum of Incorporation
The Gold Fields shareholders may, by the passing of a special resolution in accordance with the provisions of the Companies Act and the Gold Fields MOI, amend the Gold Fields MOI, including:
the creation of any class of shares;
the variation of any preferences, rights, limitations and other terms attaching to any class of shares;
the conversion of one class of shares into one or more other classes;
an increase in Gold Fields’ authorized share capital;
a consolidation of Gold Fields’ equity securities;
asub-division of Gold Fields’ equity securities; and/or
the change of Gold Fields’ name.
Variation of Rights
All or any of the rights, privileges or conditions attached to Gold Fields’ ordinary shares may be varied by a special resolution of Gold Fields passed in accordance with the provisions of the Companies Act and the Gold Fields MOI.
Distribution of Assets on Liquidation
In the event of a voluntary or compulsory liquidation, dissolution orwinding-up, the assets remaining after payment of all the debts and liabilities of Gold Fields, including the costs of liquidation, shall be dealt with by a
liquidator who may, with the sanction of a special resolution, among other things, divide among the shareholders any part of the assets of Gold Fields, and may vest any part of the assets of Gold Fields as the liquidator deems fit in trust for the benefit of shareholders. The division of assets is not required to be done in accordance with the legal rights of shareholders of Gold Fields. In particular, any class may be given preferential or special rights or may be partly or fully excluded.
Employee Share Scheme
The Companies Act permits the establishment of employee share schemes, whether by means of a trust or otherwise, for the purpose of offering participation therein solely to employees, including salaried directors, officers and other persons closely involved in the business of the company or a subsidiary of the company, either by means of the issue of shares in the company or by the grant of options for shares in the company.
Purchase of Shares
Gold Fields or any subsidiary of Gold Fields may, if authorized by special resolution by way of a general approval, acquire ordinary shares in the capital of Gold Fields in accordance with the Companies Act and the JSE Listings Requirements, provided amongstamong other things that:
the number of its own ordinary shares acquired by Gold Fields in any one financial year shall not exceed 20% of the ordinary shares in issue at the date on which this resolution is passed;
this authority shall lapse on the earlier of the date of the next annual general meeting or the date 15 months after the date on which the special resolution is passed;
the Board has resolved to authorize the acquisition and that Gold Fields and its subsidiaries, or the Group, will satisfy the solvency and liquidity test immediately after the acquisition and that since the test was done there have been no material changes to the financial position of the Group;
the price paid per ordinary share may not be greater than 10% above the weighted average of the market value of the ordinary shares for the five business days immediately preceding the date on which an acquisition is made;
the number of shares acquired by subsidiaries of Gold Fields shall not exceed 10% in the aggregate of the number of issued shares in Gold Fields.
Borrowing Powers
In terms of the provisions of Section 19(1) of the Companies Act, read together with Clause 4 of the Gold Fields MOI, the borrowing powers of the Company are unlimited.
Non-South African Shareholders
There are no limitations imposed by South African law or by the Memorandum of Incorporation of Gold Fields on the rights ofnon-South African shareholders to hold or vote Gold Fields’ ordinary shares.
Rights of Minority Shareholders and Directors’ Duties
The Companies Act provides instances in which a minority shareholder may seek relief from the courts if he, she or it has been unfairly prejudiced by the company.
In South Africa, a director of a company, when acting in that capacity, must exercise the powers and perform the functions of a director:
in good faith and for a proper purpose;
in the best interests of the company; and
with the degree of care, skill and diligence that may reasonably be expected of a person:
carrying out the same functions in relation to the company as those carried out by that director; and
having the general knowledge, skill and experience of that director.
Material Contracts
Additional Black Economic Empowerment Transactions
On August 5, 2010, Gold Fields announced a series of empowerment transactions to meet its 2014 Black Economic Empowerment equity ownership requirements. On November 2, 2010, the shareholders of Gold Fields approved these transactions at the General Meeting which included the establishment of an ESOP, the issue of approximately 600,000 Gold Fields shares to a broad-based BEEBBBEE consortium, or BEECO, and BEECO’s subscription for a 10% holding in South Deep with a phase in participation over 20 years. On November 19, 2010, Gold Fields issued 13,525,394 shares to the ESOP, housed and administered by the Gold Fields Thusano Share Trust, thereby commencing the implementation of the ESOP transaction. The remaining empowerment transactions have been completed.
U.S.$70 million Ghana Credit Facility
Gold Fields Ghana and Abosso entered into a senior secured revolving credit facility agreement dated December 22, 2010, as amended and restated on May 6, 2014, pursuant to which The Standard Bank of South Africa Limited, or Standard Bank, agreed to make available to Gold Fields Ghana and Abosso, or the Ghana Borrowers, a senior secured revolving credit facility in a maximum aggregate principal amount of US$70,000,000, or the Original Ghana Facility.
With effect from October 28, 2016, the Original Ghana Facility was again amended and restated, or the U.S.$70 million Ghana Credit Facility. Under the facility each Ghana Borrower must apply all amounts borrowed by it under the facility towards general corporate purposes, working capital purposes and/or capital expenditure purposes, including the purchase of a yellow metal fleet.
Borrowings under this facility are guaranteed by the Ghana Borrowers. Borrowings under this facility are also secured by the registration of security over certain fleet vehicles owned by Gold Fields Ghana, or the Secured Assets. In addition, the lenders are noted as first loss payees under the insurance contracts in respect of the Secured Assets and are assigned the rights under the maintenance contracts between certain suppliers of the Secured Assets. This facility isnon-recourse to the rest of the Gold Fields group.
The facility bears interest at LIBOR plus a margin of 2.40% per annum. The Ghana Borrowers are required to pay a quarterly commitment fee of 1.00% per annum.
The final maturity date of the U.S.$70 million Ghana Credit Facility is May 6, 2017. The Ghana Borrowers intend to refinance the U.S.$70 million Ghana Credit Facility prior to the final maturity date.
The outstanding borrowings under this facility on December 31, 2016 and December 31, 2015 were U.S.$45.0 million and U.S.$45.0 million, respectively.
U.S.$200 million La Cima Credit Facility
On December 16, 2014, La Cima, entered into a revolving senior secured credit facility for up to U.S.$200 million, or the U.S.$200 million La Cima Credit Facility. Under this facility, the borrower must apply all amounts borrowed by it under the facility to refinance a then existing U.S.$200 millionnon-revolving senior secured term loan, to finance its working capital requirements and for general corporate purposes. The final maturity date of this facility is three years from the agreement date. On the agreement date, the total commitments under this facility amounted to U.S.$75.0 million. On January 19, 2015, total commitments were increased by U.S.$75.0 million to U.S.$150.0 million.
The loan bears interest at LIBOR plus a margin of 1.625% per annum. Where the utilization under this facility is less than or equal to U.S.$66,666,666, a utilization fee of 0.075% per annum will be payable on the amount of utilizations. Where the utilization under this facility is greater than U.S.$66,666,666 and less than or equal to U.S.$133,333,333, a utilization fee of 0.15% per annum will be payable on the amount of utilizations. Where the utilization under this facility is greater than U.S.$133,333,333, a utilization fee of 0.25% per annum will be payable on the amount of utilizations. Such utilization fee is payable quarterly in arrears.
The borrower is required to pay a quarterly commitment fee of 0.65% per annum on the undrawn amount.
Borrowings under the U.S.$200 million La Cima Credit Facility are secured by first-ranking assignments of all rights, title and interest in all of La Cima’s concentrate sale agreements. In addition, the offshore and onshore collection accounts of La Cima are subject to an account control agreement and a first-ranking charge in favor of the lenders. This facility isnon-recourse to the rest of the Gold Fields Group.
The outstanding balance under U.S.$200 million La Cima Credit Facility at December 31, 2016 was U.S.$82.0 million, compared to U.S.$42.0 million on December 31, 2015.
At December 31, 2015, La Cima did not meet certain covenants specified in the revolving senior secured credit facility agreement. The lenders subsequently waived their rights and entitlements arising from the failure of La Cima to meet the specific covenants.
R1.0 billion Rand Revolving Credit Facilities
In 2013, GFO and GFIJVH entered into two revolving credit facilities with Standard Bank and RMB, respectively. The purpose of these facilities is to fund capital expenditure and general corporate and working capital requirements of the Gold Fields group.
The salient terms of these facilities could be summarized as follows:
a R500.0 million (U.S.$33.1 million) revolving credit facility entered into by the borrowers and Standard Bank on December 20, 2013, bearing interest at JIBAR plus a margin of 2.75% per annum, with a semi-annual commitment fee of 1.05% per annum on the undrawn and uncanceled amounts of the facility, or the Standard Bank RCF; and
a R500.0 million (U.S.$33.1 million) revolving credit facility entered into by the borrowers and RMB on June 19, 2013, bearing interest at JIBAR plus a margin of 2.50% per annum, with a semi-annual commitment fee of 1% per annum on the undrawn and uncanceled amounts of the facility, or the RMB RCF.
Borrowings under these facilities were guaranteed by Gold Fields, GFO, GFIJVH, Orogen, and Gold Fields Holdings Company (BVI) Limited, or GF Holdings.
The RMB RCF and the Standard Bank RCF matured on June 19, 2016 and December 20, 2016 respectively.
U.S.$1 billion Notes Issue
See “OperatingOn September 30, 2010, Orogen announced the issue of U.S.$1,000,000,000 4.875% guaranteed notes due October 7, 2020, issued October 7, 2010. Gold Fields, GFO, GF Holdings and Financial ReviewSibanye Gold, or the Guarantors, on a joint and Prospects—Credit Facilitiesseveral basis, unconditionally and Other Capital Resources—irrevocably guaranteed the payment of all amounts due in respect of the U.S.$1 billion Notes. The U.S.$1 billion Notes Issue”.and guarantees constitute direct, unsubordinated and unsecured obligations of Orogen and the Guarantors, respectively, and rank equally in right of payment among themselves and with all other existing and future unsubordinated and unsecured obligations of Orogen and the Guarantors, respectively. With effect from April 24, 2015, the noteholders released Sibanye Gold as a Guarantor pursuant to a consent solicitation process.
La Cima revolving senior secured credit facility
Gold Fields used the net proceeds of the offering of the U.S.$1 billion Notes to repay certain existing indebtedness of the Group and for general corporate purposes.
See “Operating and Financial Review and Prospects—Credit Facilities and Other Capital Resources—La Cima revolving senior secured credit facility”.
Amendment and Restatement Agreement relatingOn February 19, 2016, GFA, a wholly-owned subsidiary of Gold Fields, announced an offer to purchase U.S.$200.0 million of the U.S.$1 billion Notes at discounts of 17% to the Senior Revolving Loan Facilities Agreement originally datedoriginal value. Gold Fields accepted for purchase an aggregate principal amount of the U.S.$1 billion Notes equal to U.S.$147.6 million at a purchase price of U.S.$880 per U.S.$1,000 in principal amount of the U.S.$1 billion Notes. Gold Fields intends to hold the U.S.$1 billion Notes acquired until their maturity date on October 7, 2020. The outstanding balance under this facility on December 22, 2010
See “Operating and Financial Review and Prospects—Credit Facilities and Other Capital Resources—31, 2016 was U.S.$70 million Ghana Senior Secured Revolving Credit Facility”.846.4 million.
U.S.$1,510 million Term Loan and Revolving Credit Facility
See “OperatingOrogen, GFO and Financial ReviewGFIJVH entered into a term loan and Prospects—Credit Facilitiesrevolving credit facility agreement dated November 28, 2012, as amended and Other Capital Resources—restated on January 30, 2013 and as further amended and restated on July 22, 2013, or the Original U.S.$ Facility. Pursuant to the Original U.S.$ Facility a syndicated bank group, agreed to make available to the borrowers certain credit facilities in the aggregate amount of U.S.$1.44 billion.
On June 18, 2014, the Original U.S.$ Facility was again amended and restated, or the U.S.$1,510 million Term Loan and Revolving Credit Facility”.Facility. Under this facility, the lenders have made a US$120 million term loan (Facility A) and two revolving credit facilities of US$720 million (Facility B) and US$670 million (Facility C) each available to the borrowers.
The outstanding balance under the U.S.$1,510 million Term Loan and Revolving Credit Facility at December 31, 2015 was U.S.$724.0 million.
Borrowings under the U.S.$1,510 million Term Loan and Revolving Credit Facility were guaranteed by Gold Fields, GF Holdings, Orogen, GFO and GFIJVH.
On June 13, 2016, the outstanding balance of U.S.$630.0 million under the U.S.$1,510 million Term Loan and Revolving Credit Facility was refinanced by the US$1,290,000,000 Credit Facilities Agreement, as detailed below. The U.S.$1,510 million Term Loan and Revolving Credit Facility was also canceled on June 13, 2016.
R1,500 million Nedbank Revolving Credit Facility
See “OperatingOn March 1, 2013, Nedbank, GFIJVH and Financial Review and Prospects—Credit Facilities and Other Capital Resources—GFO entered into a R1,500 million Nedbank Revolving Credit Facility”.Facility. The purpose of the facility is to fund capital expenditure and general corporate and working capital requirements of the Gold Fields group. The tenor of the facility is five years. The final maturity date of this facility is March 7, 2018.
The facility bears interest at JIBAR plus a margin of 2.50% per annum. The borrowers are required to pay a commitment fee of 0.85% per annum every six months.
Borrowings under the facility are guaranteed by Gold Fields, GFO, GFH, Orogen and GFIJVH.
The outstanding borrowings under this facility at December 31, 2016 and December 31, 2015 were nil and nil, respectively.
R1.0 billion Long-TermU.S.$1,290 million Credit Facilities Agreement
On June 6, 2016, The Bank of Tokyo-Mitsubishi UFJ, Ltd., GFIJVH, GFO, Orogen, Gold Fields Ghana Holdings (BVI) Limited, or GF Ghana, and certain wholly owned subsidiaries of Gold Fields entered into a U.S.$1,290 million Credit Facilities Agreement, or the U.S.$1,290 million Credit Facilities Agreement. The U.S.$1,290 million Credit Facilities Agreement comprises of a:
U.S.$380 million Term Loan (Facility A) maturing June 2019;
U.S.$360 million RCF (Facility B) maturing June 2019; and
U.S.$550 million RCF (Facility C) maturing June 2021;
The facility bears interest at LIBOR plus a margin as follows:
the margin in relation to each Facility A Loan is 2.50 per cent. per annum;
the margin in relation to each Facility B Loan is 2.20 per cent. per annum; and
the margin in relation to each Facility C Loan is 2.45 per cent. per annum;
based on the current long-term credit rating of Gold Fields. The margin shall be adjusted to the following percentages dependent on the long-term credit rating assigned from to time to Gold Fields by either Moody’s or Standard & Poor’s:
Rating (Standard & | Rating (Moody’s) | Facility A Margin p.a. | Facility B Margin p.a. | Facility C Margin p.a. | ||||
BBB | Baa2 | 1.75% | 1.45% | 1.70% | ||||
BBB- | Baa3 | 2.00% | 1.70% | 1.95% | ||||
BB+ | Ba1 | 2.50% | 2.20% | 2.45% | ||||
BB | Ba2 | 3.00% | 2.70% | 2.95% | ||||
BB- | Ba3 | 3.50% | 3.20% | 3.45% |
The borrowers are required to pay a quarterly commitment fee of 35% of the applicable margin per annum on the undrawn and uncanceled amounts of the facilities.
The borrowers must apply all amounts borrowed by them under the U.S.$1,290 million Credit Facilities Agreement towards, firstly, (i) repayment of the U.S.$1,510 million Term Loan and Revolving Credit Facility and thereafter (ii) their general corporate and working capital purposes.
Borrowings under the U.S.$1,290 million Credit Facilities Agreement are guaranteed by Gold Fields, Orogen, GF Holdings, GF Ghana, Gruyere Holdings Pty Ltd, or Gruyere Holdings, GFO and GFIJVH.
The outstanding borrowings under U.S.$1,290 million Credit Facilities Agreement at December 31, 2016 was U.S.$658.5 million.
R500 million ABSA Bank Revolving Credit Facility
Effective March 31, 2017, ABSA Bank Limited, GFIJVH, GFO and certain wholly owned subsidiaries of Gold Fields entered into a R500 million Revolving Credit Facility. The purpose of the facility is to fund capital expenditure and general corporate and working capital requirements of the Gold Fields group. The tenor of the facility is six years. The final maturity date of this facility is March 31, 2020.
The facility bears interest at JIBAR plus a margin of 2.55% per annum based on the current long-term credit rating of Gold Fields.
The margin shall be adjusted to the following percentages dependent on the long-term credit rating assigned from to time to Gold Fields by either Moody’s or Standard & Poor’s:
Rating | Margin | |||
| (%) | ||||
BBB-/Baa3 | 2.05 | |||
BB+/Ba1 | 2.55 | |||
BB/Ba2 | 3.05 | |||
The borrowers are required to pay a commitment fee of 35% of the applicable margin per annum on the undrawn portion of the facility every six months.
Borrowings under the facility are guaranteed by Gold Fields, Orogen, GF Holdings, GF Ghana, Gruyere Holdings, GFO and GFIJVH.
R500 million Standard Bank Revolving Credit Facility
Effective March 31, 2017, Standard Bank, GFIJVH, GFO and certain wholly owned subsidiaries of Gold Fields entered into a R500 million Revolving Credit Facility. The purpose of the facility is to fund capital expenditure and general corporate and working capital requirements of the Gold Fields group. The tenor of the facility is six years. The final maturity date of this facility is March 31, 2020.
The facility bears interest at JIBAR plus a margin of 2.75% per annum.
The borrowers are required to pay a commitment fee of 1.05% per annum on the undrawn portion of the facility every six months.
Borrowings under the facility are guaranteed by Gold Fields, Orogen, GF Holdings, GF Ghana, Gruyere Holdings, GFO and GFIJVH.
Other Short-Term Credit Facilities
See “OperatingThe Group utilized uncommitted loan facilities from some of the major banks to fund the capital expenditure and Financial Reviewworking capital requirements of the South African operations.
These facilities have no fixed terms, are short-term in nature and Prospects—Credit Facilities and Other Capital Resources—R1.0 billion Long-Term Revolving Credit Facilities”.
The outstanding borrowings of Gold Fields under these facilities at December 31, 2016 were U.S.$61.0 million, compared to U.S.$16.7 million on December 31, 2015.
Management and Other Compensatory Plans and Arrangements
See “Directors, Senior Management and Employees—Long-term Cash Incentive Plan”, “Directors, Senior Management and Employees—The Gold Fields Limited 2005 Share Plan”, “Directors, Senior Management and Employees—Introduction of a MSR for members of the Group Executive Committee”, “Directors, Senior Management and Employees—The Revised Gold Fields Limited 2012 Share Plan”, “Directors, Senior Management and Employees—The Gold Fields Limited 2005Vesting of the 2013 Performance Share Plan”, “Directors, Senior Management and Employees—Shares Set Aside for Share Plans”Award” and “Directors, Senior Management and Employees—Executive Directors’ Terms of Employment”.
IndemnityGruyere Sale Agreement
Pursuant to the Indemnity AgreementOn November 7, 2016, Gold Fields entered into betweena sale agreement with Gold Road Resources Limited for the guarantorsacquisition of a 50% interest in the Gruyere Gold Project in Western Australia, or the Gruyere Sale Agreement. The acquisition of the Notes, or the Guarantors,Gruyere Gold Project asset by Gold Fields was completed on December 13, 2016, for total consideration comprising A$350 million in cash and Sibanye Gold, the Guarantors (other than Sibanye Gold) agreed to hold Sibanye Gold harmless from and against any and all liabilities and expenses which may be incurred by Sibanye Gold under or in connection with the Notes, including any payment obligations by Sibanye Gold to the noteholders or the trusteea royalty. In terms of the Notes pursuantcash consideration, A$250 million will be paid to the guaranteeGold Road at completion and A$100 million is payable towards Gold Road’s share of the Notes, all on the termsGruyere development and subject to the conditions contained therein.construction costs under an agreed joint venture construction cash call schedule. The Indemnity Agreement will remain in place for as long as Sibanye Gold’s guarantee obligationsroyalty under the Notes remain in place, whichGruyere Sale Agreement is 1.5% net smelter return royalty on Gold Fields’ share of production after the redemption datetotal mine production at Gruyere exceeds 2Moz.
Gruyere Gold Project Joint Venture Agreement dated December 6, 2016, between Gruyere Mining Company Pty Ltd, Gold Road Resources Limited and others
Following completion of the Notes unless Sibanyeacquisition under the Gruyere Sale Agreement, Gold is released as a guarantor by the trusteeFields and Gold Road formed an unincorporated joint venture in respect of the Notes. See “Operatingdevelopment, construction and Financial Reviewoperation of the Gruyere Gold Project under a joint venture agreement dated December 6, 2016. The joint venture is initially on a 50:50 basis and Prospects—Credit Facilities and Other Capital Resources—U.S.$provides that each party is responsible for its pro rata share of project expenditure. Gold Fields took over management of the project from Gold Road on February 1, billion Notes Issue”.2017.
Deposit Agreement
Gold Fields has an American Depositary Receipt facility. In connection with this facility, Gold Fields is party to a Deposit Agreement, dated as of February 2, 1998, as amended and restated as of May 21, 2002 among Gold Fields, The Bank of New York (now known as The Bank of New York Mellon, or BNYM), as Depositary, and all owners and holders from time to time of American Depositary Receipts issued thereunder.
This summary is subject to and qualified in its entirety by reference to the Deposit Agreement, including the form of ADRs attached thereto. Terms used in this section and not otherwise defined will have the meanings set forth in the Deposit Agreement. Copies of the Deposit Agreement are available for inspection at the Corporate Trust Office of the Depositary, located at 101 Barclay Street, New York, New York 10286. The Depositary’s principal executive office is located at One Wall Street, New York, New York 10286.
American Depositary Receipts
Each Gold Fields ADS represents ownership interests in one Gold Fields ordinary share and the rights attributable to one Gold Fields ordinary share that Gold Fields will deposit with one of the custodians, which currently are Standard Bank of South Africa, First National Bank of South Africa and Société Générale. Each Gold Fields ADR also represents securities, cash or other property deposited with BNYM but not distributed to holders of Gold Fields ADRs.
As BNYM will actually be the holder of the underlying ordinary shares, Gold Fields will not treat you as one of its shareholders. As a holder of ADSs, you will have ADR holder rights. A Deposit Agreement among Gold Fields, BNYM and you, as a Gold Fields ADR holder, sets out the ADR holders’ rights and obligations of BNYM, as depositary. New York state law governs the Deposit Agreement and the ADRs evidencing the Gold Fields ADSs.
You may hold ADRs either directly or indirectly through your broker or financial institution. If you hold ADRs directly, you are an ADR holder. This description assumes you hold your ADRs directly. If you hold the ADRs indirectly, you must rely on the procedures of your broker or financial institution to assert the rights of ADR holders described in this section. You should consult with your broker or financial institution to find out what those procedures are.
Share Dividends and Other Distributions
How will you receive dividends and other distributions on the ordinary shares?
BNYM will pay to you the cash dividends or other distributions it or the custodian receives on the ordinary shares or other deposited securities, after deducting its fees and expenses. You will receive these distributions in proportion to the number of ordinary shares your Gold Fields ADSs represent.
Cash:Cash
BNYM will convert any cash dividend or distribution Gold Fields pays on the ordinary shares, other than any dividend or distribution paid in U.S. dollars, into U.S. dollars. If that is not possible on a reasonable basis, or
if any approval from any government is needed and cannot be obtained, the Deposit Agreement allows BNYM to distribute the foreign currency only to those ADS holders to whom it is possible to do so or to hold the foreign currency it cannot convert for the account of the ADS holders who have not been paid. It will not invest the foreign currency and it will not be liable for any interest.
Before making a distribution, BNYM will deduct any withholding taxes that must be paid under applicable laws. It will distribute only whole U.S. dollars and U.S. cents and will round any fractional amounts to the nearest whole cent. If the exchange rates fluctuate during a time when BNYM cannot convert the foreign currency, you may lose some or all of the value of the distribution.
Ordinary shares:shares
BNYM will distribute new ADRs representing any ordinary shares Gold Fields distributes as a dividend or free distribution, if Gold Fields requests that BNYM make this distribution and if Gold Fields furnishes BNYM promptly with satisfactory evidence that it is legal to do so. BNYM will only distribute whole ADRs. It will sell ordinary shares, which would require it to issue a fractional ADS and distribute the net proceeds to the holders entitled to those ordinary shares. If BNYM does not distribute additional cash or ADSs, each ADS will also represent the new ordinary shares.
Right to purchase additional ordinary shares:shares
If Gold Fields offers holders of securities any rights, including rights to subscribe for additional ordinary shares, BNYM may take actions necessary to make these rights available to you. Gold Fields must first instruct BNYM to do so and furnish it with satisfactory evidence that it is legal to do so. If Gold Fields does not furnish this evidence and/or give these instructions, and BNYM determines that it is practical to sell the rights, BNYM may sell the rights and allocate the net proceeds to holders’ accounts. BNYM may allow rights that are not distributed or sold to lapse. In that case, you will receive no value for them.
If BNYM makes rights available to you, upon instruction from you it will exercise the rights and purchase the ordinary shares on your behalf. BNYM will then deposit the ordinary shares and deliver ADSs to you. It will only exercise rights if you pay BNYM the exercise price and any charges the rights require you to pay. U.S. securities laws may restrict the sale, deposit, cancellation and transfer of the ADSs issued after exercise of rights. In this case, BNYM may deliver the ADSs under a separate restricted deposit agreement, which will contain the same provisions as the Deposit Agreement, except for changes needed to put the restrictions in place. BNYM will not offer you rights unless those rights and the securities to which the rights relate are either exempt from registration or have been registered under the Securities Act of 1933 with respect to a distribution to you.
Other distributions:distributions
BNYM will send to you anything else Gold Fields distributes on deposited securities by any means BNYM thinks is legal, fair and practical. If it cannot make the distribution in that way, BNYM may decide to sell what
Gold Fields distributed—for example by public or private sale—and distribute the net proceeds, in the same way as it does with cash, or it may decide to hold what Gold Fields distributed, in which case the ADRs will also represent the newly distributed property.
BNYM is not responsible if it decides that it is unlawful or impractical to make a distribution available to any ADR holder. Gold Fields will have no obligation to take any other action to permit the distribution of ADSs, ordinary shares, rights or anything else to ADS holders. This means that you may not receive the distribution Gold Fields makes on its ordinary shares or any value for them if it is illegal or impractical for Gold Fields to make them available to you.
Deposit, Withdrawal and Cancellation
How does the Depositary issue ADSs?
BNYM will deliver the ADSs that you are entitled to receive in the offer against deposit of the underlying ordinary shares. BNYM will deliver additional ADSs if you or your broker deposit ordinary shares with the custodian. You must also deliver evidence satisfactory to BNYM of any necessary approvals of the governmental agency in South Africa, if any, which is responsible for regulating currency exchange at that time. If required by BNYM, you must in addition deliver an agreement transferring your rights as a shareholder to receive dividends or other property. Upon payment of its fees and of any taxes or charges, BNYM will register the appropriate number of ADSs in the names you request and will deliver the ADRs at its Corporate Trust Office to the persons you request.
How do ADS holders cancel an ADS and obtain ordinary shares?
You may submit a written request to withdraw ordinary shares and turn in your ADRs evidencing your ADSs at the Corporate Trust Office of BNYM. Upon payment of its fees and of any taxes or charges, such as stamp taxes or stock transfer taxes, BNYM will deliver the deposited securities underlying the ADSs to an account designated by you at the office of the custodian. At your request, risk and expense, BNYM may deliver at its Corporate Trust Office any dividends or distributions with respect to the deposited securities represented by the ADSs, or any proceeds from the sale of any dividends, distributions or rights, which may be held by BNYM.
Record Dates
Whenever any distribution of cash or rights, change in the number of ordinary shares represented by ADSs or notice of a meeting of holders of ordinary shares or ADSs is made, BNYM will fix a record date for the determination of the owners entitled to receive the benefits, rights or notice.
Voting of Deposited Securities
How do you vote?
If you are an ADS holder on a record date fixed by BNYM, you may exercise the voting rights of the same class of securities as the ordinary shares represented by your ADSs, but only if Gold Fields asks BNYM to ask for your instructions. Otherwise, you will not be able to exercise your right to vote unless you withdraw the ordinary shares.
However, you may not know about the meeting enough in advance to withdraw the ordinary shares. If Gold Fields asks for your instructions, BNYM will notify you of the upcoming meeting and arrange to deliver certain materials to you. The materials will (1) include all information included with the meeting notice sent by Gold Fields to BNYM, (2) explain how you may instruct BNYM to vote the ordinary shares or other deposited securities underlying your ADSs as you direct if you vote by mail or by proxy and (3) include a voting instruction card and any other information required under South African law that Gold Fields and BNYM will
prepare. For instructions to be valid, BNYM must receive them on or before the date specified in the instructions. BNYM will try, to the extent practical, subject to applicable law and the provisions of theby-laws of Gold Fields, to vote or have its agents vote the underlying shares as you instruct. BNYM will only vote, or attempt to vote, as you instruct. However, if BNYM does not receive your voting instructions, it will give a proxy to vote your ordinary shares to a designated representative of Gold Fields, unless Gold Fields informs BNYM that either: (1) it does not want the proxy issued, (2) substantial opposition exists or (3) the matter materially and adversely affects the rights of holders of ordinary shares.
Gold Fields cannot assure that you will receive the voting materials in time to ensure that you can instruct BNYM to vote your ordinary shares. In addition, BNYM and its agents are not responsible for failing to carry out voting instructions or for the manner of carrying out voting instructions. This means that you may not be able to exercise your right to vote and there may be nothing you can do if your ordinary shares are not voted as you requested.
Inspection of Transfer Books
BNYM will keep books for the registration and transfer of ADRs. These books will be open at all reasonable times for inspection by you, provided that you are inspecting the books for a purpose related to Gold Fields or the Deposit Agreement or the ADRs.
Reports and Other Communications
BNYM will make available for your inspection at its Corporate Trust Office any reports or communications, including any proxy material, received from Gold Fields, as long as these materials are received by BNYM as the holder of the deposited securities and generally available to Gold Fields shareholders. At Gold Fields’ written request, BNYM will also send copies of reports, notices and communications to you.
Fees and Expenses
BNYM, as Depositary, will charge any party depositing or withdrawing ordinary shares or any party surrendering ADRs or to whom ADRs are issued:
For: | Gold Fields ADS holders must pay: | |
• each issuance of a Gold Fields ADS, including as a result of a distribution of ordinary shares or rights or other property or upon exercise of a warrant to purchase an ADS | • $5.00 or less per 100 Gold Fields ADSs or portion thereof | |
• each distribution of securities distributed to holders of Gold Fields’ ordinary shares which are distributed by BNYM to Gold Fields’ ADR holders | • any fees that would be payable if the securities had been ordinary shares and those ordinary shares had been deposited for the issuance of ADSs | |
• each cancellation of a Gold Fields ADS, including if the Deposit Agreement terminates | • $5.00 or less per 100 Gold Fields ADSs or portion thereof | |
• each cash distribution pursuant to the Deposit Agreement | • not more than $0.02 per ADS (or portion thereof) | |
• annual depositary services | • not more than $0.02 per ADS (or portion thereof) paid annually, provided that this fee will not be charged if the $0.02 fee for cash distributions described above was charged during the calendar year | |
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• transfer and registration of ordinary shares on the Gold Fields’ share register from your name to the name BNYM or its agent when you deposit or withdraw ordinary shares | • registration or transfer fees | ||
• conversion of foreign currency to U.S. dollars | • expenses of BNYM | ||
• cable, telex and facsimile transmission expenses, if expressly provided in the Deposit Agreement | • expenses of BNYM | ||
• as necessary | • certain taxes and governmental charges BNYM or the custodian has to pay on any Gold Fields ADS or ordinary share underlying a Gold Fields ADS | ||
In fiscal 2014,2016, BNYM paid U.S.$1.30.95 million to Gold Fields as reimbursement for costs incurred over the year in connection with the ADR program.
Payment of Taxes
You will be responsible for any taxes or other governmental charges payable on your ADRs or on the deposited securities underlying your ADRs. BNYM may deduct the amount of any taxes owed from any payments to you. It may also restrict or refuse the transfer of your Gold Fields ADSs or restrict or refuse the withdrawal of your underlying deposited securities until you pay any taxes owed on your Gold Fields ADSs or underlying securities. It may also sell deposited securities to pay any taxes owed. You will remain liable if the proceeds of the sale are not enough to pay the taxes. If BNYM sells deposited securities, it will, if appropriate, reduce the number of Gold Fields ADSs held by you to reflect the sale and pay to you any proceeds, or send to you any property, remaining after it has paid the taxes.
Reclassifications, Recapitalizations and Mergers
If Gold Fields:
changes the par value of any of the Gold Fields ordinary shares;
reclassifies, splits or consolidates any of the Gold Fields ordinary shares;
distributes securities on any of the Gold Fields ordinary shares that are not distributed to you; or
recapitalizes, reorganizes, merges, consolidates, sells its assets, or takes any similar action, then:
the cash, ordinary shares or other securities received by BNYM will become new deposited securities under the Deposit Agreement, and each Gold Fields ADS will automatically represent the right to receive a proportional interest in the new deposited securities; and BNYM may and will, if Gold Fields asks it to, distribute some or all of the cash, ordinary shares or other securities it received. It may also issue new Gold Fields ADSs or ask you to surrender your outstanding Gold Fields ADSs in exchange for new Gold Fields ADSs identifying the new deposited securities.
Amendment and Termination of the Deposit Agreement
How may the Deposit Agreement be amended?
Gold Fields may agree with BNYM to amend the Deposit Agreement and the Gold Fields ADRs without your consent for any reason. If the amendment adds or increases fees or charges, except for taxes and governmental charges, or prejudices an important right of Gold Fields ADS holders, it will only become effective
30 days after BNYM notifies you of the amendment. At the time an amendment becomes effective, you are considered, by continuing to hold your ADSs, to agree to the amendment and to be bound by the agreement as amended. However, no amendment will impair your right to receive the deposited securities in exchange for your Gold Fields ADSs.
How may the Deposit Agreement be terminated?
BNYM will terminate the Deposit Agreement if Gold Fields asks it to do so, in which case it must notify you at least 30 days before termination. BNYM may also terminate the agreement after notifying you if BNYM informs Gold Fields that it would like to resign and Gold Fields does not appoint a new depositary bank within 90 days.
If any Gold Fields ADSs remain outstanding after termination, BNYM will stop registering the transfer of Gold Fields ADSs, will stop distributing dividends to Gold Fields ADS holders, and will not give any further notices or do anything else under the Deposit Agreement other than:
collect dividends and distributions on the deposited securities;
sell rights and other property offered to holders of deposited securities; and
deliver ordinary shares and other deposited securities upon cancellation of Gold Fields ADSs.
At any time after one year after termination of the Deposit Agreement, BNYM may sell any remaining deposited securities by public or private sale. After that, BNYM will hold the money it received on the sale, as well as any cash it is holding under the Deposit Agreement, for the pro rata benefit of the Gold Fields ADS holders that have not surrendered their Gold Fields ADSs. It will not invest the money and has no liability for interest. BNYM’s only obligations will be to account for the money and cash. After termination, Gold Fields’ only obligations will be with respect to indemnification of, and to pay specified amounts to, BNYM.
Your Right to Receive the Ordinary Shares Underlying Your Gold Fields ADSs
You have the right to cancel your Gold Fields ADSs and withdraw the underlying ordinary shares at any time except:
due to temporary delays caused by BNYM or Gold Fields closing its transfer books, the transfer of ordinary shares being blocked in connection with voting at a shareholders meeting, or Gold Fields paying dividends;
when you or other ADR holders seeking to withdraw ordinary shares owe money to pay fees, taxes and similar charges; or
when it is necessary to prohibit withdrawals in order to comply with any laws or governmental regulations that apply to Gold Fields ADSs or to the withdrawal of ordinary shares or other deposited securities.
This right of withdrawal may not be limited by any provision of the Deposit Agreement.
Limitations on Obligations and Liability to Gold Fields ADS Holders
The Deposit Agreement expressly limits the obligations of Gold Fields and BNYM. It also limits the liability of Gold Fields and BNYM. Gold Fields and BNYM:
are only obligated to take the actions specifically set forth in the Deposit Agreement without negligence or bad faith;
are not liable if either of them is prevented or delayed by law, any provision of the Gold Fieldsby-laws or circumstances beyond their control from performing their obligations under the agreement;
are not liable if either of them exercises, or fails to exercise, discretion permitted under the agreement;
have no obligation to become involved in a lawsuit or proceeding related to the ADSs or the Deposit Agreement on your behalf or on behalf of any other party unless they are indemnified to their satisfaction; and
may rely upon any advice of or information from any legal counsel, accountants, any person depositing ordinary shares, any Gold Fields ADS holder or any other person whom they believe in good faith is competent to give them that advice or information.
In the Deposit Agreement, Gold Fields and BNYM agree to indemnify each other under specified circumstances.
Requirements for Depositary Actions
Before BNYM will deliver or register the transfer of a Gold Fields ADS, make a distribution on a Gold Fields ADS, or permit withdrawal of ordinary shares, BNYM may require:
payment of taxes, including stock transfer taxes or other governmental charges, and transfer or registration fees charged by third parties for the transfer of any ordinary shares or other deposited securities, as well as the fees and expenses of BNYM;
production of satisfactory proof of the identity of the person presenting ordinary shares for deposit or Gold Fields ADSs upon withdrawal, and of the genuineness of any signature; and
compliance with regulations BNYM may establish consistent with the Deposit Agreement, including presentation of transfer documents.
BNYM may refuse to deliver, transfer, or register transfer of Gold Fields ADSs generally when the transfer books of BNYM are closed or at any time if BNYM or Gold Fields thinks it advisable to do so.
Pre-Release of Gold Fields ADSs
In certain circumstances, subject to the provisions of the Deposit Agreement, BNYM may deliver Gold Fields ADSs before deposit of the underlying ordinary shares. This is called apre-release of Gold Fields ADSs. BNYM may also deliver ordinary shares prior to the receipt and cancellation ofpre-released Gold Fields ADSs (even if those Gold Fields ADSs are canceled before thepre-release transaction has been closed out). Apre-release is closed out as soon as the underlying ordinary shares are delivered to BNYM. BNYM may receive Gold Fields ADSs instead of the ordinary shares to close out apre-release. BNYM maypre-release Gold Fields ADSs only under the following conditions:
before or at the time of thepre-release, the person to whom thepre-release is being made must represent to BNYM in writing that it or its customer, as the case may be, owns the ordinary shares or Gold Fields ADSs to be deposited;
thepre-release must be fully collateralized with cash or collateral that BNYM considers appropriate; and
BNYM must be able to close out thepre-release on not more than five business days’ notice.
Thepre-release will be subject to whatever indemnities and credit regulations BNYM considers appropriate. In addition, BNYM will limit the number of Gold Fields ADSs that may be outstanding at any time as a result ofpre-release.
Governing Law
The Deposit Agreement is governed by the law of the State of New York.
South African Exchange Control Limitations Affecting Security Holders
The discussion below relates to exchange controls in force as of the date of this annual report. These controls are subject to change at any time without notice. It is not possible to predict whether existing exchange controls will be abolished, continued or amended by the South African government in the future. Investors are urged to consult a professional adviser as to the exchange control implications of their particular investments.
Acquisitions of shares or assets of South African companies bynon-South African purchasers solely for a cash consideration equal to the fair value of the shares, will generally be permitted by the SARB pursuant to South African exchange control regulations. An acquisition of shares or assets of a South African company by anon-South African purchaser may be refused by the SARB in other circumstances, such as if the consideration for the acquisition is shares in anon-South African company or if the acquisition is financed by a loan from a South African lender. Denial of SARB approval for an acquisition of shares or assets of a South African company may result in the transaction not being able to be completed. Subject to this limitation, there are no restrictions on equity investments in South African companies and a foreign investor may invest freely in the ordinary shares and ADSs of Gold Fields.
There are no exchange control restrictions on the remittance in full of dividends declared out of trading profits tonon-residents of the Common Monetary AreaCMA (comprising South Africa, the Kingdoms of Lesotho and Swaziland and the Republic of Namibia) by Gold Fields.
Under South African exchange control regulations, the ordinary shares and ADSs of Gold Fields are freely transferable outside South Africa between persons who are not residents of the Common Monetary Area.CMA. Additionally, where ordinary shares are sold on the JSE on behalf of shareholders of Gold Fields who are not residents of the Common Monetary Area,CMA, the proceeds of such sales will be freely exchangeable into foreign currency and remittable to them. Any share certificates held bynon-resident Gold Fields shareholders will be endorsed with the words “non-resident.“non-resident.” The same endorsement, however, will not be applicable to ADSs of Gold Fields held bynon-resident shareholders.
Taxation
Certain South African Tax Considerations
The discussion in this section sets forth the material South African tax consequences of the purchase, ownership and disposition of Gold Fields’ ordinary shares or ADSs under current South African law. Changes in the law may alter the tax treatment of Gold Fields’ ordinary shares or ADSs, possibly on a retroactive basis.
The following summary is not a comprehensive description of all of the tax considerations that may be relevant to a decision to purchase, own or dispose of Gold Fields’ ordinary shares or ADSs and does not cover tax consequences that depend upon your particular tax circumstances. In particular, the following summary addresses tax consequences for holders of ordinary shares or ADSs who are not residents of, or who do not carry on business in, South Africa and who hold ordinary shares or ADSs as capital assets (that is, for investment purposes). For the purposes of the income tax treaty between South Africa and the United States, or the Treaty, and South African tax law, a United States resident that owns Gold Fields ADSs will be treated as the owner of the Gold Fields ordinary shares represented by such ADSs. Gold Fields recommends that you consult your own tax adviser about the consequences of holding Gold Fields’ ordinary shares or ADSs, as applicable, in your particular situation.
Withholding Tax on Dividends
It should be noted that the 15% withholding tax on dividends declared by South African resident companies tonon-resident shareholders ornon-resident ADS holders was introduced with effect from April 1, 2012. The withholding rate was increased from 15% to 20% effective February 22, 2017. Generally, under the Treaty, the withholding tax is limited to 5% of the gross amount of the dividends if the beneficial owner of the shares is a company holding directly at least 10% of the voting stock of the company paying the dividends and to 15% of the gross amount of the dividends in all other cases.
Income Tax and Capital Gains Tax
Non-resident holders of ordinary shares or ADSs will not be subject to income or capital gains tax in South Africa, with respect to the disposal of those ordinary shares or ADSs, on the basis that 80% or more of the market value of the Shares do not relate to any immovable property held in South Africa, unless thenon-resident carried on business through a permanent establishment in South Africa, and the profits are realized in the ordinary course of that business.
Securities Transfer Tax
No Securities Transfer Tax, or STT, is payable in South Africa with respect to the issue of a security.
STT is charged at a rate of 0.25% on the taxable amount of the transfer of every security issued by a company or a close corporation incorporated in South Africa, or a company incorporated outside South Africa but listed on an exchange in South Africa, subject to certain exemptions.
The word “transfer” is broadly defined and includes the transfer, sale, assignment or cession or disposal in any other manner of a security. The cancellation or redemption of a security is also regarded as a transfer unless the company is being liquidated. However, the issue of a security that does not result in a change in beneficial ownership is not regarded as a transfer.
STT is levied on the taxable amount of a security. The taxable amount of a listed security is the greater of the consideration for the security declared by the transferee or the closing price of that security. The taxable amount of an unlisted security is the greater of the consideration given for the acquisition of the security or the market value of the unlisted security. In the case of a transfer of a listed security, either the member or the participant or the person to whom the security is transferred is liable for the tax. The tax must be paid within a period of 14 days from the transfer. The liability for tax with respect to the transfer of listed securities lies with the party facilitating the transfer or the recipient of the security.
The liability for STT with respect to the transfer of unlisted securities is that of the company that issued the unlisted security. The STT must be paid by the company issuing the unlisted security within two months from the date of the transfer of such security.
U.S. Federal Income Tax Considerations
TO ENSURE COMPLIANCE WITH TREASURY DEPARTMENT CIRCULAR 230, HOLDERS ARE HEREBY NOTIFIED THAT: (A) ANY DISCUSSION OF U.S. FEDERAL TAX ISSUES IN THIS DOCUMENT IS NOT INTENDED OR WRITTEN TO BE RELIED UPON, AND CANNOT BE RELIED UPON, BY HOLDERS FOR THE PURPOSE OF AVOIDING PENALTIES THAT MAY BE IMPOSED ON HOLDERS UNDER THE INTERNAL REVENUE CODE; (B) SUCH DISCUSSION IS INCLUDED HEREIN BY GOLD FIELDS IN CONNECTION WITH THE PROMOTION OR MARKETING (WITHIN THE MEANING OF CIRCULAR 230) BY GOLD FIELDS OF THE TRANSACTIONS OR MATTERS ADDRESSED HEREIN; AND (C) HOLDERS SHOULD SEEK ADVICE BASED ON THEIR PARTICULAR CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISER.
The following discussion summarizes the material U.S. federal income tax consequences of the acquisition, ownership and disposition of ordinary shares and ADSs by a U.S. Holder. As used herein, the term “U.S. Holder” means a beneficial owner of ordinary shares or ADSs that is for U.S. federal income tax purposes:
a citizen or resident of the United States;
a corporation created or organized under the laws of the United States, or any Statestate within the United States;States or the District of Columbia;
otherwisean estate the income of which is subject to U.S. federal income tax on without regard to its source; or
a net income basis in respecttrust if a court within the United States is able to exercise primary supervision over the administration of the ordinary sharestrust and one or ADSs.
Themore U.S. federal income tax treatmentpersons have the authority to control all substantial decisions of a partner in an entitythe trust, or the trust has validly elected to be treated as a partnershipdomestic trust for U.S. federal income tax purposes that holds ordinary shares or ADSs will depend upon the status of the partner and the activities of the partnership. If you are an entity treated as a partnership for U.S. federal income tax purposes, you should consult your tax adviser concerning the U.S. federal income tax consequences to your partners of the acquisition, ownership and disposition of ordinary shares or ADSs by you.purposes.
This summary only applies to U.S. Holders that hold ordinary shares or ADSs as capital assets. This summary is based upon:
the current federal income tax laws of the United States, including the Internal Revenue Code of 1986, as amended, or the Code, its legislative history, and existing and proposed regulations thereunder;
current U.S. Internal Revenue Service, or IRS, practice and applicable U.S. court decisions; and
the income tax treaty between the United States and South Africa
all as of the date hereof and all subject to change at any time, possibly with retroactive effect.
This summary assumes that the obligations of the Depositary under the Deposit Agreement and any related agreements will be performed in accordance with their terms.
This summary is of a general nature and does not address all U.S. federal income tax consequences that may be relevant to you in light of your particular situation.situation (including consequences under the alternative minimum tax or the net investment income tax), and does not address state, local,non-U.S. or other tax laws (such as estate and gift tax laws). For example, this summary does not apply to:
investors that own (directly, indirectly or indirectly) 10%by attribution) 5% or more of Gold Fields’ voting stock;stock by vote or value;
financial institutions;
insurance companies;
investors liable for the alternative minimum tax or the net investment tax;
individual retirement accounts and othertax-deferred accounts;
tax-exempt organizations;
dealers in securities or currencies;
investors that hold ordinary shares or ADSs as part of straddles, hedging transactions or conversion transactions for U.S. federal income tax purposes; or
investors whose functional currency is not the U.S. dollar.dollar;
persons that have ceased to be U.S. citizens or lawful permanent residents of the United States;
investors holding the ordinary shares or ADSs in connection with a trade or business conducted outside the United States; and
U.S. citizens or lawful permanent residents living abroad.
The U.S. federal income tax treatment of a partner in an entity or arrangement treated as a partnership for U.S. federal income tax purposes that holds ordinary shares or ADSs will depend upon the status of the partner and the activities of the partnership. If you are an entity or arrangement treated as a partnership for U.S. federal income tax purposes, you should consult your tax adviser concerning the U.S. federal income tax consequences to you and your partners of the acquisition, ownership and disposition of ordinary shares or ADSs by you.
Gold Fields does not believe that it should be treated as,was a PFIC within the meaning of Section 1297 of the Code for its 2016 taxable year and does not expect to become,be a PFIC for U.S. federal income tax purposes, butits current taxable year or in the foreseeable future. However, Gold Fields’ possible status as a PFIC must be determined annually and therefore may be subject to change. If Gold Fields were to be treated as a PFIC, U.S. Holders of ordinary shares or ADSs would be required (i) to pay a special U.S. addition to tax on certain distributions and gains on sale and (ii) to pay tax on any gain from the sale of ordinary shares or ADSs at ordinary income (rather than capital gains) rates in addition to paying the special addition to tax on this gain. Additionally, dividends paid by Gold Fields would not be eligible for the special reduced rate of tax described below under “—Taxation of Dividends”. The remainder of this discussion assumes that Gold Fields is not a PFIC for U.S. federal income tax purposes. You should consult your own tax advisers regarding the potential application of the PFIC regime.
The summary of U.S. federal income tax consequences set out below is for general information only. You are urged to consult your tax advisers as to the particular tax consequences to you of acquiring, owning and disposing of the ordinary shares or ADSs, including your eligibility for the benefits of the income tax treaty between the United States and South Africa, the applicability and effect of state, local, foreignnon-U.S. and other tax laws and possible changes in tax law.
U.S. Holders of ADSs
For U.S. federal income tax purposes, a U.S. Holder of ADSs generally will be treated as the owner of the corresponding number of underlying ordinary shares held by the depositaryDepositary for the ADSs, and references to ordinary shares in the following discussion refer also to ADSs representing the ordinary shares.
Deposits and withdrawals of ordinary shares by U.S. Holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes. Your tax basis in withdrawn ordinary shares will be the same as your tax basis in the ADSs surrendered, and your holding period for the ordinary shares will include the holding period of the ADSs.
However, the U.S. Treasury has expressed concern that U.S. holders of depositary receipts (such as U.S. Holders of Gold Fields ADSs) may be claiming foreign tax credits in situations where an intermediary in the chain of ownership between such holders and the issuer of the security underlying the depositary receipts, or a party to whom depositary receipts or deposited shares are delivered by the depositary prior to the receipt by the depositary of the corresponding securities, has taken actions inconsistent with the ownership of the underlying
security by the person claiming the credit, such as a disposition of such security. Such actions may also be inconsistent with the claiming of the reduced tax rates that may be applicable to certain dividends received by certainnon-corporate holders, as described below. Accordingly, (i) the ability to offset any South African taxes and (ii) the availability of the reduced tax rates for any dividends received by certainnon-corporate U.S. Holders, each as described below, could be affected by actions taken by such parties or intermediaries.
Taxation of Dividends
Distributions paid out of Gold Fields’ current or accumulated earnings and profits (as determined for U.S. federal income tax purposes), before reduction for any South African withholding tax paid by Gold Fields with respect thereto, will generally be taxable to you as foreign source dividend income, and will not be eligible for the dividends received deduction allowed to corporations. Distributions that exceed Gold Fields’ current and accumulated earnings and profits will be treated as anon-taxable return of capital to the extent of your basis in the ordinary shares and thereafter as capital gain. However, we doGold Fields does not maintain calculations of ourits earnings and profits in accordance with U.S. federal income tax accounting principles. You should therefore assume that any distribution by usGold Fields with respect to the ordinary shares will constitutebe reported as ordinary dividend income. You should consult your own tax advisers with respect to the appropriate U.S. federal income tax treatment of any distribution received from us.Gold Fields. For purposes of determining limitations on any foreign tax credits, dividends paid by Gold Fields will generally constitute “passive income.”
Dividends paid by Gold Fields generally will be taxable tonon-corporate U.S. Holders at the special reduced rate normally applicable to long-term capital gains, provided that either (i) Gold Fields qualifies for the benefits of the income tax treaty between the United States and South Africa, or (ii) the ADSs are considered to be “readily tradable” on the NYSE. You will be eligible for this reduced rate only if youNYSE, and certain other requirements are an individual, and have held the ordinary shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date.met.
For U.S. federal income tax purposes, the amount of any dividend paid in Rand will be included in income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date the dividends are received by you (in the case of ordinary shares) or the depositaryDepositary (in the case of ADSs). regardless of whether they are converted into U.S. dollars at that time. If you or the depositary,Depositary, as the case may be, convert dividends received in Rand into U.S. dollars on the day they are received, you generally will not be required to recognize foreign currency gain or loss in respect of this dividend income.
Effect of South African Withholding Taxes
As discussed in “—Certain South African Tax Considerations—Withholding Tax on Dividends”, under current law, South Africa imposes a withholding tax of 15%20% on dividends paid by Gold Fields. A U.S. Holder will generally be entitled, subject to certain limitations, to a foreign tax credit against its U.S. federal income tax liability, or a deduction in computing its U.S. federal taxable income, for South African income taxes withheld by Gold Fields.
U.S. Holders that receive payments subject to this withholding tax will be treated, for U.S. federal income tax purposes, as having received the amount of South African taxes withheld by Gold Fields, and as then having paid over the withheld taxes to the South African taxing authorities. As a result of this rule, the amount of dividend income included in gross income for U.S. federal income tax purposes by a U.S. Holder with respect to a payment of dividends may be greater than the amount of cash actually received (or receivable) by the U.S. Holder from Gold Fields with respect to the payment.
For purposes of the foreign tax credit limitation, foreign source income is classified in one of two “baskets”, and the credit for foreign taxes on income in any basket is limited to U.S. federal income tax allocable to that income. Dividends paid by Gold Fields generally will constitute foreign source income in the “passive income” basket. If a U.S. Holder receives a dividend from Gold Fields that qualifies for the reduced rate described above under “—Taxation of Dividends”, the amount of the dividend taken into account in calculating the foreign tax credit limitation will in general be limited to the gross amount of the dividend, multiplied by the reduced rate
divided by the highest rate of tax normally applicable to dividends. In certain circumstances, a U.S. Holder may be unable to claimThe rules governing foreign tax credits (and may instead be allowed deductions) for foreign taxes imposed on a dividend if the U.S. Holder has not held the Shares for at least 16 days in the 31-day period beginning 15 days before the ex-dividend date.
U.S. Holders that are accrual basis taxpayers, and who do not otherwise elect, must translate South African taxes into U.S. dollars at a rate equal to the average exchange rate for the taxable year in which the taxes accrue, while all U.S. Holders must translate taxable dividend income into U.S. dollars at the spot rate on the date received. This difference in exchange rates may reduce the U.S. dollar value of the credits for South African taxes relative to the U.S. Holder’s U.S. federal income tax liability attributable to a dividend. However, cash basis and electing accrual basis U.S. Holders may translate South African taxes into U.S. dollars using the exchange rate in effect on the day the taxes were paid. Any such election by an accrual basis U.S. Holder will apply for the taxable year in which it is made and all subsequent taxable years, unless revoked with the consent of the IRS.
complex. You should consult your tax advisor concerning the foreign tax credit implications of the payment of South African withholding taxes.
Taxation of a Sale or Other Disposition
Your tax basis in an ordinary share or ADS will generally be its U.S. dollar cost. The U.S. dollar cost of an ordinary share purchased with foreign currency will generally be the U.S. dollar value of the purchase price on
the date of purchase or, in the case of ordinary shares traded on an established securities market, as defined in the applicable Treasury Regulations, that are purchased by a cash basis taxpayer (or an accrual basis taxpayer that so elects), on the settlement date for the purchase. Such an election by an accrual basis taxpayer must be applied consistently from year to year and cannot be revoked without the consent of the IRS.
Upon a sale or other disposition of ordinary shares or ADSs, other than an exchange of ADSs for ordinary shares and vice versa, you will generally recognize capital gain or loss for U.S. federal income tax purposes equal to the difference between the amount realized and your adjusted tax basis in the ordinary shares or ADSs. This capital gain or loss will be long-term capital gain or loss if your holding period in the ordinary shares or ADSs exceeds one year. However, regardless of your actual holding period, any loss may be treated as long-term capital loss to the extent you receive a dividend that qualifies for the reduced rate described above under “—Taxation of Dividends” and also exceeds 10% of your basis in the ordinary shares. Any gain or loss will generally be U.S. source.
The amount realized on a sale or other disposition of ordinary shares for an amount in foreign currency will be the U.S. dollar value of this amount on the date of sale or disposition. On the settlement date, you will recognize U.S. source foreign currency gain or loss (taxable as ordinary income or loss) equal to the difference (if any) between the U.S. dollar value of the amount received based on the exchange rates in effect on the date of sale or other disposition and the settlement date. However, in the case of ordinary shares traded on an established securities market that are sold by a cash basis taxpayer (or an accrual basis taxpayer that so elects), the amount realized will be based on the exchange rate in effect on the settlement date for the sale, and no exchange gain or loss will be recognized at that time.
Foreign currency received on the sale or other disposition of an ordinary share will have a tax basis equal to its U.S. dollar value on the settlement date. Foreign currency that is purchased will generally have a tax basis equal to the U.S. dollar value of the foreign currency on the date of purchase. Any gain or loss recognized on a sale or other disposition of a foreign currency (including its use to purchase ordinary shares or upon exchange for U.S. dollars) will be U.S. source ordinary income or loss.
Deposits and withdrawals of ordinary shares by U.S. Holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes. Your tax basis in withdrawn ordinary shares will be the same as your tax basis in the ADSs surrendered, and your holding period for the ordinary shares will include the holding period of the ADSs.
To the extent you incur Securities Transfer Tax in connection with a transfer or withdrawal of ordinary shares as described under “—Certain South African Tax Considerations—Securities Transfer Tax” above, such securities transfer tax will not be a creditable tax for U.S. foreign tax credit purposes.
Backup Withholding and Information Reporting
Payments of dividends and other proceeds with respect to ordinary shares or ADSs by U.S. persons will be reported to you and to the IRS as may be required under applicable regulations. Backup withholding may apply to these payments if you fail to provide an accurate taxpayer identification number or certification of exempt status or fail to report all interest and dividends required to be shown on your U.S. federal income tax returns. Some holders are not subject to backup withholding. You should consult your tax adviser asabout these rules and any other reporting obligations that may apply to your qualification for an exemption from backup withholdingthe ownership and disposition of the procedure for obtaining an exemption.
Foreign Financial Asset Reporting
U.S. taxpayers that ownordinary shares, including requirements relating to the holding of certain foreign financial assets, including equity of foreign entities, with an aggregate value in excess of $50,000 at the end of the taxable year or $75,000 at any time during the taxable year (or, for certain individuals living outside the United States and married individuals filing joint returns, certain higher thresholds) may be required to file an information report with respect to such assets with their tax returns. Gold Fields’ ordinary shares and ADSs are expected to constitute foreign financial assets subject to these requirements unless they are held in an account at a financial institution (in which case, the account may be reportable if maintained by a foreign financial institution). You should consult you tax advisor regarding the application of the rules relating to foreign financial asset reporting.assets.
Documents on Display
Gold Fields files annual and special reports and other information with the SEC. You may read and copy any reports or other information on file at the SEC’s public reference room at the following location:
100 F Street, N.E.
Washington, D.C. 20549
Please call the SEC at1-800-SEC-0330 for further information on the public reference room. The SEC filings are also available to the public from commercial document retrieval services. Gold Fields’ SEC filings may also be obtained electronically via the EDGAR system on the website maintained by the SEC at http://www.sec.gov.
ITEM 11: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Gold Fields is exposed to market risks, including foreign currency, commodity price and interest rate risk associated with underlying assets, liabilities and anticipated transactions. Following periodic evaluation of these exposures, Gold Fields may enter into derivative financial instruments to manage some of these exposures. As part of its strategy, however, Gold Fields does not generally hedge against the risk of changes in the price of gold. See “—Commodity Price Sensitivity—Commodity Price Hedging Policy.”Policy”.
Gold Fields has policies in areas such as counterparty exposure, hedging practices and prudential limits which have been approved by Gold Fields’ Board of Directors. Management of financial risk is centralized at Gold Fields’ treasury department, which acts as the interface between Gold Fields’ operations and counterparty banks. The treasury department manages financial risk in accordance with the policies and procedures established by the Gold Fields Board of Directors and Executive Committee. Gold Fields’ Audit Committee has approved dealing limits for money market, foreign exchange and commodity transactions, which Gold Fields’ treasury department is required to adhere to. Among other restrictions, these limits describe which instruments may be traded and demarcate open position limits for each category as well as indicating counterparty credit- related limits. The dealing exposure and limits are checked and controlled each day and reported to the Chief Financial Officer.
Foreign Currency Sensitivity
General
In the ordinary course of business, Gold Fields enters into transactions, such as gold and concentrate sales, denominated in foreign currencies, primarily U.S. dollars. In addition, Gold Fields has investments and indebtedness in various foreign currencies, primarily U.S. and Australian dollars. Although this exposes Gold Fields to transaction and translation exposure from fluctuations in foreign currency exchange rates, Gold Fields does not generally hedge this exposure, although it may do so in specific circumstances, such as foreign currency commitments, financing projects or acquisitions. Also, Gold Fields on occasion undertakes currency hedging to take advantage of favorable short-term fluctuations in exchange rates when management believes exchange rates are at unsustainably high levels.
Foreign Currency Hedging Experience
Gold Fields uses various derivative instruments to protect its exposure to adverse movements in foreign currency exchange rates.
On October 1, 2014, South Deep entered into a U.S.$/Randzero-cost collar for $7.5U.S.$7.5 million per month for a period of six months starting October 2014. A floor of R11.2 and an average cap over the period of R12.0567 was achieved. At December 31, 2014, the fair value of the collar was nil.
On February 25, 2016, South Deep entered into U.S.$/Rand forward exchange contracts for a total delivery of U.S.$69.8 million starting at July 2016 to December 2016. The average forward rate achieved over the six month period was R16.8273. The hedge was delivered into in July and August and the balance closed out in September 2016. The average rate achieved on delivery and close out was R13.8010, resulting in a profit of U.S.$14.4 million.
Gains and losses on financial instruments are disclosed in detail under “Operating and Financial Review and Prospects—Results of Operations—(Loss)/gainGain/(loss) on financial instruments.”Financial Instruments”.
Foreign Currency Contract Position
As of December 31, 2014,2016, there were no foreign currency contract positions other than the abovementioned which is not considered material.
positions.
Foreign Currency Sensitivity Analysis
Gold Fields’ revenues and costs are very sensitive to the Rand/U.S. dollar and Australian dollar/U.S. dollar exchange rates because revenues are generated using a gold price denominated in U.S. dollars, while costs of the South African and Australian operations are incurred principally in Rand and Australian dollars, respectively. Depreciation of the Rand and Australian dollar against the U.S. dollar results in lower operating costs when they are translated into U.S. dollars, thereby increasing the operating margin of the South African and Australian operations. Conversely, appreciation of the Rand and Australian dollar results in higher operating costs when translated into U.S. dollars, thereby decreasing the operating margins at the South African and Australian operations. The impact on profitability of changes in the value of the Rand and Australian dollar against the U.S. dollar can be substantial.
A sensitivity analysis of themark-to-market valuation has not been performed as there were no significant foreign currency contracts as of December 31, 2014.2016.
Commodity Price Sensitivity
General
Gold and copper
The market price of gold and to a lesser extent copper have a significant effect on the results of operations of Gold Fields, the ability of Gold Fields to pay dividends and undertake capital expenditures, and the market price of Gold Fields’ ordinary shares. Gold and copper prices have historically fluctuated widely and are affected by numerous industry factors over which Gold Fields does not have any control. See “Risk Factors—Changes in the market price for gold, and to a lesser extent copper, which in the past have fluctuated widely, affect the profitability of Gold Fields’ operations and the cash flows generated by those operations” and “Operating and Financial Review and Prospects—Revenues.”Revenues”. The aggregate effect of these factors on the gold and copper prices, all of which are beyond the control of Gold Fields, is impossible for Gold Fields to predict.
Oil
The market price of oil has a significant effect on the results of the offshore operations of Gold Fields. The offshore operations consume large quantities of diesel in the running of their mining fleets. Oil prices have historically fluctuated widely and are affected by numerous factors over which Gold Fields does not have any control.
Commodity Price Hedging Policy
Gold and copper
Generally, Gold Fields does not enter into forward sales, derivatives or other hedging arrangements to establish a price in advance for future gold and copper production. On an exceptional basis, Gold Fields may consider gold and copper hedging arrangements in one or more of the following circumstances:
to protect cash flows at times of significant capital expenditure;
for specific debt-servicing requirements; and
to safeguard the viability of higher cost operations.
See “Information on the Company—Strategy.”Strategy”.
To the extent that it enters into commodity hedging arrangements, Gold Fields seeks to use different counterparty banks consisting of local and international banks to spread risk. None of the counterparties is affiliated with, or a related party of, Gold Fields.
Oil
Generally Gold Fields does not enter into derivatives or other hedging arrangements to establish a price in advance for future oil consumption. However, where oil prices are expected to increase in the short- to medium- term, Gold Fields may consider hedging the oil price in order to protect itself against the adverse cost effects of a material increase in the oil price.
Commodity Price Hedging Experience
Gold
No gold derivative instruments were entered into during fiscal 20142016 and no gold derivative instruments have been entered into since fiscal 2007.
Copper
No contracts were entered into during fiscal 2012, 20132014, 2015 and 2014.2016.
Oil
From time to time, various subsidiaries of Gold Fields enter into call options to fix the price of specified quantities of diesel fuel. During fiscal 2013 and 2014, the following options wereoption was entered into:
On May 1, 2013, St. Ives Gold Mining Company (Pty) Ltd entered into a Singapore Gasoil 10ppm cash settled swap transaction for 7,500 barrels per month effective from June 1, 2013 until March 31, 2014 at a fixed price of $115.00 per barrel.
On September 10, 2014, Gold Fields Australia (Pty) Limited entered into a Singapore Gasoil 10ppm cash settled swap transaction contract for a total of 136,500 barrels, effective September 15, 2014 until March 31, 2015 at a fixed price of $115.00 per barrel. The 136,500 barrels are based on 50 per cent of usage for the seven month period – September 2014 to March 2015. Brent Crude at the time of the transaction was $99.10 per barrel.
On November 26, 2014, Gold Fields Australia (Pty) Limited entered into further Singapore Gasoil 10ppm cash settled swap transaction contracts. A contract for 63,000 barrels for the period January – January—March 2015 was committed at a fixed price of $94.00U.S.$94.00 per barrel, and a further 283,500 barrels was committed at a price of $96.00U.S.$96.00 per barrel for the period April – April—December 2015. Brent Crude at the time of the transaction was $78.50U.S.$78.50 per barrel.
No further contracts were entered into during fiscal 2014.2015 and 2016.
Commodity Price Contract Position
The following contract was outstanding as ofAt December 31, 2014:2016, there were no outstanding commodity contracts.
Australian diesel hedge—430,500 barrels with a negative fair value of $10.3 million.
Interest Rate Sensitivity
General
As of December 31, 2014,2016, Gold Fields’ indebtedness amounted to $1 910.9U.S.$1,692.9 million. Gold Fields generally does not undertake any specific action to cover its exposure to interest rate risk, although it may do so in specific circumstances. For a discussion of Gold Fields’ credit facilities and other borrowings outstanding as of December 31, 2014,2016, including the interest rates applicable to them, see “Operating and Financial Review and Prospects—Credit Facilities and Other Capital Resources.”Facilities”.
Interest Rate Sensitivity Analysis
U.S.$919.6846.5 million of Gold Fields interest bearing debt outstanding as of December 31, 20142016 was exposed to interest rate fluctuations. This debt is normally rolled for periods between one and three months and is therefore exposed to the rate changes in this period.
U.S.$703.0785.5 million of the total debt was exposed to changes in LIBOR while $216.6U.S.$61.0 million was exposed to the South African Prime Rate and JIBAR.Rate. The following table indicates the change to finance expense on average borrowings for fiscal 2016 of U.S.$798.7 million and U.S.$42.3 million, had LIBOR and the South African Prime Rate, and JIBARrespectively, differed as indicated.
| Change in finance expense for a nominal change in interest rate, change as of December 31, 2014 | Change in finance expense for a nominal change in interest rate, change as of December 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||
| ($ million, except for percentages) | (U.S.$ million, except for percentages) | |||||||||||||||||||||||||||||||||||||||||||||||
Sensitivity to interest rates | (1.5 | )% | (1.0 | )% | (0.5 | )% | 0.5 | % | 1.0 | % | 1.5 | (1.5 | )% | (1.0 | )% | (0.5 | )% | 0.5 | % | 1.0 | % | 1.5 | % | |||||||||||||||||||||||||
Sensitivity to LIBOR interest rate | (11.8 | ) | (7.9 | ) | (3.9 | ) | 3.9 | 7.9 | 11.8 | (12.0 | ) | (8.0 | ) | (4.0 | ) | 4.0 | 8.0 | 12.0 | ||||||||||||||||||||||||||||||
Sensitivity to Prime and JIBAR | (3.4 | ) | (2.3 | ) | (1.1 | ) | 1.1 | 2.3 | 3.4 | |||||||||||||||||||||||||||||||||||||||
Sensitivity to South African Prime interest rate | (0.6 | ) | (0.4 | ) | (0.2 | ) | 0.2 | 0.4 | 0.6 | |||||||||||||||||||||||||||||||||||||||
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Change in finance expense | (15.2 | ) | (10.2 | ) | (5.0 | ) | 5.0 | 10.2 | 15.2 | (12.6 | ) | 8.4 | (4.2 | ) | 4.2 | 8.4 | 12.6 | |||||||||||||||||||||||||||||||
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ITEM 12: DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES
Not applicable.
ITEM 13: DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES
Not applicable.
ITEM 14: MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS
AND USE OF PROCEEDS
Not applicable.
ITEM 15: CONTROLS AND PROCEDURES
| (a) | Disclosure Controls and Procedures: |
Gold Fields has carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer of Gold Fields, of the effectiveness of the design and operation of Gold Fields’ disclosure controls and procedures (as defined in Exchange ActRule 13a-15(e)) as of the end of the period covered by this annual report. Based upon that evaluation, Gold Fields’ Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2014,2016, Gold Fields’ disclosure controls and procedures were effective.
| (b) | Management’s Report on Internal Control over Financial Reporting: |
Gold Fields’ management is responsible for establishing and maintaining adequate internal control over financial reporting. The Securities Exchange Act of 1934 defines internal control over financial reporting in Rule13a-15(f) and15d-15(f) as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, and effected by the company’s board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles, and includes those policies and procedures that:
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
Gold Fields’ management assessed the effectiveness of its internal control over financial reporting as of December 31, 2014.2016. In making this assessment, Gold Fields’ management used the criteria set forthestablished in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, (1992), or COSO, in Internal Control-Integrated Framework.COSO. Based upon its assessment, Gold Fields’ management concluded that, as of December 31, 2014,2016, its internal control over financial reporting is effective based upon those criteria.
KPMG Inc., or KPMG, an independent registered public accounting firm that audited the consolidated financial statements included in this annual report on Form20-F, has issued an attestation report on the effectivenessmanagement’s assessment of Gold Fields’ internal control over financial reporting as of December 31, 2014.2016.
| (c) | Attestation Report of the Registered Public Accounting Firm: |
See report of KPMG Inc., an Independent Registered Public Accounting Firm, onpage F-1.
| (d) | Changes in Internal Control Over Financial Reporting: |
There has been no change in our internal control over financial reporting (as such term is defined inRules 13a-15(f) and15d-15(f) under the Exchange Act) that occurred during fiscal 20142016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 16A: AUDIT COMMITTEE FINANCIAL EXPERT
The Board of Directors has determined that Gold Fields’ Audit Committee does not have an “audit committee financial expert,”expert”, as defined in the rules promulgated by the Securities and Exchange Commission. Although a person with such qualifications does not serve on the Audit Committee, the Board of Directors believes that the members of the Audit Committee collectively possess the knowledge and experience to oversee and assess the performance of Gold Fields’ management and auditors, the quality of Gold Fields’ disclosure controls, the preparation and evaluation of Gold Fields’ financial statements and Gold Fields’ financial reporting. Gold Fields’ Board of Directors also believes that the members of the Audit Committee collectively possess the understanding of audit committee functions necessary to diligently execute their responsibilities. For biographical information on each member of the Audit Committee, see “Directors, Senior Management andEmployees—Non-executive Directors”.
Gold Fields has adopted a Company Code of Ethics,Conduct, or the Code, which applies to all directors and employees, the text of which can be accessed on Gold Fields’ website at www.goldfields.co.za.
ITEM 16C: PRINCIPAL ACCOUNTANT FEES AND SERVICES
KPMG served as Gold Fields’ principal accountant. Set forth below are the fees for audit and other services rendered by KPMG for fiscal 2012, 20132016, 2015 and 2014.
| Year ended December 31, | Year ended December 31, | |||||||||||||||||||||||
| 2012 | 2013 | 2014 | 2016 | 2015 | 2014 | |||||||||||||||||||
| (U.S.$ million) | (U.S.$ million) | |||||||||||||||||||||||
Audit fees | 3.8 | 3.4 | 3.2 | 2.4 | 2.7 | 3.2 | ||||||||||||||||||
Audit-related fees | 1.2 | 0.3 | 0.3 | 0.3 | 0.2 | 0.3 | ||||||||||||||||||
Tax fees | — | — | — | 0.1 | — | (1) | — | (1) | ||||||||||||||||
All other fees | 0.1 | — | 0.1 | — | 0.1 | 0.1 | ||||||||||||||||||
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Total | 5.1 | 3.7 | 3.6 | 2.8 | 3.0 | 3.6 | ||||||||||||||||||
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Note:
| (1) | Nominal amount due to rounding to U.S.$ million. |
Audit fees include fees for audit services rendered for Gold Fields’ annual consolidated financial statements filed with regulatory organizations.
Audit-related fees include fees for related services by the principal accountant that are reasonably related to the performance of the audit or review of the registrant’s financial statements.
Tax fees include fees for tax compliance, tax advice, tax planning and othertax-related services.
All other fees consist of fees for all other services not included in any of the other categories noted above.
All of the above fees werepre-approved by the Audit Committee.
Audit Committee’s Policies and Procedures
In accordance with the Securities and Exchange Commission rules regarding auditor independence, the Audit Committee has established Policies and Procedures for Audit andNon-Audit Services Provided by an Independent Auditor. The rules apply to Gold Fields and its consolidated subsidiaries engaging any accounting firms for audit services and the auditor who audits the accounts filed with the Securities and Exchange Commission, or the external auditor, for permissiblenon-audit services.
When engaging the external auditor for permissiblenon-audit services (audit-related services, tax services, and all other services),pre-approval is obtained prior to the commencement of the services.
ITEM 16D: EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES
Not applicable.
ITEM 16E: PURCHASES OF EQUITY SECURITIES BY THE ISSUER
AND AFFILIATED PURCHASERS
None.
ITEM 16F: CHANGE IN REGISTRANT’S CERTIFYING ACCOUNTANT
Not applicable.
ITEM 16G: CORPORATE GOVERNANCE
Gold Fields’ home country corporate governance practices are regulated by the Listing Requirements of the JSE, or the JSE Listing Requirements. The following is a summary of the significant ways in which Gold Fields’ home country corporate governance standards and its corporate governance practices differ from those followed by domestic companies under the NYSE Listing Standards.
The NYSE Listing Standards require that thenon-management directors of U.S. listed companies meet at regularly scheduled non executive sessions without management. The JSE Listing Requirements do not require such meetings of listed companynon-executive directors. Gold Fields’non-management directors do however meet regularly without management.
The NYSE Listing Standards require U.S. listed companies to have a nominating/corporate governance committee composed entirely of independent directors. The JSE Listing Requirements also require the appointment of such a committee, and stipulate that all members of this committee must benon-executive directors, the majority of whom must be independent. Gold Fields has a Nominating and Governance Committee which currently comprises threenon-executive directors, all of whom are independent under the NYSE Listing Standards and the JSE Listing Requirements which is chaired by the Chairman of Gold Fields, as required by the JSE Listing Requirements.
The NYSE Listing Standards require U.S. listed companies to have a compensation committee composed entirely of independent directors. The JSE Listing Requirements merely require the appointment of such a committee. Gold Fields has appointed a Remuneration Committee, currently comprising foursix board members, all of whom are independent under both the JSE Listing Requirements and the NYSE Listing Standards.
The NYSE Listings Standards require U.S. listed companies to have an audit committee composed entirely of independent directors. The South African Companies Act requires that the audit committee be approved by shareholders on an annual basis at a company’s annual general meeting. The JSE Listings Requirements also require an audit committee composed entirely of independent directors. Gold Fields has appointed an Audit Committee, currently comprised of threesix board members, all of whom arenon-executive and independent, as defined under both the JSE Listings Requirements and the NYSE Listing Requirements.
ITEM 16H: MINE SAFETY DISCLOSURE
Not applicable.
Gold Fields has responded to Item 18 in lieu of responding to this item.
The following financial statements of Gold Fields Limited are filed as part of this annual report.
Gold Fields Limited | ||||
| F-1 | ||||
Accounting Policiesto the Consolidated Financial Statements | F-2 | |||
Consolidated Income Statements for fiscal 2016, 2015 and 2014 | F-23 | |||
Consolidated Statements of Comprehensive Income for fiscal | ||||
Consolidated | ||||
Consolidated Statements of Cash Flows for fiscal | ||||
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The following instruments and documents are included as Exhibits to this annual report.
No. | Exhibit | |
| 1.1 | Memorandum of Association of Gold Fields (incorporated by reference to Exhibit 1.1 to the registration statement on Form20-F (FileNo. 1-31318), filed by Gold Fields with the Securities and Exchange Commission on May 6, 2002) | |
| 1.2 | Articles of Association of Gold Fields (incorporated by reference to Exhibit 1.2 to the registration statement on Form20-F (FileNo. 1-31318), filed by Gold Fields with the Securities and Exchange Commission on May 6, 2002) | |
| 1.3 | Amended Articles of Association of Gold Fields (incorporated by reference to Exhibit 1.3 to the annual report on Form20-F (FileNo. | |
| 2.1 | Memorandum of Incorporation of Gold Fields (included in Exhibits 1.1 and 1.2) | |
| 2.2 | Deposit Agreement among Gold Fields, Gold Fields Limited (f/k/a/Driefontein Consolidated Limited), The Bank of New York, as depositary, and the owners and beneficial owners from time to time of American Depositary Receipts, dated as of February 2, 1998, as amended and restated as of May 21, 2002 (incorporated by reference to Exhibit 2.3 to the annual report on Form20-F (FileNo. 1-31318), filed by Gold Fields with the Securities and Exchange Commission on October 24, 2002) | |
| 2.3 | Form of American Depositary Receipt (included in Exhibit 2.2) | |
| 2.4 | Amended Memorandum of Incorporation of Gold Fields (included in Exhibit 1.3) | |
| 2.5 | Trust Deed among Orogen, as issuer; Gold Fields Limited, GFIMSA, GFO, and GFH, as guarantors; and Citicorp Trustee Company Limited, as trustee, dated October 7, 2010 in relation to the U.S.$1 billion Note Issue (incorporated by reference to Exhibit 2.8 to the annual report on Form20-F (FileNo. | |
| 2.6 | Supplemental Trust Deed among Orogen, as issuer; Gold Fields, GFO, and GFH, as guarantors; Sibanye Gold and Citicorp Trustee Company Limited, as trustee, dated April 24, 2015 in relation to the U.S.$1 billion Note Issue (incorporated by reference to Exhibit 2.6 to the annual report on Form 20-F (File No. 1-31318), filed by Gold Fields with the Securities and Exchange Commission on April 13, 2016) | |
| 2.7 | Amended Memorandum of Incorporation of Gold Fields, adopted by Special Resolution on May 14, 2012 (incorporated by reference to Exhibit 2.6 to the annual report on Form20-F (FileNo.1-31318), filed by Gold Fields with the Securities and Exchange Commission on May 14, 2013) | |
| 4.1 | The Gold Fields Limited 2005Non-Executive Share Plan, adopted November 17, 2005 (incorporated by reference to Exhibit 4.24 to the annual report on Form20-F (FileNo. 1-31318), filed by Gold Fields with the Securities and Exchange Commission on December 22, 2005) | |
| 4.2 | The Gold Fields Limited 2005 Share Plan, adopted November 17, 2005 (incorporated by reference to Exhibit 4.25 to the annual report on Form20-F (FileNo. | |
| 4.3 | The Gold Fields Limited 2012 Share Plan, dated May 14, 2012 (incorporated by reference to Exhibit 4.6 to the annual report on Form20-F (FileNo. 1-31318), filed by Gold Fields with the Securities and Exchange Commission on May 14, 2013) | |
No. | Exhibit | |
| 4.4 | Agreement between Nicholas J. Holland and Gold Fields Group Services (Pty) Ltd, dated March 6, 2009 and effective March 1, 2009 (incorporated by reference to Exhibit 4.29 to the annual report onForm 20-F (FileNo. | |
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| 4.5 | Agreement between Nicholas J. Holland and Gold Fields Ghana Holdings (BVI) Limited, dated March 9, 2009 and effective March 1, 2009 (incorporated by reference to Exhibit 4.30 to the annual report on Form20-F (FileNo. | |
| 4.6 | Agreement between Nicholas J. Holland and Gold Fields Orogen Holding Company (BVI), dated March 6, 2009 and effective March 1, 2009 (incorporated by reference to Exhibit 4.31 to the annual report on Form20-F (FileNo. | |
| 4.7 | Agreement between Nicholas J. Holland and Gold Fields Group Services (Pty) Ltd, dated April 9, 2010 and effective April 1, 2010 (incorporated by reference to Exhibit 4.29 to the annual report onForm 20-F (FileNo. | |
| 4.8 | Agreement between Nicholas J. Holland and Gold Fields Ghana Holdings (BVI) Limited, dated April 9, 2010 and effective April 1, 2010 (incorporated by reference to Exhibit 4.30 to the annual report on Form20-F (FileNo. | |
| 4.9 | Agreement between Nicholas J. Holland and Gold Fields Orogen Holding Company (BVI), dated April 9, 2010 and effective April 1, 2010 (incorporated by reference to Exhibit 4.31 to the annual report on Form20-F (FileNo. | |
| 4.10 | U.S.$200 million Revolving Senior Secured Credit Facility Agreement between The Bank of Nova Scotia, Scotiabank Peru S.A.A., Scotiabank Europe Plc and La Cima, dated December 16, 2014 | |
| Revolving Credit Facility Agreement among Nedbank Limited, GFI Joint Venture Holdings (Proprietary) Limited, GFO and the Original Guarantors (listed in Schedule 1), dated March 1, 2013 (incorporated by reference to Exhibit 4.28 to the annual report on Form20-F (FileNo. 1-31318), filed by Gold Fields with the Securities and Exchange Commission on May 14, 2013) | ||
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| Agreement between Paul A. Schmidt and Gold Fields Group Services (Pty) Ltd, dated November 24, 2009 and effective November 6, 2009 (incorporated by reference to Exhibit 4.33 to the annual report on Form20-F (File No. 1 -31318), filed by Gold Fields with the Securities and Exchange Commission on December 3, 2009) | ||
| Agreement between Paul A. Schmidt and Gold Fields Ghana Holdings (BVI) Limited, dated November 24, 2009 and effective November 6, 2009 (incorporated by reference to Exhibit 4.34 to the annual report on Form20-F (File No. 1 -31318), filed by Gold Fields with the Securities and Exchange Commission on December 3, 2009) | ||
| Agreement between Paul A. Schmidt and Gold Fields Orogen Holding Company (BVI), dated November 24, 2009 and effective November 6, 2009 (incorporated by reference to Exhibit 4.35 to the annual report on Form20-F (File No. 1 -31318), filed by Gold Fields with the Securities and Exchange Commission on December 3, 2009) | ||
No. | Exhibit | |
| First Addendum to the Employment Contract made and entered into between Gold Fields Group Services (Pty) Ltd and Paul A. Schmidt, dated April 1, 2010 (incorporated by reference to Exhibit 4.40 to the annual report on Form20-F (File No. 1 -31318), filed by Gold Fields with the Securities and Exchange Commission on December 2, 2010) | ||
| First Addendum to the Employment Contract made and entered into between Gold Fields Ghana Holdings (BVI) Limited and Paul A. Schmidt, dated April 1, 2010 (incorporated by reference to Exhibit 4.41 to the annual report on Form20-F (File No. 1 -31318), filed by Gold Fields with the Securities and Exchange Commission on December 2, 2010) | ||
| First Addendum to the Employment Contract made and entered into between Gold Fields Orogen Holding Company (BVI) and Paul A. Schmidt, dated April 1, 2010 (incorporated by reference to Exhibit 4.42 to the annual report on Form20-F (File No. 1 -31318), filed by Gold Fields with the Securities and Exchange Commission on December 2, 2010) | ||
| 4.18 | US$1,290,000,000 Credit Facilities Agreement between The Bank of Tokyo-Mitsubishi UFJ, Ltd., GFI Joint Venture Holdings Proprietary Limited, Gold Fields Operations Limited, Gold Fields Orogen Holding (BVI) Limited, Gold Fields Ghana Holdings (BVI) Limited and the Original Guarantors (listed in Schedule 1), dated June 6, 2016 | |
| 4.19 | The Sale Agreement—Gruyere Project between Gold Road Resources Limited, Gruyere Mining Company Pty Ltd and Gold Fields Australia Pty Ltd dated November 6, 2016. | |
| 4.20 | Gruyere Project Joint Venture Agreement between Gruyere Mining Company Pty Ltd, Gold Road Resources Limited and others dated December 6, 2016 | |
| 4.21 | Rand 500,000,000 Revolving Credit Facility Agreement between ABSA Bank Limited, GFI Joint Venture Holdings Proprietary Limited, Gold Fields Operations Limited and the Original Guarantors (listed in Schedule 1), dated March 27, 2017 | |
| 4.22 | Rand 500,000,000 Revolving Credit Facility Agreement between The Standard Bank of South Africa Limited, GFI Joint Venture Holdings Proprietary Limited, Gold Fields Operations Limited and the Original Guarantors (listed in Schedule 1), dated March 27, 2017 | |
| 8.1 | Amended list of subsidiaries of the registrant | |
| 12.1 | Certification of Chief Executive Officer | |
| 12.2 | Certification of Chief Financial Officer | |
| 13.1 | Certification of Chief Executive Officer | |
| 13.2 | Certification of Chief Financial Officer | |
The registrant hereby certifies that it meets all of the requirements for filing on Form20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.
GOLD FIELDS LIMITED
/s/ Nicholas J. Holland |
| Name: Nicholas J. Holland |
| Title: Chief Executive Officer |
| Date: April |
Report of the Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Gold Fields Limited:Limited
We have audited the accompanying consolidated balance sheetsstatements of financial position of Gold Fields Limited (“the Company”) and subsidiaries as of December 31, 20142016 and 2013,2015, and the related consolidated income statements, and statements of operations, comprehensive income, changes in shareholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2014. In connection with our audits of the consolidated financial statements, we2016. We also have audited the financial statement schedule, “Schedule I—Valuation and Qualifying Accounts”. We also have audited Gold Fields Limited’sCompany’s internal control over financial reporting as of December 31, 2014,2016, based on criteria established in Internal Control – Integrated Framework (1992)(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Gold Fields Limited’sThe Company’s management is responsible for these consolidated financial statements, and financial statement schedule, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying “Management’s Report on Internal Control over Financial Reporting” appearing in Item 15 of the Company’s 2016 Annual Report on Form 20-F. Our responsibility is to express an opinion on these consolidated financial statements, and financial statement schedule and an opinion on Gold Fields Limited’sthe Company’s internal control over financial reporting based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Gold Fields Limited and subsidiaries as of December 31, 20142016 and 2013,2015, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2014,2016, in conformity with U.S. generally accepted accounting principles.International Financial Reporting Standards as issued by the International Accounting Standards Board. Also in our opinion, the related financial statement schedule when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. Also in our opinion, Gold Fields LimitedCompany maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014,2016, based on criteria established in Internal Control – Integrated Framework (1992)(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
/s/ KPMG Inc.
Johannesburg, South Africa
April 14, 20155, 2017
Accounting policies to the consolidated financial statements
The principal accounting policies applied in the preparation of these financial statements are set out below. These policies have been consistently applied to all the years presented, except for the adoption of new and revised standards and interpretations.
Gold Fields Limited
Consolidated Statements (the “Company” or “Gold Fields”) is a company domiciled in South Africa. The registration number of Operations
($ in millions unless otherwise noted)
| Fiscal Year Ended December 31, | ||||||||||||||||
| 2014 | 2013 | 2012 | ||||||||||||||
REVENUES | ||||||||||||||||
Product sales | 2,868.8 | 2,906.3 | 3,530.6 | |||||||||||||
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COSTS AND EXPENSES | ||||||||||||||||
Production costs (exclusive of depreciation and amortization) | 1,808.1 | 1,819.9 | 1,862.6 | |||||||||||||
Depreciation and amortization | 677.3 | 568.5 | 425.8 | |||||||||||||
Corporate expenditure | 27.3 | 39.4 | 38.2 | |||||||||||||
Employee termination costs | 42.2 | 35.5 | 6.1 | |||||||||||||
Exploration expenditure | 36.2 | 77.9 | 135.3 | |||||||||||||
Feasibility and evaluation costs | — | 68.0 | 103.5 | |||||||||||||
Loss/(profit) on disposal of property, plant and equipment | 1.3 | (10.2 | ) | (0.2 | ) | |||||||||||
Asset impairments and write-offs | 14.0 | 215.3 | 41.6 | |||||||||||||
Royalties | 86.1 | 90.5 | 116.8 | |||||||||||||
Accretion expense on provision for environmental rehabilitation | 15.4 | 10.4 | 13.9 | |||||||||||||
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| 2,707.9 | 2,915.2 | 2,743.6 | ||||||||||||||
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OTHER (EXPENSES)/INCOME | ||||||||||||||||
Interest and dividends | 4.2 | 8.5 | 16.3 | |||||||||||||
Finance expense | (80.8 | ) | (72.4 | ) | (55.6 | ) | ||||||||||
Loss on financial instruments | (11.5 | ) | (0.3 | ) | (0.4 | ) | ||||||||||
Foreign exchange gains/(losses) | 8.4 | 7.3 | (13.8 | ) | ||||||||||||
Profit on disposal of investments and subsidiaries | 78.0 | 17.8 | 27.6 | |||||||||||||
Impairment of investments | (6.8 | ) | (10.3 | ) | (10.5 | ) | ||||||||||
Other expenses | (44.2 | ) | (104.2 | ) | (37.9 | ) | ||||||||||
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| (52.7 | ) | (153.6 | ) | (74.3 | ) | |||||||||||
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INCOME/(LOSS) BEFORE TAX, IMPAIRMENT OF INVESTMENT IN EQUITY INVESTEE, SHARE OF EQUITY INVESTEES’ LOSSES AND DISCONTINUED OPERATIONS | 108.2 | (162.5 | ) | 712.7 | ||||||||||||
Income and mining tax expense | (121.6 | ) | (105.7 | ) | (359.4 | ) | ||||||||||
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(LOSS)/INCOME BEFORE IMPAIRMENT OF INVESTMENT IN EQUITY INVESTEE, SHARE OF EQUITY INVESTEES’ LOSSES AND DISCONTINUED OPERATIONS | (13.4 | ) | (268.2 | ) | 353.3 | |||||||||||
Impairment of investment in equity investee | (7.4 | ) | — | — | ||||||||||||
Share of equity investees’ losses, net of tax | (4.4 | ) | (18.4 | ) | (63.1 | ) | ||||||||||
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(Loss)/income from continuing operations | (25.2 | ) | (286.6 | ) | 290.2 | |||||||||||
Income from discontinued operations, net of tax | — | 20.5 | 362.3 | |||||||||||||
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Net (loss)/income | (25.2 | ) | (266.1 | ) | 652.5 | |||||||||||
Net income/(loss) attributable to noncontrolling interests | 2.0 | (18.2 | ) | (1.8 | ) | |||||||||||
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- Continuing operations | 2.0 | (18.2 | ) | (1.9 | ) | |||||||||||
- Discontinued operations | — | — | 0.1 | |||||||||||||
Net (loss)/income attributable to Gold Fields shareholders | (27.2 | ) | (247.9 | ) | 654.3 | |||||||||||
- Continuing operations | (27.2 | ) | (268.4 | ) | 292.1 | |||||||||||
- Discontinued operations | — | 20.5 | 362.2 | |||||||||||||
BASIC (LOSS)/EARNINGS PER SHARE ($) | ||||||||||||||||
- Continuing operations | (0.04 | ) | (0.36 | ) | 0.40 | |||||||||||
- Discontinued operations | — | 0.03 | 0.50 | |||||||||||||
DILUTED (LOSS)/EARNINGS PER SHARE ($) | ||||||||||||||||
- Continuing operations | (0.04 | ) | (0.36 | ) | 0.40 | |||||||||||
- Discontinued operations | — | 0.03 | 0.50 | |||||||||||||
WEIGHTED AVERAGE NUMBER OF SHARES USED IN THE | ||||||||||||||||
- COMPUTATION OF BASIC (LOSS)/EARNINGS PER SHARE | ||||||||||||||||
- Continuing operations | 769,141,871 | 742,606,726 | 727,459,457 | |||||||||||||
- Discontinued operations | — | 742,606,726 | 727,459,457 | |||||||||||||
- COMPUTATION OF DILUTED (LOSS)/EARNINGS PER SHARE | ||||||||||||||||
- Continuing operations | 769,141,871 | 742,606,726 | 730,723,950 | |||||||||||||
- Discontinued operations | — | 742,606,726 | 730,723,950 | |||||||||||||
DIVIDEND PER SHARE ($) | 0.04 | 0.08 | 0.50 | |||||||||||||
the Company is 1968/004880/06. The accompanying notes are an integral partaddress of thesethe Company is 150 Helen Road, Sandton, Johannesburg. The consolidated financial statements
Gold Fields Limited
Consolidated Statements of Comprehensive Income
($ in millions unless otherwise noted)
| Fiscal Year Ended December 31, | ||||||||||||||
| 2014 | 2013 | 2012 | ||||||||||||
Net (loss)/income | (25.2 | ) | (266.1 | ) | 652.5 | |||||||||
Other comprehensive loss, net of tax | (368.4 | ) | (746.5 | ) | (190.6 | ) | ||||||||
Changes in fair value of listed investments | 6.0 | 1.6 | 14.5 | |||||||||||
Mark-to-market adjustment of listed investments 1 | 6.9 | (1.3 | ) | 18.7 | ||||||||||
Realized gain on disposal of listed investments2 | (1.8 | ) | (7.4 | ) | (14.7 | ) | ||||||||
Impairment of listed investments3 | 0.9 | 10.3 | 10.5 | |||||||||||
Foreign currency translation adjustment | (374.4 | ) | (748.1 | ) | (205.1 | ) | ||||||||
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Comprehensive (loss)/income | (393.6 | ) | (1,012.6 | ) | 461.9 | |||||||||
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Comprehensive (loss)/income attributable to: | ||||||||||||||
Gold Fields shareholders | (395.6 | ) | (994.4 | ) | 424.6 | |||||||||
Noncontrolling interests | 2.0 | (18.2 | ) | 37.3 | ||||||||||
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| (393.6 | ) | (1,012.6 | ) | 461.9 | ||||||||||
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The accompanying notes are an integral part of these consolidated financial statements
Gold Fields Limited
($ in millions unless otherwise noted)
| December 31, 2014 | December 31, 2013 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash and cash equivalents | 458.0 | 325.0 | ||||||
Assets held for sale | 31.0 | 47.0 | ||||||
Receivables | 226.5 | 272.6 | ||||||
Inventories | 373.3 | 402.7 | ||||||
Short-term deferred income and mining taxes | 6.9 | 29.0 | ||||||
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Total current assets | 1,095.7 | 1,076.3 | ||||||
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Property, plant and equipment, net | 4,453.3 | 4,933.0 | ||||||
Goodwill | 756.3 | 845.5 | ||||||
Deferred income and mining taxes | 10.9 | 22.6 | ||||||
Inventories | 148.1 | 109.0 | ||||||
Non-current investments | 286.5 | 268.9 | ||||||
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Total assets | 6,750.8 | 7,255.3 | ||||||
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LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
Accounts payable and provisions | 498.5 | 445.0 | ||||||
Short-term deferred income and mining taxes | 10.3 | 16.0 | ||||||
Interest payable | 11.2 | 12.4 | ||||||
Royalties, income and mining taxes payable | 58.2 | 34.6 | ||||||
Short-term loans and current portion of long-term loans | 140.2 | 121.5 | ||||||
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Total current liabilities | 718.4 | 629.5 | ||||||
Long-term loans | 1,770.7 | 1,938.6 | ||||||
Deferred income and mining taxes | 252.9 | 309.3 | ||||||
Provision for environmental rehabilitation | 300.1 | 269.2 | ||||||
Long-term incentive plan | 8.3 | — | ||||||
Other non-current liabilities | 9.1 | 10.9 | ||||||
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Total liabilities | 3,059.5 | 3,157.5 | ||||||
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COMMITMENTS AND CONTINGENCIES - see notes 21 and 22 | ||||||||
SHAREHOLDERS’ EQUITY | ||||||||
Share capital December 31, 2014 - 1,000,000,000 (December 31, 2013 - 1,000,000,000) authorized ordinary shares of 50 South African cents each. Shares issued December 31, 2014: 771,416,491 (December 31, 2013: 767,160,263) | 63.0 | 62.9 | ||||||
Additional paid-in capital | 4,465.0 | 4,439.0 | ||||||
Retained earnings | 684.1 | 741.1 | ||||||
Accumulated other comprehensive loss | (1,617.4 | ) | (1,249.0 | ) | ||||
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Gold Fields shareholders’ equity | 3,594.7 | 3,994.0 | ||||||
Noncontrolling interests | 96.6 | 103.8 | ||||||
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Total equity | 3,691.3 | 4,097.8 | ||||||
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TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY | 6,750.8 | 7,255.3 | ||||||
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The accompanying notes are an integral part of these consolidated financial statements
Gold Fields Limited
Consolidated Statements of Changes in Shareholders’ Equity
($ in millions unless otherwise noted)
| Number of ordinary shares issued | Share capital | Additional paid-in capital | Retained earnings | Accumulated other comprehensive (loss)/income | Gold Fields’ shareholders equity | Noncontrolling interests | Total | |||||||||||||||||||||||||
BALANCE - DECEMBER 31, 2011 | 723,735,186 | 59.0 | 5,374.6 | 772.5 | (423.3 | ) | 5,782.8 | 69.5 | 5,852.3 | |||||||||||||||||||||||
Net income/(loss) | — | — | — | 654.3 | — | 654.3 | (1.8 | ) | 652.5 | |||||||||||||||||||||||
Dividends declared | — | — | — | (364.2 | ) | — | (364.2 | ) | (8.5 | ) | (372.7 | ) | ||||||||||||||||||||
Share-based compensation | — | — | 77.7 | — | — | 77.7 | — | 77.7 | ||||||||||||||||||||||||
Exercise of employee share options | 5,801,627 | 2.0 | — | — | — | 2.0 | — | 2.0 | ||||||||||||||||||||||||
Purchase of noncontrolling interests | — | — | — | (8.3 | ) | — | (8.3 | ) | 0.1 | (8.2 | ) | |||||||||||||||||||||
Other comprehensive (loss)/income1 | — | — | — | — | (229.7 | ) | (229.7 | ) | 39.1 | (190.6 | ) | |||||||||||||||||||||
Receipt of funds from noncontrolling interests | — | — | — | — | — | — | 27.7 | 27.7 | ||||||||||||||||||||||||
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BALANCE - DECEMBER 31, 2012 | 729,536,813 | 61.0 | 5,452.3 | 1,054.3 | (653.0 | ) | 5,914.6 | 126.1 | 6,040.7 | |||||||||||||||||||||||
Net loss | — | — | — | (247.9 | ) | — | (247.9 | ) | (18.2 | ) | (266.1 | ) | ||||||||||||||||||||
Dividends declared | — | — | — | (61.2 | ) | — | (61.2 | ) | (1.1 | ) | (62.3 | ) | ||||||||||||||||||||
Sibanye Gold spin-off | — | — | (1,184.2 | ) | — | 150.5 | (1,033.7 | ) | — | (1,033.7 | ) | |||||||||||||||||||||
Share-based compensation | — | — | 45.1 | — | — | 45.1 | — | 45.1 | ||||||||||||||||||||||||
Exercise of employee share options | 8,905,790 | 0.4 | — | — | — | 0.4 | — | 0.4 | ||||||||||||||||||||||||
Purchase of noncontrolling interests | — | — | — | (4.1 | ) | — | (4.1 | ) | (8.7 | ) | (12.8 | ) | ||||||||||||||||||||
Transactions with noncontrolling interests | — | — | — | — | — | — | (1.1 | ) | (1.1 | ) | ||||||||||||||||||||||
Acquisition of Barrick Yilgarn assets | 28,717,660 | 1.5 | 125.8 | — | — | 127.3 | — | 127.3 | ||||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (746.5 | ) | (746.5 | ) | — | (746.5 | ) | |||||||||||||||||||||
Receipt of funds from noncontrolling interests | — | — | — | — | — | — | 6.8 | 6.8 | ||||||||||||||||||||||||
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BALANCE - DECEMBER 31, 2013 | 767,160,263 | 62.9 | 4,439.0 | 741.1 | (1,249.0 | ) | 3,994.0 | 103.8 | 4,097.8 | |||||||||||||||||||||||
Net (loss)/income | — | — | — | (27.2 | ) | — | (27.2 | ) | 2.0 | (25.2 | ) | |||||||||||||||||||||
Dividends declared | — | — | — | (29.8 | ) | — | (29.8 | ) | (10.7 | ) | (40.5 | ) | ||||||||||||||||||||
Share-based compensation | — | — | 26.0 | — | — | 26.0 | — | 26.0 | ||||||||||||||||||||||||
Exercise of employee share options | 4,256,228 | 0.1 | — | — | — | 0.1 | — | 0.1 | ||||||||||||||||||||||||
Disposal of noncontrolling interests | — | — | — | — | — | — | (0.5 | ) | (0.5 | ) | ||||||||||||||||||||||
Other comprehensive loss | — | — | — | — | (368.4 | ) | (368.4 | ) | — | (368.4 | ) | |||||||||||||||||||||
Receipt of funds from noncontrolling interests | — | — | — | — | — | — | 2.0 | 2.0 | ||||||||||||||||||||||||
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BALANCE - DECEMBER 31, 2014 | 771,416,491 | 63.0 | 4,465.0 | 684.1 | (1,617.4 | ) | 3,594.7 | 96.6 | 3,691.3 | |||||||||||||||||||||||
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The accompanying notes are an integral part of these consolidated financial statements
Gold Fields Limited
Consolidated Statements of Changes in Shareholders’ Equity (continued)
($ in millions unless otherwise noted)
The following is a reconciliation of the componentsCompany as at 31 December 2016 and 2015 and for each of accumulated other comprehensive (loss)/the years in thethree-year period ended 31 December 2016 comprise the Company and its subsidiaries (together referred to as the “Group” and individually as “Group entities”) as well as the Group’s share of the assets, liabilities, income forand expenses of joint operations and the periods presented:
| Share of equity investee’s other comprehensive income | Mark-to-market of listed investments | Foreign exchange translation | Accumulated other comprehensive (loss)/income | |||||||||||||
BALANCE - DECEMBER 31, 2011 | (14.4 | ) | (21.6 | ) | (387.2 | ) | (423.2 | ) | ||||||||
Other comprehensive income/(loss) before reclassifications | — | 18.7 | (244.3 | ) | (225.6 | ) | ||||||||||
Mark-to-market of listed investments | — | 18.7 | — | 18.7 | ||||||||||||
Foreign exchange translation | — | — | (244.3 | ) | (244.3 | ) | ||||||||||
Other comprehensive loss reclassified to statement of operations | — | (4.2 | ) | — | (4.2 | ) | ||||||||||
Realized gain on disposal of listed investments | — | (14.7 | ) | — | (14.7 | ) | ||||||||||
Impairment of listed investments | — | 10.5 | — | 10.5 | ||||||||||||
Net current year other comprehensive income/(loss) | — | 14.5 | (244.3 | ) | (229.8 | ) | ||||||||||
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BALANCE - DECEMBER 31, 2012 | (14.4 | ) | (7.1 | ) | (631.5 | ) | (653.0 | ) | ||||||||
Other comprehensive loss before reclassifications | — | (1.3 | ) | (748.1 | ) | (749.4 | ) | |||||||||
Mark-to-market of listed investments | — | (1.3 | ) | — | (1.3 | ) | ||||||||||
Foreign exchange translation | — | — | (748.1 | ) | (748.1 | ) | ||||||||||
Other comprehensive income reclassified to statement of operations | — | 2.9 | — | 2.9 | ||||||||||||
Realized gain on disposal of listed investments | — | (7.4 | ) | — | (7.4 | ) | ||||||||||
Impairment of listed investments | — | 10.3 | — | 10.3 | ||||||||||||
Net current year other comprehensive income/(loss) | — | 1.6 | (748.1 | ) | (746.5 | ) | ||||||||||
Reclassification from accumulated other comprehensive (loss)/income - Sibanye Gold spin-off | — | — | 150.5 | 150.5 | ||||||||||||
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BALANCE - DECEMBER 31, 2013 | (14.4 | ) | (5.5 | ) | (1,229.1 | ) | (1,249.0 | ) | ||||||||
Other comprehensive income/(loss) before reclassifications | — | 6.9 | (374.4 | ) | (367.5 | ) | ||||||||||
Mark-to-market of listed investments | — | 6.9 | — | 6.9 | ||||||||||||
Foreign exchange translation | — | — | (374.4 | ) | (374.4 | ) | ||||||||||
Other comprehensive loss reclassified to statement of operations | — | (0.9 | ) | — | (0.9 | ) | ||||||||||
Realized gain on disposal of listed investments | — | (1.8 | ) | — | (1.8 | ) | ||||||||||
Impairment of listed investments | — | 0.9 | — | 0.9 | ||||||||||||
Net current year other comprehensive income/(loss) | — | 6.0 | (374.4 | ) | (368.4 | ) | ||||||||||
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BALANCE - DECEMBER 31, 2014 | (14.4 | ) | 0.5 | (1,603.5 | ) | (1,617.4 | ) | |||||||||
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Group’s interest in associates and joint ventures. The accompanying notes are an integral part of these consolidated financial statements
Gold Fields Limited
Consolidated Statements of Cash Flows
($ millions unless otherwise noted)
| Fiscal Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
CASH FLOWS FROM OPERATIONS | ||||||||||||
Net (loss)/income from continuing operations | (25.2 | ) | (286.6 | ) | 290.2 | |||||||
Reconciled to net cash provided by operations: | ||||||||||||
- Share of equity investees’ profits | 4.4 | 18.4 | 63.1 | |||||||||
- Impairment of investment in equity investee | 7.4 | — | — | |||||||||
- Deferred income and mining taxes | (12.6 | ) | (59.4 | ) | 5.5 | |||||||
- Profit on disposal of investments and subsidiaries | (78.0 | ) | (17.8 | ) | (27.6 | ) | ||||||
- Impairment of investments | 6.8 | 10.3 | 10.5 | |||||||||
- Asset impairments and write-offs | 14.0 | 215.3 | 41.6 | |||||||||
- Depreciation and amortization | 677.3 | 568.5 | 425.8 | |||||||||
- Loss/(profit) on disposal of property, plant and equipment | 1.3 | (10.2 | ) | (0.2 | ) | |||||||
- Share-based compensation | 26.0 | 40.5 | 45.5 | |||||||||
- Long-term incentive plan expense | 8.7 | — | — | |||||||||
- Accretion expense on provision for environmental rehabilitation | 15.4 | 10.4 | 13.9 | |||||||||
- Other | (6.1 | ) | (2.6 | ) | (10.5 | ) | ||||||
- Cash portion of share of equity investee loss | (3.6 | ) | (18.4 | ) | (50.1 | ) | ||||||
Changes in operating assets and liabilities: | ||||||||||||
- Receivables | 26.6 | 140.7 | (109.2 | ) | ||||||||
- Inventories | (22.5 | ) | (11.0 | ) | (81.6 | ) | ||||||
- Accounts payable and provisions | 77.7 | (121.3 | ) | 110.7 | ||||||||
- Royalties, income and mining taxes payable | 26.2 | (142.5 | ) | 22.8 | ||||||||
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NET CASH PROVIDED BY CONTINUING OPERATIONS | 743.8 | 334.3 | 750.4 | |||||||||
NET CASH PROVIDED BY DISCONTINUED OPERATIONS | — | 30.9 | 409.5 | |||||||||
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NET CASH PROVIDED BY OPERATIONS | 743.8 | 365.2 | 1,159.9 | |||||||||
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CASH FLOWS FROM INVESTING ACTIVITIES | ||||||||||||
Additions to property, plant and equipment | (480.5 | ) | (543.7 | ) | (943.4 | ) | ||||||
Finance expense capitalized | (24.2 | ) | (18.3 | ) | (13.0 | ) | ||||||
Proceeds on disposal of property, plant and equipment | 4.9 | 10.4 | 1.4 | |||||||||
Barrick Yilgarn asset purchase | — | (135.0 | ) | — | ||||||||
Investment in the Far South East Project | — | — | (110.0 | ) | ||||||||
Investment in the Mankayan Project - Bezant Resources | — | (10.0 | ) | — | ||||||||
Proceeds on disposal of Chucapaca | 81.0 | — | — | |||||||||
Purchase of listed investments | (4.4 | ) | (3.5 | ) | (0.8 | ) | ||||||
Proceeds on sale of listed investments | 6.4 | 35.0 | 65.4 | |||||||||
Investment in environmental trust funds | (7.1 | ) | (15.4 | ) | (3.3 | ) | ||||||
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NET CASH UTILIZED IN INVESTING ACTIVITIES - CONTINUING OPERATIONS | (423.9 | ) | (680.5 | ) | (1,003.7 | ) | ||||||
NET CASH UTILIZED IN INVESTING ACTIVITIES - DISCONTINUED OPERATIONS | — | (54.9 | ) | (381.8 | ) | |||||||
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NET CASH UTILIZED IN INVESTING ACTIVITIES | (423.9 | ) | (735.4 | ) | (1,385.5 | ) | ||||||
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CASH FLOWS FROM FINANCING ACTIVITIES | ||||||||||||
Long and short-term loans raised | 463.9 | 3,177.7 | 936.3 | |||||||||
Long and short-term loans repaid | (591.8 | ) | (2,971.3 | ) | (975.9 | ) | ||||||
Increase in noncontrolling interests funding | 2.0 | 6.8 | 27.7 | |||||||||
Purchase of noncontrolling interests | — | (12.8 | ) | (10.8 | ) | |||||||
Dividends paid to Company shareholders | (29.8 | ) | (61.2 | ) | (364.2 | ) | ||||||
Dividends paid to noncontrolling interests | (10.6 | ) | (1.1 | ) | (11.5 | ) | ||||||
Payment to South African Equity interests in South Deep | (1.9 | ) | (2.2 | ) | (2.5 | ) | ||||||
Ordinary shares issued | — | 0.8 | 2.0 | |||||||||
Cash transferred on spin-off of Sibanye Gold | — | (106.4 | ) | — | ||||||||
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NET CASH (UTILIZED IN)/PROVIDED BY FINANCING ACTIVITIES - CONTINUING OPERATIONS | (168.2 | ) | 30.3 | (398.9 | ) | |||||||
NET CASH PROVIDED BY FINANCING ACTIVITIES - DISCONTINUED OPERATIONS | — | 39.0 | 514.7 | |||||||||
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NET CASH (UTILIZED IN)/PROVIDED BY FINANCING ACTIVITIES | (168.2 | ) | 69.3 | 115.8 | ||||||||
EFFECT OF EXCHANGE RATE ON CASH AND CASH EQUIVALENTS | (18.7 | ) | (29.7 | ) | 21.4 | |||||||
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NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS | 133.0 | (330.6 | ) | (88.4 | ) | |||||||
CASH AND CASH EQUIVALENTS - beginning of the year | 325.0 | 655.6 | 744.0 | |||||||||
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CASH AND CASH EQUIVALENTS - end of year | 458.0 | 325.0 | 655.6 | |||||||||
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The accompanying notes are an integral part of these consolidated financial statements
Gold Fields Limited
Notes to the Consolidated Financial Statements
($Group is primarily involved in millions unless otherwise noted)gold mining.
Gold Fields Limited (formerly Driefontein Consolidated Limited, or Driefontein, the Company or the Group) was originally incorporated in South Africa and listed on the JSE Securities Exchange S.A. (“JSE”) during 1968 as East Driefontein Gold Mining Company Limited. Following a merger with West Driefontein Gold Mining Company Limited, it was renamed Driefontein on June 15, 1981. On May 10, 1999, Driefontein completed a business combination, with another South African company listed on the JSE, Gold Fields Limited (“Old Gold Fields”). Old Gold Fields evolved through a series of transactions in 1998, whereby it acquired substantially allThe financial statements of the gold mining assetsGroup have been prepared in accordance with International Financial Reporting Standards (“IFRS”) as issued by the International Accounting Standards Board (“the Board”), the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and interests previously heldFinancial Reporting Pronouncements as issued by Gold Fields of South Africa Limited, Gencor Limited, New Wits Limited and certain other shareholders in the companies owning the assets and interests. These assets and interests included publicly traded gold mining companies, mineral rights and service agreements. Driefontein, the surviving entity, was renamed Gold Fields Limited, and Old Gold Fields was renamed GFL Mining Services Limited, effective from that date. The Group is engaged in gold mining and related activities, including exploration, extraction, processing and smelting. Gold bullion, the Group’s principal product, is currently produced in South Africa, Ghana and Australia and sold in South Africa and internationally. The Group also produces copper/gold concentrate in Peru, which is sold internationally.
On November 29, 2012, Gold Fields announced the creation of a new South African gold mining company through the listing and subsequent unbundling of its 100% owned subsidiary, Sibanye Gold Limited (“Sibanye Gold”), formerly known as GFI Mining South Africa Proprietary Limited, which holds the KDC and Beatrix gold minesFinancial Reporting Standards Council, as well as various service companies.the requirements of the South African Companies Act. The separationconsolidated financial statements have been prepared under the historical cost convention, as modified byavailable-for-sale financial assets, and financial assets and liabilities (including derivative instruments), which have been brought to account at fair value through profit or loss or through the fair value adjustment reserve in the statement of Sibanye Gold from Gold Fields is referred to as the Spin-off. comprehensive income.
The board of directors of Gold Fields, orconsolidated financial statements were authorised for issue by the Board passedof Directors on 20 March 2017.
Standards, interpretations and amendments to published standards effective for the resolution necessaryyear ended 31 December 2016
During the financial year, the following new and revised accounting standards, amendments to implementstandards and new interpretations were adopted by the Spin-off on December 12, 2012Group:
Standard(s) Amendment(s) Interpretation(s) | Nature of the Change | Salient features of the changes | Impact on financial position or performance | |||
| IAS 1Presentation of Financial Statements | Amendment | • The amendments issued clarifies materiality and aggregation, the presentation of subtotals, the structure of financial statements and the disclosure of accounting policies. | No impact | |||
| IAS 16Property, Plant and Equipmentand IAS 38Intangible assets | Amendment | • The amendments to IAS 38Intangible Assetsintroduce a rebuttable presumption that the use of revenue-based amortisation methods for intangible assets is inappropriate; and • The amendments to IAS 16Property, Plant and Equipment explicitly state that revenue-based methods of depreciation cannot be used for property, plant and equipment. | No impact | |||
Accounting policies to the Spin-off was completed on February 18, 2013. Refer to notes 3(a) and 9.1.consolidated financial statements (continued)
The following
Standard(s) Amendment(s) Interpretation(s) | Nature of the Change | Salient features of the changes | Impact on financial position or performance | |||||
IFRS 11Joint Operations | Amendment | • The amendments require business combination accounting to be applied to acquisitions of interests in a joint operation that constitute a business. | No impact | |||||
Various IFRS | Amendment | • Annual improvements project (2012 to 2014) is a collection of amendments to IFRS and are the result of conclusions reached by the Board on proposals made at its annual improvements project. | No impact | |||||
Standards, interpretations and amendments to published standards which are not yet effective
Certain new standards, amendments and interpretations to existing standards have been published that apply to the Group’s accounting policies usedperiods beginning on 1 January 2017 or later periods but have not been early adopted by the Group which have been consistently applied for all periods presented:Group.
These standards, amendments and interpretations are:
Standard(s) Amendment(s) Interpretation(s) | Nature of the change | Salient features of the changes | Effective Date* | |||||||
| IAS 7Statement of cash flows | Amendment | • The amendments require disclosures that enable users of financial statements to evaluate changes in liabilities arising from financing activities, including both changes arising from cash flow andnon-cash changes. Management does not expect the standard to have a material impact on the Group. | 1 January 2017 | |||||||
| IAS 12Income taxes | Amendment | • The amendments provide additional guidance on the existence of deductible temporary differences; and • The amendments also provide additional guidance on the methods used to calculate future taxable profit to establish whether a deferred tax asset can be recognised. Management does not expect the standard to have a material impact on the Group. | 1 January 2017 | |||||||
| IFRS 2Share-based payments | Amendment | • The amendments cover three accounting areas: - Measurement of cash-settledshare-based payments; - Classification ofshare-based payments settled net of tax withholdings; and | 1 January 2018 | |||||||
Accounting policies to the consolidated financial statements (continued)
| 1. | BASIS OF PREPARATION (continued) |
Standard(s) Amendment(s) Interpretation(s) | Nature of the change | Salient features of the changes | Effective Date* | |||||||
- Accounting for a modification of ashare-based payment from cash-settled to equity-settled. Management does not expect the standard to have a material impact on the Group. | ||||||||||
| IFRS 9FinancialInstruments | New Standard | • This IFRS is part of the IASB’s project to replace IAS 39FinancialInstruments: Recognition and Measurement; • Addresses classification and measurement of financial assets and replaces the multiple classification and measurement models in IAS 39 with a single model that has only three classification categories: amortised cost, fair value through other comprehensive income and fair value through profit or loss; • The classification and measurement of financial liabilities are the same as per IAS 39 barring two aspects; • Adds the requirements related to the classification and measurement of financial liabilities, and derecognition of financial assets and liabilities to the version issued in November 2009; and • Includes those paragraphs of IAS 39 dealing with how to measure fair value and accounting for derivatives embedded in a contract that contains a host that is not a financial asset, as well as the requirements of IFRIC 9Reassessment of Embedded Derivatives. Management is in the process of reviewing the requirements of the standard in order to assess the impact of the standard on the Group. | 1 January 2018 | |||||||
| IFRS 15 Revenue from contracts with customers | New Standard | • Provides a framework that replaces existing revenue recognition guidance in IFRS; • The standard contains a single model that applies to contracts with customers and two approaches to recognising revenue: at a point in time or over time; and | 1 January 2018 | |||||||
Accounting policies to the consolidated financial statements (continued)
| 1. | BASIS OF PREPARATION (continued) |
Standard(s) Amendment(s) Interpretation(s) | Nature of the change | Salient features of the changes | Effective Date* | |||
• The model features a contract-based five-step analysis of transactions to determine whether, how much and when revenue is recognised. Management is in the process of reviewing the requirements of the standard in order to assess the impact of the standard on the Group. | ||||||
IFRS 16 Leases | New Standard | • This IFRS sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract, ie the customer (‘lessee’) and the supplier (‘lessor’); • IFRS 16 replaces the previous leases standard, IAS 17Leases,and related Interpretations; and • IFRS 16 has one model for lessees which will result in almost all leases being included on the statement of financial position. No significant changes have been included for lessors. Management is in the process of reviewing the requirements of the standard in order to assess the impact of the standard on the Group. | 1 January 2019 | |||
Future eventsSignificant accounting judgements and their effects cannot be determinedestimates
Use of estimates: The preparation of the financial statements in conformity with absolute certainty. Therefore,IFRS requires the Group’s management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The determination of estimates requires the exercise of judgmentjudgement based on various assumptions and other factors such as historical experience, current and expected economic conditions, and in some cases actuarial techniques. Actual results ultimately maycould differ from those estimates.
The more significant areas requiring the use of management estimates and assumptions relate to mineral reserves that are the basis of future cash flow estimates andunit-of-production depreciation depletion and amortization calculations;amortisation calculations, provision for environmental reclamation and closure obligations;rehabilitation costs, estimates of recoverable gold and other materials in heap leach pads;and stockpiles inventories, asset impairments, (including impairmentswrite-downs of goodwill, long-lived assets, investments, gold in process, and stockpiles); other employee benefit liabilities (including valuation of share-based compensation and deferred compensation); valuation allowances for deferred tax assets; unrecognized tax benefits; reserves forinventory to net realisable value, income taxes, production start date, contingencies and litigation;business combinations.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the fair value of assets acquired and liabilities assumed in business combinations and the fair value and accounting treatment of financial instruments.circumstances.
Gold Fields Limited
NotesAccounting policies to the Consolidated Financial Statements
($ in millions unless otherwise noted)
Inter-company transactions and balances are eliminated on consolidation. Gains or losses that arise from a change in the Group’s interest in subsidiaries or equity method investees’ are recognized in equity.
Goodwill is not amortized; however it is subject
The estimates and assumptions that have a significant risk of causing a material adjustment to an annual assessment for impairment. The Company evaluates the carrying amounts of assets and liabilities within the financial year are discussed below.
Mineral reserves estimates
Mineral reserves are estimates of the amount of goodwillproduct that can be economically and legally extracted from the Group’s properties. In order to calculate the reserves, estimates and assumptions are required about a range of geological, technical and economic factors, including but not limited to quantities, grades, production techniques, recovery rates, production costs, capital expenditure, transport costs, commodity demand, commodity prices and exchange rates.
Estimating the quantity and grade of the mineral reserves requires the size, shape and depth of orebodies to be determined by analysing geological data such as the logging and assaying of drill samples. This process may require complex and difficult geological judgements and calculations to interpret the data.
The Group is required to determine whether current events and circumstances indicate that suchreport on the mineral reserves in accordance with the South African Mineral Resource Committee (“SAMREC”) code.
Estimates of mineral reserves may change from year to year due to the change in economic assumptions used to estimate ore reserves and due to additional geological data becoming available during the course of operations. Changes in reported proven and probable reserves may affect the Group’s financial results and position in a number of ways, including the following:
Asset carrying amountvalues may no longer be recoverable. To accomplish this,affected due to changes in estimated cash flows or timing thereof;
Depreciation and amortisation charges to profit or loss may change as these are calculated on the Company comparesunits-of-production method, or where the useful economic lives of assets change;
Provision for environmental rehabilitation costs change where changes in ore reserves affect expectations about the timing or cost of these activities; and
The carrying value of deferred tax assets may change due to changes in estimates of the likely recovery of the tax benefits.
Carrying value of property, plant and equipment and goodwill
All mining assets are amortised using theunits-of-production method where the mine operating plan calls for production from proved and probable mineral reserves.
Mobile and other equipment are depreciated over the shorter of the estimated fair valuesuseful life of its reporting unitsthe asset or the estimate of mine life based on proved and probable mineral reserves.
The calculation of theunits-of-production rate of amortisation could be impacted to their carrying amounts. Ifthe extent that actual production in the future is different from current forecast production based on proved and probable mineral reserves. This would generally result from the extent that there are significant changes in any of the factors or assumptions used in estimating mineral reserves. These factors could include:
Changes in proved and probable mineral reserves;
Differences between actual commodity prices and commodity price assumptions;
Unforeseen operational issues at mine sites;
Changes in capital, operating, mining, processing and reclamation costs, discount rates and foreign exchange rates; and
Changes in mineral reserves could similarly impact the useful lives of assets depreciated on astraight-line basis, where those lives are limited to the life of the mine.
Accounting policies to the consolidated financial statements (continued)
| 1. | BASIS OF PREPARATION (continued) |
The Group reviews and tests the carrying value of long-lived assets annually or when events or changes in circumstances suggest that the reporting unit exceeds its estimated fair value, the Company compares the implied fair value of the reporting unit’s goodwill to its carrying amount and any excess ofmay not be recoverable by comparing the recoverable amounts to these carrying value over the fair valuevalues. In addition, goodwill is charged to earnings. The Company’s fair value estimates are basedtested for impairment on numerous assumptions and it is possible that actual fair values will be significantly different from the estimates, as actual future quantities of recoverable minerals, gold and other commodity prices, production levels and operating costs of production and capital are each subject to significant risks and uncertainties.
|
Assets and liabilities are translated at the prevailing exchange rate at period end. Statement of operations items are translated at the average exchange rate for the period. Exchange differences on translation are accounted for in shareholders’ equity. These differences are recognized in net income or loss upon realization of the underlying foreign entity.
|
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
At the Group’s surface mines, when it has been determined that a mineral property can be economically developed as a result of establishing proven and probable reserves, costs incurred to develop the property are capitalized as incurred until saleable minerals are extracted from the mine and are amortized using the units-of-production method over the estimated life of the ore body based on estimated recoverable ounces or pounds mined from proven and probable reserves. These costs include costs to further delineate the ore body and remove overburden to initially expose the ore body. Subsequent mine development costs are treated as variable production costs.
At the Group’s underground mines, the Group capitalizes all underground development costs to access specific ore blocks or other areas of the mine where such costs will provide future economic benefits as a result of establishing proven and probable reserves associated with a specific block or area of operations, even after the reef horizon may have been intersected with the development of the first specific ore block or area of the mine. All costs associated with the development of a specific underground block or area are capitalized until saleable minerals are extracted from that specific block or area. At the Group’s underground mines, these costs include the cost of shaft sinking and access, the costs of building access ways, lateral development, drift development, ramps, box cuts and other infrastructure development.
The costs incurred to access specific ore blocks or areas of the mine, which only provide an economic benefit over the period during which that ore block or area is being mined, are attributed to earnings using the units-of-production method where the denominator is estimated recoverable ounces of gold contained in proven and probable reserves within that ore block or area. Capitalized costs that provide an economic benefit over the entire mine life, such as the initial primary shaft in an underground complex, will continue to be attributed to earnings using the units-of-production method, where the denominator is the estimated recoverable ounces of gold contained in total accessible proven and probable reserves. Accessible proven and probable reserves, also referred to as “above infrastructure proven and probable reserves”, relate to mineralization which is located at a level at which an operation currently has infrastructure sufficient to allow mining operations to occur.
Interest on borrowings incurred in respect of assets requiring a substantial period of time to prepare for their intended use is capitalized to the date on which the assets are substantially completed and ready for their intended use.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
Production stage mineral interests represent mineral interests in operating properties that contain proven and probable reserves. Development stage mineral interests represent interests in properties under development that contain proven and probable reserves. Exploration stagemineral interests represent interests in properties that are believed to potentially contain (i) other mineralized material such as inferred material within pits, measured, indicated and inferred material with insufficient drill spacing to qualify as proven and probable reserves; and inferred material in close proximity to proven and probable reserves; (ii) around-mine exploration potential such as inferred material not immediately adjacent to existing reserves and mineralization but located within the immediate mine infrastructure; (iii) other mine-related exploration potential that is not part of measured, indicated or inferred material and is comprised mainly of material outside of the immediate mine area; or (iv) greenfield exploration potentialthat is not associated with any other production, development or exploration stage property as described above. The Group’s mineral use rights are enforceable regardless of whether proven or probable reserves have been established. In certain limited situations, the nature of a use right changes from an exploration right to mining right upon the establishment of proven and probable reserves. The Group has the ability and intent to renew mineral use rights where the existing term is not sufficient to recover all identified and valued proven and probable reserves and/or undeveloped mineral interests.
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|
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
If there are indications that an impairment may have occurred, the Group prepares estimates are prepared of expected future cash flows forrecoverable amounts of each group of assets. The recoverable amounts of cash-generating units (“CGU”) and individual assets have been determined based on the higher ofvalue-in-use and fair value less cost of disposal (“FVLCOD”) calculations. Expected future cash flows used to determine the value in use or FVLCOD of property, plant and equipment and goodwill are inherently uncertain and could materially change over time. They are significantly affected by a number of factors including reserves and production estimates, together with economic factors such as the gold and copper prices, discount rates, foreign currency exchange rates, resource valuations (determined based on comparable market transactions), estimates of costs to produce reserves and future capital expenditure.
An individual operating mine does not have an indefinite life because of the finite life of its reserves. The allocation of goodwill to an individual mine will result in an eventual goodwill impairment due to the wasting nature of the mine. In accordance with the provisions of IAS 36Impairment of Assets, the Group performs its annual impairment review of goodwill at each financial year-end.
The Group generally used FVLCOD to determine the recoverable amount of each CGU.
Significant assumptions used in the Group’s impairment assessments (FVLCOD calculations) include:
| 2016 | 2015 | |||||||
US$ Gold price per ounce - year 1 | US$1,100 | US$1,100 | ||||||
US$ Gold price per ounce - year 2 | US$1,200 | US$1,200 | ||||||
US$ Gold price per ounce - year 3 onwards | US$1,300 | US$1,300 | ||||||
Rand Gold price per kilogramme - year 1 | R500,000 | R500,000 | ||||||
Rand Gold price per kilogramme - year 2 | R550,000 | R500,000 | ||||||
Rand Gold price per kilogramme - year 3 onwards | R600,000 | R500,000 | ||||||
A$ Gold price per ounce - year 1 | A$1,500 | A$1,500 | ||||||
A$ Gold price per ounce - year 2 | A$1,600 | A$1,500 | ||||||
A$ Gold price per ounce - year 3 onwards | A$1,700 | A$1,550 | ||||||
US$ Copper price per tonne - year 1 | US$5,512 | US$4,410 | ||||||
US$ Copper price per tonne - year 2 | US$5,512 | US$5,950 | ||||||
US$ Copper price per tonne - year 3 onwards | US$6,171 | US$6,610 | ||||||
Resource value per ounce (used to calculate the value beyond proved and probable mineral reserves) | US$60 | US$69 | ||||||
Discount rates | ||||||||
• South Africa - nominal | 13.5 | % | 14.5 | % | ||||
• Ghana - real | 9.7 | % | 9.6 | % | ||||
• Peru - real | 4.8 | % | 5.6 | % | ||||
• Australia - real | 3.8 | % | 4.1 | % | ||||
• Inflation rate - South Africa | 5.5 | % | 5.4 | % | ||||
Long-term exchange rates | ||||||||
• ZAR/US$ - year 1 | 14.14 | 14.14 | ||||||
• ZAR/US$ - year 2 | 14.26 | 12.96 | ||||||
• ZAR/US$ - year 3 onwards | 14.36 | 11.96 | ||||||
• A$/US$ - year 1 | 0.73 | 0.73 | ||||||
• A$/US$ - year 2 | 0.75 | 0.80 | ||||||
• A$/US$ - year 3 onwards | 0.76 | 0.84 | ||||||
Accounting policies to the consolidated financial statements (continued)
| 1. | BASIS OF PREPARATION (continued) |
Following the Group’s impairment assessment, an impairment of US$66.4 million was recognised at Cerro Corona (refer note 6). There was no goodwill impairment at 31 December 2016 (refer note 14).
The FVLCOD calculations are very sensitive to the gold price assumptions and an increase or decrease in the gold price could materially change the FVLCOD.
Should there be a probability-weighted approach appliedsignificant decrease in the gold price, the Group would take actions to potential outcomesassess the implications on thelife-of-mine plans, including the determination of reserves and reflect:resources and the appropriate cost structure for the CGU’s.
The carrying amount of property, plant and equipment at 31 December 2016 was US$4,547.8 million (2015: US$4,312.4 million). The carrying value of goodwill at 31 December 2016 was US$317.8 million (2015: US$295.3 million).
Production start date
The Group assesses the stage of each mine construction project to determine when a mine moves into the production stage. The criteria used to assess the start date are determined based on the unique nature of each mine construction project. The Group considers various relevant criteria to assess when the mine is substantially complete, ready for its intended use and moves into the production stage. Some of the criteria would include, but are not limited to the following:
estimated sales proceeds from the production and salelevel of recoverable ounces of gold contained in proven and probable reserves;capital expenditure compared to the construction cost estimates;
expected gold prices and currency exchange rates (considering historical and current prices, price trends and related factors);
expected future operating costs and capital expendituresability to produce proven and probable gold reserves based on approved life-of-mine plans that assume current plant capacity, but exclude the impact of inflation;metal in saleable form (within specifications); and
expected cash flows associated with value beyond provenability to sustain commercial levels of production of metal.
When a mine construction project moves into the production stage, the capitalisation of certain mine construction costs ceases and probable reserves, which include the expected cash outflows requiredcosts are either regarded as inventory or expensed, except for capitalisable costs related to develop and extract the value beyond proven and probable reserves.mining asset additions or improvements, underground mine development, deferred stripping activities or ore reserve development.
Income taxes
The impairment analysis first compares the total estimated cash flows on an undiscounted basis to the carrying amount of the asset, including goodwill, if any. If the undiscounted cash flows are less than the carrying amount of the asset, a second step is performed. The Group records a reduction of a group of assets to fair value as a charge to earnings if discounted expected future cash flows are less than the carrying amount. The Group estimates fair value by discounting the expected future cash flows using a discount factor, adjusted for inflation, that reflects the risk- free rate of interest for a term consistent with the period of expected cash flows.
Management’s estimate of future cash flows is subject to risk and uncertainties. Itincome taxes in numerous jurisdictions. Significant judgement is therefore reasonably possible that changes could occur which may affectrequired in determining the recoverability of the Group’s mining assets.
|
Gold Fields Limited
Notesliability for income taxes due to the Consolidated Financial Statements
($ in millions unless otherwise noted)
complexity of legislation. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The principal temporaryGroup recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences arise from depreciation on property, plantwill impact the income tax and equipment, provisions, unutilized capital allowances and tax losses carried forward. A valuation allowance is recorded to reduce the carrying amounts of deferred tax assets if it is more likely than not that such assets will not be realized.
The Group recognizes interest and penalties on income taxes, if any, in net income or loss as part of income tax expense.
Gold Fields recognizes the tax benefit from an uncertain tax position only if it is more likely than not the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. Changes in recognition or measurement are reflectedprovisions in the period in which such determination is made.
The Group recognises the changenet future tax benefit related to deferred income tax assets to the extent that it is probable that the deductible temporary differences will reverse in judgment occurs.the foreseeable future. Assessing the recoverability of deferred income tax assets requires the Group to make significant estimates related to expectations of future taxable income. Estimates of future taxable income are based on forecast cash flows from operations and the application of existing tax laws in each jurisdiction. To the extent that future cash flows and taxable income differ significantly from estimates, the ability of the Group to realise the net deferred tax assets recorded at the reporting date could be impacted.
Additionally, future changes in tax laws in the jurisdictions in which the Group operates could limit the ability of the Group to obtain tax deductions in future periods.
Accounting policies to the consolidated financial statements (continued)
Unrealized losses
Carrying values at 31 December 2016:
Deferred taxation liability: US$465.5 million (2015: US$487.3 million)
Deferred taxation asset: US$48.7 million (2015: US$54.1 million)
Taxation payable: US$107.9 million (2015: US$59.3 million)
Refer note 9 for detail of unrecognised deferred tax assets.
Provision for environmental rehabilitation costs
The Group’s mining and exploration activities are includedsubject to various laws and regulations governing the protection of the environment. The Group recognises management’s best estimate for provision of environmental rehabilitation costs in the determinationperiod in which they are incurred. Actual costs incurred in future periods could differ materially from the estimates. Additionally, future changes to environmental laws and regulations, life of net incomemine estimates and discount rates could affect the carrying amount of this provision.
Refer note 25.1 of the consolidated financial statements for details of key assumptions used to estimate the provision.
The carrying amounts of the provision for environmental rehabilitation costs at 31 December 2016 was US$283.1 million (2015: US$275.4 million).
Stockpiles, gold in process and product inventories
Costs that are incurred in or loss where it is determined that a decline, other than a temporary decline,benefit the productive process are accumulated as stockpiles, gold in process, ore on leach pads and product inventories. Net realisable value tests are performed at least annually and represent the estimated future sales price of the product based on prevailing spot metals prices at the reporting date, less estimated costs to complete production and bring the product to sale. If any inventories are expected to be realised in the valuelong-term horizon, estimated future sales prices are used for valuation purposes.
Stockpiles are measured by estimating the number of tonnes added and removed from the investment has occurred.
The engineering estimates of recoverable gold on the heap leach padsexpected processing method. Stockpile tonnages are calculated from quantities of ore placed on the pads (measured tonnes added to the leach pads), the grade of ore placed on the leach pads (based on assay data) and a recovery percentage (based on the leach process and the ore type). In general, the leach pad production cycles project recoveries of approximately 50% to 70% of the placed recoverable ounces in the first year of leaching, declining each year thereafter until the leaching process is completed.verified by periodic surveys.
Although the quantities of recoverable gold placed on the leach padsmetal are reconciled by comparing the grades of ore placed on the pads to the quantities of goldmetals actually recovered (metallurgical balancing), the nature of the leaching process inherently limits the ability to precisely monitor inventorythe recoverability levels. As a result, the metallurgical balancing process is constantly monitored and engineering estimates are refined based on actual results over time.
Variations between actual and estimated quantities resulting
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
from changes in assumptions and estimates that do not result in write-downswrite downs to marketnet realisable value are accounted for on a prospective basis.
The ultimate recoverycarrying amount of gold fromtotalgold-in-process and stockpiles(non-current and current) at 31 December 2016 was US$234.3 million (2015: US$189.7 million).
Contingencies
By their nature, contingencies will only be resolved when one or more future events occur or fail to occur. The assessment of such contingencies inherently involves the pad will not be known until the leaching process is terminated.
The current portionexercise of leach pad inventories is determined based on engineeringsignificant judgement and estimates of the quantitiesoutcome of goldfuture events. Such contingencies include, but are not limited to environmental obligations, litigation, regulatory proceedings, tax matters and losses resulting from other events and developments.
Accounting policies to the consolidated financial statements (continued)
| 1. | BASIS OF PREPARATION (continued) |
When a loss is considered probable and reasonably estimable, a liability is recorded in the amount of the best estimate for the ultimate loss. The likelihood of a loss with respect to a contingency can be difficult to predict and determining a meaningful estimate of the loss or a range of losses may not always be practicable based on the information available at the time and the potential effect of future events and decisions by third parties that will determine the ultimate resolution of the contingency. It is not uncommon for such matters to be resolved over many years, during which time relevant developments and new information is continuously evaluated to determine both the likelihood of any potential loss and whether it is possible to reasonably estimate a range of possible losses. When a loss is probable but a reasonable estimate cannot be made, disclosure is provided.
Business combinations
Determination of whether a set of assets acquired and liabilities assumed constitute the acquisition of a business or asset may require the Group to make certain judgements as to whether or not the assets acquired and liabilities assumed include the inputs, processes and outputs necessary to constitute a business as defined in IFRS 3Business Combinations. Based on an assessment of the relevant facts and circumstances, the Group concluded that the acquisition of the Gruyere Gold Project (refer note 15.2 for details of the acquisition) did not meet the criteria for accounting as a business combination and the transaction has been accounted for as an acquisition of an asset.
| 2. | CONSOLIDATION |
| 2.1 | Business combinations |
The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for the acquisition of a business is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as incurred, other than those associated with the issue of debt or equity securities. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date. On anacquisition-by-acquisition basis, the Group recognises anynon-controlling interest in the acquiree either at fair value or at thenon-controlling interest’s proportionate share of the acquiree’s net assets. Subsequently, the carrying amount ofnon-controlling interest is the amount of the interest at initial recognition plus thenon-controlling interest’s share of the subsequent changes in equity.
The excess of the consideration transferred, the amount of anynon-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest in the acquiree over the fair value of the identifiable net assets acquired is recorded as goodwill. If this is less than the fair value of the net assets of the subsidiary acquired in the case of a bargain purchase, the difference is recognised directly in profit or loss.
If a transaction does not meet the definition of a business under IFRS, the transaction is recorded as an asset acquisition. Accordingly, the identifiable assets acquired and liabilities assumed are measured at the fair value of the consideration paid, based on their relative fair values at the acquisition date. Acquisition-related costs are included in the consideration paid and capitalised. Any contingent consideration payable that is dependent on the purchaser’s future activity is not included in the consideration paid until the activity requiring the payment is performed. Any resulting future amounts payable are recognised in profit or loss when incurred. No goodwill and no deferred tax asset or liability arising from the assets acquired and liabilities assumed are recognised upon the acquisition of assets.
Accounting policies to the consolidated financial statements (continued)
| 2. | CONSOLIDATION (continued) |
| 2.2 | Subsidiaries |
Subsidiaries are all entities controlled by the Group. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the relevant activities of the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group until the date on which control ceases.
Inter-company transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
| 2.3 | Transactions withnon-controlling interests |
The Group treats transactions withnon-controlling interests that do not result in loss of control as transactions with equity owners of the Group. For purchases fromnon-controlling interests, the difference between any consideration paid and the relevant share acquired of the carrying value of net assets of the subsidiary is recorded in equity. Gains or losses on disposals tonon-controlling interests are also recorded in equity.
| 2.4 | Equity accounted investees |
The Group’s interests in equity accounted investees comprise interests in associates and joint ventures.
Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies. Joint ventures are arrangements in which the Group has joint control, whereby the Group has rights to the net assets of the arrangement, rather than rights to its assets and obligations for its liabilities.
Interests in associates and joint ventures are accounted for using the equity method. They are recognised initially at cost, which includes transaction costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and the other comprehensive income of equity accounted investees, until the date on which significant influence or joint control ceases.
Results of associates and joint ventures are equity accounted using the results of their most recent audited financial statements. Any losses from associates or joint ventures are brought to account in the consolidated financial statements until the interest in such associates or joint ventures is written down to zero. Thereafter, losses are accounted for only insofar as the Group is committed to providing financial support to such associates or joint ventures.
The carrying value of an investment in associate and joint ventures represents the cost of the investment, including goodwill, a share of the post-acquisition retained earnings and losses, any other movements in reserves and any accumulated impairment losses. The carrying value is assessed annually for existence of indicators of impairment and if such exist, the carrying amount is compared to the recoverable amount, being the higher of value in use or fair value less cost of disposal. If an impairment in value has occurred, it is recognised in the period in which the impairment arose.
| 2.5 | Joint operations |
A joint operation is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the use of assets and obligations for the liabilities of the arrangement. The Group accounts for activities under joint operations by recognising in relation to the joint operation, the assets it controls and the liabilities it incurs, the expenses it incurs and the revenue from the sale or use of its share of the joint operations output.
Accounting policies to the consolidated financial statements (continued)
| 3. | FOREIGN CURRENCIES |
| 3.1 | Functional and presentation currency |
Items included in the financial statements of each of the Group entities are measured using the currency of the primary economic environment in which the entity operates (“the functional currency”). The consolidated financial statements are presented in US Dollar.
| 3.2 | Transactions and balances |
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated in foreign currencies, are recognised in profit or loss. Translation differences onavailable-for-sale equities are included in other comprehensive income.
| 3.3 | Foreign operations |
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows:
Assets and liabilities are translated at the exchange rate ruling at the reporting date (ZAR/US$: 14.03; US$/A$: 0.72 (2015: ZAR/US$: 15.10; US$/A$: 0.73)). Equity items are translated at historical rates. The income and expenses are translated at the average exchange rate for the year (ZAR/US$: 14.70; US$/A$: 0.75 (2015: ZAR/US$: 12.68; US$/A$: 0.75 and 2014: ZAR/US$: 10.82; US$/A$: 0.90)), unless this average was not a reasonable approximation of the rates prevailing on the transaction dates, in which case these items were translated at the rate prevailing on the date of the transaction. Exchange differences on translation are accounted for in other comprehensive income. These differences will be recognised in profit or loss upon realisation of the underlying operation.
On consolidation, exchange differences arising from the translation of the net investment in foreign operations (ie the reporting entity’s interest in the net assets of that operation), and of borrowings and other currency instruments designated as hedges of such investments, are taken to other comprehensive income. When a foreign operation is sold, exchange differences that were recorded in other comprehensive income are recognised in profit or loss as part of the gain or loss on disposal. If the Group disposes of part of its interest in a subsidiary but retains control, then the relevant proportion of the cumulative amount is reattributed tonon-controlling interest. When the Group disposes of only part of an associate or joint venture while retaining significant influence or joint control, the relevant proportion of the cumulative amount is reclassified to profit or loss.
Goodwill and fair value adjustments arising on the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and are translated at each reporting date at the closing rate.
| 4. | PROPERTY, PLANT AND EQUIPMENT |
| 4.1 | Mine development and infrastructure |
Mining assets, including mine development and infrastructure costs and mine plant facilities, are recorded at cost less accumulated depreciation and accumulated impairment losses.
Expenditure incurred to evaluate and develop new orebodies, to define mineralisation in existing orebodies and to establish or expand productive capacity, is capitalised until commercial levels of production are achieved, at which times the costs are amortised as set out below.
Accounting policies to the consolidated financial statements (continued)
| 4. | PROPERTY, PLANT AND EQUIPMENT (continued) |
Development of orebodies includes the development of shaft systems and waste rock removal that allows access to reserves that are economically recoverable in the future. Subsequent to this, costs are capitalised if the criteria for recognition as an asset are met.
| 4.2 | Borrowing costs |
Borrowing costs incurred in respect of assets requiring a substantial period of time to prepare for their intended future use are capitalised to the date that the assets are substantially completed.
| 4.3 | Mineral and surface rights |
Mineral and surface rights are recorded at cost less accumulated amortisation and accumulated impairment losses. When there is little likelihood of a mineral right being exploited, or the fair value of mineral rights has diminished below cost, an impairment loss is recognised in profit or loss in the year that such determination is made.
| 4.4 | Land |
Land is shown at cost and is not depreciated.
| 4.5 | Other assets |
Non-mining assets are recorded at cost less accumulated depreciation and accumulated impairment losses. These assets include the assets of the mining operations not included in mine development and infrastructure, borrowing costs, mineral and surface rights and land and all the assets of thenon-mining operations.
| 4.6 | Amortisation and depreciation of mining assets |
Amortisation and depreciation is determined to give a fair and systematic charge to profit or loss taking into account the nature of a particular ore body and the method of mining that ore body. To achieve this, the following calculation methods are used:
mining assets, including mine development and infrastructure costs, mine plant facilities and evaluation costs, are amortised over the life of the mine using theunits-of-production method, based on estimated proved and probable ore reserves;
stripping activity assets are amortised on aunits-of-production method, based on the estimated proved and probable ore reserves of the ore body to which the assets relate; and
where it is anticipated that the mine life will significantly exceed the proved and probable reserves, the mine life is estimated using a methodology that takes account of current exploration information to assess the likely recoverable gold from a particular area. Such estimates are adjusted for the level of confidence in the assessment and the probability of conversion to reserves. The probability of conversion is based on historical experience of similar mining and geological conditions.
Proved and probable ore reserves reflect estimated quantities of economically recoverable reserves, which can be recovered in future from known mineral deposits.
Certain mining plant and equipment included in mine development and infrastructure is depreciated on a straight-line basis over the lesser of their estimated useful lives or life of mine.
Accounting policies to the consolidated financial statements (continued)
| 4. | PROPERTY, PLANT AND EQUIPMENT (continued) |
| 4.7 | Depreciation ofnon-mining assets |
Non-mining assets are recorded at cost and depreciated on a straight-line basis over their current expected useful lives to their residual values as follows:
Vehicles – 20%
Computers – 33.3%
Furniture and equipment – 10%
The assets’ useful lives, depreciation methods and residual values are reassessed at each reporting date and adjusted if appropriate.
| 4.8 | Mining exploration |
Expenditure on advances solely for exploration activities is charged against profit or loss until the viability of the mining venture has been proven. Expenditure incurred on exploration“farm-in” projects is written off until an ownership interest has vested. Exploration expenditure to define mineralisation at existing ore bodies is considered mine development costs and is capitalised until commercial levels of production are achieved.
Exploration activities at certain of the Group’snon-South African operations are broken down into defined areas within the mining lease boundaries. These areas are generally defined by structural and geological continuity. Exploration costs in these areas are capitalised to the extent that specific exploration programmes have yielded targets and/or results that warrant further exploration in future years.
| 4.9 | Impairment |
Recoverability of the carrying values of long-term assets or cash-generating units of the Group are reviewed annually or whenever events or changes in circumstances indicate that such carrying value may not be recoverable. To determine whether a long-term asset or cash-generating unit may be impaired, the higher of “value in use” (defined as: “the present value of future cash flows expected to be derived from an asset or cash-generating unit”) or “fair value less costs of disposal” (defined as “the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date”) is compared to the carrying value of the asset/ CGU. Impairment losses are recognised in profit or loss.
A cash-generating unit is defined by the Group as the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. Generally for the Group this represents an individual operating mine, including mines which are part of a larger mine complex. The costs attributable to individual shafts of a mine are impaired if the shaft is closed.
Exploration targets in respect of which costs have been capitalised at certain of the Group’s international operations are evaluated on an annual basis to ensure that these targets continue to support capitalisation of the underlying costs. Those that do not are impaired.
When any infrastructure is closed down during the year, any carrying value attributable to that infrastructure is impaired.
| 4.10 | Gain or loss on disposal of property, plant and equipment |
Any gain or loss on disposal of property, plant and equipment (calculated as the net proceeds from disposal less the carrying amount of the item) is recognised in profit or loss.
Accounting policies to the consolidated financial statements (continued)
| 4. | PROPERTY, PLANT AND EQUIPMENT (continued) |
| 4.11 | Leases |
At the inception of an arrangement, the Group determines whether the arrangement contains a lease. Leases that transfer to the Group substantially all of the risks and rewards of ownership are classified as finance leases. All other leases are classified as operating leases and are not recognised in the statement of financial position.
Operating lease costs are charged against profit or loss on a straight-line basis over the period of the lease.
| 4.12 | Deferred stripping |
Production stripping costs in a surface mine are capitalised to property, plant and equipment if, and only if, all of the following criteria are met:
It is probable that the future economic benefit associated with the stripping activity will flow to the entity;
The entity can identify the component of the ore body for which access has been improved; and
The costs relating to the stripping activity associated with that component can be measured.
If the above criteria are not met, the stripping costs are recognised directly in profit or loss.
The Group initially measures the stripping activity asset at cost, this being the accumulation of costs directly incurred to perform the stripping activity that improves access to the identified component of ore.
After initial recognition, the stripping activity asset is carried at cost less accumulated amortisation and accumulated impairment losses.
| 5. | GOODWILL |
Goodwill is stated at cost less accumulated impairment losses. Goodwill on acquisition of equity accounted investees is tested for impairment as part of the carrying amount of the investment in associate or joint venture whenever there is any objective evidence that the investment may be impaired. Goodwill on acquisition of a subsidiary is assessed annually or whenever there are impairment indicators to establish whether there is any indication of impairment to goodwill. A write-down is made if the carrying amount exceeds the recoverable amount. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill allocated to the entity sold.
Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or groups of cash-generating units that are expected to be recovered duringbenefit from the next 12 months.business combination in which the goodwill arose.
Income tax comprises current and deferred tax. Current tax and deferred tax is recognised in profit or loss except to the extent that it relates to a business combination, or items recognised directly in equity or in other comprehensive income.
Current tax is measured on taxable income at the applicable statutory rate substantively enacted at the reporting date.
Deferred taxation is provided on temporary differences existing at each reporting date between the tax values of assets and liabilities and their carrying amounts. Substantively enacted tax rates are used to determine future anticipated effective tax rates which in turn are used in the determination of deferred taxation.
Accounting policies to the consolidated financial statements (continued)
| 6. | TAXATION (continued) |
The measurement of deferred tax reflects the tax consequences that would follow the manner in which the Group expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities.
These temporary differences are expected to result in taxable or deductible amounts in determining taxable profits for future periods when the carrying amount of the asset is recovered or the liability is settled.
Deferred tax liabilities are generally recognised for all taxable temporary differences. Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries and equity accounted investees except where the reversal of the temporary difference can be controlled and it is probable that the difference will not reverse in the foreseeable future.
Deferred tax assets relating to the carry forward of unutilised tax losses and/or deductible temporary differences are recognised to the extent it is probable that future taxable profit will be available against which the unutilised tax losses and/or deductible temporary differences can be recovered. Deferred tax assets are reviewed at each reporting date and are adjusted if recovery is no longer probable.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, and they relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be realised simultaneously.
No provision is made for any potential taxation liability on the distribution of retained earnings by Group companies as it is probable that the related taxable temporary differences will not reverse in the foreseeable future.
| 7. | INVENTORIES |
Consumable stores: Consumable stores are valued at average cost, after appropriate provision for surplus and slow moving items.
Gold-in-process: Gold in-process inventories at the international operations represent materials that are currently in the process of being converted to a saleable product. Conversion processes vary depending on the nature of the ore and the specific mining operation, but include mill in-circuit, leach in-circuit, flotation and column cells, and carbon in-pulp inventories. In-process material is measured based on assays of the material fed to process and the projected recoveries of the respective plants.
In-process inventories are valued at the average cost of the material fed to process attributable to the source material coming from the mine, stockpile or leach pad plus the in-process conversion costs, including applicable depreciation relating to the process facility, incurred to that point in the process.
Gold bullion: Gold bullion inventories represent saleable gold ore or gold bullion and are valued at the average cost of the respective in-process inventories incurred prior to the refining process, plus refining costs.
Concentrates: Concentrate inventories represent concentrate available for shipment. The concentrate inventory is valued at the average cost, including an allocated portion of amortization. Costs are added to and removed from the concentrate inventory based on tons of concentrate and are valued at the lower of average cost and market value. Management’s determination of the gold and copper concentrate content and quantity depends on assay and laboratory results for the metal content and survey for the quantities.
Stockpiles: Stockpiles represent coarse ore that has been extracted from the mine that is available for further processing. Stockpiles are measured by estimating the number of tons (via truck counts and/or in-pit surveys of the ore before stockpiling) added and removed from the stockpile, the number of contained ounces (based on assay data) and the recovery percentage (based on the process for which the ore is destined). Stockpile tonnages are verified by periodic surveys. Stockpiles are valued based on mining costs incurred up to the point of stockpiling the ore, including applicable depreciation and amortization relating to mining operations. Value is added to a stockpile based on the current mining cost per ton plus applicable depreciation and amortization and removed at the average cost per recoverable ounce of gold in the stockpile.
Mineral rights: Mineral rights not linked to any specific operationInventories are valued at the lower of cost and net realisable value. Gold on hand represents production on hand after the smelting process. Due to the different nature of the Group’snon-South African operations,gold-in-process for such operations represents either production in broken ore form, gold in circuit or production from the time of placement on heap leach pads.
Cost is determined on the following basis:
Gold on hand andgold-in-process is valued using weighted average cost. Cost includes production, amortisation and related administration costs;
Heap leach and stockpiles inventories are valued using weighted average cost. Cost includes production, amortisation and related administration costs. The cost of materials on the heap leach and stockpiles from which metals are expected to be recovered in a period longer than 12 months is classified asnon-current assets; and
Consumable stores are valued at weighted average cost, after appropriate provision for redundant and slow-moving items.
Net realisable value is determined with reference to relevant market value.prices or the estimated future sales price of the product if it is expected to be realised in the long term.
| 8. | FINANCIAL INSTRUMENTS |
| 8.1 | Non-derivative financial assets and liabilities |
The Group classifiesnon-derivative financial assets into the following categories: financial assets at fair value through profit or loss,held-to-maturity financial assets, loans and receivables andavailable-for-sale financial assets.
Accounting policies to the consolidated financial statements (continued)
| FINANCIAL |
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
Hedging activities
The Group classifiesnon-derivative financial liabilities into the other financial liabilities category.
The Group initially recognises loans and receivables on the date they are conductedoriginated. All other financial assets (including assets designated at fair value through profit or loss) are recognised initially on trade date, which is the date that the Group becomes a party to the contractual provisions of the instrument. The Group derecognises a financial asset when the contractual rights to the cash flows in accordance with guidelines establisheda transaction in which substantially all the risks and rewards of the ownership of the financial asset are transferred. The Group derecognises a financial liability when its contractual obligations are discharged, cancelled or expire. Any interest in such transferred financial asset that is created or retained by the Audit Committee which allowGroup is recognised as a separate asset or liability. The particular recognition and measurement methods adopted are disclosed in the individual policy statements associated with each item.
A financial asset not classified as fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset and the loss event(s) had an impact on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets are impaired includes default or delinquency by a debtor, indications that a debtor will enter bankruptcy, economic conditions that correlate with defaults or the disappearance of an active market for a security.
An impairment loss in respect of a financial asset measured at amortised cost is calculated as the usedifference between its carrying amount and the present value of various hedging instruments.
Changesthe estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognised in profit or loss and reflected in an allowance against loans and receivables. When an event occurring after the impairment loss was recognised causes the amount of impairment loss to decrease, the decrease in impairment loss is reversed through profit or loss. A significant decline in the fair value of a derivative thatanavailable-for-sale financial asset below its cost is highly effective, and that is designated and qualifies as a fair value hedge,objective evidence of impairment. Impairment losses onavailable-for-sale financial assets are recorded in net income or loss, along withrecognised by reclassifying the changelosses accumulated in the fair value of the hedged assetadjustment reserve in other comprehensive income to profit or liability that is attributableloss. Impairment losses charged to the hedged risk.income statement onavailable-for-sale financial assets are not reversed.
ChangesFinancial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group has a legal right to offset the amounts and intends to settle them on a net basis or to realise the asset and settle the liability simultaneously.
| 8.1.1 | Investments |
Investments comprise (1) investments in listed companies which are classified asavailable-for-sale and are accounted for at fair value, with unrealised gains and losses subsequent to initial recognition recognised in other comprehensive income and included in other reserves, and released to profit or loss when the investments are sold or impaired; and (2) investments in unlisted companies which are accounted for at cost and adjusted for impairment where appropriate.
Purchases and sales of investments are recognised on the trade date, which is the date that the Group commits to purchase or sell the asset. Cost of purchase includes transaction costs. The fair value of a derivative thatlisted investments is highly effective,based on quoted bid prices.
On disposal or impairment ofavailable-for-sale financial assets, cumulative unrealised gains and that is designated and qualifies as a cash flow hedge, are recognized directlylosses previously recognised in shareholders’ equity. Amounts deferred in shareholders’ equityother comprehensive income are included in net incomedetermining the profit or loss on disposal, or impairment charge relating to, that financial asset, respectively, which is recognised in the same period during which the hedged firm commitment or forecasted transaction affects net incomeprofit or loss.
Recognition of derivatives which meet the criteria for the normal purchases normal sales exception is deferred until settlement. Under these contracts, the Group must deliver a specified quantity of gold at a future date at a specified price
Accounting policies to the contracted counter-party.
Hedges of net investment in foreign entities are accounted for similarly to cash flow hedges. Changes in the fair value of derivatives that do not qualify for hedge accounting are recognized in net income or loss, under the caption entitled gains and losses onconsolidated financial instruments. The fair value recognized on the balance sheet is included under the caption financial instruments.
The Group formally documents all relationships between hedging instruments and hedged items at inception, as well as its risk management objective and strategy for undertaking various hedge transactions. This process includes linking derivatives designed as hedges to specific assets and liabilities or to specific firm commitments or forecasted transactions. The Group also formally assesses, both at the hedge inception date and on an ongoing basis, whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of hedged items.statements (continued)
The carrying amount of cash and cash equivalents is stated at cost which approximates fair value.
Cash and cash equivalents comprise cash on hand, demand deposits and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value and are measured at amortised cost which is deemed to be fair value as they have a short-term maturity (less than 12 months).
Gold Fields LimitedBank overdrafts are included within current liabilities in the statement of financial position and within cash and cash equivalents in the statement of cash flows.
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
Under ASC 410 the Group records the fair value of a liability for an asset retirement obligation in the period in which it is incurred. When the liability isTrade receivables are initially recorded, the Group correspondingly capitalizes the cost by increasing the carrying value of the related long-lived asset. Over time, the liability is increased (accretion) to reflect an interest element considered in its initial measurementrecognised at fair value and subsequently carried at amortised cost less allowance for impairment, except for trade receivables from provisional copper and gold concentrate sales. Estimates made for impairment are based on a review of all outstanding amounts at year-end. Irrecoverable amounts are written off during the capitalized cost is amortized over the useful life of the related asset. Upon settlement of the liability, the Group will record a gain or loss if the actual cost incurred differsyear in which they are identified.
The trade receivables from the liability recorded.
Environmental liabilities, other than rehabilitation costs which relate to liabilities from specific events,provisional copper and gold concentrate sales are expensed as incurred.
Contributions to defined contribution funds are recognized in net income or loss as incurred.
The Group has an obligation to provide medical benefits to certain of its pensioners and dependents of ex-employees. These liabilities are unfunded and have been provided in full, calculated on an actuarial basis.
Valuation of these obligations is carried out annually by independent actuaries using appropriate mortality tables, long-term estimates of increases in medical costs and appropriate discount rates.
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Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
Contracts for the sale of copper concentrate are provisionally priced - that is, the selling price is subject to final adjustment at the end of a period normally ranging from 30 to 90 days after delivery to the customer, based on market prices at the relevant quotation points stipulated in the contract.
Revenue on provisionally priced copper concentrate sales is recorded on the date of shipment, net of refining and treatment charges, using the forward London Metal Exchange price to the estimated final pricing date, adjusted for the specific terms of the relevant agreement. Variations between the price used to recognize revenue and the actual final price received can be caused by changes in prevailing copper and gold prices and result in an embedded derivative. The host contract is the receivable from the sale of copper concentrate at the forward London Metal Exchange price at the time of sale. The embedded derivative, which does not qualify for hedge accounting, is marked-to-market each period until final settlement occurs, with changes in fair value classified as provisional price adjustments and included as a component of revenue whilerevenue.
| 8.1.4 | Trade payables |
Trade payables are recognised initially at fair value and subsequently measured at amortised cost using the effective interest method.
| 8.1.5 | Borrowings |
Borrowings are recognised initially at fair value, net of transaction costs incurred, where applicable and subsequently measured at amortised cost using the effective interest method.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
Interest payable on borrowings is recognised in profit or loss over the term of the borrowings using the effective interest method.
Finance expense comprises interest on borrowings and environmental rehabilitation liability offset by interest capitalised on qualifying assets.
Cash flows from interest paid are classified under operating activities in the statement of cash flows.
| 8.2 | Derivative financial instruments |
The Group’s general policy with regards to its exposure to the dollar gold price is to remain unhedged. The Group may from time to time establish currency and/or interest rate and/or commodity financial instruments to protect underlying cash flows.
On the date a derivative contract is entered into, the Group designates the derivative as (1) a hedge of the fair value of a recognised asset or liability (fair value hedge), (2) a hedge of a forecast transaction or a firm commitment (cash flow hedge), (3) a hedge of a net investment in a foreign entity, or (4) should the derivative not fall into one of the three categories above it is not regarded as a hedge.
Accounting policies to the consolidated financial statements (continued)
| 8. | FINANCIAL INSTRUMENTS (continued) |
| 8.2 | Derivative financial instruments (continued) |
Derivative financial instruments are initially recognised in the statement of financial position at fair value and subsequently remeasured at their fair value, unless they meet the criteria for the normal purchases normal sales exemption.
Provided the Group’s derivative transactions do not qualify for hedge accounting, changes in the fair value of such derivatives are recognised immediately in profit or loss.
| 8.3 | Embedded derivatives |
The Group assesses whether an embedded derivative is required to be separated from a host contract and accounted for as a derivative when the Group first becomes a party to a contract.
Embedded derivatives are separated from the host contract and accounted for separately if:
the economic characteristics and risks of the host contract and the embedded derivative are not closely related;
a separate instrument with the same terms as the embedded derivative would meet the definition of a derivative; and
the combined instrument is not measured at fair value through profit or loss.
Subsequent reassessment is not performed unless there is a change in the terms of the contract itselfthat significantly modifies the cash flows.
| 9. | NON-CURRENT ASSETS HELD FOR SALE |
Non-current assets (or disposal groups) comprising assets and liabilities, are classified as held for sale or held for distribution if it is highly probable they will be recovered primarily through sale or distribution rather than through continuing use. These assets may be a component of an entity, a disposal group or an individualnon-current asset.
Non-current assets held for sale or distribution are stated at the lower of carrying amount and fair value less cost of disposal. Impairment losses on initial classification as held for sale and subsequent gains or losses on remeasurement are recognised in profit or loss. Once classified as held for sale or distribution, property, plant and equipment is no longer amortised or depreciated.
| 10. | PROVISIONS |
Provisions are recognised when the Group has a present legal or constructive obligation resulting from past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
| 11. | PROVISION FOR ENVIRONMENTAL REHABILITATION COSTS |
Long-term provisions for environmental rehabilitation costs are based on the Group’s environmental management plans, in compliance with applicable environmental and regulatory requirements.
Rehabilitation work can include facility decommissioning and dismantling, removal or treatment of waste materials, site and land rehabilitation, including compliance with and monitoring of environmental regulations, security and other site-related costs required to perform the rehabilitation work and operations of equipment designed to reduce or eliminate environmental effects.
Accounting policies to the consolidated financial statements (continued)
| 11. | PROVISION FOR ENVIRONMENTAL REHABILITATION COSTS (continued) |
Full provision is made based on the net present value of the estimated cost of restoring the environmental disturbance that has occurred up to the reporting date. The unwinding of the obligation is accounted for in profit or loss.
The estimated costs of rehabilitation are reviewed annually and adjusted as appropriate for changes in legislation, technology or other circumstances. Cost estimates are not reduced by the potential proceeds from the sale of assets or from plant clean up at closure.
Changes in estimates are capitalised or reversed against the relevant asset, except where a reduction in the provision is greater than the remaining net book value of the related asset, in which case the value is reduced to nil and the remaining adjustment is recognised in profit or loss. In the case of closed sites, changes in estimates and assumptions are recognised in profit or loss. Estimates are discounted at therisk-free rate in the jurisdiction of the obligation.
Increases due to additional environmental disturbances are capitalised and amortised over the remaining lives of the mines. These increases are accounted for on a net present value basis.
For the South African and Ghanaian operations, annual contributions are made to a dedicated rehabilitation trust fund to fund the estimated cost of rehabilitation during and at the end of the life of mine. The amounts contributed to these trust funds are included undernon-current assets. Interest earned on monies paid to rehabilitation trust funds is accrued on a time proportion basis and is recorded as interest income. This trust is consolidated for Group purposes.
In respect of the South African operation and allnon-South African operations, bank and other guarantees are also provided for funding of the environmental rehabilitation obligations.
| 12. | EMPLOYEE BENEFITS |
| 12.1 | Short-term employee benefits |
Short-term employee benefits are expensed as the related service is provided. A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably.
| 12.2 | Pension and provident funds |
The Group operates a defined contribution retirement plan and contributes to a number of industry-based defined contribution retirement plans. The retirement plans are funded by payments from employees and Group companies.
Contributions to defined contribution funds are recognised as an employee benefit expense in accountsprofit or loss in the periods during which related services are rendered by employees.
| 12.3 | Share-based payments |
The Group operates a number of equity-settled compensation plans. The fair value of the equity-settled instruments is measured by reference to the fair value of the equity instrument granted which in turn is determined using the modified Black Scholes and Monte Carlo simulation models on the date of grant.
Fair value is based on market prices of the equity-settled instruments granted, if available, taking into account the terms and conditions upon which those equity-settled instruments were granted. Fair value of equity-settled instruments granted is estimated using appropriate valuation models and appropriate
Accounting policies to the consolidated financial statements (continued)
| 12. | EMPLOYEE BENEFITS (continued) |
| 12.3 | Share-based payments (continued) |
assumptions at grant date.Non-market vesting conditions (service period prior to vesting) are not taken into account when estimating the fair value of the equity-settled instruments at grant date. Market conditions are taken into account in determining the fair value at grant date.
The fair value of the equity-settled instruments is recognised as an employee benefit expense over the vesting period based on the Group’s estimate of the number of instruments that will eventually vest, with a corresponding increase in equity. Vesting assumptions fornon-market conditions are reviewed at each reporting date to ensure they reflect current expectations.
Where the terms of an equity-settled award are modified, the originally determined expense is recognised as if the terms had not been modified. In addition, an expense is recognised for any modification, which increases the total fair value of theshare-based payment arrangement, or is otherwise beneficial to the participant as measured at the date of the modification.
| 12.4 | Long-term incentive plan |
The Group operates a long-term incentive plan.
The Group’s net obligation in respect of the long-term incentive plan is the amount of future benefit that employees have earned in return for their services in the current and prior periods. That benefit is estimated using appropriate assumptions and is discounted to determine its present value at each reporting date.Re-measurements are recognised in profit or loss in the period in which they arise.
| 12.5 | Termination benefits |
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. Termination benefits are expensed at the earlier of the date the Group can no longer withdraw the offer of those benefits or the date the Group recognises costs for a restructuring. Benefits falling due more than 12 months after the reporting date are discounted to present value.
| 13. | SHARE CAPITAL |
| 13.1 | Ordinary share capital |
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.
| 13.2 | Repurchase and reissue of share capital |
When share capital recognised as equity is repurchased, the amount of the consideration paid, which includes directly attributable costs, net of any tax effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are deducted from equity. When treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or deficit on the transaction is presented in share premium.
| 14. | REVENUE RECOGNITION |
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the amount of revenue can be reliably measured. Revenue is stated at the fair value of the consideration received or receivable.
Accounting policies to the consolidated financial statements (continued)
| 14. | REVENUE RECOGNITION (continued) |
Revenue arising from gold, copper and silver sales is recognised when the significant risks and rewards of ownership pass to the buyer. The price of gold, copper and silver is determined by market forces.
Copper and gold concentrate revenue is calculated, net of refining and treatment charges, on a best estimate basis on shipment date, using forward metal prices to the estimated final pricing date, adjusted for the specific terms of the agreements. Variations between the price recorded at the shipment date and the actual final price received are caused by changes in prevailing copper prices, and result in an embedded derivative in the trade receivable. The embedded derivative ismarked-to-market each period until final settlement occurs, with changes in fair value classified as provisional price adjustments and included as a component of revenue.
| 15. | INVESTMENT INCOME |
Investment income comprises interest income on funds invested and dividend income from listed and unlisted investments.
Investment income is recognised to the extent that it is probable that economic benefits will flow to the Group and the amount of investment income can be reliably measured. Investment income is stated at the fair value of the consideration received or receivable.
| 15.1 |
| 15.2 |
principal outstandingCash flows from dividends and interest received are classified under operating activities in the effective rate to maturity on the accrual basis.statement of cash flows.
| DIVIDENDS |
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Gold Fields Limited
NotesDividends withholding tax is a tax on shareholders receiving dividends and is applicable to the Consolidated Financial Statements
($ in millions unless otherwise noted)
RECENTLY ADOPTED ACCOUNTING PRONOUNCEMENTS
Liabilities
During February 2013, the Accounting Standard Codification, or the ASC guidance related to liabilities: obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed at the reporting date was updated.all dividends paid. The update requires an entity to measure obligations resulting from joint and several liability arrangements for which the total amount of the obligation is fixed as the sum of the amount the entity agreed to pay on the basis of its arrangement among its co-obligors and any additional amount the entity expects to payGroup withholds dividends tax on behalf of its co-obligors. The update is effective for fiscal years,shareholders at a rate of 15% on dividends paid before 22 February 2017 and interim periods within those years, beginning20% on dividends paid after December 15, 2013. The new standard is to be applied prospectivelythis date. Amounts withheld are not recognised as part of the Group’s tax charge but retrospective application is permitted. The Company implementedrather as part of the provisions of ASU 2013-04 as of January 1, 2014. The updated guidance did not impact Gold Fields’ financial statements.dividend paid recognised directly in equity.
Income Taxes
During July 2013, the ASC guidance related to income taxes: presentation of an unrecognized tax benefit when a netCash flows from dividends paid are classified under operating loss carry forward, a similar tax loss, or a tax credit carry forward exists was updated. The update requires an unrecognized tax benefit, or a portion of an unrecognized tax benefit, to be presentedactivities in the financial statements as a reduction to a deferred tax asset for a net operating loss carry forward, a similar tax loss, or a tax credit carry forward. The update is effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The new standard is to be applied prospectively but retrospective application is permitted. The Company implemented the provisionsstatement of ASU 2013-11 as of January 1, 2014. The updated guidance did not impact Gold Fields’ financial statements.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS NOT YET ADOPTED
Revenue
During May 2014, the ASC guidance related to revenue from contracts with customers was updated. The update requires an entity to recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should also disclose sufficient quantitative and qualitative information to enable users of financial statements to understand the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. The new standard is effective for annual reporting periods beginning after December 15, 2016. Gold Fields will implement the provisions of ASU 2014-09 as of January 1, 2017. Gold Fields does not expect that the updated guidance will materially impact its financial statements.
Discontinued operations
During April 2014, the ASC guidance related to reporting discontinued operations and disclosures of disposals of components of an entity was updated. The update changes the requirements for reporting discontinued operations and limits discontinued operations reporting to disposals of components of an entity that represent strategic shifts that have a major effect on an entity’s operations and financial results. The new standard is effective for any disposals of components of a company in annual reporting periods beginning after December 15, 2014. Gold Fields will implement the provisions of ASU 2014-08 as of January 1, 2015. Gold Fields does not expect that the updated guidance will impact its financial statements.flows.
On February 18, 2013, Gold Fields completed the separation of its wholly-owned subsidiary, Sibanye Gold (formerly known as GFI Mining South Africa, or GFIMSA), which includes the KDC and Beatrix mining operations. The Spin-off was achieved by way of Gold Fields making a distribution on a pro rata basis of one Sibanye Gold ordinary share for every one Gold Fields share (whether held in the form of shares, American depositary receipts, or ADRs, or international depositary receipts) to Gold Fields shareholders, registered as such in Gold Fields’ register at close of business on February 15, 2013, in terms of section 46 of the South African Companies Act and section 46 of the South African Income Tax Act. The Board of Gold Fields passed the resolution necessary to implement the Spin-off on December 12, 2012. Sibanye Gold shares listed on the JSE, and on the NYSE on February 11, 2013. As of February 18, 2013, or the Spin-off Date, Gold Fields and Sibanye Gold were independent, publicly traded companies with separate public ownership, boards of directors and management. Refer note 9.1.
On October 1, 2013, Gold Fields completed the acquisition of the Granny Smith, Lawlers and Darlot gold mines (collectively the Yilgarn South assets) in Western Australia, from Barrick Gold Corporation. Gold Fields acquired the assets for a total net consideration of $262.3 million after adjustments for working capital and employee entitlements. In accordance with the sale and purchase agreement, Gold Fields elected
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
to satisfy half of the consideration by delivering 28.7 million of its common shares (which was based on the 5-day volume-weighted average price for the ADR’s trading on the NYSE prior to closing). The balance of $135.0 million (less a $30.0 million deposit paid on signing of the agreement) was paid from cash resources held by Gold Fields in Australia.
Taking control of the acquired mines enabled the Group to increase its production profile in Australia and to obtain cost efficiencies through the integration of the Lawlers and the existing Agnew gold mines.
In the three months to December 31, 2013, the Yilgarn South assets contributed revenue of $151.3 million and loss after tax was $4.1 million. The loss after tax was mainly due to transaction costs of $27.4 million. The disclosure of other information required by ASC 805-10-50-2 is impracticable as financial information for the acquired assets and liabilities under U.S. GAAP was not available prior to the acquistion date.
The following summarises the major classes of consideration transferred, and the recognised amount of assets acquired and liabilities assumed at the acquisition date.
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The fair value of the ordinary shares issued was based on the listed share price of the Company at October 1, 2013 of R44.8 per share.
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The Group incurred acquisition related costs of $27.4 million in respect of stamp duty on the transferred assets, due diligence and legal costs. These costs have been included under other costs in the consolidated statement of operations.
There were no changes to the provisional purchase price allocattion performed at the time of acquisition of the Yilgarn South assets.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
On July 2, 2014, Gold Fields sold its 85% interest in the Yanfolila exploration project in Mali to London-listed Hummingbird Resources (Hummingbird) for $21.1 million in the form of 21,258,503 Hummingbird shares, resulting in Hummingbird being accounted for as an equity accounted investee. This sale resulted in a profit of $5.1 million being recognized under profit on disposal of investments and subsidiaries in the consolidated statement of operations. Refer note 14(d) for disclosure on the investment in Hummingbird.
On August 19, 2014, Gold Fields sold its 51% stake in Canteras del Hallazgo S.A.C (CDH), the company that manages the Chucapaca exploration project in southern Peru, to Compañía de Minas Buenaventura S.A.A. (Buenaventura). Buenaventura is Peru’s largest publicly traded, precious metals mining company and previously owned 49% in CDH. The proceeds were $81.0 million and a 1.5% net smelter royalty on future sales of gold, copper and silver produced in the current Chucapaca concession. No value was attributed to the 1.5% net smelter royalty in calculating the sales price due to the uncertainty associated with realizing any future royalties given that the Chucapaca project is still in the exploration phase. This sale resulted in a profit of $72.8 million being recognized under profit on disposal of investments and subsidiaries in the consolidated statement of operations. Refer note 9.2.
| Fiscal Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
Materials contained on heap leach pad | 1.3 | 61.3 | 19.2 | |||||||||
Stockpiles 1 | — | 16.1 | — | |||||||||
Consumables1 | 1.3 | 2.4 | — | |||||||||
Heap leach inventory 2 | — | 42.8 | 19.2 | |||||||||
Property, plant and equipment | 12.7 | 122.3 | 14.5 | |||||||||
Yanfolila 3 | — | 29.7 | — | |||||||||
Heap leach assets 2 | — | 20.2 | 10.1 | |||||||||
Tarkwa expansion project 4 | — | 4.6 | — | |||||||||
Property, plant and equipment - other 5 | 12.7 | 14.8 | 4.4 | |||||||||
Damang - asset group 6 | — | 53.0 | — | |||||||||
Other | — | 31.7 | 7.9 | |||||||||
Tarkwa expansion project 4 | — | 22.2 | — | |||||||||
Non-refundable option payment to Bezant 7 | — | 9.5 | — | |||||||||
Biox - property, plant and equipment 8 | — | — | 7.9 | |||||||||
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Total asset impairments and write-offs | 14.0 | 215.3 | 41.6 | |||||||||
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Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
The key assumptions used in the calculation were as follows:
- Real discount rate - 8%
- Gold price per ounce - $1,300
- Resource valuation per ounce - $26
- 2013 life of mine years - 6
The fair value calculation was very sensitive to the gold price assumption and an increase or decrease in the gold price could materially change the fair value.
| Fiscal Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
Interest expense | (105.0 | ) | (90.7 | ) | (68.6 | ) | ||||||
Capitalized interest | 24.2 | 18.3 | 13.0 | |||||||||
|
|
|
|
|
| |||||||
Total finance expense | (80.8 | ) | (72.4 | ) | (55.6 | ) | ||||||
|
|
|
|
|
| |||||||
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
| Fiscal Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
Stamp duty and other costs on the acquisition of the Yilgarn South assets (refer note 3 (b)) | — | 27.4 | — | |||||||||
Facility charges 1 | — | 23.5 | — | |||||||||
Regulatory legal fees 2 | 7.1 | 11.1 | — | |||||||||
Other | 37.1 | 42.2 | 37.9 | |||||||||
|
|
|
|
|
| |||||||
Total other costs | 44.2 | 104.2 | 37.9 | |||||||||
|
|
|
|
|
| |||||||
| Fiscal Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
| Current income taxes | ||||||||||||
South Africa | (0.6 | ) | (16.1 | ) | (14.5 | ) | ||||||
Ghana | (31.1 | ) | (40.6 | ) | (170.6 | ) | ||||||
Australia | (41.8 | ) | (42.1 | ) | (64.1 | ) | ||||||
Peru | (60.7 | ) | (66.3 | ) | (104.7 | ) | ||||||
|
|
|
|
|
| |||||||
Current income and mining taxes | (134.2 | ) | (165.1 | ) | (353.9 | ) | ||||||
|
|
|
|
|
| |||||||
Deferred income taxes | ||||||||||||
South Africa | (13.2 | ) | 14.2 | 24.2 | ||||||||
Ghana | 13.5 | 68.3 | (36.8 | ) | ||||||||
Australia | 1.5 | 1.0 | (4.8 | ) | ||||||||
Peru | 10.8 | (24.1 | ) | 11.9 | ||||||||
|
|
|
|
|
| |||||||
Deferred income and mining taxes benefit/(expense) | 12.6 | 59.4 | (5.5 | ) | ||||||||
|
|
|
|
|
| |||||||
Total income and mining taxes | (121.6 | ) | (105.7 | ) | (359.4 | ) | ||||||
|
|
|
|
|
| |||||||
The Company’s pre-tax income/(loss) from continuing operations before impairment of investments in equity investees, share of equity investees’ share of losses and discontinued operations comprise:
| Fiscal Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
South Africa | (110.9 | ) | (348.7 | ) | (169.5 | ) | ||||||
Ghana | 46.5 | (96.9 | ) | 441.6 | ||||||||
Australia | 117.9 | 111.0 | 156.5 | |||||||||
Peru | 109.0 | 153.4 | 259.6 | |||||||||
British Virgin Islands | (54.3 | ) | 18.7 | 24.5 | ||||||||
|
|
|
|
|
| |||||||
| 108.2 | (162.5 | ) | 712.7 | |||||||||
|
|
|
|
|
| |||||||
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
| Fiscal Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
South African mining tax on mining income, an income tax, is determined on a formula basis which takes into account the profit and revenue from mining operations during the period. Non-mining income is taxed at a standard rate. Deferred tax is provided at the estimated mining tax rate that will apply when the temporary differences reverse. The applicable tax rates are: | ||||||||||||
South Africa | ||||||||||||
Maximum mining statutory rate | 34.0 | % | 34.0 | % | 34.0 | % | ||||||
Non-mining income standard tax rate | 28.0 | % | 28.0 | % | 28.0 | % | ||||||
Non-mining companies | 28.0 | % | 28.0 | % | 28.0 | % | ||||||
Ghana | 35.0 | % | 35.0 | % | 35.0 | % | ||||||
Australia | 30.0 | % | 30.0 | % | 30.0 | % | ||||||
Peru | 30.0 | % | 30.0 | % | 30.0 | % | ||||||
Major items causing the Group’s income tax provision to differ from the South African mining statutory rate were: | ||||||||||||
Tax on (loss)/income before tax, impairment of investments in equity investees, share of equity investees’ losses and discontinued operations at South African mining statutory rate | (36.8 | ) | 55.3 | (242.3 | ) | |||||||
Rate adjustment to reflect company tax rates | 1.7 | 25.5 | 17.1 | |||||||||
Valuation allowance raised against deferred tax assets1 | (38.3 | ) | (1.1 | ) | — | |||||||
Reversal of valuation allowance previously raised against deferred tax assets2 | — | — | 58.2 | |||||||||
Non deductible expenditure 3 | (18.0 | ) | (56.1 | ) | (12.5 | ) | ||||||
Non taxable profit on disposal of investments and subsidiaries | 23.4 | — | — | |||||||||
Non deductible exploration and feasibility and evaluation costs | (9.6 | ) | �� | (47.2 | ) | (74.4 | ) | |||||
Non deductible share-based compensation | (6.2 | ) | (11.5 | ) | (12.9 | ) | ||||||
Non deductible interest expense | (24.4 | ) | (25.3 | ) | (24.8 | ) | ||||||
Deferred tax adjustment on changes in tax rates at the South African (2013 and 2012) and Ghanaian operations in 2012 | — | (4.4 | ) | (65.4 | ) | |||||||
Prior year adjustment to Cerro Corona deferred tax4 | — | (29.5 | ) | — | ||||||||
Deferred taxation raised on unremitted earnings5 | (7.0 | ) | — | — | ||||||||
Prior year under provision | (4.1 | ) | — | — | ||||||||
Other | (2.3 | ) | (11.4 | ) | (2.5 | ) | ||||||
|
|
|
|
|
| |||||||
Income and mining tax expense | (121.6 | ) | (105.7 | ) | (359.4 | ) | ||||||
|
|
|
|
|
| |||||||
|
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
The Group applied SEC Staff Accounting Bulletin (SAB) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB No. 108 states that registrants must quantify the impact of correcting all misstatements on all periods presented, including both the carryover (iron curtain method) and reversing (rollover method) effects of prior-year misstatements on the current-year financial statements, and by evaluating the misstatement measured under each method in light of quantitative and qualitative factors.
In accordance with accounting guidance presented in ASC 250-10 and SEC Staff Accounting Bulletin No. 99, Materiality, the Group assessed the materiality of the misstatement and concluded that it was not material to Group’s current-year financial statements, taken as a whole.
Under SAB No. 108, prior-year misstatements may be corrected in the current- year provided that such correction does not result in a material misstatement to the current-year financial statements. Correcting current-year financial statements for such “immaterial errors” does not require previously filed reports to be amended. The Group corrected the misstatement in the consolidated financial statements for the year ended December 31, 2013 as an “out-of-period” adjustment of $29.5 million.
In all other cases, no provision is made for the income tax effect that may arise on the remittance of unremitted earnings by certain foreign subsidiaries. It is management’s intention that these earnings will be permanently reinvested into future capital projects, maintenance capital and ongoing working capital funding requirements. In the event that the Group repatriated these earnings, income taxes and withholding taxes may be incurred. The determination of such taxes is subject to various complex calculations and ,accordingly, the Group has determined that it is impractical to estimate the amount of deferred tax liability on such unremitted earnings.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
| December 31, 2014 | December 31, 2013 | |||||||
Deferred income and mining tax liabilities and assets on the balance sheet as of December 31, 2014 and 2013 relate to the following: | ||||||||
Deferred income and mining tax liabilities | ||||||||
Mining assets | 971.4 | 1,054.5 | ||||||
Investments held by environmental trust funds | 2.7 | 2.7 | ||||||
Inventory | 22.7 | 18.2 | ||||||
Other | 18.1 | 19.5 | ||||||
|
|
|
| |||||
Gross deferred income and mining tax liabilities | 1,014.9 | 1,094.9 | ||||||
|
|
|
| |||||
Provisions, including rehabilitation accruals | (118.8 | ) | (103.7 | ) | ||||
Tax losses | (162.8 | ) | (159.8 | ) | ||||
Unredeemed capital expenditure | (867.6 | ) | (883.8 | ) | ||||
Other | (7.1 | ) | (4.1 | ) | ||||
|
|
|
| |||||
Gross deferred income and mining tax assets | (1,156.3 | ) | (1,151.4 | ) | ||||
Valuation allowance for deferred tax assets | 386.8 | 330.2 | ||||||
|
|
|
| |||||
Total deferred income and mining tax assets | (769.5 | ) | (821.2 | ) | ||||
|
|
|
| |||||
Total deferred income and mining tax liabilities | 245.4 | 273.7 | ||||||
Less: short-term portion of deferred income and mining tax liabilities | (10.3 | ) | (16.0 | ) | ||||
Less: short-term portion of deferred income and mining tax assets | 6.9 | 29.0 | ||||||
|
|
|
| |||||
Long-term portion of deferred income and mining taxes | 242.0 | 286.7 | ||||||
|
|
|
| |||||
Classified as: | ||||||||
Long-term liabilities | (252.9 | ) | (309.3 | ) | ||||
Long-term assets | 10.9 | 22.6 | ||||||
|
|
|
| |||||
| (242.0 | ) | (286.7 | ) | |||||
|
|
|
| |||||
The classification of deferred income and mining tax liabilities or assets as current or non-current is based on the related liability or asset creating the deferred tax. Deferred taxes not related to a specific liability or asset are classified based on the estimated period of reversal.
The Group has established a valuation allowance for certain deferred tax assets where cumulative losses require a valuation allowance, or where management believes that they will not be realized based on projections as of December 31, 2014 and December 31, 2013. The valuation allowance relates primarily to net operating loss carry-forwards for the entities below, except for GFI Joint Venture Holdings, or GFIJVH, and Gold Fields Operations, or GFO, which also include unredeemed capital expenditure.
| December 31, 2014 | December 31, 2013 | |||||||
Orogen Investments SA (Luxembourg) | 36.8 | 41.0 | ||||||
Gold Fields Arctic Platinum Oy | 18.3 | 23.2 | ||||||
GFI Joint Venture Holdings | 305.3 | 266.0 | ||||||
Gold Fields Operations | 26.4 | — | ||||||
|
|
|
| |||||
| 386.8 | 330.2 | |||||||
|
|
|
| |||||
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
As at December 31, 2014 and December 31, 2013 the Group had unredeemed capital expenditure available for deduction against future mining income at its operations as follows:
| December 31, 2014 | December 31, 2013 | |||||||||||||||||||
| Tax Rate | Gross | Net | Gross | Net | ||||||||||||||||
Unredeemed capital expenditure: | ||||||||||||||||||||
Gold Fields Operations | 30 | % | 656.9 | 197.0 | 692.3 | 207.7 | ||||||||||||||
GFI Joint Venture Holdings1 | 30 | % | 1,822.6 | 546.8 | 1,779.9 | 534.0 | ||||||||||||||
Gold Fields La Cima 2 | 30 | % | 352.5 | 105.8 | 450.9 | 135.3 | ||||||||||||||
Abosso Gold Fields Limited | 35 | % | 51.3 | 18.0 | 19.3 | 6.8 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
| 2,883.3 | 867.6 | 2,942.4 | 883.8 | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Gold Fields has recognised a full valuation allowance against the net deferred tax asset relating to GFIJVH.
| December 31, 2014 | December 31, 2013 | |||||||||||||||||||
| Tax Rate | Gross | Net | Gross | Net | ||||||||||||||||
Calculated tax losses: | ||||||||||||||||||||
Gold Fields Operations 1 | 30 | % | 283.0 | 84.9 | 301.1 | 90.4 | ||||||||||||||
Gold Fields Joint Venture Holdings 1 | 30 | % | 20.9 | 6.3 | — | — | ||||||||||||||
Gold Fields Group Services (Pty) Limited1 | 28 | % | 0.8 | 0.2 | 8.2 | 2.3 | ||||||||||||||
Abosso Gold Fields2 | 35 | % | 46.5 | 16.3 | 7.2 | 2.6 | ||||||||||||||
Orogen Investments SA (Luxembourg)3 | 29.2 | % | 126.0 | 36.8 | 140.4 | 41.2 | ||||||||||||||
Gold Fields Arctic Platinum Oy 4 | 24.5 | % | 74.7 | 18.3 | 94.8 | 23.3 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
| 551.9 | 162.8 | 551.7 | 159.8 | |||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
| ||
| ||
| ||
| ||
|
It is possible that the Group will receive assessments during the next twelve months, which may have an effect on unrecognised tax benefits. The Group cannot estimate the amounts of possible changes as a result of an assessment.
| Fiscal Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
BASIC (LOSS)/EARNINGS PER SHARE | ||||||||||||
Net (loss)/income attributable to Gold Fields shareholders | ||||||||||||
- Continuing operations | (27.2 | ) | (268.4 | ) | 292.1 | |||||||
- Discontinued operations * | — | 20.5 | 362.2 | |||||||||
|
|
|
|
|
| |||||||
| (27.2 | ) | (247.9 | ) | 654.3 | ||||||||
|
|
|
|
|
| |||||||
Weighted average number of shares - continuing operations | ||||||||||||
Shares outstanding - beginning of year | 767,160,263 | 729,536,813 | 723,735,186 | |||||||||
Weighted average number of shares issued | 1,981,608 | 13,069,913 | 3,724,271 | |||||||||
|
|
|
|
|
| |||||||
Weighted average number of shares issued at the end of the year | 769,141,871 | 742,606,726 | 727,459,457 | |||||||||
|
|
|
|
|
| |||||||
Basic (loss)/earnings per share | ||||||||||||
- Continuing operations | (0.04 | ) | (0.36 | ) | 0.40 | |||||||
- Discontinued operations * | — | 0.03 | 0.50 | |||||||||
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
The Group presents basic and diluted earnings per share. Basic earnings per share is calculated by dividingbased on the profit attributable to ordinary shareholders from discontinued operations of $nil (fiscal 2013: $20.5 million and fiscal 2012: $362.2 million)divided by the weighted average number of ordinary shares in issue in fiscal 2014 of 769,141,871 (fiscal 2013: 742,606,726 and fiscal 2012: 727,459,457).
| Fiscal Year Ended December 31, | ||||||||||||
| 2014 | 2013 | 2012 | ||||||||||
DILUTED (LOSS)/EARNINGS PER SHARE | ||||||||||||
Net (loss)/income attributable to Gold Fields shareholders | ||||||||||||
- Continuing operations | (27.2 | ) | (268.4 | ) | 292.1 | |||||||
- Discontinued operations * | — | 20.5 | 362.2 | |||||||||
|
|
|
|
|
| |||||||
| (27.2 | ) | (247.9 | ) | 654.3 | ||||||||
|
|
|
|
|
| |||||||
Weighted average number of shares - continuing operations | ||||||||||||
Weighted average number of shares issued at the end of the year | 769,141,871 | 742,606,726 | 727,459,457 | |||||||||
Effect of dilutive securities 1 | — | — | 3,264,493 | |||||||||
|
|
|
|
|
| |||||||
| 769,141,871 | 742,606,726 | 730,723,950 | ||||||||||
|
|
|
|
|
| |||||||
Diluted (loss)/earnings per share | ||||||||||||
- Continuing operations | (0.04 | ) | (0.36 | ) | 0.40 | |||||||
- Discontinued operations * | — | 0.03 | 0.50 | |||||||||
during the period. Diluted earnings per share is calculated ondetermined by adjusting the basis of profit attributable to ordinary shareholders, from discontinued operations of $nil (fiscal 2013: $20.5 millionif applicable, and fiscal 2012: $362.2 million) and 769,141,871 shares, being the dilutedweighted average number of ordinary shares in issue for ordinary shares that may be issued in fiscal 2014 (fiscal 2013: 742,606,726 and fiscal 2012: 730,723,950).the future.
On February 18, 2013, Gold Fields completedOperating segments are reported in a manner consistent with the separation of its wholly-owned subsidiary, Sibanye Gold (formerly known as GFI Mining South Africa, or GFIMSA), which includesinternal reporting provided to the KDCchief operating decision-maker and Beatrixis based on individual mining operations. The Spin-off was achieved by way of Gold Fields making a distribution on a pro rata basis of one Sibanye Gold ordinary sharechief operating decision-maker, who is responsible for every one Gold Fields share (whether held in the form of shares, American depositary receipts, or ADRs, or international depositary receipts) to Gold Fields shareholders, registered as such in Gold Fields’ register at close of business on February 15, 2013, in terms of section 46allocating resources and assessing performance of the South African Companies Act and section 46 ofoperating segments, has been identified as the South African Income Tax Act. The Board of Gold Fields passed the resolution necessary to implement the Spin-off on December 12, 2012. Sibanye GoldExecutive Committee that makes strategic decisions.
Gold Fields LimitedConsolidated income statements
Notes tofor the Consolidated Financial Statementsyear ended 31 December
($Figures in millions unless otherwise noted)stated
shares listed on the JSE, and on the NYSE on February 11, 2013. As of February 18, 2013, or the Spin-off Date, Gold Fields and Sibanye Gold were independent, publicly traded companies with separate public ownership, boards of directors and management.
| UNITED STATES DOLLAR | ||||||||||||||
| Notes | 2016 | 2015 | 2014 | |||||||||||
Revenue | 1 | 2,749.5 | 2,545.4 | 2,868.8 | ||||||||||
Cost of sales | 2 | (2,066.7 | ) | (2,066.1 | ) | (2,334.4 | ) | |||||||
|
|
|
|
|
| |||||||||
Net operating profit | 682.8 | 479.3 | 534.4 | |||||||||||
Investment income | 3 | 8.3 | 6.3 | 4.2 | ||||||||||
Finance expense | 4 | (78.3 | ) | (82.9 | ) | (99.2 | ) | |||||||
Gain/(loss) on financial instruments | 14.4 | (4.7 | ) | (11.5 | ) | |||||||||
Foreign exchange (loss)/gain | (6.4 | ) | 9.5 | 8.4 | ||||||||||
Other costs, net | (16.8 | ) | (21.2 | ) | (62.5 | ) | ||||||||
Share-based payments | 5 | (14.4 | ) | (10.9 | ) | (26.0 | ) | |||||||
Long-term incentive plan | 26 | (11.0 | ) | (5.3 | ) | (8.7 | ) | |||||||
Exploration expense | (92.2 | ) | (53.5 | ) | (47.2 | ) | ||||||||
Share of results of equity accounted investees after taxation | 15 | (2.3 | ) | (5.7 | ) | (2.4 | ) | |||||||
Restructuring costs | (11.7 | ) | (9.3 | ) | (42.0 | ) | ||||||||
Impairment of investments and assets | 6 | (76.5 | ) | (221.1 | ) | (26.7 | ) | |||||||
Profit on disposal of investments | 2.3 | 0.1 | 0.5 | |||||||||||
Profit on disposal of Chucapaca | 32 | — | — | 4.6 | ||||||||||
Profit/(loss) on disposal of assets | 15.1(b) | 48.0 | (0.1 | ) | (1.3 | ) | ||||||||
|
|
|
|
|
| |||||||||
Profit before royalties and taxation | 7 | 446.2 | 80.5 | 224.6 | ||||||||||
Royalties | 8 | (80.4 | ) | (76.0 | ) | (86.1 | ) | |||||||
|
|
|
|
|
| |||||||||
Profit before taxation | 365.8 | 4.5 | 138.5 | |||||||||||
Mining and income taxation | 9 | (192.1 | ) | (247.1 | ) | (118.1 | ) | |||||||
|
|
|
|
|
| |||||||||
Profit/(loss) for the year | 173.7 | (242.6 | ) | 20.4 | ||||||||||
|
|
|
|
|
| |||||||||
Profit/(loss) attributable to: | ||||||||||||||
- Owners of the parent | 162.8 | (242.1 | ) | 12.8 | ||||||||||
- Non-controlling interest holders | 10.9 | (0.5 | ) | 7.6 | ||||||||||
|
|
|
|
|
| |||||||||
| 173.7 | (242.6 | ) | 20.4 | |||||||||||
|
|
|
|
|
| |||||||||
Earnings/(loss) per share attributable to owners of the parent: | ||||||||||||||
Basic earnings/(loss) per share - cents | 10.1 | 20 | (31 | ) | 2 | |||||||||
Diluted basic earnings/(loss) per share - cents | 10.2 | 20 | (31 | ) | 2 | |||||||||
The distribution was a spin-off to Gold Fields shareholders and was accordingly accounted for at the historical carrying amountaccompanying notes form an integral part of the net assets of Sibanye Gold. The total distribution amounted to $1,033.7 million.
The distribution met the requirements of a discontinued operation, since the operations and cash flows of Sibanye Gold have been eliminated from the on-going operations of the Group as a result of the distribution and Gold Fields did not have any significant continuing involvement in the operation of Sibanye Gold after the distribution, and has been presented as such in these financial statements. Below is a summary of the results of the discontinued operation as well as the related assets and liabilities distributed.
| Fiscal Year Ended December 31, | ||||||||
| 2013 | 2012 | |||||||
Product sales | 310.7 | 2,021.2 | ||||||
Costs and expenses | (285.7 | ) | (1,737.8 | ) | ||||
|
|
|
| |||||
Income before tax and share of equity investee’s profits | 25.0 | 283.4 | ||||||
Income and mining tax expense | (5.4 | ) | 67.5 | |||||
|
|
|
| |||||
Income before share of equity investee’s profits | 19.6 | 350.9 | ||||||
Share of equity investee’s profits | 0.9 | 11.4 | ||||||
|
|
|
| |||||
Net income | 20.5 | 362.3 | ||||||
|
|
|
| |||||
Property, plant and equipment, net | 1,987.3 | |||||||
Non-current investments | 187.0 | |||||||
Current assets | 285.4 | |||||||
Current liabilities | (234.8 | ) | ||||||
Non-current liabilities | (1,191.2 | ) | ||||||
|
| |||||||
Net carrying value | 1,033.7 | |||||||
Net asset value distributed | (1,033.7 | ) | ||||||
|
| |||||||
Profit on distribution | — | |||||||
|
| |||||||
During fiscal 2014, Gold Fields sold its 51% interest in Canteras del Hallazgo (entity that housed the Chucapaca exploration project in Peru) to Compañía de Minas Buenaventura S.A.A. Refer note 3(d).
Below is a summary of Chucapaca’s assets and liabilities sold in 2014:
| ||||||
| ||||||
| ||||||
| ||||||
Gold Fields LimitedConsolidated statements of comprehensive income
Notes tofor the Consolidated Financial Statementsyear ended 31 December
($Figures in millions unless otherwise noted)stated
Following the decision to dispose of non-core projects, Arctic Platinum (fiscal 2013: Arctic Platinum and Yanfolila) is classified as held for sale and valued at the lower of fair value less cost to sell or carrying value. The disposal is expected to be completed during fiscal 2015.
| December 31, 2014 | December 31, 2013 | |||||||
Arctic Platinum | 31.0 | 31.0 | ||||||
Yanfolila 1,2 | — | 16.0 | ||||||
|
|
|
| |||||
Total assets held for sale | 31.0 | 47.0 | ||||||
|
|
|
| |||||
| UNITED STATES DOLLAR | ||||||||||||||||||||
| 2016 | 2015 | 2014 | ||||||||||||||||||
Profit/(loss) for the year | 173.7 | (242.6 | ) | 20.4 | ||||||||||||||||
Other comprehensive income, net of tax1,2 | 121.4 | (636.6 | ) | (320.1 | ) | |||||||||||||||
Marked-to-market valuation of listed investments | (8.3 | ) | 0.4 | 2.8 | ||||||||||||||||
Reclassification of realised gain on disposal of listed investments | — | — | (1.8 | ) | ||||||||||||||||
Foreign currency translation adjustments | 129.7 | (637.0 | ) | (321.1 | ) | |||||||||||||||
|
|
|
|
|
| |||||||||||||||
Total comprehensive income for the year | 295.1 | (879.2 | ) | (299.7 | ) | |||||||||||||||
|
|
|
|
|
| |||||||||||||||
Attributable to: | ||||||||||||||||||||
- Owners of the parent | 284.2 | (878.7 | ) | (308.9 | ) | |||||||||||||||
-Non-controlling interest holders | 10.9 | (0.5 | ) | 9.2 | ||||||||||||||||
|
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|
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|
| |||||||||||||||
| 295.1 | (879.2 | ) | (299.7 | ) | ||||||||||||||||
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| |||||||||||||||
| 1 |
| 2 |
The accompanying notes form an integral part of these financial statements.
| December 31, 2014 | December 31, 2013 | |||||||
Product sale trade receivables | 86.4 | 110.9 | ||||||
Other trade receivables | 14.0 | 16.7 | ||||||
Deposits | 0.3 | 5.1 | ||||||
Value added tax | 39.9 | 57.7 | ||||||
Payroll debtors | 8.2 | 3.7 | ||||||
Prepayments | 64.2 | 68.2 | ||||||
Other | 13.5 | 10.3 | ||||||
|
|
|
| |||||
| 226.5 | 272.6 | |||||||
|
|
|
| |||||
| December 31, 2014 | December 31, 2013 | |||||||
Ore stockpiles | 100.7 | 88.0 | ||||||
Materials contained on heap leach pads | 109.0 | 109.0 | ||||||
Gold in-process | 38.5 | 43.1 | ||||||
Consumable stores | 273.2 | 269.9 | ||||||
Other | — | 1.7 | ||||||
|
|
|
| |||||
| 521.4 | 511.7 | |||||||
|
|
|
| |||||
Classified as: | ||||||||
Current assets | 373.3 | 402.7 | ||||||
Long-term assets1 | 148.1 | 109.0 | ||||||
|
|
|
| |||||
| 521.4 | 511.7 | |||||||
|
|
|
| |||||
Gold Fields LimitedConsolidated statements of financial position
Notes to the Consolidated Financial Statementsat 31 December
($Figures in millions unless otherwise noted)stated
| December 31, 2014 | December 31, 2013 | |||||||
Cost | 7,453.4 | 7,731.7 | ||||||
Accumulated depreciation and amortization | (3,000.1 | ) | (2,798.7 | ) | ||||
|
|
|
| |||||
| 4,453.3 | 4,933.0 | |||||||
|
|
|
| |||||
Mining properties, mine development costs, mine plant facilities and mineral interests | 3,807.2 | 4,285.1 | ||||||
Asset retirement costs | 105.7 | 89.3 | ||||||
Other non-mining assets | 540.4 | 558.6 | ||||||
|
|
|
| |||||
| 4,453.3 | 4,933.0 | |||||||
|
|
|
| |||||
Included in property, plant and equipment is cumulative capitalized interest, net of amortization, relating to the following assets:
| December 31, 2014 | December 31, 2013 | |||||||
South African operations | 67.4 | 50.0 | ||||||
Tarkwa Mine | 9.0 | 10.9 | ||||||
Cerro Corona | 34.5 | 43.0 | ||||||
|
|
|
| |||||
| 110.9 | 103.9 | |||||||
|
|
|
| |||||
| UNITED STATES DOLLAR | ||||||||||||||||
| Notes | 2016 | 2015 | ||||||||||||||
ASSETS | ||||||||||||||||
Non-current assets | 5,282.0 | 4,969.6 | ||||||||||||||
Property, plant and equipment | 13 | 4,547.8 | 4,312.4 | |||||||||||||
Goodwill | 14 | 317.8 | 295.3 | |||||||||||||
Inventories | 19 | 132.8 | 132.8 | |||||||||||||
Equity-accounted investees | 15.1 | 170.7 | 129.1 | |||||||||||||
Investments | 17 | 19.7 | 10.9 | |||||||||||||
Environmental trust funds | 18 | 44.5 | 35.0 | |||||||||||||
Deferred taxation | 23 | 48.7 | 54.1 | |||||||||||||
Current assets | 1,052.7 | 908.1 | ||||||||||||||
Inventories | 19 | 329.4 | 298.2 | |||||||||||||
Trade and other receivables | 20 | 170.2 | 168.9 | |||||||||||||
Cash and cash equivalents | 21 | 526.7 | 440.0 | |||||||||||||
Assets held for sale | 12 | 26.4 | 1.0 | |||||||||||||
|
|
|
| |||||||||||||
Total assets | 6,334.7 | 5,877.7 | ||||||||||||||
|
|
|
| |||||||||||||
EQUITY AND LIABILITIES | ||||||||||||||||
Equity attributable to owners of the parent | 3,067.0 | 2,656.1 | ||||||||||||||
Share capital | 22 | 59.6 | 58.1 | |||||||||||||
Share premium | 3,562.9 | 3,412.9 | ||||||||||||||
Other reserves | (2,126.4 | ) | (2,262.2 | ) | ||||||||||||
Retained earnings | 1,570.9 | 1,447.3 | ||||||||||||||
Non-controlling interest | 122.6 | 111.9 | ||||||||||||||
|
|
|
| |||||||||||||
Total equity | 3,189.6 | 2,768.0 | ||||||||||||||
Non-current liabilities | 2,285.7 | 2,545.6 | ||||||||||||||
Deferred taxation | 23 | 465.5 | 487.3 | |||||||||||||
Borrowings | 24 | 1,504.9 | 1,761.6 | |||||||||||||
Provisions | 25 | 291.7 | 284.1 | |||||||||||||
Long-term incentive plan | 26 | 23.6 | 12.6 | |||||||||||||
Current liabilities | 859.4 | 564.1 | ||||||||||||||
Trade and other payables | 27 | 543.3 | 427.6 | |||||||||||||
Royalties payable | 30 | 20.2 | 18.5 | |||||||||||||
Taxation payable | 31 | 107.9 | 59.3 | |||||||||||||
Current portion of borrowings | 24 | 188.0 | 58.7 | |||||||||||||
|
|
|
| |||||||||||||
Total equity and liabilities | 6,334.7 | 5,877.7 | ||||||||||||||
|
|
|
| |||||||||||||
Depreciation charge on property, plant and equipment for continuing operations amounted to $677.3 million (fiscal 2013: $568.5 million and fiscal 2012: $425.8 million).
Fleet assets in Ghana with a carrying valueThe accompanying notes form an integral part of $176.6 million have been pledged as security for the $70 million senior secured revolving credit facility. Refer note 16(f).
| December 31, 2014 | December 31, 2013 | |||||||
Balance at beginning of the year | 845.5 | 1,020.1 | ||||||
Translation adjustment | (89.2 | ) | (174.6 | ) | ||||
|
|
|
| |||||
Balance at end of the year | 756.3 | 845.5 | ||||||
|
|
|
| |||||
The goodwill arose on the acquisition of South Deep and was attributable to the upside potential of the asset, deferred tax and other factors. The total goodwill has been allocated to South Deep, being the reporting unit where it is tested for impairment.
Goodwill is tested for impairment on an annual basis at the end of each fiscal year or transition period. In addition, the Group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount of a reporting unit may not be recoverable.
For goodwill impairment testing purposes, Gold Fields estimated the fair value of the South Deep reporting unit. The process for determining fair value is subjective as gold mining companies typically trade at athese financial statements.
Gold Fields LimitedConsolidated statements of changes in equity
Notes tofor the Consolidated Financial Statementsyear ended 31 December
($Figures in millions unless otherwise noted)stated
market capitalization that is based on net asset value and requires management to make numerous assumptions. The net asset value represents a discounted cash flow valuation based on expected future cash flows. The expected future cash flows used to determine the fair value of the reporting unit are inherently uncertain and could materially change over time. They are significantly affected by a number of factors, including, but not limited to, reserves and production estimates, together with economic factors such as the long-term gold price and foreign currency exchange rates, estimates of production costs, future capital expenditure and discount rates. Therefore it is possible that outcomes within the next fiscal year that are materially different from the assumptions used in the impairment testing process could require an adjustment to the carrying values.
Based on management’s assessment, no impairment to the goodwill was required at December 31, 2014. Management’s estimates and assumptions for the goodwill impairment test include:
- Long term gold price of R420,000 per kilogram (US$1,300 per ounce) for the life of mine of 72 years (fiscal 2013: R400,000 per kilogram (US$1,300 per ounce) for the life of mine of 73 years);
- A nominal discount rate of between 12.9% and 14.1% (fiscal 2013: 10.9% and 12.3%);
- Market value, at US$63.7 per ounce (fiscal 2013: US$50.0 per ounce), used for resource with infrastructure;
- Expected future operating costs and capital expenditures to produce proven and probable gold reserves based on mine plans that assume current plant capacity; and
- Expected cash flows associated with value beyond proven and probable reserves.
| UNITED STATES DOLLAR | ||||||||||||||||||||||||||||||||||
| Number of ordinary shares in issue | Share capital and share premium | Accumulated other comprehensive income 1 | Other reserves 2 | Retained earnings | Equity attributable to owners of the parent | Non- controlling interest | Total equity | |||||||||||||||||||||||||||
Balance at 31 December 2013 | 767,160,263 | 3,470.7 | (1,445.1 | ) | 104.3 | 1,721.5 | 3,851.4 | 193.8 | 4,045.2 | |||||||||||||||||||||||||
Profit for the year | — | — | — | — | 12.8 | 12.8 | 7.6 | 20.4 | ||||||||||||||||||||||||||
Other comprehensive income | — | — | (321.7 | ) | — | — | (321.7 | ) | 1.6 | (320.1 | ) | |||||||||||||||||||||||
Total comprehensive income | — | — | (321.7 | ) | — | 12.8 | (308.9 | ) | 9.2 | (299.7 | ) | |||||||||||||||||||||||
Dividends declared | — | — | — | — | (29.8 | ) | (29.8 | ) | (10.7 | ) | (40.5 | ) | ||||||||||||||||||||||
Share-based payments | — | — | — | 26.0 | — | 26.0 | — | 26.0 | ||||||||||||||||||||||||||
Disposal of subsidiary (refer note 32) | — | — | — | — | — | — | (69.8 | ) | (69.8 | ) | ||||||||||||||||||||||||
Equity contributions from non-controlling interest holders | — | — | — | — | — | — | 2.0 | 2.0 | ||||||||||||||||||||||||||
Exercise of employee share options | 4,256,228 | 0.1 | — | — | — | 0.1 | — | 0.1 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance at 31 December 2014 | 771,416,491 | 3,470.8 | (1,766.8 | ) | 130.3 | 1,704.5 | 3,538.8 | 124.5 | 3,663.3 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Loss for the year | — | — | — | — | (242.1 | ) | (242.1 | ) | (0.5 | ) | (242.6 | ) | ||||||||||||||||||||||
Other comprehensive income | — | — | (636.6 | ) | — | — | (636.6 | ) | — | (636.6 | ) | |||||||||||||||||||||||
Total comprehensive income | — | — | (636.6 | ) | — | (242.1 | ) | (878.7 | ) | (0.5 | ) | (879.2 | ) | |||||||||||||||||||||
Dividends declared | — | — | — | — | (15.1 | ) | (15.1 | ) | (12.1 | ) | (27.2 | ) | ||||||||||||||||||||||
Share-based payments | — | — | — | 10.9 | — | 10.9 | — | 10.9 | ||||||||||||||||||||||||||
Exercise of employee share options | 5,177,671 | 0.2 | — | — | — | 0.2 | — | 0.2 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance at 31 December 2015 | 776,594,162 | 3,471.0 | (2,403.4 | ) | 141.2 | 1,447.3 | 2,656.1 | 111.9 | 2,768.0 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Profit for the year | — | — | — | — | 162.8 | 162.8 | 10.9 | 173.7 | ||||||||||||||||||||||||||
Other comprehensive income | — | — | 121.4 | — | — | 121.4 | — | 121.4 | ||||||||||||||||||||||||||
Total comprehensive income | — | — | 121.4 | — | 162.8 | 284.2 | 10.9 | 295.1 | ||||||||||||||||||||||||||
Dividends declared | — | — | — | — | (39.2 | ) | (39.2 | ) | (0.2 | ) | (39.4 | ) | ||||||||||||||||||||||
Share-based payments | — | — | — | 14.4 | — | 14.4 | — | 14.4 | ||||||||||||||||||||||||||
Shares issued3 | 38,857,913 | 151.5 | — | — | — | 151.5 | — | 151.5 | ||||||||||||||||||||||||||
Exercise of employee share options | 5,154,870 | — | — | — | — | — | — | — | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
Balance at 31 December 2016 | 820,606,945 | 3,622.5 | (2,282.0 | ) | 155.6 | 1,570.9 | 3,067.0 | 122.6 | 3,189.6 | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||
| December 31, 2014 | December 31, 2013 | |||||||
Listed investmentsa | 4.4 | 3.2 | ||||||
Unlisted investmentsb | 1.1 | 4.3 | ||||||
Investments held by environmental trust fundsc | 30.5 | 23.9 | ||||||
Equity investeesd | 250.5 | 237.5 | ||||||
|
|
|
| |||||
| 286.5 | 268.9 | |||||||
|
|
|
| |||||
| December 31, 2014 | December 31, 2013 | |||||||||||||||
| Number of shares | Market value, $ per share | Number of shares | Market value, $ per share | |||||||||||||
Radius Gold Incorporated | 3,625,124 | 0.07 | 3,625,124 | 0.09 | ||||||||||||
Gran Columbia Gold Corporation | 63,410 | 0.34 | 63,410 | 0.78 | ||||||||||||
Sibanye Gold | 856,330 | 1.92 | 856,330 | 1.12 | ||||||||||||
Orsu Metals Corp. | 26,134,919 | 0.02 | 26,134,919 | 0.05 | ||||||||||||
Clancy Exploration Ltd. | 17,764,783 | 0.01 | 17,764,783 | 0.01 | ||||||||||||
Tocqueville Bullion Reserve Ltd. | 1,339 | 1,178.73 | — | — | ||||||||||||
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
Details of the listed investments are as follows:
| December 31, 2014 | December 31, 2013 | |||||||
Fair value | 4.4 | 3.2 | ||||||
Less: Cost | 3.9 | 3.4 | ||||||
|
|
|
| |||||
Net unrealized gain/(loss) | 0.5 | (0.2 | ) | |||||
|
|
|
| |||||
The net gain/(loss) comprises: | ||||||||
Gross unrealized gains | 0.7 | 0.2 | ||||||
Gross unrealized losses | (0.2 | ) | (0.4 | ) | ||||
|
|
|
| |||||
| 0.5 | (0.2 | ) | ||||||
|
|
|
| |||||
The gross unrealized loss comprises the following number of equity instruments none of which have been in a continuous unrealized loss position for more than 12 months | 3 | 3 | ||||||
|
|
|
| |||||
Realized gain reclassified from equity on disposal of listed investments ($ million) | 1.8 | 7.4 | ||||||
|
|
|
| |||||
Investments acquired during fiscal 2014 comprised mainly of Tocqueville Bullion Reserve Limited and Robust Resources Limited (fiscal 2013: Clancy Exploration Limited). The investment in Robust Resources limited comprised of 10,274,565 shares, which were acquired for $2.6 million. Investments disposed during fiscal 2014 comprised mainly of Robust Resources Limited (fiscal 2013: Northam Platinum Limited and Timpetra Resources Limited).
As a result of the disposal of investments, a realized gain on disposal of listed investments before tax of $1.8 million (fiscal 2013: $7.4 million) was reclassified out of accumulated other comprehensive income to net income and is included in profit on disposal of investments and subsidiaries in the consolidated statement of operations.
In December 2014, GFO advanced $3.0 million to Rand Refinery in terms of the above Facility. The investment in Rand Refinery, as well as the above loan, was written down to $nil, resulting in a total impairment of $4.1 million. This amount is included in impairment of investments in the consolidated statement of operations.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
| Ownership % | Market value | |||||||||||||||||
Investment | Description of business | December 31, 2014 | December 31, 2013 | December 31, 2014 | December 31, 2013 | |||||||||||||
Far South East | Exploration | 40.0 | 40.0 | * | * | |||||||||||||
Rusoro Mining Limited | Gold mining | 26.4 | 26.4 | 1.8 | 3.3 | |||||||||||||
Bezant Resources Plc 1 | Exploration | 21.6 | 21.6 | 1.3 | 5.1 | |||||||||||||
Hummingbird Resources Plc 2 | Exploration | 25.1 | — | 10.9 | — | |||||||||||||
| (1) |
| (2) | Other reserves includeshare-based payments and share of equity investee’s other comprehensive income. The aggregate of Accumulated other comprehensive income and Other reserves in the consolidated statement of changes in equity is disclosed in the Consolidated statement of financial position as other reserves. |
| (3) | During 2016, Gold Fields |
Carrying amount | December 31, 2014 | December 31, 2013 | ||||||
Far South East | 230.0 | 230.0 | ||||||
Rusoro Mining Limited | — | — | ||||||
Bezant Resources Plc | 1.3 | 7.5 | ||||||
Hummingbird Resources Plc | 19.2 | — | ||||||
|
|
|
| |||||
Total | 250.5 | 237.5 | ||||||
|
|
|
| |||||
Far South East
| December 31, 2014 | December 31, 2013 | |||||||
Gold Fields interest in FSE on December 31, 2014 was 40.0% (2013: 40.0%). | ||||||||
Opening balance | 230.0 | 230.0 | ||||||
Accumulated equity contribution | 72.1 | 68.5 | ||||||
Share of accumulated losses brought forward | (68.5 | ) | (50.1 | ) | ||||
Share of losses recognized for the year | (3.6 | ) | (18.4 | ) | ||||
|
|
|
| |||||
Closing balance | 230.0 | 230.0 | ||||||
|
|
|
| |||||
Gold Fields paid $10.0 million in option fees to Lepanto Consolidated Mining Company during the 6 months ended December 31, 2010. In addition, Gold Fields paid non-refundable down payments of $66.0 million during the year ended December 31, 2011 and $44.0 million during the 6 months ended December 31, 2010 to Liberty Express Assets in accordance with the agreement concluded whereby the Group has the option to acquire 60% of FSE. On March 31, 2012, Gold Fields acquired 40% of the issued share capital of FSE by contributing a further $110.0 million in fiscal year ended December 31, 2012. FSE has no revenues or significant assets or liabilities, except for the rights to explore and eventually mine the property.
Gold Fields Limited
Notesthe period 17 March 2016 and a 0.7% discount to the Consolidated Financial Statements
($ in millions unless otherwise noted)
The remaining 20% option is not likelynet proceeds from the placement was used to be exercised until such time FSE obtains a Foreign Technical Assistance Agreement which allows for direct majority foreign ownership and control.
| December 31, 2014 | December 31, 2013 | |||||||
Trade payables | 170.2 | 141.2 | ||||||
Accruals | 212.1 | 173.8 | ||||||
Payroll and other compensation | 48.9 | 55.1 | ||||||
Leave pay accrual | 37.9 | 42.9 | ||||||
Short-term portion of the South Deep Dividend liability | 1.7 | 1.9 | ||||||
Stamp duty due on acquisition of Yilgarn South assets | — | 15.0 | ||||||
Other1 | 27.7 | 15.1 | ||||||
|
|
|
| |||||
| 498.5 | 445.0 | |||||||
|
|
|
| |||||
| December 31, 2014 | December 31, 2013 | |||||||
- $500 million syndicated revolving credit facilitya | — | — | ||||||
- $200 million non-revolving senior secured term loan b | — | 70.0 | ||||||
- La Cima revolving senior secured credit facilityc | 42.0 | — | ||||||
- $1 billion notes issued | 991.3 | 990.0 | ||||||
- $1 billion syndicated revolving credit facilitye | — | — | ||||||
- $70 million senior secured revolving credit facilityf | 35.0 | 35.0 | ||||||
- $1,510 million term loan and revolving credit facility g | 626.0 | 773.5 | ||||||
- R1,500 million Nedbank revolving credit facilityh | 129.8 | 145.1 | ||||||
- Other loansi | 86.8 | 46.5 | ||||||
|
|
|
| |||||
| 1,910.9 | 2,060.1 | |||||||
Short-term loans and current portion of long-term loans | (140.2 | ) | (121.5 | ) | ||||
|
|
|
| |||||
Total long-term loans | 1,770.7 | 1,938.6 | ||||||
|
|
|
| |||||
(a) $500 million syndicated revolving credit facility
On February 15, 2013, this facility was refinanced by drawing down underrefinance the $1,510US$1,510 million term loan and revolving credit facility as detailedfacilities. The new facilities amount to US$1,290 million. Refer note 24 for further details.
The accompanying notes form an integral part of these financial statements.
Consolidated statements of cash flows
for the year ended 31 December
Figures in 16(g). millions unless otherwise stated
| UNITED STATES DOLLAR | ||||||||||||||||||||||
| Notes | 2016 | 2015 | 2014 | |||||||||||||||||||
Cash flows from operating activities | 917.5 | 743.9 | 808.5 | |||||||||||||||||||
Cash generated by operations | 28 | 1,270.1 | 1,005.4 | 1,061.3 | ||||||||||||||||||
Interest received | 7.3 | 5.9 | 3.6 | |||||||||||||||||||
Dividends received | — | — | 0.1 | |||||||||||||||||||
Change in working capital | 29 | (2.7 | ) | 43.6 | 83.7 | |||||||||||||||||
|
|
|
|
|
| |||||||||||||||||
Cash generated by operating activities | 1,274.7 | 1,054.9 | 1,148.7 | |||||||||||||||||||
Interest paid | (81.7 | ) | (86.8 | ) | (103.8 | ) | ||||||||||||||||
Royalties paid | 30 | (78.7 | ) | (76.9 | ) | (88.8 | ) | |||||||||||||||
Taxation paid | 31 | (156.1 | ) | (118.4 | ) | (105.3 | ) | |||||||||||||||
|
|
|
|
|
| |||||||||||||||||
Net cash from operations | 958.2 | 772.8 | 850.8 | |||||||||||||||||||
Dividends paid | (40.7 | ) | (28.9 | ) | (42.3 | ) | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||
- Owners of the parent | (39.2 | ) | (15.1 | ) | (29.8 | ) | ||||||||||||||||
-Non-controlling interest holders | (0.2 | ) | (12.1 | ) | (10.6 | ) | ||||||||||||||||
- South Deep BEE dividend | (1.3 | ) | (1.7 | ) | (1.9 | ) | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||
Cash flows from investing activities | (867.9 | ) | (651.5 | ) | (530.9 | ) | ||||||||||||||||
Additions to property, plant and equipment | (649.9 | ) | (634.1 | ) | (608.9 | ) | ||||||||||||||||
Proceeds on disposal of property, plant and equipment | 2.3 | 3.1 | 4.9 | |||||||||||||||||||
Proceeds on disposal of Chucapaca | 32 | — | — | 81.0 | ||||||||||||||||||
Purchase of Gruyere Gold project assets | 15.2 | (197.1 | ) | — | — | |||||||||||||||||
Purchase of investments | (12.7 | ) | (3.0 | ) | (4.4 | ) | ||||||||||||||||
Proceeds on disposal of investments | 4.4 | — | 6.4 | |||||||||||||||||||
Environmental trust funds and rehabilitation payments | (14.9 | ) | (17.5 | ) | (9.9 | ) | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||
Cash flows from financing activities | 37.0 | (88.3 | ) | (125.9 | ) | |||||||||||||||||
Equity contributions fromnon-controlling interest holders | — | — | 2.0 | |||||||||||||||||||
Shares issued | 151.5 | — | — | |||||||||||||||||||
Loans raised | 1,298.7 | 506.0 | 463.9 | |||||||||||||||||||
Loans repaid | (1,413.2 | ) | (594.3 | ) | (591.8 | ) | ||||||||||||||||
|
|
|
|
|
| |||||||||||||||||
Net cash generated | 86.6 | 4.1 | 151.7 | |||||||||||||||||||
Effect of exchange rate fluctuation on cash held | 0.1 | (22.1 | ) | (18.7 | ) | |||||||||||||||||
Cash and cash equivalents at beginning of the year | 440.0 | 458.0 | 325.0 | |||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||
Cash and cash equivalents at end of the year | 21 | 526.7 | 440.0 | 458.0 | ||||||||||||||||||
|
|
|
|
|
| |||||||||||||||||
The facility was also cancelled on February 15, 2013.accompanying notes form an integral part of these financial statements.
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 1. |
| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
Revenue from mining operations | 2,749.5 | 2,545.4 | 2,868.8 | |||||||||
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| |||||||
| 2. | COST OF SALES | ||||
| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
Salaries and wages | (409.5 | ) | (389.6 | ) | (448.1 | ) | ||||||
Consumable stores | (353.9 | ) | (389.2 | ) | (441.2 | ) | ||||||
Utilities | (175.1 | ) | (167.9 | ) | (199.2 | ) | ||||||
Mine contractors | (318.2 | ) | (294.9 | ) | (351.0 | ) | ||||||
Other | (176.3 | ) | (189.7 | ) | (245.4 | ) | ||||||
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| |||||||
Operating costs | (1,433.0 | ) | (1,431.3 | ) | (1,684.9 | ) | ||||||
Gold inventory change | 45.5 | (24.9 | ) | 7.2 | ||||||||
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Operating costs including gold inventory change | (1,387.5 | ) | (1,456.2 | ) | (1,677.7 | ) | ||||||
Amortisation and depreciation | (679.2 | ) | (609.9 | ) | (656.7 | ) | ||||||
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Total cost of sales | (2,066.7 | ) | (2,066.1 | ) | (2,334.4 | ) | ||||||
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| 3. |
| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
Dividends received | — | — | 0.1 | |||||||||
Interest received - environmental trust funds | 1.0 | 0.4 | 0.5 | |||||||||
Interest received - cash balances | 7.3 | 5.9 | 3.6 | |||||||||
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| |||||||
Total investment income | 8.3 | 6.3 | 4.2 | |||||||||
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| 4. | ||||||||
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| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
Interest expense – environmental rehabilitation | (10.9 | ) | (11.7 | ) | (18.4 | ) | ||||||
Interest expense – borrowings | (82.5 | ) | (87.8 | ) | (105.0 | ) | ||||||
Borrowing costs capitalised | 15.1 | 16.6 | 24.2 | |||||||||
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Total finance expense | (78.3 | ) | (82.9 | ) | (99.2 | ) | ||||||
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Gold Fields Limited
Notes to the Consolidated Financial Statementsconsolidated financial statements
($for the year ended 31 December
Figures in millions unless otherwise noted)stated
16. SHORT-TERM AND LONG-TERM LOANS (continued)
(b) $200 million non-revolving senior secured term loan
On September 17, 2010, La Cima entered into a non-revolving senior secured term loan for up to $200.0 million with The Bank of Nova Scotia and Banco de Credito del Peru. The purpose of this facility was to repay the La Cima outstanding subordinated loans with its affiliates and to finance its working capital requirements. The loan bore interest at LIBOR plus a margin of 2.00% per annum.
On September 22, 2010, the lenders advanced $200 million to La Cima under this facility. The facility amount was repayable in 20 equal quarterly instalments of $10 million each. During fiscal year ended December 31, 2014, $30.0 million was repaid (fiscal 2013: $40.0 million), all in accordance with the agreement terms.
On December 19, 2014, the outstanding balance of $40.0 million under this facility was refinanced by drawing down under the La Cima revolving senior secured credit facility as detailed in (c) below. This facility was also cancelled on December 19, 2014.
Borrowings under the non-revolving senior secured term loan were secured by first-ranking assignments of all rights, title and interest in all of La Cima’s concentrate sale agreements. In addition, the offshore and onshore collection accounts of La Cima would be subject to an account control agreement and a first ranking charge in favor of the lenders. This facility was non-recourse to the rest of the Group.
| December 31, 2014 | December 31, 2013 | |||||||
Opening balance | 70.0 | 110.0 | ||||||
Loans repaid | (70.0 | ) | (40.0 | ) | ||||
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| |||||
Closing balance | — | 70.0 | ||||||
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| |||||
(c) La Cima revolving senior secured credit facility
On December 16, 2014, La Cima entered into a revolving senior secured credit facility for up to $200 million. The purpose of this facility was to refinance the $200.0 million non-revolving senior secured term loan, to finance its working capital requirements and for general corporate purposes. The final maturity date of this facility is three years from the agreement date. On the agreement date, the total commitments amounted to $75.0 million.
The loan bears interest at LIBOR plus a margin of 1.625% per annum. Borrowings under the revolving senior secured credit facility are secured by first-ranking assignments of all rights, title and interest in all of La Cima’s concentrate sale agreements. In addition, the offshore and onshore collection accounts of La Cima are subject to an account control agreement and a first-ranking charge in favour of the lenders. This facility is non-recourse to the rest of the Gold Fields Group.
Where the utilization under this facility is less than or equal to $66,666,666, a utilization fee of 0.075% per annum will be payable on the amount of utilizations. Where the utilization under this facility is greater than $66,666,666 and less than or equal to $133,333,333, a utilization fee of 0.15% per annum will be payable on the amount of utilizations. Where the utilization under this facility is greater than $133,333,333, a utilization fee of 0.25% per annum will be payable on the amount of utilizations. Such utilization fee is payable quarterly in arrears.
The borrowers are required to pay a quarterly commitment fee of 0.65% per annum on the undrawn amount.
On December 19, 2014, La Cima drew down $42.0 million under this facility.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
16. SHORT-TERM AND LONG-TERM LOANS (continued)
The outstanding balance under this facility at December 31, 2014 was $42.0 million.
Subsequent to year-end, on January 19, 2015, the total commitments were increased by $75.0 million to $150.0 million.
| ||||||||
| ||||||||
(d) $1 billion notes issue
On September 30, 2010, Orogen issued $1,000,000,000 4.875% guaranteed notes, or the Notes, due October 7, 2020. The payment of all Notes is unconditionally and irrevocably guaranteed by Gold Fields Limited, Sibanye Gold, GFO and GF Holdings, or together, the Guarantors, on joint and several basis. The Notes and guarantees constitute direct, unsubordinated and unsecured obligations of Orogen and the Guarantors, respectively, and rank equally in right of payment among themselves and with all other existing and future unsubordinated and unsecured obligations of Orogen and the Guarantors, respectively.
The transaction costs of $13.6 million were deducted from the liability on initial measurement. These costs will unwind over the period of the Notes as an interest expense.
Gold Fields used a portion of the net proceeds of the offering of the Notes to repay certain existing indebtedness of the Group and the balance of the net proceeds for general corporate purposes.
An indemnity agreement (“the Indemnity Agreement”) has been entered into between the Guarantors, pursuant to which the Guarantors (other than Sibanye Gold) hold Sibanye Gold harmless from and against any and all liabilities and expenses which may be incurred by Sibanye Gold under or in connection with the Notes, including any payment obligations by Sibanye Gold to the noteholders or the trustee of the Notes pursuant to the guarantee of the Notes, all on the terms and subject to the conditions contained therein. The Indemnity Agreement will remain in place for as long as Sibanye Gold’s guarantee obligations under the Notes remain in place. In addition, for as long as Sibanye Gold remains a guarantor, Gold Fields is required to pay an annual guarantee fee to Sibanye Gold of 0.25% of the value of the Notes, payable semi-annually. This fee can vary based on Gold Fields credit rating.
| December 31, 2014 | December 31, 2013 | |||||||
Opening balance | 990.0 | 988.8 | ||||||
Unwinding of transaction costs | 1.3 | 1.2 | ||||||
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| |||||
Closing balance | 991.3 | 990.0 | ||||||
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| |||||
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
16. SHORT-TERM AND LONG-TERM LOANS (continued)
(e) $1 billion syndicated revolving credit facility
On February 15, 2013, this facility was refinanced by drawing down under the $1,510 million term loan and revolving credit facility as detailed in 16(g). The facility was also cancelled on February 15, 2013.
| ||||||||
| ||||||||
| ||||||||
(f) $70 million senior secured revolving credit facility
On December 22, 2010, GF Ghana and Abosso entered into a $60 million reducing senior secured revolving credit facility, which became available on February 21, 2011. The available facility amount reduces annually on each anniversary date being 21 February, from $60 million to $43 million to $35 million in the last and final year with the final maturity date being February 21, 2014. The final maturity date was subsequently extended to May 21, 2014. The purpose of this facility is for general corporate purposes, working capital purposes and/or capital expenditure purposes, including the purchase of a yellow vehicle fleet.
On May 6, 2014, the facility was amended and increased to $70 million. The final maturity date of the new facility is three years from the financial close date (May 6, 2017).
The loan bears interest at LIBOR plus a margin of 2.40% per annum. The borrowers are required to pay a quarterly commitment fee of 1.00% per annum.
Borrowings under the facility are guaranteed by GF Ghana and Abosso and further secured by the registration of security over certain fleet vehicles owned by GF Ghana and Abosso, or the Secured Assets. In addition, the lenders are noted as first loss payees under the insurance contracts in respect of the Secured Assets and are assigned the rights under the maintenance contracts between certain suppliers of the Secured Assets. This facility is non-recourse to the rest of the Group.
During 2014, the outstanding balance of $35.0 million under the initial facility was refinanced by drawing down $35.0 million under the amended facility.
The outstanding borrowings for GF Ghana on December 31, 2014 were $35.0 million (December 31, 2013: $35.0 million).
| December 31, 2014 | December 31, 2013 | |||||||
Opening balance | 35.0 | — | ||||||
Loans advanced | 35.0 | 35.0 | ||||||
Loans repaid | (35.0 | ) | — | |||||
|
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| |||||
Closing balance | 35.0 | 35.0 | ||||||
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| |||||
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
16. SHORT-TERM AND LONG-TERM LOANS (continued)
(g) $1,510 million term loan and revolving credit facility
On November 28, 2012, Orogen, GFO and GFI Joint Venture Holdings (Pty) Limited, or GFIJVH (collectively “the Borrowers”) entered into a $900 million term loan and revolving credit facility, or the $900 million facility. The $900 million facility comprises a $450 million three-year term loan tranche, or Facility A and a $450 million five-year revolving tranche, or Facility B. In addition to the $900 million facility, Orogen, GFO and GFIJVH entered into a $600 million bridge loan to bond issue facility, or the US$ bridge facility. The $ bridge facility had a 21-month maturity.
The purpose of the $900 million facility was to refinance the existing $1 billion syndicated revolving credit facility and the $500 million syndicated revolving credit facility on the spin-off of Sibanye Gold in February 2013 and for general corporate and working capital purposes. The final maturity dates of Facility A and Facility B are November 28, 2015 and November 28, 2017, respectively, with the $ bridge facility maturing on August 28, 2014.
Subsequent to entering into the $900 million facility, the facility was syndicated to a wider bank group and received an oversubscription which allowed the Borrowers to increase the facility amount to $1,440 million on January 30, 2013, or the $1,440 million facility. Accordingly, the amounts of Facility A and Facility B both increased to $720 million. As a result of this oversubscription, the Borrowers cancelled the $ bridge facility on January 30, 2013.
On July 22, 2013, the agreement was amended and Facility A was decreased to a $100 million while a third $620 million revolving tranche, or Facility C was added. Facility C was due to mature on November 28, 2015.
On June 18, 2014, the agreement was amended and Facility A was increased to $120 million while Facility C was increased to $670 million. $75 million of Facility A matures on November 28, 2015 and the remaining portion of $45 million matures on November 28, 2017, facility C matures on November 28, 2017.
Borrowings under Facility A bear interest at LIBOR plus an initial margin of 2.45% per annum, borrowing under Facility B bear interest at LIBOR plus an initial margin of 2.25% per annum and borrowings under Facility C bear interest at LIBOR plus an initial margin of 2.00%. The initial margins detailed above are based on the current long term credit rating assigned to Gold Fields and could either increase or decrease depending on the changes in the long term credit rating of Gold Fields.
Where the utilization under Facility B is less than or equal to 33 1/3%, a utilization fee of 0.20% per annum will be payable on the amount of utilizations. Where the utilization under Facility B is greater than 33 1/3% and less than or equal to 66 2/3%, a utilization fee of 0.40% per annum will be payable on the amount of utilizations. Where the utilization under Facility B is greater than 66 2/3%, a utilization fee of 0.60% per annum will be payable on the amount of utilizations. Such utilization fee is payable quarterly in arrears. The borrowers are required to pay a quarterly commitment fee of 0.90% per annum under Facility B on the undrawn amount.
Where the utilization under Facility C is less than or equal to 33 1/3%, a utilization fee of 0.15% per annum will be payable on the amount of utilizations. Where the utilization under Facility C is greater than 33 1/3% and less than or equal to 66 2/3%, a utilization fee of 0.30% per annum will be payable on the amount of utilizations. Where the utilization under Facility C is greater than 66 2/3%, a utilization fee of 0.45% per annum will be payable on the amount of utilizations. Such utilization fee is payable quarterly in arrears. The borrowers are required to pay a quarterly commitment fee of 0.80% per annum under Facility C on the undrawn amount.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
16. SHORT-TERM AND LONG-TERM LOANS (continued)
The facility was undrawn at December 31, 2012.
On February 15, 2013, the $1 billion and the $500 million syndicated revolving credit facilities were refinanced by drawing down $720.0 million under this facility.
On various dates during 2014, Orogen made additional drawdowns of $41.5 million (fiscal 2013: $173.0 million) under this facility. Orogen repaid $189.0 million (fiscal 2013: $119.5 million) during 2014 under this facility.
The outstanding balance under this facility at December 31, 2014 was $626.0 million (December 31, 2013: $773.5 million).
Borrowings under the $1,510 million facility are guaranteed by Gold Fields, GF Holdings, Orogen, GFO and GFIJVH.
| December 31, 2014 | December 31, 2013 | |||||||
Opening balance | 773.5 | — | ||||||
Loans advanced | 41.5 | 893.0 | ||||||
Loans repaid | (189.0 | ) | (119.5 | ) | ||||
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| |||||
Closing balance | 626.0 | 773.5 | ||||||
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| |||||
(h) R1,500 million Nedbank revolving credit facility
On March 1, 2013, Nedbank, GFIJVH and GFO entered into a R1,500 million revolving credit facility. The purpose of the facility is to fund Gold Fields’ capital expenditure and general corporate and working capital requirements. The final maturity date of this facility is March 7, 2018.
The facility bears interest at JIBAR plus a margin of 2.50% per annum. The borrowers are required to pay a commitment fee of 0.85% per annum every six months on the undrawn amount.
On March 8, 2013, each of GFO and GFIJVH drew down $37.7 million under this facility. On each of June 10, 2013 and September 10, 2013, each of GFO and GFIJVH drew down an additional $17.2 million and $22.8 million, respectively, under this facility.
The outstanding balance under this facility at December 31, 2014 was $129.8 million (December 2013, 31: $145.1 million).
Borrowings under the facility are guaranteed by Gold Fields, GFO, GFH, Orogen and GFIJVH.
| December 31, 2014 | December 31, 2013 | |||||||
Opening balance | 145.1 | — | ||||||
Loans advanced | — | 155.5 | ||||||
Translation adjustment | (15.3 | ) | (10.4 | ) | ||||
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Closing balance | 129.8 | 145.1 | ||||||
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Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
16. SHORT-TERM AND LONG-TERM LOANS (continued)
(i) Other loans
Short-term rand credit facilities: The Group utilized uncommitted loan facilities from some of the major banks to fund the capital expenditure and working capital requirements of the South African operations. The total draw downs for continuing operations were $299.2 million in fiscal year ended December 31, 2014 (fiscal 2013: $2,094.2 million) and for discontinued operations $nil in fiscal year ended December 31, 2014 (fiscal 2013: $25.4 million). Total repayments for continuing operations were $276.2 million in fiscal year ended December 31, 2014 (fiscal 2013: $2,041.8 million) and for discontinued operations $nil in fiscal year ended December 31, 2014 (fiscal 2013: $164.0 million).
During 2013, these facilities were primarily utilized to recapitalize Sibanye Gold as part of the spin-off.
These facilities have no fixed terms, are short-term in nature and interest rates are market related. Borrowings under these facilities are guaranteed by Gold Fields Limited.
On February 18, 2013, the outstanding borrowings of Sibanye Gold amounting to $142.4 million were refinanced by drawing down under the Rand bridge loan facilities as detailed below.
The outstanding borrowings of Gold Fields under these facilities at December 31, 2014 were $65.2 million (December 31, 2013: $46.5 million).
R3.5 billion long-term revolving credit facilities: Sibanye Gold and GFO, or the borrowers entered into various revolving credit facilities with some of the major banks with tenors between three and five years. The purpose of the facilities was to finance capital expenditure, general corporate and working capital requirements and to refinance existing borrowings.
The outstanding borrowings of Sibanye Gold under these facilities at December 31, 2012 were US$350.0 million.
On February 18, 2013, these facilities were refinanced by drawing down under the Rand bridge loan facilities as detailed below and were also cancelled on February 18, 2013.
R1.0 billion long-term revolving credit facilities:GFO and GFIJVH, or the Borrowers entered into various revolving credit facilities with some of the major banks with three year tenors. The purpose of the facilities is to finance capital expenditure, general corporate and working capital requirements.
The Borrowers are required to pay a commitment fee of between 1% and 1.05% per annum on the undrawn and uncancelled amounts of the facilities, calculated and payable semi-annually in arrears.
In summary the facilities are:
- a R500.0 million ($43.3 million) Rand Merchant Bank revolving credit facility entered into on June 19, 2013 and maturing on June 20, 2016 at JIBAR plus 2.5%;
- a R500.0 million ($43.3 million) Standard Bank revolving credit facility entered into on December 20, 2013 and maturing on December 21, 2016 at JIBAR plus 2.75%;
Borrowings under these facilities are guaranteed by Gold Fields, GFO, GFH, Orogen and GFIJVH.
These facilities were unutilised during the year ended December 31, 2013.
During the year ended December 31, 2014, each of GFO and GFIJVH drew down US$23.1 million (R250.0 million) under the R500.0 million Rand Merchant Bank facility. On December 12, 2014, each of GFO and GFIJVH repaid US$10.8 million (R125.0 million), under the R500.0 million Rand Merchant Bank facility.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
16. SHORT-TERM AND LONG-TERM LOANS (continued)
The outstanding balance under the facilities at December 31, 2014 was US$21.6 million (R250.0 million).
Rand bridge loan facilities: On November 28, 2012, Sibanye Gold entered into a R6.0 billion term loan and revolving credit facilities to refinance Sibanye Gold’s debt as detailed above under the other rand long-term revolving credit facilities and the other rand short-term credit facilities on spin-off of Sibanye Gold, with the balance of the Rand bridge loan facilities to be used to fund Sibanye Gold’s ongoing capital expenditure, working capital and general corporate expenditure requirements.
The facility was undrawn at December 31, 2012.
On February 18, 2013, the date of spin-off, the rand revolving credit facilities and the short-term rand credit facilities were refinanced by Sibanye Gold drawing down under this facility.
Following the unbundling of Sibanye Gold in 2013, the Group has no access to this facility.
Summary of other loans
| December 31, 2014 | December 31, 2013 | |||||||
Opening balance | 46.5 | 492.4 | ||||||
Loans advanced | ||||||||
- continuing operations | 345.4 | 2,094.2 | ||||||
- discontinued operations | — | 542.4 | ||||||
Loans repaid | ||||||||
- continuing operations | (297.8 | ) | (2,041.8 | ) | ||||
- discontinued operations | — | (503.4 | ) | |||||
Spin-off of Sibanye Gold | — | (531.4 | ) | |||||
Translation | (7.3 | ) | (5.9 | ) | ||||
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Closing balance | 86.8 | 46.5 | ||||||
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Debt maturity ladder
The combined aggregate maturities of short and long-term loans for each of the next five years at December 31, 2014 and December 31, 2013 is tabulated below:
Maturity | December 31, 2014 | December 31, 2013 | ||||||
1 year | 140.2 | 121.5 | ||||||
2 years | 21.6 | 750.0 | ||||||
3 years | 628.0 | — | ||||||
4 years | 129.8 | 53.5 | ||||||
5 years and thereafter | 991.3 | 1,135.1 | ||||||
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| 1,910.9 | 2,060.1 | |||||||
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At December 31, 2014, the Group was in compliance with its debt covenants.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
The Group has made,granted equity-settled instruments comprising share options and expectsrestricted shares to make inexecutive directors, certain officers and employees. During the future, expenditures to comply with environmental laws and regulations, but cannot predict the full amount of such future expenditures. Estimated future reclamation costs are based principally on legal and regulatory requirements. The following is a reconciliation of the total liability for environmental rehabilitation:
| December 31, 2014 | December 31, 2013 | |||||||
Provision for environmental rehabilitation | ||||||||
Opening balance | 269.2 | 373.6 | ||||||
Addition to liabilities - continuing operations | 36.7 | 10.3 | ||||||
Liabilities settled - continuing operations | (2.8 | ) | (2.5 | ) | ||||
Accretion of liability - continuing operations | 15.4 | 10.4 | ||||||
Accretion of liability - discontinued operations | — | 2.2 | ||||||
Barrick Yilgarn asset purchase | — | 55.0 | ||||||
Disposal of discontinued operations | — | (154.9 | ) | |||||
Foreign currency translation adjustment | (18.4 | ) | (24.9 | ) | ||||
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Closing balance | 300.1 | 269.2 | ||||||
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* South African, Ghanaian, Australian and Peruvian mining companies are required by law to undertake rehabilitation works as part of their ongoing operations. These environmental rehabilitation costs are funded as follows:
- Ghana - secured cash deposits (refer note 14) and reclamation bonds underwritten by banks to secure estimated costs of rehabilitation,
- South Africa - contributions into environmental trust funds (refer note 14) and guarantees,
- Australia - unconditional bank-guaranteed performance bonds to secure the estimated costs, and
- Peru - guarantees with annual deposits for proper compliance with the Mine Closure Plan.
The provision is calculated usingyear ended 31 December 2016, the following undiscounted closure cost estimates:
| December 31, 2014 | December 31, 2013 | |||||||
South Africa | 32.3 | 33.3 | ||||||
Ghana | 89.4 | 83.3 | ||||||
Australia | 212.7 | 196.6 | ||||||
Peru | 56.4 | 42.0 | ||||||
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Total closure cost estimate1 | 390.8 | 355.2 | ||||||
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Gold Fields Limited
Notes to the Consolidated Financial Statements
($share plans were in millions unless otherwise noted)
18.1 Retirement benefits
Contributions to the various retirement schemes are fully expensed during the year in which they are incurred.place: The cost of providing retirement benefits for the Company’s defined contribution plans for the fiscal year ended December 31, 2014 is $35.4 million for continuing operations and $nil for discontinued operations (fiscal 2013: $32.3 million for continuing operations and $nil for discontinued operations and fiscal 2012: $30.0 million for continuing operations and $62.8 million for discontinued operations).
18.2 Share option schemes—equity settled
The Company maintains prior stock plans (the Gold Fields Limited 2012 Share Plan, the Gold Fields Limited 2005 Share Plan, the Gold Fields Limited 2005 Non-Executive2012 Share Plan and the GF Management Incentive Scheme) but no longer grants awardsGold Fields Limited 2012 Share Plan as amended in 2016. During 2016, the Gold Fields Limited 2012 Share Plan as amended in 2016 was introduced to replace the LTIP. Allocations under these plans following the introduction of the Long Term Incentive Plan (“LTIP”) (refer note 18.3) and the plans will be closed once all options have vested and have been exercised or forfeited. The details of these plans are discussed below.
The charge for share-based compensation has been recognized in the statement of operations under the captions production costs, corporate expenditure and exploration expenditure. The cost for continuing operations the fiscal year ended December 31, 2014 is $26.0 million (fiscal 2013: $40.5 million and fiscal 2012: $45.5 million) and for discontinued operations is $nil (fiscal 2013: $4.6 million and fiscal 2012: $32.2 million).this plan were made during 2016.
The following information on share-based compensation expense is available for each plan:
| December 31, 2014 | December 31, 2013 | December 31, 2012 | ||||||||||||||||||
| Continuing operations | Continuing operations | Discontinued operations | Continuing operations | Discontinued operations | ||||||||||||||||
(a) The Gold Fields Limited 2012 Share Plan | ||||||||||||||||||||
- Performance shares | 12.0 | 18.8 | 1.1 | 13.1 | 7.6 | |||||||||||||||
- Bonus shares | 12.3 | 11.9 | 0.8 | 8.7 | 5.0 | |||||||||||||||
(b) The Gold Fields Limited 2005 Share Plan | 1.7 | 9.8 | 2.7 | 23.7 | 19.6 | |||||||||||||||
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Total share-based compensation | 26.0 | 40.5 | 4.6 | 45.5 | 32.2 | |||||||||||||||
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| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
(a) Gold Fields Limited 2005 Share Plan | — | — | 1.7 | |||||||||
(b)(i) Gold Fields Limited 2012 Share Plan | ||||||||||||
- Performance shares | 1.9 | 8.2 | 12.0 | |||||||||
- Bonus shares | — | 2.7 | 12.3 | |||||||||
(b)(ii) Gold Fields Limited 2012 Share Plan amended | ||||||||||||
- Performance shares | 12.5 | — | — | |||||||||
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Total included in profit or loss for the year | 14.4 | 10.9 | 26.0 | |||||||||
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Spin-off of Sibanye Gold during 2013 : The rules of the share plans make provision for an adjustment to the number of shares in the event there is a variation in the issued share capital as a result of corporate action. The share plans require that the fair market value of an employee’s share portfolio pre and post corporate action remain the same. In order to uphold this principle, an independent professional firm was contracted to provide a fairness opinion on the additional number of shares or changes to strike prices required to maintain the pre-spin-off value of the share portfolios of employees as a result of the Sibanye spin-off, which resulted in additional shares being awarded. There was no incremental share-based compensation resulting from this modification. The modification affected all employees who participated in the various share option schemes pre-spin-off and who remained employed by the Group post-spin-off. Furthermore, employees who ceased to be employed by the Group as a result of the spin-off are treated as “good leavers” in terms of the rules of the share plans. Good leavers are entitled to the vested portion of their shares based on the period that the shares were held up to vesting date. The unvested portion is forfeited in terms of the rules of the share plans.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
(a) The Gold Fields Limited 2012 Share Plan:At the annual general meetingAnnual General Meeting on May 14, 201217 November 2005, shareholders approved the adoption of the Gold Fields Limited 20122005 Share Plan to replace the Gold Fields Limited 2005 Share Plan.GF Management Incentive Scheme approved in 1999. The plan provided for two methods of participation, namely the Performance Allocated Share Appreciation Rights Method (“SARS”) and the Performance Vesting Restricted Share Method or PS and the Bonus Share Method, or BS.(“PVRS”). This plan sought to attract, retain, motivate and reward participating employees on a basis which sought to align the interests of such employees with those of the Company’s shareholders. No further allocations of options under this plan are being made following the introduction of the Long Term IncentiveGold Fields Limited 2012 Share Plan (“LTIP”) (refer note 18.3)(see below) and the plan will be closed once all options have vested and have been exercised or forfeited. Currently, the last vesting date of expiry is 1 December 20, 2016.2017.
The following table summarises the movement of share options under the Gold Fields Limited 2005 Share Plan during the years ended 31 December 2016, 2015 and 2014:
| 2016 | 2015 | 2014 | ||||||||||||||||||||||||||||||||||
| Performance vesting restricted shares (“PVRS”) | Share appreciation rights (“SARS”) | Average instrument price (US$) | Performance vesting restricted shares (“PVRS”) | Share appreciation rights (“SARS”) | Average instrument price (US$) | Performance vesting restricted shares (“PVRS”) | Share appreciation rights (“SARS”) | Average instrument price (US$) | ||||||||||||||||||||||||||||
Outstanding at beginning of the year | — | 1,025,178 | 6.03 | — | 1,818,261 | 7.89 | 1,230,971 | 3,151,728 | 8.89 | |||||||||||||||||||||||||||
Movement during the year: | ||||||||||||||||||||||||||||||||||||
Exercised and released | — | — | — | — | — | — | (1,217,700 | ) | — | — | ||||||||||||||||||||||||||
Forfeited | — | (494,567 | ) | 5.27 | — | (793,083 | ) | 7.34 | (13,271 | ) | (1,333,467 | ) | 8.62 | |||||||||||||||||||||||
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Outstanding at end of the year (vested) | — | 530,611 | 7.39 | — | 1,025,178 | 6.03 | — | 1,818,261 | 7.89 | |||||||||||||||||||||||||||
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Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 5. | SHARE-BASED PAYMENTS (continued) |
| (b)(i) | Gold Fields Limited 2012 Share Plan – awards prior to 1 March 2016 |
At the Annual General Meeting on 14 May 2012, shareholders approved the adoption of the Gold Fields Limited 2012 Share Plan to replace the Gold Fields Limited 2005 Share Plan. The plan provided for two methods of participation, namely the Performance Share Method (“PS”) and the Bonus Share Method (“BS”). This plan sought to attract, retain, motivate and reward participating employees on a basis which sought to align the interests of such employees with those of the Company’s shareholders.
The salient features of the plan are:were:
-
PS were offered to participants annually in March. Quarterly allocations of PS were also made in June, September and December on a pro-ratapro rata basis to qualifying new employees. PS were performance-related shares, granted at zero cost (the shares are granted in exchange for the rendering of service by participants to the Company during thethree-year restricted period prior to the share vesting period);
- based
Based on the rules of the plan, the actual number of PS which would be settled to a participant three years after the original award date was determined by the company’sCompany’s performance measured against the performance of seven other major gold mining companies (“the peer group”) based on the relative change in the Gold Fields share price compared to the basket of respective US Dollar share prices of the peer group. Furthermore, for PS awards to be settled to members of the Executive Committee, an internal companyCompany performance target is required to be met before the external relative measure is applied. The internal target performance criterion has been set at 85% of the company’sCompany’s planned gold production over thethree-year measurement period as set out in the business plans of the companyCompany approved by the Board. In the event that the internal target performance criterion is met the full initial target award shall be settled on the settlement date. In addition, the Remuneration Committee has determined that the number of PS to be settled may be increased by up to 200% of the number of the initial target PS conditionally awarded, depending on the performance of the companyCompany relative to the performance of the peer group, based on the relative change in the Gold Fields share price compared to the basket of respective US Dollar share prices of the peer group;
- the
The performance of the Company that will resultresulted in the settlement of shares is to bewas measured by the Company’s share price performance relative to the share price performance of athe following peer group of gold mining companies, collectively referred to as “the peer group”, over the three year period;three-year period:
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| - | AngloGold Ashanti; |
| - | Barrick Gold Corporation; |
| - | Goldcorp Incorporated; |
| - | Harmony Gold Mining Company; |
| - | Newmont Mining Corporation; |
| - | Newcrest Mining Limited; and |
| - | Kinross Gold Corporation. |
The performance of the Company’s shares against the shares of the peer group was measured for thethree-year period running from the relevant award date;
BS were offered to participants annually in March; and
- based
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 5. | SHARE-BASED PAYMENTS (continued) |
| (b)(i) | Gold Fields Limited 2012 Share Plan – awards prior to 1 March 2016 (continued) |
Based on the rules of the plan, the actual number of BS which would be settled in equal proportions to a participant in two equal tranches over a 9-monthnine-month and an a18-month period after the original award date iswas determined by the employee’s annual cash bonus calculated with reference to actual performance against predetermined targets for the financial year ended immediately preceding the award date.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
Details of the Performance shares and Bonus shares granted under this Plan are as follows:
| Number of Performance shares | Number of Bonus shares | |||||||
Outstanding at December 31, 2011 | — | — | ||||||
Granted during the year | 4,511,700 | 1,368,423 | ||||||
Exercised and released | — | (528,392 | ) | |||||
Forfeited | (249,530 | ) | (47,655 | ) | ||||
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Outstanding at December 31, 2012 | 4,262,170 | 792,376 | ||||||
Spin-off of Sibanye Gold—forfeited | (1,562,498 | ) | (241,023 | ) | ||||
Additional shares awarded due to spin-off of Sibanye | 396,229 | — | ||||||
Granted during the year | 5,310,968 | 2,018,771 | ||||||
Exercised and released | (515,025 | ) | (1,314,156 | ) | ||||
Forfeited | (1,862,128 | ) | (373,896 | ) | ||||
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Outstanding at December 31, 2013 | 6,029,716 | 882,072 | ||||||
Granted during the year | — | 4,000,559 | ||||||
Exercised and released | (834,010 | ) | (2,167,802 | ) | ||||
Forfeited | (879,049 | ) | (552,907 | ) | ||||
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Outstanding at December 31, 2014 | 4,316,657 | 2,161,922 | ||||||
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None of the outstanding options above have vested at year-end.
The Group usesfollowing table summarises the Monte-Carlo Simulation to value the Performance Shares. The inputs to the model for awards granted during the period were as follows:
| 2014 | 2013 | |||||||
Weighted average historical volatility (based on a statistical analysis of the share price on a weighted moving average basis for the expected term of the option) | — | 33.1 | % | |||||
Expected term (years) | — | 3.00 | ||||||
Dividend yield | — | 4.60 | % | |||||
Weighted average three year risk free interest rate (based on US interest rates) | — | 0.20 | % | |||||
Weighted average fair value (South African rand) | — | 79.83 | ||||||
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
A future trading model is used to estimate the loss in value to the holdersmovement of Bonus Shares due to trading restrictions. The actual valuation is developed using a Monte-Carlo analysis of the future share price of Gold Fields:
Weighted average historical volatility (based on a statistical analysis of the share price on a weighted moving average basis for the expected term of the option) | 43.5 | % | 32.0 | % | ||||
Expected term (months) | 9 - 18 | 9 - 18 | ||||||
Dividend yield | 0.60 | % | 4.60 | % | ||||
Weighted average three year risk free interest rate (based on SA interest rates) | 5.50 | % | 4.10 | % | ||||
Weighted average fair value (South African rand) | 40.28 | 72.42 |
(b) The Gold Fields Limited 2005 Share Plan: At Gold Fields’ annual general meeting held on November 17, 2005, the shareholders approved The Gold Fields Limited 2005 Share Plan, or the 2005 Plan, under which employees, including executive directors, would be compensated going forward.
The 2005 Plan provided for two types of awards: performance vesting restricted shares, or PVRS, and performance allocated share appreciation rights, or SARS. The PVRS will only be released to participants and the SARS will vest three years after the date of the award and/or allocation of such shares. However, in respect of the PVRS, Company performance criteria need to be met in respect of awards to executives. The size of the initial allocation of SARS and PVRS was dependent on the performance of the participant at the time of allocation. The allocations under The 2005 Plan were usually made annually in March.
No further allocations of options under this plan are being made following the introduction of the Gold Fields Limited 2012 Share Plan (see above)during the years ended 31 December 2016, 2015 and the plan will be closed once all options have been exercised or forfeited. Currently the last date of expiry of SARS is December 1, 2017.
Details of the PVRS and SARS granted under this Plan are as follows:2014:
| Number of PVRS | Number of SARS | Average price $ | 2016 | 2015 | 2014 | |||||||||||||||||||||||||||||||
| Performance shares (“PS”) | Bonus shares (“BS”) | Performance shares (“PS”) | Bonus shares (“BS”) | Performance shares (“PS”) | Bonus shares (“BS”) | |||||||||||||||||||||||||||||||
Outstanding at December 31, 2011 | 7,369,112 | 5,030,143 | 13.27 | |||||||||||||||||||||||||||||||||
Outstanding at beginning of the year | 2,446,922 | — | 4,316,657 | 2,161,922 | 6,029,716 | 882,072 | ||||||||||||||||||||||||||||||
Movement during the year: | ||||||||||||||||||||||||||||||||||||
Granted | 393,178 | — | — | — | — | 4,000,559 | ||||||||||||||||||||||||||||||
Exercised and released | (1,798,082 | ) | (259,455 | ) | 12.99 | (2,428,904 | ) | — | (1,704,704 | ) | (2,094,343 | ) | (834,010 | ) | (2,167,802 | ) | ||||||||||||||||||||
Forfeited | (584,814 | ) | (451,779 | ) | 14.30 | (18,018 | ) | — | (165,031 | ) | (67,579 | ) | (879,049 | ) | (552,907 | ) | ||||||||||||||||||||
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Outstanding at December 31, 2012 | 4,986,216 | 4,318,909 | 12.53 | |||||||||||||||||||||||||||||||||
Spin-off of Sibanye Gold - forfeited | (2,221,264 | ) | (1,077,878 | ) | 11.99 | |||||||||||||||||||||||||||||||
Additional shares awarded due to spin-off of Sibanye | 538,562 | 465,346 | 10.72 | |||||||||||||||||||||||||||||||||
Exercised and released | (1,857,614 | ) | — | — | ||||||||||||||||||||||||||||||||
Forfeited | (214,929 | ) | (554,649 | ) | 10.61 | |||||||||||||||||||||||||||||||
Outstanding at end of the year | 393,178 | — | 2,446,922 | — | 4,316,657 | 2,161,922 | ||||||||||||||||||||||||||||||
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Outstanding at December 31, 2013 | 1,230,971 | 3,151,728 | 8.89 | |||||||||||||||||||||||||||||||||
Exercised and released | (1,217,700 | ) | — | — | ||||||||||||||||||||||||||||||||
Forfeited | (13,271 | ) | (1,333,467 | ) | 8.62 | |||||||||||||||||||||||||||||||
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Outstanding at December 31, 2014 | — | 1,818,261 | 7.89 | |||||||||||||||||||||||||||||||||
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In terms of the 2005 Plan rules, PVRS were granted for no consideration, vested after three years from grant date and did not expire.
| 2016 | 2015 | 2014 | ||||||||||
The fair value of equity instruments granted during the year ended 31 December 2014 were valued using the Monte Carlo simulation model: | ||||||||||||
Monte Carlo simulation | ||||||||||||
Bonus shares | ||||||||||||
A future trading model is used to estimate the loss in value to the holders of bonus shares due to trading restrictions. The actual valuation is developed using a Monte Carlo analysis of the future share price of Gold Fields: | ||||||||||||
- weighted average historical volatility (based on a statistical analysis of the share price on a weighted moving average basis for the expected term of the option) | — | — | 43.5 | % | ||||||||
- expected term (months) | — | — | 9.0 -18.0 | |||||||||
- dividend yield | — | — | 0.6 | % | ||||||||
- weighted average three-year risk free interest rate (based on SA interest rates) | — | — | 5.5 | % | ||||||||
- weighted average fair value (South African Rand) | — | — | 40.28 | |||||||||
- marketability discount | — | — | 2.0 | % | ||||||||
Gold Fields Limited
Notes to the Consolidated Financial Statementsconsolidated financial statements
($for the year ended 31 December
Figures in millions unless otherwise noted)stated
In terms
| (b)(ii) | Gold Fields Limited 2012 Share Plan amended – awards after 1 March 2016 |
At the Annual General Meeting on 18 May 2016, shareholders approved the adoption of the 2005revised Gold Fields Limited 2012 Share Plan to replace the LTIP. The plan provides for four methods of participation, namely the Performance Share Method (“PS”), the Retention Share Method (“RS”), the Restricted Share Method (“RSS”) and the Matching Share Method (“MS”). This plan is in place to attract, retain, motivate and reward participating employees on a basis which seeks to align the interests of such employees with those of the Company’s shareholders. Allocations of options under this plan were made during 2016. Currently, the last vesting date is 28 February 2019.
The salient features of the plan were:
PS are offered to participants annually in March. PS are performance-related shares, granted at zero cost (the shares are granted in exchange for the rendering of service by participants to the Company during thethree-year restricted period prior to the share vesting period);
Based on the rules SARS expire no later than six years fromof the grant date and vestedplan, the actual number of PS which will be settled to a participant three years after grant date. The average exercise price for SARS outstanding at December 31, 2014 was $7.89.
Included in the above are 1,818,261 (2013: 2,095,543 and 2012: 1,605,403) vested SARS with an average instrument price of $7.89 (2013: $8.31 and 2012: $12.84).
At the time the 2005 Plan was first implemented, the release of PVRS was subject to, among other things, the Group’s relative performance on the Philadelphia XAU Index, or the XAU Index. In fiscal year ended June 30, 2008, it became evident that the XAU Index was not representative of Gold Fields’ peer competitors, as some of the companies in the XAU Index are not pure gold mining companies. Furthermore, since the selection of the XAU Index as a benchmark, a number of relatively small gold producers have been included in the XAU Index and again these cannot be regarded as representative of Gold Fields’ peer competitors. Accordingly, instead of using the XAU Index, Gold Fields’ performanceoriginal award date is therefore measured against only five gold mining companies whom it believes can be regarded as its peer competitors.
During the years ended December 31, 2013 and December 31, 2012 some share appreciation rights’ expiry dates were extended to enable participants who were disadvantaged due to the closed period to be placed in an equitable position. There was no incremental share-based compensation resulting from this modification. No expiry dates were extended during 2014.
The following executive directors were affecteddetermined by the modification:following performance conditions:
Performance | Weighting | Threshold | Target | Stretch and cap | ||||||
Absolute TSR | 33% | N/A – No vesting below target | Compounded cost of equity in real terms over three-year performance period | Compounded cost of equity in real terms over three-year performance period +6% per annum | ||||||
Relative TSR | 33% | Median of the peer group | Linear vesting to apply between above-median and upper quartile performance and capped at upper quartile performance | |||||||
| Free cash flow margin (“FCFM”) | 34% | Average FCFM over performance period of 5% at a gold price of $1,300/oz – margin to be adjusted relative to the actual gold price for the three-year period | Average FCFM over performance period of 15% at a gold price of $1,300/oz – margin to be adjusted relative to the actual gold price for the three-year period | Average FCFM over performance period of 20% at a gold price of $1,300/oz – margin to be adjusted relative to the actual gold price for the three-year period | ||||||
The vesting profile will be as follows:
| December 31, 2012 | Number of options | Average instrument price $ | Contractual life extended by (years) | |||||||||
NJ Holland | 49,000 | 12.80 | 0.06 | |||||||||
PA Schmidt | 43,310 | 12.68 | 0.06 | |||||||||
Performance condition | Threshold | Target | Stretch and cap | |||||||||
Absolute TSR 1, 4 | 0 | % | 100 | % | 200 | % | ||||||
Relative TSR 3, 4 | 0 | % | 100 | % | 200 | % | ||||||
FCFM 2 | 0 | % | 100 | % | 200 | % | ||||||
| December 31, 2013 | Number of options | Average instrument price $ | Contractual life extended by (years) | |||||||||
NJ Holland | 121,428 | 8.21 | 0.16 | |||||||||
PA Schmidt | 75,082 | 8.56 | 0.17 | |||||||||
| (1) | Absolute TSR and relative TSR: Linear vesting will occur between target and stretch (no vesting occurs for performance below target). |
| (2) | FCFM: Linear vesting will occur between threshold, target and stretch. |
| (3) | The peer group consists of ten companies: Anglogold Ashanti, Goldcorp, Barrick, Eldorado Gold, Randgold, Yamana, Agnico Eagle, Kinross, Newmont and Newcrest. |
Gold Fields Limited
Notes to the Consolidated Financial Statementsconsolidated financial statements
($for the year ended 31 December
Figures in millions unless otherwise noted)stated
| (b)(ii) | Gold Fields Limited 2012 Share Plan amended – awards after 1 March 2016 (continued) |
| (4) | TSR will be calculated as the compounded annual growth rate (“CAGR”) of the TSR index between the average of the 60 trading days up to the first day of the performance period and the average of the 60 trading days up to the last day of the performance period. TSR will be defined as the return on investing in ordinary shares in the Company at the start of the performance period, holding the shares and reinvesting the dividends received on the portfolio in Gold Fields shares over the performance period. The USD TSR index, provided by external service providers will be based on the US$ share price. |
RS can be awarded on an ad hoc basis to key employees where a retention risk has been identified. These will be subject to the vesting condition of service over a period of three years only, and will not be subject to any performance conditions.
RSS: In 2016, Gold Fields implemented a Minimum Shareholding Requirement (“MSR”) where executives are required to build and to hold a percentage of their salary in Gold Fields shares over a period of five years. Executives will be given the opportunity (as at the approval date of the MSR), prior to the annual bonus being communicated or the upcoming vesting date of the LTIP award or PS, to elect to receive all or a portion of their annual bonus or cash LTIP in restricted shares or to convert all or a portion of their unvested PS into restricted shares towards fulfilment of the MSR. These shares are subject to the holding period as set out above.
This holding period will mean that the restricted shares may not be sold or disposed of and that the beneficial interest must be retained therein until the earlier of:
Notice given by the executive, provided that such notice may only be given after five years from the start of the holding period;
Termination of employment of that employee, i.e. retirement, retrenchment, ill health, death, resignation or dismissal;
Abolishment of the MSR; or
In special circumstances such as proven financial hardship or compliance with the MSR, upon application by the employee and approval by the Remuneration Committee.
Mr Nick Holland, CEO, elected prior to the determination of the annual performance bonus for 2016 and in line with the rules of the MSR policy, to defer 50% of his 2016 cash bonus (US$677,600) into restricted shares. A similar election was made in 2015 to defer 50% of his 2015 annual performance bonus (US$618,900) into restricted shares. Mr Holland also elected to defer vesting 100% of the 2013 Performance Share award which was due to vest on 1 March 2016 into restricted shares. Mr Holland has 507,473 restricted shares held in escrow as at 31 December 2016. The 507,473 restricted shares comprise of 132,477 shares relating to the 2015 short-term incentive and 374,996 shares relating to the 2013 Performance Share award. No other executive has elected to receive any restricted shares.
MS: To facilitate the introduction of the MSR policy and to compensate executives for locking in their vested shares for an additional five years, thus exposing themselves to further market volatility, the Company intends to make a matching award. This is intended to entail a conditional award of shares of one share for every three shares committed towards the MSR (matching shares). The matching shares will vest on a date that corresponds with the end of the holding period of the shares committed towards the MSR provided the executive is still in the employment of the Company and has met the MSR requirements of the MSR policy, including having sustainably accumulated shares to reach the MSR over the five year holding period.
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 5. | SHARE-BASED PAYMENTS (continued) |
| (b)(ii) | Gold Fields Limited 2012 Share Plan amended – awards after 1 March 2016 (continued) |
At 31 December 2016, the maximum number of matching shares that could vest at the end of five years was 169,158 shares.
The following tables summarizetable summarises the movement of share options under the Gold Fields Limited 2012 Share Plan as amended in 2016 during the year ended 31 December 2016:
| 2016 | ||||
| Performance Shares (“PS”) | ||||
Outstanding at beginning of the year | — | |||
Movement during the year: | ||||
Granted | 8,196,037 | |||
Forfeited | (57,565 | ) | ||
Outstanding at end of the year1 | 8,138,472 | |||
| (1) | None of the outstanding options of 8,138,472 above have vested. |
| 2016 | ||||
The fair value of equity instruments granted during the year ended 31 December 2016 were valued using the Monte Carlo simulation model: | ||||
Monte Carlo simulation | ||||
Performance shares | ||||
This model is used to value the performance shares. The inputs to the model for options granted during the year were as follows: | ||||
- weighted average historical volatility (based on a statistical analysis of the share price on a weighted moving average basis for the expected term of the option) | 58.1 | % | ||
- expected term (years) | 3 years | |||
- dividend yield 1 | n/a | |||
- weighted average three-year risk free interest rate (based on US interest rates) | 0.5 | % | ||
- weighted average fair value (United States Dollar) | 2.6 | |||
| (1) | There is no dividend yield applied to the Monte Carlo simulation model as the performance conditions follow a total shareholder return method. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 5. | SHARE-BASED PAYMENTS (continued) |
Summary
The following table summarises information relating to the options and equity-settled instruments under all plans outstanding at 31 December 31, 20142016, 2015 and December 31, 2013.2014:
| Outstanding SARS at December 31, 2014 | ||||||||||||||||
| Price range $ | Number of options | Contractual life (in years) | Weighted average exercise price $ | |||||||||||||
Range of prices | 5.19 - 7.35 | 580,833 | 1.22 | 6.56 | ||||||||||||
| 7.36 - 9.51 | 454,131 | 0.33 | 8.17 | |||||||||||||
| 9.52 - 11.68 | 769,159 | 2.33 | 8.94 | |||||||||||||
| 11.69 - 13.84 | 14,138 | 3.01 | 10.25 | |||||||||||||
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Total | 1,818,261 | 1.48 | 7.89 | |||||||||||||
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| Outstanding SARS at December 31, 2013 | ||||||||||||||||
| Price range | Number of options $ | Contractual life (in years) | Weighted average exercise price $ | |||||||||||||
Range of prices | 5.80 - 8.22 | 873,064 | 2.22 | 7.33 | ||||||||||||
| 8.23 - 10.64 | 1,217,915 | 0.90 | 9.00 | |||||||||||||
| 10.65 - 13.06 | �� | 1,033,784 | 3.34 | 10.00 | ||||||||||||
| 13.07 - 15.47 | 26,965 | 4.01 | 11.46 | |||||||||||||
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Total | 3,151,728 | 2.09 | 8.89 | |||||||||||||
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| 2016 | 2015 | 2014 | ||||||||||||||||||||||||||||||||||
Range of exercise prices for | Number of instruments | Price (US$) | Contractual life (years) | Number of instruments | Price (US$) | Contractual life (years) | Number of instruments | Price (US$) | Contractual life (years) | |||||||||||||||||||||||||||
n/a* | 8,531,650 | — | — | 2,446,922 | — | — | 6,478,579 | — | 0.80 | |||||||||||||||||||||||||||
4.28 - 6.06 | — | — | — | 448,296 | 5.03 | 0.22 | 580,833 | 6.56 | 1.22 | |||||||||||||||||||||||||||
6.07 - 7.84 | 3,835 | 6.79 | 0.50 | 33,641 | 5.86 | 0.60 | 454,131 | 8.17 | 0.33 | |||||||||||||||||||||||||||
7.85 - 9.62 | 515,255 | 7.37 | 0.34 | 531,720 | 6.84 | 1.35 | 769,159 | 8.94 | 2.33 | |||||||||||||||||||||||||||
9.63 - 11.40 | 11,521 | 8.44 | 1.00 | 11,521 | 7.84 | 2.01 | 14,138 | 10.25 | 3.01 | |||||||||||||||||||||||||||
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Total outstanding at end of the year | 9,062,261 | 3,472,100 | 8,296,840 | |||||||||||||||||||||||||||||||||
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* Restricted shares (“PVRS”) are awarded for no consideration. | ||||||||||||||||||||||||||||||||||||
Weighted average share price during the year on the JSE Limited (US$) | 4.29 | 3.55 | 3.90 | |||||||||||||||||||||||||||||||||
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The PVRS havecompensation costs related to awards not been included in the table above as they vest automatically after three years and are granted for no consideration.
(c) GF Management Incentive Scheme: Prior to approval of The 2005 Plan, share options were available to executive officers and other employees, as determined by the Board of Directors under The GF Management Incentive Scheme. This scheme was introduced to provide an incentive for certain officers and employees to acquire shares in the Company. No further allocations of options under this scheme are being made following the introduction of the Gold Fields 2005 Share Plan (see above) and the scheme was closed during the year ended December 31, 2013 as all options relating to this scheme were exercised or lapsed during the year.
Details of the options grantedyet recognised under the GF Management Incentive Scheme are as follows:
| Number of Options | Average option price $ | |||||||
Outstanding at December 31, 2011 | 311,225 | 9.04 | ||||||
Exercised and released | (204,570 | ) | 8.38 | |||||
Forfeited | (31,155 | ) | 9.02 | |||||
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Outstanding at December 31, 2012 | 75,500 | 10.09 | ||||||
Spin - off of Sibanye Gold - forefeited | (28,100 | ) | 10.09 | |||||
Exercised and released | (31,147 | ) | 6.17 | |||||
Forfeited | (16,253 | ) | 9.68 | |||||
|
|
|
| |||||
Outstanding at December 31, 2013 and 2014 | — | — | ||||||
|
|
|
| |||||
Gold Fields Limited
Notesabove plans at 31 December 2016, 2015 and 2014 amount to the Consolidated Financial Statements
($ in millions unless otherwise noted)
US$36.6 million, US$1.5 million and US$14.3 million, respectively.
The directors were authorised to issue and allot all or any of such shares required for the plans, but in aggregate all plans may not exceed 35,309,56341,076,635 of the total issued ordinary shares capital of the Company. An individual participant may also not be awarded an aggregate of shares from all or any such plans exceeding 3,530,9564,107,663 of the Company’s total issued ordinary share capital. The unexercised options and shares under all plans represented 1.08%1.1% of the total issued ordinary share capital at 31 December 2016.
Notes to the consolidated financial statements
for the year ended 31 2014. No further allocations of options are being made under any of these plans.December
The compensation cost related to awards not yet recognizedFigures in the statement of operations under all schemes amounts to $14.3 million and is to be spread over two years.millions unless otherwise stated
| UNITED STATES DOLLAR | ||||||||||||||||||||
| 2016 | 2015 | 2014 | ||||||||||||||||||
Investments | (0.1 | ) | (117.4 | ) | (14.2 | ) | ||||||||||||||
Listed investments | (0.1 | ) | (8.5 | ) | (8.3 | ) | ||||||||||||||
Unlisted investments | — | — | (5.9 | ) | ||||||||||||||||
Equity accounted investees | ||||||||||||||||||||
- Hummingbird Resources Plc (“Hummingbird”) 1 | — | (7.5 | ) | — | ||||||||||||||||
- Far Southeast Gold Resources Incorporated (“FSE”) 2 | — | (101.4 | ) | — | ||||||||||||||||
Property, plant and equipment | (76.4 | ) | (95.7 | ) | (11.2 | ) | ||||||||||||||
Arctic Platinum (“APP”) 3 | — | (39.0 | ) | (3.2 | ) | |||||||||||||||
Yanfolila 4 | — | — | 4.7 | |||||||||||||||||
Property, plant and equipment - other 5 | (76.4 | ) | (56.7 | ) | (12.7 | ) | ||||||||||||||
Inventories | — | (8.0 | ) | (1.3 | ) | |||||||||||||||
Stockpiles and consumables 6 | — | (8.0 | ) | (1.3 | ) | |||||||||||||||
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|
|
| |||||||||||||
Impairment of investments and assets | (76.5 | ) | (221.1 | ) | (26.7 | ) | ||||||||||||||
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| |||||||||||||
| (1) | Following the identification of impairment indicators at 30 June 2015, the investment in Hummingbird was valued at its recoverable amount, which resulted in an impairment of US$7.5 million. The recoverable amount was based on the investment’s fair value at the time, being its quoted market price (level 1 of the fair value hierarchy). The impairment is included in the “Corporate and other” segment. |
| (2) | Following the identification of impairment indicators at 31 December 2015, FSE was valued at its recoverable amount which resulted in an impairment of US$101.4 million. The recoverable amount was based on the fair value less cost of disposal (“FVLCOD”) of the investment (level 2 of the fair value hierarchy). FVLCOD was indirectly derived from the market value of Lepanto Consolidated Mining Company, being the 60% shareholder of FSE. The impairment is included in the “Corporate and other” segment. |
| (3) | Following the Group’s decision during 2013 to dispose ofnon-core projects, APP was classified as held for sale and, accordingly, valued at the lower of fair value less cost of disposal or carrying value which resulted in impairments of US$89.7 million and US$3.2 million during 2013 and 2014, respectively. APP carrying value at 31 December 2014 after the above impairments was US$40.0 million which was based on an offer received close to the 2014 year-end. During 2015, active marketing activities for the disposal of the project continued after the 2014 offer was not realised. During 2015, APP was further impaired by US$39.0 million, resulting in a carrying value of US$1.0 million at 31 December 2015. The impairment is included in the “Corporate and other” segment. At 31 December 2016, APP no longer met the definition of an asset held for sale and was reclassified to property, plant and equipment at a recoverable amount of US$1.0 million. Refer note 12 for further details. |
| (4) | Following the disposal of Yanfolila in 2014, US$4.7 million of the previously recorded impairment was reversed. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 6. | IMPAIRMENT OF INVESTMENTS AND ASSETS (continued) |
| (5) | Impairment of property, plant and equipment is made up as follows: |
| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
- 2015: Redundant assets at Cerro Corona (2014: South Deep, St Ives and Agnew) | — | 6.7 | 12.7 | |||||||||
- Cash-generating unit impairment at Darlot | — | 14.2 | — | |||||||||
(The recoverable amount was based on its FVLCOD calculated using the income approach (level 3 of the fair value hierarchy). The impairment is mainly due to thelife-of-mine plan being reduced to one year forecasting negative cash flows for 2016 (refer to accounting policies on page F-7 for assumptions)). | ||||||||||||
- Cash-generating unit impairment at Cerro Corona | 66.4 | — | — | |||||||||
(The recoverable amount was based on its FVLCOD calculated using a combination of the market and the income approach (level 3 of the fair value hierarchy). The impairment is due to reduction in gold and copper reserves due to depletion, a decrease in the gold and copper price assumptions for 2017 and 2018, a lower resource price and an increase in the Peru tax rate from 2017 onwards. Refer to accounting policies on page F-7 for assumptions). | ||||||||||||
- Damang assets held for sale | 7.6 | — | — | |||||||||
Following the Damangre-investment plan, a decision was taken to sell certain mining fleet assets and related spares. The sale of the assets is expected to be concluded during 2017. As a result, the assets were classified as held for sale (refer note 12) and valued at the lower of FVLCOD or carrying value which resulted in an impairment of US$7.6 million. | ||||||||||||
- Asset-specific impairment at Damang | 2.4 | 35.8 | — | |||||||||
(Relating to inoperable mining fleet that is no longer used under the currentlife-of-mine plan (2015: Immovable mining assets written off to US$nil that would no longer be used under the currentlife-of-mine plan)). | ||||||||||||
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| |||||||
Total impairment of property, plant and equipment - other | 76.4 | 56.7 | 12.7 | |||||||||
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| |||||||
| (6) | 2015: Net realisable value write-down of stockpiles at Damang (2014: consumables at Lawlers). |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 7. | INCLUDED IN PROFIT BEFORE ROYALTIES AND TAXATION ARE THE FOLLOWING: |
| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
Operating lease charges 1 | (2.8 | ) | (2.7 | ) | (3.2 | ) | ||||||
Regulatory legal fees 1 | — | (0.1 | ) | (7.1 | ) | |||||||
Profit onbuy-back of notes 1 | 17.7 | — | — | |||||||||
Social contributions and sponsorships 1 | (19.3 | ) | (12.2 | ) | (13.0 | ) | ||||||
Global compliance costs 1 | (0.1 | ) | (3.6 | ) | — | |||||||
Facility charges on borrowings 1 | (8.1 | ) | (1.7 | ) | (1.3 | ) | ||||||
Rehabilitation income/(charges) 1 | 9.9 | 15.1 | (18.4 | ) | ||||||||
| (1) | Included under “Other costs, net” in the consolidated income statement. |
| 8. | ROYALTIES |
| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
South Africa | (1.8 | ) | (1.2 | ) | (1.3 | ) | ||||||
Foreign | (78.6 | ) | (74.8 | ) | (84.8 | ) | ||||||
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| |||||||
Total royalties | (80.4 | ) | (76.0 | ) | (86.1 | ) | ||||||
|
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| |||||||
Royalty rates | ||||||||||||
South Africa (effective rate) 1 | 0.5 | % | 0.5 | % | 0.5 | % | ||||||
Australia 2 | 2.5 | % | 2.5 | % | 2.5 | % | ||||||
Ghana 2 | 5.0 | % | 5.0 | % | 5.0 | % | ||||||
Peru 3 | 6.4 | % | 4.0 | % | 3.3 | % | ||||||
| (1) | The Mineral and Petroleum Resource Royalty Act 2008 (“Royalty Act”) was promulgated on 24 November 2008 and became effective from 1 March 2010. The Royalty Act imposes a royalty on refined (mineral resources that have undergone a comprehensive level of beneficiation such as smelting and refining as defined in Schedule 1 of the Act) and unrefined (mineral resources that have undergone limited beneficiation as defined in Schedule 2 of the Act) minerals payable to the state. The royalty in respect of refined minerals (which include gold refined to 99.5% and above and platinum) is calculated by dividing earnings before interest and taxes (“EBIT”) by the product of 12.5 times gross revenue calculated as a percentage, plus an additional 0.5%. EBIT refers to taxable mining income (with certain exceptions such as no deduction for interest payable and foreign exchange losses) before assessed losses but after capital expenditure. A maximum royalty of 5% has been introduced on refined minerals. The effective rate of royalty tax payable for the year ended 31 December 2016 was 0.5% of mining revenue (2015: 0.5% and 2014: 0.5%) equalling the minimum charge per the formula. |
| (2) | The Australian and Ghanaian operations are subject to a 2.5% (2015: 2.5% and 2014: 2.5%) and 5.0% (2015: 5.0% and 2014: 5.0%) gold royalty, respectively, on revenue as the mineral rights are owned by the state. |
| (3) | The Peruvian operations are subject to a mining royalty calculated on a sliding scale with rates ranging from 1% to 12% of the value of operating profit. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 9. | MINING AND INCOME TAXATION |
| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
The components of mining and income tax are the following: | ||||||||||||
South African taxation | ||||||||||||
-non-mining tax | (1.0 | ) | — | — | ||||||||
- company and capital gains taxation | (3.9 | ) | (3.5 | ) | (1.7 | ) | ||||||
- prior year adjustment - current taxation | 0.3 | 0.5 | (0.3 | ) | ||||||||
- deferred taxation | (9.5 | ) | 17.1 | 24.9 | ||||||||
- prior year adjustment - deferred taxation | — | — | (3.9 | ) | ||||||||
Foreign taxation | ||||||||||||
- current taxation | (193.8 | ) | (139.9 | ) | (128.4 | ) | ||||||
- prior year adjustment - current taxation | (6.3 | ) | — | (3.8 | ) | |||||||
- deferred taxation | 22.1 | (116.1 | ) | (4.9 | ) | |||||||
- prior year adjustment - deferred taxation | — | (5.2 | ) | — | ||||||||
|
|
|
|
|
| |||||||
Total mining and income taxation | (192.1 | ) | (247.1 | ) | (118.1 | ) | ||||||
|
|
|
|
|
| |||||||
Major items causing the Group’s income taxation to differ from the maximum South African statutory mining tax rate of 34.0% (2015: 34.0% and 2014: 34.0%) were: | ||||||||||||
Taxation on profit before taxation at maximum South African statutory mining tax rate | (124.4 | ) | (1.5 | ) | (47.1 | ) | ||||||
Rate adjustment to reflect the actual realised company tax rates in South Africa and offshore | 22.7 | 21.8 | 8.4 | |||||||||
Non-deductible share-based payments | (4.9 | ) | (3.7 | ) | (7.2 | ) | ||||||
Non-deductible exploration expense | (15.2 | ) | (7.7 | ) | (10.9 | ) | ||||||
Deferred tax assets not recognised on impairment of investments 1 | — | (53.2 | ) | (3.6 | ) | |||||||
Non-deductible interest paid | (24.2 | ) | (26.9 | ) | (27.7 | ) | ||||||
Non-deductible legal and consulting fees | — | — | (2.4 | ) | ||||||||
Non-taxable profit on disposal of investments | 0.8 | — | 1.7 | |||||||||
Non-taxable profit onbuy-back of notes | 6.0 | — | — | |||||||||
Share of results of equity accounted investees after taxation | (0.8 | ) | (1.9 | ) | (0.8 | ) | ||||||
Netnon-deductible expenditure andnon-taxable income | (9.7 | ) | (8.5 | ) | (8.2 | ) | ||||||
Deferred taxation charge on Peruvian Nuevo Sol devaluation against US Dollar 2 | (1.1 | ) | (41.0 | ) | (3.1 | ) | ||||||
Various Peruviannon-deductible expenses | (8.3 | ) | (7.8 | ) | (8.0 | ) | ||||||
Prior year adjustments | (6.0 | ) | (4.4 | ) | (9.1 | ) | ||||||
Deferred tax assets not recognised at Cerro Corona and Damang 3 | (34.9 | ) | (112.5 | ) | — | |||||||
Deferred tax release on change of tax rate at the Peruvian and Ghanaian operations (2015: Peruvian) | 8.6 | 4.5 | — | |||||||||
Other | (0.7 | ) | (4.3 | ) | (0.1 | ) | ||||||
|
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|
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| |||||||
Total mining and income taxation | (192.1 | ) | (247.1 | ) | (118.1 | ) | ||||||
|
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| |||||||
| (1) | Deferred tax assets not recognised on impairment of investments relate to the impairment of listed investments, FSE, Hummingbird and APP. Refer to note 6 for details of impairments. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 9. | MINING AND INCOME TAXATION (continued) |
| (2) | The functional currency of Cerro Corona is US Dollar, however, the Peruvian tax base is based on values in Peruvian Nuevo Sol. |
| (3) | Deferred tax assets amounting to US$34.9 million (2015: US$112.5 million) were not recognised at Cerro Corona and Damang to the extent that there is not sufficient future taxable income available. In making this determination, the Group analysed, among others, forecasts of future earnings and the nature and timing of future deductions and benefits represented by deferred tax assets. |
| 2016 | 2015 | 2014 | ||||||||||
South Africa - current tax rates 4 | ||||||||||||
Mining tax 1 | Y = 34 - 170/X | Y = 34 - 170/X | Y = 34 - 170/X | |||||||||
Non-mining tax 2 | 28.0 | % | 28.0 | % | 28.0 | % | ||||||
Company tax rate | 28.0 | % | 28.0 | % | 28.0 | % | ||||||
International operations - current tax rates 4 | ||||||||||||
Australia | 30.0 | % | 30.0 | % | 30.0 | % | ||||||
Ghana 3 | 32.5 | % | 35.0 | % | 35.0 | % | ||||||
Peru | 30.0 | % | 30.0 | % | 30.0 | % | ||||||
| (1) | South African mining tax on mining income is determined according to a formula which takes into account the profit and revenue from mining operations. South African mining taxable income is determined after the deduction of all mining capital expenditure, with the proviso that this cannot result in an assessed loss. Capital expenditure amounts not deducted are carried forward as unredeemed capital expenditure to be deducted from future mining income. Accounting depreciation is ignored for the purpose of calculating South African mining taxation. The effective mining tax rate for Gold Fields Operations Limited (“GFO”) and GFI Joint Venture Holdings (Proprietary) Limited (“GFIJVH”), owners of the South Deep mine, has been calculated at 30% (2015: 30% and 2014: 30%). |
In the formula above, Y is the percentage rate of tax payable and X is the ratio of mining profit, after the deduction of redeemable capital expenditure, to mining revenue expressed as a percentage.
| (2) | Non-mining income of South African mining operations consists primarily of interest income. |
| (3) | On 11 March 2016, Gold Fields signed a development agreement with the government of Ghana for both the Tarkwa and Damang mines. This agreement resulted in a reduction in the corporate tax rate from 35.0% to 32.5%, effective 17 March 2016. |
| (4) | Deferred tax is provided at the expected future rate for mining operations arising from temporary differences between the carrying values and tax values of assets and liabilities. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 9. | MINING AND INCOME TAXATION (continued) |
At 31 December 2016, the Group had the following estimated amounts available forset-off against future income(pre-tax):
| UNITED STATES DOLLAR | ||||||||||||||||||||||||
| 2016 | 2015 | |||||||||||||||||||||||
| Gross unredeemed capital expenditure | Gross tax losses | Gross deferred tax asset not recognised | Gross unredeemed capital expenditure | Gross tax losses | Gross deferred tax asset not recognised | |||||||||||||||||||
South Africa 1 | ||||||||||||||||||||||||
Gold Fields Operations Limited | 606.4 | 182.3 | — | 528.2 | 219.2 | — | ||||||||||||||||||
GFI Joint Venture Holdings (Proprietary) Limited 2, 3 | 1,929.2 | — | 1,132.6 | 1,586.0 | 22.2 | 862.4 | ||||||||||||||||||
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| |||||||||||||
| 2,535.6 | 182.3 | 1,132.6 | 2,114.2 | 241.4 | 862.4 | |||||||||||||||||||
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International operations | ||||||||||||||||||||||||
Exploration entities 4 | — | 388.8 | 388.8 | — | 345.2 | 345.2 | ||||||||||||||||||
Gold Fields Australia Proprietary Limited 5 | — | 1.2 | — | — | 1.2 | — | ||||||||||||||||||
Abosso Goldfields Limited 6 | 88.8 | 68.7 | 157.5 | 63.9 | 65.7 | 129.6 | ||||||||||||||||||
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| |||||||||||||
| 88.8 | 458.7 | 546.3 | 65.1 | 410.9 | 474.8 | |||||||||||||||||||
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| |||||||||||||
| (1) | These deductions are available to be utilised against income generated by the relevant tax entity and do not expire unless the tax entity concerned ceases to operate for a period of longer than one year. Under South African mining tax ring-fencing legislation, each tax entity is treated separately and as such these deductions can only be utilised by the tax entities in which the deductions have been generated. South African tax losses and unredeemed capital expenditure have no expiration date. |
| (2) | Comprises US$796.6 million gross recognised capital allowance and US$1,132.6 million gross unrecognised capital allowance (2015: US$723.6 million gross recognised capital allowance and US$862.4 million gross unrecognised capital allowance). |
| (3) | During 2014, the South African Revenue Service (“SARS”) issued a Finalisation of Audit Letter (“the Audit Letter”) stating that SARS has disallowed US$163.4 million of GFIJVH’s gross recognised capital allowance of US$796.6 million. Refer note 35 on Contingent Liabilities for further details. |
| (4) | The total tax losses of US$388.8 million (2015: US$345.2 million) comprise US$10.9 million (2015: US$3.8 million) tax losses that expire between one and two years, US$58.9 million (2015: US$62.9 million) tax losses that expire between two and five years, US$41.2 million (2015: US$49.6 million) tax losses that expire between five and 10 years, US$40.6 million (2015: US$40.7 million) tax losses that expire after 10 years and US$237.2 million (2015: US$188.2 million) tax losses that have no expiry date. |
| (5) | The tax losses are available to be utilised against income generated by the relevant tax entity and do not expire. |
| (6) | Tax losses may be carried forward for five years. These losses expire on afirst-in-first-out basis. Tax losses of US$46.3 million expire in two years (2015: three years), tax losses of US$19.4 million expire in four years (2015: five years) and tax losses of US$3.0 million expire in five years. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 10. | EARNINGS PER SHARE |
| UNITED STATES DOLLAR | ||||||||||||||
| 2016 | 2015 | 2014 | ||||||||||||
| 10.1 | Basic earnings/(loss) per share - cents | 20 | (31 | ) | 2 | |||||||||
Basic earnings/(loss) per share is calculated by dividing the earnings attributable to owners of the parent of US$162.8 million (2015: loss of US$242.1 million and 2014: profit of US$12.8 million) by the weighted average number of ordinary shares in issue during the year of 809,889,990 (2015: 774,763,151 and 2014: 769,141,871). | ||||||||||||||
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| 10.2 | Diluted basic earnings/(loss) per share - cents | 20 | (31 | ) | 2 | |||||||||
Diluted basic earnings/(loss) per share is calculated on the basis of earnings attributable to owners of the parent of US$162.8 million (2015: loss of US$242.1 million and 2014: profit of US$12.8 million) and 810,082,191 (2015: 774,763,151 and 2014: 771,814,815) shares being the diluted number of ordinary shares in issue during the year. | ||||||||||||||
The weighted average number of shares has been adjusted by the following to arrive at the diluted number of ordinary shares: | ||||||||||||||
Weighted average number of shares | 809,889,990 | 774,763,151 | 769,141,871 | |||||||||||
Share options in issue | 192,201 | — | 1 | 2,672,944 | ||||||||||
|
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| |||||||||
Diluted number of ordinary shares | 810,082,191 | 774,763,151 | 771,814,815 | |||||||||||
|
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| |||||||||
(1) Share option adjustments of 1,804,321 were excluded from the dilutive number of ordinary shares as they are anti-dilutive. | ||||||||||||||
| 10.3 | Headline earnings/(loss) per share - cents | 26 | (4 | ) | 4 | |||||||||
Headline earnings/(loss) per share is calculated on the basis of adjusted net earnings attributable to owners of the parent of US$208.4 million (2015: loss of US$28.2 million and 2014: earnings of US$27.3 million) and 809,889,990 (2015: 774,763,151 and 2014: 769,141,871) shares being the weighted average number of ordinary shares in issue during the year. | ||||||||||||||
Net earnings/(loss) attributable to owners of the parent is reconciled to headline earnings as follows: | ||||||||||||||
| Long-form headline earnings/(loss) reconciliation | ||||||||||||||
| Net profit/(loss) attributable to owners of the parent | 162.8 | (242.1 | ) | 12.8 | ||||||||||
| Profit on disposal of investments, net | (2.3 | ) | (0.1 | ) | (5.1 | ) | ||||||||
Gross | (2.3 | ) | (0.1 | ) | (5.1 | ) | ||||||||
Taxation effect | — | — | — | |||||||||||
| (Profit)/loss on disposal of assets, net | (41.0 | ) | 0.5 | 0.9 | ||||||||||
Gross | (48.0 | ) | 0.1 | 1.3 | ||||||||||
Taxation effect | 7.0 | 0.2 | (0.4 | ) | ||||||||||
Non-controlling interest effect | — | 0.2 | — | |||||||||||
| Impairment andwrite-off of investments and assets and other, net | 88.9 | 213.5 | 18.7 | |||||||||||
Gross | 124.0 | 243.9 | 22.4 | |||||||||||
Taxation effect | (33.9 | ) | (28.1 | ) | (3.7 | ) | ||||||||
Non-controlling interest effect | (1.2 | ) | (2.3 | ) | — | |||||||||
|
|
|
|
|
| |||||||||
| Headline earnings/(loss) | 208.4 | (28.2 | ) | 27.3 | ||||||||||
|
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|
|
| |||||||||
| 10.4 | Diluted headline earnings/(loss) per share - centsDiluted headline earnings/(loss) per share is calculated on the basis of headline earnings attributable to owners of the parent of US$208.4 million (2015: loss of US$28.2 million and 2014: earnings of US$27.3 million) and 810,082,191 (2015: 774,763,151 and 2014: 771,814,815) shares being the diluted number of ordinary shares in issue during the year. | 26 | (4 | ) | 4 | |||||||||
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Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 11. | DIVIDENDS |
| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
2015 final dividend of 21 SA cents per share (2014: 20 SA cents and 2013: 22 SA cents) declared on 16 February 2016. | 10.6 | 12.8 | 15.7 | |||||||||
2016 interim dividend of 50 SA cents was declared during 2016 (2015: 4 SA cents 2014: 20 SA cents). | 28.6 | 2.3 | 14.1 | |||||||||
A final dividend in respect of the financial year ended 31 December 2016 of 60 SA cents per share was approved by the Board of Directors on 15 February 2017. This dividend payable is not reflected in these financial statements. Dividends are subject to dividend withholding tax. | ||||||||||||
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| |||||||
Total dividends | 39.2 | 15.1 | 29.8 | |||||||||
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| |||||||
Dividends per share - cents | 5 | 2 | 4 | |||||||||
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| |||||||
| 12. | ASSETS HELD FOR SALE |
| UNITED STATES DOLLAR | ||||
| 2016 | 2015 | |||
APP 1 | — | 1.0 | ||
Damang mining fleet and related spares 2 | 26.4 | — | ||
|
| |||
Total assets held for sale | 26.4 | 1.0 | ||
|
| |||
| (1) | Following the Group’s decision to dispose ofnon-core projects, APP was classified as held for sale and valued at the lower of fair value less cost to sell or carrying value. |
APP’s carrying value at 31 December 2014 was US$40.0 million following impairments of US$89.7 million and US$3.2 million during 2013 and 2014, respectively, which was based on offers received during 2013 and 2014. During 2015, active marketing activities for the disposal continued after the 2014 offer was not realised. During 2015, APP was further impaired by US$39.0 million, resulting in a carrying value of US$1.0 million at 31 December 2015.
At 31 December 2016, APP no longer meets the definition of an asset held for sale as it is no longer highly probable that the sale will occur within 12 months of classification as held for sale and was reclassified to property, plant and equipment at a recoverable amount of US$1.0 million.
Refer to note 6 for details on the impairment of APP.
| (2) | Following the Damangre-investment plan, a decision was taken to sell certain mining fleet assets and related spares. The sale of the assets is expected to be concluded during 2017. As a result, the assets were classified as held for sale and valued at the lower of FVLCOD or carrying value which resulted in an impairment of US$7.6 million. |
Mining fleet and related spares with carrying values of US$18.6 million and US$7.8 million, respectively, were reclassified to assets held for sale. Refer note 13 and 19 for further details.
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 13. | PROPERTY, PLANT AND EQUIPMENT |
| UNITED STATES DOLLAR | ||||||||||||||||||||||||
| 2015 | 2016 | |||||||||||||||||||||||
| Land, mineral rights and rehabilitation assets | Mine development, infrastructure and other assets 1 | Total | Total | Mine development, infrastructure and other assets 1 | Land, mineral rights and rehabilitation assets | |||||||||||||||||||
| Cost | ||||||||||||||||||||||||
| 855.6 | 8,050.5 | 8,906.1 | Balance at beginning of the year | 8,648.8 | 7,913.2 | 735.6 | ||||||||||||||||||
| — | 0.1 | 0.1 | Reclassifications | 1.0 | 1.0 | — | ||||||||||||||||||
| 1.6 | 632.5 | 634.1 | Additions | 649.9 | 648.6 | 1.3 | ||||||||||||||||||
| — | — | — | Gruyere Gold project asset acquisition 2 | 275.9 | — | 275.9 | ||||||||||||||||||
| — | — | — | Reclassification from assets held for sale (refer note 12) | 43.2 | 43.2 | — | ||||||||||||||||||
| — | — | — | Reclassification to assets held for sale (refer note 12) | (79.1 | ) | (79.1 | ) | — | ||||||||||||||||
| — | 16.6 | 16.6 | Borrowing costs capitalised 3 | 15.1 | 15.1 | — | ||||||||||||||||||
| (0.2 | ) | (25.9 | ) | (26.1 | ) | Disposals | (160.4 | ) | (157.3 | ) | (3.1 | ) | ||||||||||||
| 0.8 | — | 0.8 | Changes in estimates of rehabilitation assets | 14.9 | — | 14.9 | ||||||||||||||||||
| — | 13.6 | 13.6 | Other | 3.0 | 3.0 | — | ||||||||||||||||||
| (122.2 | ) | (774.2 | ) | (896.4 | ) | Translation adjustment | 153.9 | 146.8 | 7.1 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 735.6 | 7,913.2 | 8,648.8 | Balance at end of the year | 9,566.2 | 8,534.5 | 1,031.7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Accumulated depreciation and impairment | ||||||||||||||||||||||||
| 303.9 | 3,706.5 | 4,010.4 | Balance at beginning of the year | 4,336.4 | 4,035.1 | 301.3 | ||||||||||||||||||
| — | 0.1 | 0.1 | Reclassifications | 1.0 | 1.0 | — | ||||||||||||||||||
| 29.4 | 580.5 | 609.9 | Charge for the year | 679.2 | 650.2 | 29.0 | ||||||||||||||||||
| 0.4 | 87.1 | 87.5 | Impairment 4 | 123.9 | 120.6 | 3.3 | ||||||||||||||||||
| — | — | — | Reclassification from assets held for sale (refer note 12) | 42.2 | 42.2 | — | ||||||||||||||||||
| — | — | — | Reclassification to assets held for sale (refer note 12) | (60.5 | ) | (60.5 | ) | — | ||||||||||||||||
| (0.1 | ) | (18.0 | ) | (18.1 | ) | Disposals | (158.1 | ) | (155.0 | ) | (3.1 | ) | ||||||||||||
| (32.3 | ) | (321.1 | ) | (353.4 | ) | Translation adjustment | 54.3 | 55.1 | (0.8 | ) | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 301.3 | 4,035.1 | 4,336.4 | Balance at end of the year | 5,018.4 | 4,688.7 | 329.7 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| 434.3 | 3,878.1 | 4,312.4 | Carrying value at end of the year 5 | 4,547.8 | 3,845.8 | 702.0 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
| (1) | Included in the carrying value of mine development, infrastructure and other assets are exploration and evaluation assets amounting to US$9.1 million (2015: US$18.9 million). |
| (2) | The additions of US$275.9 million (A$372.4 million) are made up of US$197.1 million (A$266.0 million) cash additions and US$78.8 million (A$106.4 million)non-cash additions. Refer note 15.2 for further details. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 13. | PROPERTY, PLANT AND EQUIPMENT (continued) |
| (3) | Borrowing costs of US$15.1 million (2015: US$16.6 million) arising on group general borrowings which are related to the qualifying projects at South Deep were capitalised during the period. An average interest capitalisation rate of 4.7% (2015: 4.8%) was applied. |
| (4) | The impairment of US$123.9 million (2015: US$87.5 million) is made up of US$76.4 million (2015: US$56.7 million) impairment of property, plant and equipment (refer note 6 for details) and US$47.5 million (2015: US$30.8 million)write-off of exploration and evaluation assets. Thewrite-off of exploration and evaluation assets is due to specific exploration programmes not yielding results to warrant further exploration at the Group’s Australian operations and is included in the US$92.2 million (2015: US$53.5 million) “Exploration expense” in the consolidated income statement. |
| (5) | Fleet assets in Ghana amounting to US$95.5 million (2015: US$176.6 million) have been pledged as security for the US$70 million senior secured revolving credit facility (refer note 24). |
| 14. | GOODWILL |
| UNITED STATES DOLLAR | ||||||||
| 2016 | 2015 | |||||||
Balance at beginning of the year | 295.3 | 385.7 | ||||||
Translation adjustment | 22.5 | (90.4 | ) | |||||
|
|
|
| |||||
Balance at end of the year | 317.8 | 295.3 | ||||||
|
|
|
| |||||
The goodwill arose on the acquisition of South Deep and was attributable to the upside potential of the asset, synergies, deferred tax and the gold multiple.
| ||||||||
The total goodwill is allocated to South Deep, the cash-generating unit (“CGU”), where it is tested for impairment.
| ||||||||
In line with the accounting policy, the recoverable amount was determined by reference to fair value less costs of disposal (“FVLCOD”). Management’s estimates and assumptions used in the 31 December 2016 FVLCOD calculation include:
| ||||||||
• Long-term gold price of R600,000 per kilogram (US$1,300 per ounce) for thelife-of-mine of 79 years (2015: R500,000 per kilogram (US$1,300 per ounce) for thelife-of-mine of 81 years);
| ||||||||
• A nominal discount rate of 13.5% (2015: 14.5%);
| ||||||||
• Fair value of US$60.0 per resource ounce (2015: US$69.0 per resource ounce), used for resource with infrastructure to calculate the FVLCOD associated with value beyond proved and probable reserves; and
| ||||||||
• The annuallife-of-mine plan takes into account the following:
| ||||||||
• proved and probable ore reserves of South Deep;
| ||||||||
• cash flows are based on thelife-of-mine plan which exceeds a period of five years; and
| ||||||||
• capital expenditure estimates over thelife-of-mine plan.
| ||||||||
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 14. | GOODWILL (continued) |
Refer accounting policies on pages F-6 to F-8 for further discussion on the significant judgements and estimates associated with assessing the carrying value of property, plant and equipment and goodwill. | ||||
The carrying value of CGUs, including goodwill, is tested on an annual basis for impairment. In addition, the Group reviews and tests the carrying value of assets when events or changes in circumstances suggest that the carrying amount of a CGU may not be recoverable. There is no goodwill impairment at 31 December 2016 (2015: US$nil). | ||||
| 15.1 | EQUITY-ACCOUNTED INVESTEES |
| UNITED STATES DOLLAR | ||||||||||||||
| 2016 | 2015 | 2014 | ||||||||||||
| (a) | Far Southeast Gold Resources Incorporated (“FSE”) | 128.6 | 128.6 | |||||||||||
| (b) | Maverix Metals Incorporated (“Maverix”) | 42.1 | — | |||||||||||
| (c) | Other | — | 0.5 | |||||||||||
|
|
|
| |||||||||||
| Total equity-accounted investees | 170.7 | 129.1 | ||||||||||||
|
|
|
| |||||||||||
Share of results of equity-accounted investees after taxation recognised in the consolidated income statement are made up as follows: | ||||||||||||||
| (a) | FSE | (2.3 | ) | (3.3 | ) | (3.6 | ) | |||||||
| (b) | Maverix | — | — | — | ||||||||||
| (c) | Other | — | (2.4 | ) | 1.2 | |||||||||
|
|
|
|
|
| |||||||||
| (2.3 | ) | (5.7 | ) | (2.4 | ) | |||||||||
|
|
|
|
|
| |||||||||
| (a) | FSE | |||||||||||||
Gold Fields’ interest in FSE, an unlisted entity, was 40% (2015: 40%) at 31 December 2016. | ||||||||||||||
Gold Fields paid US$10.0 million in option fees to Lepanto Consolidated Mining Company (“Lepanto”) during the six months ended 31 December 2010. In addition, Gold Fields paid non-refundable down payments of US$66.0 million during the year ended 31 December 2011 and US$44.0 million during the six months ended 31 December 2010 to Liberty Express Assets in accordance with the agreement concluded whereby the Group has the option to acquire 60% of FSE. On 31 March 2012, Gold Fields acquired 40% of the issued share capital and voting rights of FSE by contributing an additionalnon-refundable down payment of US$110.0 million. Lepanto owns the remaining 60% shareholding in FSE. | ||||||||||||||
The remaining 20% option is not likely to be exercised until such time as FSE obtains a Foreign Technical Assistance Agreement (“FTAA”) which allows for direct majority foreign ownership and control. | ||||||||||||||
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 15.1 | EQUITY-ACCOUNTED INVESTEES (continued) |
| UNITED STATES DOLLAR | ||||||||||
| 2016 | 2015 | |||||||||
FSE has a 31 Decemberyear-end and has been equity-accounted since1 April 2012. | ||||||||||
| Investment in joint venture consists of: | ||||||||||
| Unlisted shares at cost | 230.0 | 230.0 | ||||||||
| Equity contribution | 77.7 | 75.4 | ||||||||
| Cumulative impairment 1 | (101.4 | ) | (101.4 | ) | ||||||
| Share of accumulated losses brought forward | (75.4 | ) | (72.1 | ) | ||||||
| Share of loss after taxation 2 | (2.3 | ) | (3.3 | ) | ||||||
|
|
|
| |||||||
| Total investment in joint venture 3 | 128.6 | 128.6 | ||||||||
|
|
|
| |||||||
| (1) | Refer note 6 for details of impairment. |
| (2) | Gold Fields share of loss after taxation represents exploration and other costs, including work completed on a scoping study. |
| (3) | FSE is a company incorporated under the laws of the Philippines and owns the gold-copper Far Southeast exploration project (the “FSE project”). During the exploration phase of the FSE project and as long as the 20% option remains exercisable, the Group has joint control over the FSE project. The Group will only have the power to direct the activities of FSE once it exercises the option to acquire the additional 20% shareholding in FSE, which is only exercisable once an FTAA is obtained. FSE has no revenues or significant assets or liabilities. Assets included in FSE represent the rights to explore and eventually mine the FSE project. |
| UNITED STATES DOLLAR | ||||||||
| 2016 | 2015 | |||||||
(b) Maverix | ||||||||
Gold Fields’ interest in Maverix, listed on the Toronto Stock Exchange, was 32% (2015: 0%) at 31 December 2016. | ||||||||
On 23 December 2016, Gold Fields sold a portfolio of eleven producing andnon-producing royalties to Maverix in exchange for 42.85 million common shares and 10.0 million common share purchase warrants of Maverix, realising a profit on disposal of US$48.0 million. The warrants are classified as derivative instruments and are included in investments (refer note 17). | ||||||||
Maverix has a 31 Decemberyear-end and has been equity-accounted since 23 December 2016. | ||||||||
Investment in associate consists of: | ||||||||
Listed shares | 42.1 | — | ||||||
|
|
|
| |||||
Investment in associate - Maverix | 42.1 | — | ||||||
|
|
|
| |||||
The fair value of the investment in Maverix at 31 December 2016 is US$42.1 million. | ||||||||
(c) Other | ||||||||
Bezant Resources PLC (“Bezant”) 1 | — | 0.5 | ||||||
Rusoro Mining Limited (“Rusoro”) 2 | — | — | ||||||
|
|
|
| |||||
Investment in associates - Other | — | 0.5 | ||||||
|
|
|
| |||||
Total investments in associates | 42.1 | 0.5 | ||||||
|
|
|
| |||||
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 15.1 | EQUITY-ACCOUNTED INVESTEES (continued) |
| (1) | During 2016, the Group’s holding was diluted from 21.6% to 8.8% following the issue of new shares by Bezant. In line with the Group’s accounting policy, this resulted in Bezant no longer being accounted for as an equity-accounted investee and wasre-classified to available-for-sale financial investments. |
| (2) | Represents a holding of 26.4% in Rusoro. |
The carrying value of Rusoro was written down to US$nil at 31 December 2010 due to losses incurred by the entity. The fair value, based on the quoted market price of the investment was US$23.9 million and US$5.0 million at 31 December 2016 and 31 December 2015, respectively. The unrecognised share of profits of Rusoro for the year amounted to US$18.7 million (2015: unrecognised shares of loss of US$3.6 million). The cumulative unrecognised share of losses of Rusoro amounted to US$194.0 million (2015: US$212.7 million).
On 22 August 2016, the Arbitration Tribunal, operating under the Additional Facility Rules of the World Bank’s International Centre for the Settlement of Investment Disputes, awarded Rusoro damages of US$967.8 million plus pre andpost-award interest which currently equates to in excess of US$1.2 billion in the arbitration brought by Rusoro against the Bolivarian Republic of Venezuela. Management of Rusoro has not recognised this amount due to the uncertainty over its recoverability.
| 15.2 | INTEREST IN JOINT OPERATION |
On 13 December 2016, Gold Fields purchased 50% of the Gruyere Gold Project and entered into a 50:50 unincorporated joint venture with Gold Road Resources Limited (“Gold Road”) for the development and operation of the Gruyere Gold Project in Western Australia, which comprises the Gruyere gold deposit as well as additional resources including Central Bore and Attila/Alaric.
Gold Fields acquired 50% interest in the Gruyere Gold Project for a total purchase consideration of A$350.0 million payable in cash and a 1.5% royalty on Gold Fields’ share of production after total mine production exceeds 2 million ounces. The cash consideration is split with A$250.0 million payable on the effective date and A$100.0 million payable according to an agreed construction cash call schedule. Transaction costs of A$18.5 million (US$13.3 million) were incurred.
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 15.2 | INTEREST IN JOINT OPERATION (continued) |
Below is a summary of Gold Fields’ share of the joint operation and includes inter-company transactions and balances:
| 2016 | ||||||||
| US$ | A$ | |||||||
Statement of financial position | ||||||||
Non-current assets | ||||||||
Property, plant and equipment1 | 268.6 | 372.4 | ||||||
Current assets | ||||||||
Prepayments | 3.9 | 5.4 | ||||||
|
|
|
| |||||
Total assets | 272.5 | 377.8 | ||||||
|
|
|
| |||||
Non-current liabilities | ||||||||
Deferred taxation | 0.1 | 0.2 | ||||||
Current liabilities | 272.4 | 377.6 | ||||||
Related entity loans payable | 191.7 | 265.8 | ||||||
Deferred payment | 67.7 | 93.8 | ||||||
Stamp duty payable | 13.0 | 18.0 | ||||||
|
|
|
| |||||
Total liabilities | 272.5 | 377.8 | ||||||
|
|
|
| |||||
| (1) | The Gruyere Gold project assets of A$372.4 million were capitalised at the exchange rate on the effective date of the transaction resulting in additions to property, plant and equipment of US$275.9 million. The additions of US$275.9 million (A$372.4 million) are made up of US$197.1 million (A$266.0 million) cash additions and US$78.8 million (A$106.4 million)non-cash additions. Refer note 13. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 16. | FINANCIAL INSTRUMENTS |
| UNITED STATES DOLLAR | ||||||||
| 2016 | 2015 | |||||||
Financial instruments are split per categories below and the accounting policies for financial instruments have been applied to these line items: | ||||||||
(a) Financial assets | ||||||||
Loans and receivables | ||||||||
- Environmental trust funds | 44.5 | 35.0 | ||||||
- Trade and other receivables | 68.6 | 78.8 | ||||||
- Cash and cash equivalents | 526.7 | 440.0 | ||||||
Fair value through profit or loss | ||||||||
- Trade receivables from provisional copper concentrate sales | 10.6 | 3.1 | ||||||
Available for sale | ||||||||
- Investments | 13.8 | 10.9 | ||||||
Derivative instruments | ||||||||
- Warrants | 5.9 | — | ||||||
(b) Financial liabilities | ||||||||
Other financial liabilities | ||||||||
- Borrowings | 1,692.9 | 1,820.3 | ||||||
- Trade and other payables | 505.6 | 393.1 | ||||||
- South Deep dividend | 6.4 | 6.5 | ||||||
| 17. | INVESTMENTS |
| UNITED STATES DOLLAR | ||||||||
| 2016 | 2015 | |||||||
Listed | ||||||||
Cost | 62.9 | 51.8 | ||||||
Less: Accumulated impairments | (45.0 | ) | (44.9 | ) | ||||
Net unrealised (loss)/gain on revaluation | (7.4 | ) | 0.9 | |||||
|
|
|
| |||||
Carrying value | 10.5 | 7.8 | ||||||
|
|
|
| |||||
Market value | 10.5 | 7.8 | ||||||
|
|
|
| |||||
Unlisted | ||||||||
Carrying value at cost | 3.3 | 3.1 | ||||||
|
|
|
| |||||
Derivative instruments | ||||||||
Warrants 2 | 5.9 | — | ||||||
|
|
|
| |||||
Total investments 1 | 19.7 | 10.9 | ||||||
|
|
|
| |||||
| (1) | All listed investments are classified as available for sale. Refer note 42 for details of major investments. |
| (2) | Consists of 10.0 million common share purchase warrants of Maverix. Refer note 15.1 for further details. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 18. | ENVIRONMENTAL TRUST FUNDS |
| UNITED STATES DOLLAR | ||||||||
| 2016 | 2015 | |||||||
Balance at beginning of the year | 35.0 | 30.4 | ||||||
Contributions | 7.5 | 7.7 | ||||||
Interest earned | 1.0 | 0.4 | ||||||
Translation adjustment | 1.0 | (3.5 | ) | |||||
|
|
|
| |||||
Balance at end of the year | 44.5 | 35.0 | ||||||
|
|
|
| |||||
The trust funds consist of term deposits amounting to US$11.3 million (2015: US$7.9 million) in South Africa, as well as secured cash deposits amounting to US$33.2 million (2015: US$27.1 million) in Ghana. | ||||||||
These funds are intended to fund environmental rehabilitation obligations of the Group’s South African and Ghanaian mines and are not available for general purposes of the Group. All income earned in these funds isre-invested or spent to meet these obligations. The funds are invested in money market and fixed deposits. The obligations which these funds are intended to fund are included in environmental rehabilitation costs under long-term provisions (Refer note 25.1). | ||||||||
| 19. | INVENTORIES |
| UNITED STATES DOLLAR | ||||||||
| 2016 | 2015 | |||||||
Gold-in-process and stockpiles | 234.3 | 189.7 | ||||||
Consumable stores 1 | 227.9 | 241.3 | ||||||
|
|
|
| |||||
Total inventories 2 | 462.2 | 431.0 | ||||||
Heap leach and stockpiles inventories included innon-current assets3 | (132.8 | ) | (132.8 | ) | ||||
|
|
|
| |||||
Total current inventories 4 | 329.4 | 298.2 | ||||||
|
|
|
| |||||
| (1) | Consumable stores with a fair value of US$7.8 million was reclassified to assets held for sale. Refer note 12 for further details. |
| (2) | Refer note 6 for details on the net realisable value write-downs of inventories. |
| (3) | Heap leach and stockpile inventories will only be processed at the end oflife-of-mine. |
| (4) | The cost of consumable stores consumed during the year and included in cost of sales amounted to US$353.9 million (2015: US$389.2 million and 2014: US$441.2 million). |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 20. | TRADE AND OTHER RECEIVABLES |
| UNITED STATES DOLLAR | ||||||||
| 2016 | 2015 | |||||||
Trade receivables - gold sales and copper concentrate | 58.2 | 68.1 | ||||||
Trade receivables - other | 4.5 | 3.6 | ||||||
Deposits | 0.3 | 0.2 | ||||||
Payroll receivables | 10.7 | 7.2 | ||||||
Prepayments | 50.1 | 40.5 | ||||||
Value added tax | 39.6 | 43.2 | ||||||
Diesel rebate | 1.3 | 3.3 | ||||||
Other | 5.5 | 2.8 | ||||||
|
|
|
| |||||
Total trade and other receivables | 170.2 | 168.9 | ||||||
|
|
|
| |||||
| 21. | CASH AND CASH EQUIVALENTS |
| UNITED STATES DOLLAR | ||||||||
| 2016 | 2015 | |||||||
Cash at bank and on hand | 526.7 | 440.0 | ||||||
|
|
|
| |||||
Total cash and cash equivalents | 526.7 | 440.0 | ||||||
|
|
|
| |||||
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 22. | SHARE CAPITAL |
Authorised and issued
The authorised share capital of the Company is R500.0 million divided into 1,000,000,000 ordinary par value shares of 50 cents each. The issued share capital of the Company at 31 December 2016 is US$59.6 million (2015: US$58.1 million) divided into 820,606,945 (2015: 776,594,162) ordinary par value shares of 50 cents each.
During 2016, Gold Fields successfully completed a US$151.5 million (R2.3 billion) accelerated equity raising by way of a private placement to institutional investors.
A total number of 38,857,913 new Gold Fields shares were placed at a price of R59.50 per share which represented a 6.0% discount to the30-day volume weighted average traded price, for the period ended 17 March 2016 and a 0.7% discount to the50-day moving average.
In terms of the general authority granted by shareholders at the Annual General Meeting (“AGM”) on 18 May 2016, the authorised but unissued ordinary share capital of the Company representing not more than 5% of the issued share capital of the Company from time to time at that date, after setting aside so many ordinary shares as may be required to be allotted and issued pursuant to the share incentive schemes, was placed under the control of the directors. This authority expires at the next annual general meeting where shareholders will be asked to place under the control of the directors the authorised but unissued ordinary share capital of the Company representing not more than 5% of the issued share capital of the Company from time to time.
In terms of the JSE listing requirements, shareholders may, subject to certain conditions, authorise the directors to issue the shares held under their control for cash, other than by means of a rights offer, to shareholders. In order that the directors of the Company may be placed in a position to take advantage of favourable circumstances which may arise for the issue of such shares for cash, without restriction, for the benefit of the Company, shareholders will be asked to consider a special ordinary resolution to this effect at the forthcoming AGM.
| Repurchase | of shares |
The Company has not exercised the general authority granted to buy back shares from its issued ordinary share capital granted at the AGM held on 18 May 2016. Currently, the number of ordinary shares that may be bought back in any one financial year may not exceed 20% of the issued ordinary share capital as of 18 May 2016. At the next AGM, shareholders will be asked to renew the general authority for the acquisition by the Company, or a subsidiary of the Company, of its own shares.
Treasury shares
In 2011, Mvelaphanda Resources Limited unbundled 856,330 shares held in Gold Fields Limited back to Gold Fields Limited. The Group reclassified these shares as treasury shares, resulting in a decrease in share capital and premium.
On 1 March 2014,2016, the Remuneration Committee approved856,330 treasury shares were issued to employees under the Gold Fields Limited Long-term cash incentive plan (“LTIP”)2012 Share Plan as part of the options exercised in 2016 (Refer note 5 for further details). The plan provides Group no longer holds any treasury shares.
Notes to the consolidated financial statements
for key senior managersthe year ended 31 December
Figures in millions unless otherwise stated
| 23. | DEFERRED TAXATION |
| UNITED STATES DOLLAR | ||||||||
| 2016 | 2015 | |||||||
| The detailed components of the net deferred taxation liability which results from the differences between the carrying amounts of assets and liabilities recognised for financial reporting and taxation purposes in different accounting periods are: | ||||||||
Liabilities | ||||||||
- Mining assets | 973.2 | 959.8 | ||||||
- Investment in environmental trust funds | 2.8 | 2.1 | ||||||
- Inventories | 13.7 | 14.5 | ||||||
- Other | 3.5 | 9.8 | ||||||
|
|
|
| |||||
Liabilities | 993.2 | 986.2 | ||||||
|
|
|
| |||||
Assets | ||||||||
- Provisions | (100.8 | ) | (104.8 | ) | ||||
- Tax losses | (54.7 | ) | (72.4 | ) | ||||
- Unredeemed capital expenditure | (420.9 | ) | (375.8 | ) | ||||
|
|
|
| |||||
Assets | (576.4 | ) | (553.0 | ) | ||||
|
|
|
| |||||
Net deferred taxation liabilities | 416.8 | 433.2 | ||||||
|
|
|
| |||||
Included in the statement of financial position as follows: | ||||||||
Deferred taxation assets | (48.7 | ) | (54.1 | ) | ||||
Deferred taxation liabilities | 465.5 | 487.3 | ||||||
|
|
|
| |||||
Net deferred taxation liabilities | 416.8 | 433.2 | ||||||
|
|
|
| |||||
Balance at beginning of the year | 433.2 | 324.6 | ||||||
Recognised in profit or loss | (12.6 | ) | 104.2 | |||||
Translation adjustment | (3.8 | ) | 4.4 | |||||
|
|
|
| |||||
Balance at end of the year | 416.8 | 433.2 | ||||||
|
|
|
| |||||
Notes to receivethe consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 24. | BORROWINGS |
Facility | Notes | 2016 | 2015 | Borrower | Nominal interest rate | Commitment fee | Maturity date | |||||||||||||||||||||
The terms and conditions of outstanding loans are as follows: | ||||||||||||||||||||||||||||
US$1 billion notes issue (the notes) 1 | (a)(i) | 846.4 | 992.6 | Orogen | 4.875 | % | — | 7 October 2020 | ||||||||||||||||||||
Sibanye Gold guarantee fee 2 | (a)(ii) | — | — | Orogen | — | — | 24 April 2015 | |||||||||||||||||||||
US$150 million revolving senior secured credit facility3 | (b) | 82.0 | 42.0 | La Cima | LIBOR plus 1.63 | % | 0.65 | % | 19 December 2017 | |||||||||||||||||||
US$70 million senior secured revolving credit facility 4 | (c) | 45.0 | 45.0 | Ghana | LIBOR plus 2.40 | % | 1.00 | % | 6 May 2017 | |||||||||||||||||||
US$1,510 million term loan and revolving credit facilities 5 | (d) | — | 724.0 | |||||||||||||||||||||||||
- Facility A (US$75 million) | — | — | Orogen | LIBOR plus 2.45 | % | — | 28 November 2015 | |||||||||||||||||||||
- Facility A (US$45 million) | — | 45.0 | Orogen | LIBOR plus 2.45 | % | — | — | |||||||||||||||||||||
- Facility B (US$720 million) | — | 150.0 | Orogen | LIBOR plus 2.25 | % | 0.90 | % | — | ||||||||||||||||||||
- Facility C (US$670 million) | — | 529.0 | Orogen | LIBOR plus 2.00 | % | 0.80 | % | — | ||||||||||||||||||||
US$1,290 million term loan and revolving credit facilities 6 | (e) | 658.5 | — | |||||||||||||||||||||||||
- Facility A (US$380 million) | 380.0 | — | Orogen | LIBOR plus 2.50 | % | — | 6 June 2019 | |||||||||||||||||||||
- Facility B (US$360 million) | 278.5 | — | Orogen | LIBOR plus 2.20 | % | 0.77 | % | 6 June 2019 | ||||||||||||||||||||
- Facility C (US$550 million) | — | — | Orogen | LIBOR plus 2.45 | % | 0.86 | % | 6 June 2021 | ||||||||||||||||||||
R1,500 million Nedbank revolving credit facility 7 | (f) | — | — | GFIJVH/GFO | JIBAR plus 2.50 | % | 0.85 | % | 7 March 2018 | |||||||||||||||||||
Rand revolving credit facilities8 | (g) | |||||||||||||||||||||||||||
- R500 million Rand Merchant Bank revolving credit facility | — | — | GFIJVH/GFO | JIBAR plus 2.50 | % | 1.00 | % | 19 June 2016 | ||||||||||||||||||||
- R500 million Standard Bank revolving credit facility | — | — | GFIJVH/GFO | JIBAR plus 2.75 | % | 1.05 | % | 20 December 2016 | ||||||||||||||||||||
Short-term Rand uncommitted credit facilities 9 | (h) | 61.0 | 16.7 | — | — | — | — | |||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Total borrowings | 1,692.9 | 1,820.3 | ||||||||||||||||||||||||||
Current borrowings | (188.0 | ) | (58.7 | ) | ||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
Non-current borrowings | 1,504.9 | 1,761.6 | ||||||||||||||||||||||||||
|
|
|
| |||||||||||||||||||||||||
| (1) | The balance is net of unamortised transaction costs amounting to US$6.0 million (2015: US$7.4 million) which will unwind over the remaining period of the notes as an interest expense. |
The payment of all amounts due in respect of the notes is unconditionally and irrevocably guaranteed by Gold Fields Limited (“Gold Fields”), Sibanye Gold (up to 24 April 2015), Gold Fields Operations Limited (“GFO”) and Gold Fields Holdings Company (BVI) Limited (“GF Holdings”) (collectively “the Guarantors”), on a cash award conditionaljoint and several basis.
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 24. | BORROWINGS (continued) |
The notes and guarantees constitute direct, unsubordinated and unsecured obligations of Orogen and the Guarantors, respectively, and rank equally in right of payment among themselves and with all other existing and future unsubordinated and unsecured obligations of Orogen and the Guarantors, respectively.
Gold Fields Australasia Proprietary Limited (“GFA”) offered and accepted the purchase of an aggregate principal amount of notes equal to US$147.6 million at the purchase price of US$880 per US$1,000 in principal amount of notes. GFA intends to hold the notes acquired until their maturity on 7 October 2020. The purchase of the notes amounting to US$147.6 million was financed by drawing down under the US$1,510 million term loan and revolving credit facilities. The group recognised a profit of US$17.7 million on the achievementbuy back of the notes.
| (2) | As part of the unbundling of Sibanye Gold in 2013, an indemnity agreement (“the Indemnity Agreement”) was entered into between the Guarantors, pursuant to which the Guarantors (other than Sibanye Gold) hold Sibanye Gold harmless from and against any and all liabilities and expenses which may be incurred by Sibanye Gold under or in connection with the notes, including any payment obligations by Sibanye Gold to the noteholders or the trustee of the notes pursuant to the guarantee of the notes, all on the terms and subject to the conditions contained therein. |
The original Sibanye Gold guarantee fee liability was recognised as the present value of future cash flows using a risk-free rate, based on 0.25% of the value of the notes, payable semi-annually. The guarantee fee varied, based on the Group’s credit rating.
In March 2015, Gold Fields approached the noteholders through a consent solicitation process to release Sibanye Gold of its obligation as a guarantor under the notes. On 22 April 2015 the noteholders approved the various resolutions to release Sibanye Gold as a guarantor. The release became effective on 24 April 2015 when all the conditions to the extraordinary resolution were met. As a result of this release, the Sibanye Gold guarantee fee of US$26.2 million was derecognised.
| (3) | Borrowings under the revolving senior secured credit facility are secured by first-ranking assignments of all rights, title and interest in all of La Cima’s concentrate sale agreements. In addition, the offshore and onshore collection accounts of La Cima are subject to an account control agreement and afirst-ranking charge in favour of the lenders. This facility isnon-recourse to the rest of the Group. The revolving senior secured credit facility matures in 2017 and as a result is disclosed as a current liability as at 31 December 2016. |
At 31 December 2015, La Cima did not meet certain covenants specified performance conditions relatingin the revolving senior secured credit facility agreement. The lenders subsequently waived their rights and entitlements arising from the failure of La Cima to meet the specific covenants. Notwithstanding the waiver received from the lenders and the fact that there was no legal or constructive obligation to settle the debt within the next 12 months at the time, IAS 1Presentation of Financial Statements, requires that the balance outstanding under the revolving senior secured credit facility be disclosed as a current liability at 31 December 2015. At 31 December 2016, there are no breaches in covenants.
The total shareholder return and free cash flow margin. The conditions are assessed over the performance cycle which runs over three calendar years. The estimated expense associated with awards issuedamount available under this plan is recorded over the service period from the date of awardfacility was US$150.0 million (2015: US$150.0 million) at 31 December 2016.
| (4) | Borrowings under the facility are guaranteed by Gold Fields Ghana Limited and Abosso Goldfields Limited. Borrowings under this facility are also secured by the registration of security over certain fleet |
Notes to the payment date.consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 24. | BORROWINGS (continued) |
| vehicles owned by GF Ghana and Abosso (“Secured Assets”). In addition, the lenders are noted as first loss payees under the insurance contracts in respect of the Secured Assets and are assigned the rights under the maintenance contracts between certain suppliers of the Secured Assets. This facility isnon-recourse to the rest of the Group. The facility matures in 2017 and as a result is disclosed as a current liability as at 31 December 2016. |
Fleet assets in Ghana amounting to US$95.5 million (2015: US$176.6 million) have been pledged as security for this facility.
| (5) | Borrowings under these facilities are guaranteed by Gold Fields, GF Holdings, Orogen, GFO and GFIJVH. |
US$75 million of Facility A matured on 28 November 2015, resulting in the total amount available at 31 December 2015 to be US$1,435 million.
The remaining facilities were cancelled and refinanced through the US$1,290 million term loan and revolving credit facilities on 6 June 2016, resulting in the total amount available to be US$nil at 31 December 2016.
| (6) | Borrowings under this facility are guaranteed by Gold Fields, GFO, GF Holdings, Orogen, GFIJVH and Gold Fields Ghana Holdings (BVI) Limited. |
| (7) | Borrowings under this facility are guaranteed by Gold Fields, GFO, GF Holdings, Orogen and GFIJVH. |
| (8) | Borrowings under these facilities were guaranteed by Gold Fields, GFO, GF Holdings, Orogen and GFIJVH. |
| (9) | The Group utilised uncommitted loan facilities from some of the major banks to fund the capital expenditure and working capital requirements of the South African operation. These facilities have no fixed terms, are short term in nature and interest rates are market related. Borrowings under these facilities are guaranteed by Gold Fields. |
| UNITED STATES DOLLAR | ||||||||||
| 2016 | 2015 | |||||||||
(a)(i) | US$1 billion notes issue | |||||||||
Balance at beginning of the year | 992.6 | 964.6 | ||||||||
Transaction costs derecognised | — | 26.2 | ||||||||
Buy-back of US$200 million notes | (129.9 | ) | — | |||||||
Profit onbuy-back of notes | (17.7 | ) | — | |||||||
Unwinding of transaction costs | 1.4 | 1.8 | ||||||||
|
|
|
| |||||||
Balance at end of the year | 846.4 | 992.6 | ||||||||
|
|
|
| |||||||
(a)(ii) | Sibanye Gold guarantee fee | |||||||||
Balance at beginning of the year | — | 26.7 | ||||||||
Payment of Sibanye Gold guarantee fee | — | (0.9 | ) | |||||||
Unwinding of interest | — | 0.4 | ||||||||
Derecognition | — | (26.2 | ) | |||||||
|
|
|
| |||||||
Balance at end of the year | — | — | ||||||||
|
|
|
| |||||||
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 24. | BORROWINGS (continued) |
| UNITED STATES DOLLAR | ||||||||||
| 2016 | 2015 | |||||||||
(b) | US$150 million revolving senior secured credit facility | |||||||||
Balance at beginning of the year | 42.0 | 42.0 | ||||||||
Loans advanced | 40.0 | — | ||||||||
|
|
|
| |||||||
Balance at end of the year | 82.0 | 42.0 | ||||||||
|
|
|
| |||||||
(c) | US$70 million senior secured revolving credit facility | |||||||||
Balance at beginning of the year | 45.0 | 35.0 | ||||||||
Loans advanced | — | 10.0 | ||||||||
|
|
|
| |||||||
Balance at end of the year | 45.0 | 45.0 | ||||||||
|
|
|
| |||||||
(d) | US$1,510 million term loan and revolving credit facilities | |||||||||
Balance at beginning of the year | 724.0 | 626.0 | ||||||||
Loans advanced | 174.0 | 400.0 | ||||||||
Repayments | (898.0 | ) | (302.0 | ) | ||||||
|
|
|
| |||||||
Balance at end of the year | — | 724.0 | ||||||||
|
|
|
| |||||||
(e) | US$1,290 million term loan and revolving credit facilities | |||||||||
Loans advanced | 707.5 | — | ||||||||
Repayments | (49.0 | ) | — | |||||||
|
|
|
| |||||||
Balance at end of the year | 658.5 | — | ||||||||
|
|
|
| |||||||
(f) | R1,500 million Nedbank revolving credit facility | |||||||||
Balance at beginning of the year | — | 129.8 | ||||||||
Loans advanced | 20.8 | — | ||||||||
Repayments | (21.3 | ) | (129.0 | ) | ||||||
Translation adjustment | 0.5 | (0.8 | ) | |||||||
|
|
|
| |||||||
Balance at end of the year | — | — | ||||||||
|
|
|
| |||||||
(g) | Rand revolving credit facilities | |||||||||
Balance at beginning of the year | — | 21.6 | ||||||||
Repayments | — | (21.5 | ) | |||||||
Translation adjustment | — | (0.1 | ) | |||||||
|
|
|
| |||||||
Balance at end of the year | — | — | ||||||||
|
|
|
| |||||||
(h) | Short-term Rand uncommitted credit facilities | |||||||||
Balance at beginning of the year | 16.7 | 65.2 | ||||||||
Loans advanced | 356.4 | 96.0 | ||||||||
Repayments | (315.0 | ) | (141.8 | ) | ||||||
Translation adjustment | 2.9 | (2.7 | ) | |||||||
|
|
|
| |||||||
Balance at end of the year | 61.0 | 16.7 | ||||||||
|
|
|
| |||||||
Total borrowings | 1,692.9 | 1,820.3 | ||||||||
|
|
|
| |||||||
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 24. | BORROWINGS (continued) |
| UNITED STATES DOLLAR | ||||||||||
| 2016 | 2015 | |||||||||
The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the reporting dates are as follows: | ||||||||||
Variable rate with exposure to repricing (six months or less) | 846.5 | 827.7 | ||||||||
Fixed rate with no exposure to repricing (US$1 billion notes issue) | 846.4 | 992.6 | ||||||||
|
|
|
| |||||||
| 1,692.9 | 1,820.3 | |||||||||
|
|
|
| |||||||
The carrying amounts of the Group’s borrowings are denominated in the following currencies: | ||||||||||
US Dollar | 1,631.9 | 1,803.6 | ||||||||
Rand | 61.0 | 16.7 | ||||||||
|
|
|
| |||||||
| 1,692.9 | 1,820.3 | |||||||||
|
|
|
| |||||||
The Group has the following undrawn borrowing facilities: | ||||||||||
Committed | 979.0 | 1,009.5 | ||||||||
Uncommitted | 56.6 | �� | 79.1 | |||||||
|
|
|
| |||||||
| 1,035.6 | 1,088.6 | |||||||||
|
|
|
| |||||||
All of the above undrawn committed facilities have floating rates. The uncommitted facilities have no expiry dates and are open ended. Undrawn committed facilities have the following expiry dates: | ||||||||||
- within one year | 93.0 | 66.2 | ||||||||
- later than one year and not later than two years | 106.9 | 844.0 | ||||||||
- later than two years and not later than three years | 81.5 | 99.3 | ||||||||
- later than three years and not later than five years | 697.6 | — | ||||||||
|
|
|
| |||||||
| 979.0 | 1,009.5 | |||||||||
|
|
|
| |||||||
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 25. | PROVISIONS |
| UNITED STATES DOLLAR | ||||||||||
| 2016 | 2015 | |||||||||
| 25.1 | Environmental rehabilitation costs | 283.1 | 275.4 | |||||||
| 25.2 | South Deep dividend | 6.4 | 6.5 | |||||||
| 25.3 | Other | 2.2 | 2.2 | |||||||
|
|
|
| |||||||
Total provisions | 291.7 | 284.1 | ||||||||
|
|
|
| |||||||
| 25.1 | Environmental rehabilitation costs | |||||||||
Balance at beginning of the year | 275.4 | 311.2 | ||||||||
Changes in estimates 1 | 5.0 | (14.3 | ) | |||||||
Interest expense | 10.9 | 11.7 | ||||||||
Payments | (7.4 | ) | (9.8 | ) | ||||||
Translation adjustment | (0.8 | ) | (23.4 | ) | ||||||
|
|
|
| |||||||
Balance at end of the year 2 | 283.1 | 275.4 | ||||||||
|
|
|
| |||||||
The provision is calculated using the following gross closure cost estimates: | ||||||||||
South Africa | 37.1 | 29.0 | ||||||||
Ghana | 105.3 | 91.5 | ||||||||
Australia | 181.8 | 186.0 | ||||||||
Peru | 56.6 | 46.7 | ||||||||
|
|
|
| |||||||
Total gross closure cost estimates | 380.8 | 353.2 | ||||||||
|
|
|
| |||||||
The provision is calculated using the following assumptions: | Inflation rate | Discount rate | ||||||||
2016 | ||||||||||
South Africa | 5.5 | % | 9.7% | |||||||
Ghana | 2.2 | % | 9.7% - 9.8% | |||||||
Australia | 2.5 | % | 1.9% - 3.0% | |||||||
Peru | 2.2 | % | 3.7% | |||||||
2015 | ||||||||||
South Africa | 5.4 | % | 10.1% | |||||||
Ghana | 2.2 | % | 7.8% - 8.8% | |||||||
Australia | 2.5 | % | 2.0% - 2.8% | |||||||
Peru | 2.2 | % | 3.5% | |||||||
| (1) | Changes in estimates are defined as changes in reserves and corresponding changes in life of mine as well as changes in laws and regulations governing environmental matters, closure cost estimates and discount rates. |
| (2) | South African, Ghanaian, Australian and Peruvian mining companies are required by law to undertake rehabilitation works as part of their ongoing operations. These environmental rehabilitation costs are funded as follows: |
- Ghana - reclamation bonds underwritten by banks and restricted cash (refer note 18);
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 25. | PROVISIONS (continued) |
- South Africa - contributions into environmental trust funds (refer note 18) and guarantees;
- Australia - unfunded; and
- Peru - bank guarantees.
Refer to note 38 for expected timing of the cash outflows in respect of each grant is at the end of three years aftergross closure cost estimates. Certain current rehabilitation costs are charged to this provision as and when incurred.
| 25.2 | South Deep dividend |
| UNITED STATES DOLLAR | ||||||||
| 2016 | 2015 | |||||||
Total provision | 7.8 | 7.8 | ||||||
Current portion included in trade and other payables | (1.4 | ) | (1.3 | ) | ||||
|
|
|
| |||||
Balance at end of the year | 6.4 | 6.5 | ||||||
|
|
|
| |||||
During the six month period ended 31 December 2010, a wholly owned subsidiary company of Gold Fields, Newshelf 899 (Proprietary) Limited (“Newshelf”), was created to acquire 100% of the South Deep net assets from Sibanye Gold. Sibanye Gold was a wholly owned subsidiary of Gold Fields at the time. The new company then issued 10 million Class B ordinary shares representing 10% of South Deep’s net worth to a consortium of BEE partners. Class B ordinary shareholders are entitled to a dividend of R2 per share and can convert the Class B to Class A ordinary shares over a 20 year period from the effective date of the transaction, 6 December 2010. The Class B ordinary shares will convertone-third after 10 years and a third thereafter on each fifth year anniversary. | ||||||||
This transaction was made up of a preferred BEE dividend (R151.4 million) and an equity component (R673.4 million). The preferred dividend represents a liability of Gold Fields to the Class B ordinary shareholders and was valued at R151.4 million, of which R20.0 million or US$1.3 million was declared on 16 March 2016 (20 March 2015: R20.0 million or US$1.7 million) and R20.0 million or US$1.4 million (2015: R20.0 million or US$1.3 million) is classified as a short-term portion under trade and other payables. | ||||||||
Notes to the original award was made.consolidated financial statements
The charge for the LTIP has been recognizedyear ended 31 December
Figures in millions unless otherwise stated
| 26. | LONG-TERM INCENTIVE PLAN |
| UNITED STATES DOLLAR | ||||||||
| 2016 | 2015 | |||||||
Balance at beginning of the year | 12.6 | 8.3 | ||||||
Charge to income statement | 11.0 | 5.3 | ||||||
Translation adjustment | — | (1.0 | ) | |||||
|
|
|
| |||||
Balance at end of the year | 23.6 | 12.6 | ||||||
|
|
|
| |||||
On 1 March 2014, the Remuneration Committee approved the Gold Fields Limited Long-Term Incentive Plan (“LTIP”) to replace the Gold Fields Limited 2012 Share Plan. The plan provides for executive directors, certain officers and employees to receive a cash award conditional on the achievement of specified performance conditions relating to total shareholder return and free cash flow margin. The conditions are assessed over the performance cycle which runs over three calendar years. The expected timing of the cash outflows in respect of each grant is at the end of three years after the original award was made. The fair value of the free cash flow portion of the awards are valued based on the actual and expected achievement of the cash flow targets set out in the plan. No allocations were made under the LTIP in 2016 following the introduction of the Gold Fields Limited 2012 share plan as amended (Refer note 5). | ||||||||
The fair value of the total shareholder return portion of the awards granted during the year made under this plan is valued using the Monte Carlo simulation model. The inputs to the model were as follows: | ||||||||
- weighted average historical volatility (based on a statistical analysis of the share price on a weighted moving average basis for the expected term of the option) | — | 45.2 | % | |||||
- expected term (years) | — | 3.0 | ||||||
- three-year risk-free interest rate (based on US interest rates) | — | 1.5 | % | |||||
| 27. | TRADE AND OTHER PAYABLES |
| UNITED STATES DOLLAR | ||||||||
| 2016 | 2015 | |||||||
Trade payables | 169.3 | 155.3 | ||||||
| Accruals and other payables | 245.9 | 226.4 | ||||||
| Leave pay accrual | 37.7 | 34.5 | ||||||
| Interest payable on loans | 9.7 | 11.4 | ||||||
| Deferred payment - refer note 15.2 | 67.7 | — | ||||||
| Stamp duty payable - refer note 15.2 | 13.0 | — | ||||||
|
|
|
| |||||
| Total trade and other payables | 543.3 | 427.6 | ||||||
|
|
|
| |||||
Notes to the statement of operations under the captions production costs, corporate expenditure, exploration expenditure and other expenses. The cost consolidated financial statements
for the fiscal year ended December 31 2014 is $8.7 million (fiscal 2013: $nil and fiscal 2012: $nil)December
Figures in millions unless otherwise stated
| 28. | CASH GENERATED BY OPERATIONS |
| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| Profit/(loss) for the year | 173.7 | (242.6 | ) | 20.4 | ||||||||
| Mining and income taxation | 192.1 | 247.1 | 118.1 | |||||||||
| Royalties | 80.4 | 76.0 | 86.1 | |||||||||
| Interest expense | 82.5 | 87.8 | 105.0 | |||||||||
| Interest received | (7.3 | ) | (5.9 | ) | (3.6 | ) | ||||||
| Dividends received | — | — | (0.1 | ) | ||||||||
|
|
|
|
|
| |||||||
Profit beforenon-cash and other adjusting items | 521.4 | 162.4 | 325.9 | |||||||||
| Amortisation and depreciation | 679.2 | 609.9 | 656.7 | |||||||||
| Interest expense - environmental rehabilitation | 10.9 | 11.7 | 18.4 | |||||||||
| Non-cash rehabilitation (income)/charge | (9.9 | ) | (15.1 | ) | 18.4 | |||||||
| Interest received - environmental trust funds | (1.0 | ) | (0.4 | ) | (0.5 | ) | ||||||
| Impairment andwrite-off of investments and assets | 124.0 | 251.9 | 26.7 | |||||||||
| (Profit)/loss on disposal of assets | (48.0 | ) | 0.1 | 1.3 | ||||||||
| Profit on disposal of investments | (2.3 | ) | (0.1 | ) | (0.5 | ) | ||||||
| Profit on disposal of Chucapaca | — | — | (4.6 | ) | ||||||||
| Share-based payments | 14.4 | 10.9 | 26.0 | |||||||||
| Long-term incentive plan | 11.0 | 5.3 | 8.7 | |||||||||
| Borrowing costs capitalised | (15.1 | ) | (16.6 | ) | (24.2 | ) | ||||||
| Share of results of equity-accounted investees after taxation | — | 2.4 | (1.2 | ) | ||||||||
| Other | (14.5 | ) | (17.0 | ) | 10.2 | |||||||
|
|
|
|
|
| |||||||
| Total cash generated by operations | 1,270.1 | 1,005.4 | 1,061.3 | |||||||||
|
|
|
|
|
| |||||||
| 29. | CHANGE IN WORKING CAPITAL |
| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| Inventories | (38.6 | ) | 46.9 | (15.6 | ) | |||||||
| Trade and other receivables | 2.8 | 37.4 | 26.6 | |||||||||
| Trade and other payables | 33.1 | (40.7 | ) | 72.7 | ||||||||
|
|
|
|
|
| |||||||
| Total change in working capital | (2.7 | ) | 43.6 | 83.7 | ||||||||
|
|
|
|
|
| |||||||
| 30. | ROYALTIES PAID |
| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| Amount owing at beginning of the year | (18.5 | ) | (20.4 | ) | (23.1 | ) | ||||||
| Royalties | (80.4 | ) | (76.0 | ) | (86.1 | ) | ||||||
| Amount owing at end of the year | 20.2 | 18.5 | 20.4 | |||||||||
| Translation | — | 1.0 | — | |||||||||
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| Total royalties paid | (78.7 | ) | (76.9 | ) | (88.8 | ) | ||||||
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Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 31. | TAXATION PAID |
| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
| Amount owing at beginning of the year | (59.3 | ) | (37.8 | ) | (11.5 | ) | ||||||
| SA and foreign current taxation | (204.7 | ) | (142.9 | ) | (134.2 | ) | ||||||
| Amount owing at end of the year | 107.9 | 59.3 | 37.8 | |||||||||
| Translation | — | 3.0 | 2.6 | |||||||||
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| Total taxation paid | (156.1 | ) | (118.4 | ) | (105.3 | ) | ||||||
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| 32. | DISPOSAL OF CHUCAPACA |
| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
During 2014, Gold Fields disposed of its 51% interest in Canteras del Hallazgo (entity that houses the Chucapaca project in Peru) to Compañía de Minas Buenaventura S.A.A. | ||||||||||||
Below is a summary of Chucapaca’s assets and liabilities disposed of in 2014: | ||||||||||||
Property, plant and equipment | — | — | 132.4 | |||||||||
Non-current assets | — | — | 10.1 | |||||||||
Trade and other receivables | — | — | 5.7 | |||||||||
Cash and cash equivalents | — | — | 0.7 | |||||||||
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Total assets disposed of | — | — | 148.9 | |||||||||
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Deferred taxation | — | — | 2.1 | |||||||||
Trade and other payables | — | — | 0.6 | |||||||||
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Total liabilities disposed of | — | — | 2.7 | |||||||||
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Net assets disposed of | — | — | 146.2 | |||||||||
Less:Non-controlling interest | — | — | (69.8 | ) | ||||||||
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Carrying value disposed of | — | — | 76.4 | |||||||||
Cash received | — | — | 81.0 | |||||||||
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Profit on disposal | — | — | 4.6 | |||||||||
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Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 33. | RETIREMENT BENEFITS |
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The fair value of the awards made under this plan are valued using the Monte Carlo simulation model. The inputs to the model were as follows:
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Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
Risk management activities
In the normal course of its operations, the Group is exposed to commodity price, currency, interest rate, liquidity and credit risk. In order to manage these risks, the Group has developed a comprehensive risk management process to facilitate control and monitoring of these risks.
Concentration of credit risk
The Group’s financial instruments do not represent a concentration of credit risk as the Group deals with a number of major banks. Accounts receivable are regularly monitored and assessed and where necessary an adequate level of provision is maintained.
A formal process of allocating counterparty exposure and prudential limits is approved by the audit committee and is applied under the supervision of the Group’s executive committee. Facilities requiring margin payments are not engaged.
Concentration of labor
About three quarters of the Group’s total workforce is unionized (73.1%), but patterns of union participation vary considerably between locations. Each of the Group’s regions have the following levels of union participation within their workforce:
- Peru 12%
- Australia nil%
- South Africa 93%
- Ghana 96%
Foreign currency and commodity price risk
In the normal course of business, the Group enters into transactions for the sale of its gold, denominated in U.S. Dollars. In addition, the Group has assets and liabilities in a number of different currencies (South African Rand, U.S. Dollars and Australian Dollars). As a result, the Group is subject to transaction and translation exposure from fluctuations in foreign currency exchange rates.
As at December 31, 2014 and 2013, Gold Fields did not hold any derivative instruments to protect its exposure to adverse movements in gold and copper commodity prices.
Under the long-established structure of sales agreements prevalent in the industry, substantially all of Gold Fields’ copper concentrate sales are provisionally priced at the time of shipment. The provisional prices are finalized in a contractually specified future period (generally one to three months) primarily based on quoted London Metal Exchange, or LME, prices. Sales subject to final pricing are generally settled in a subsequent month. Because a significant portion of Gold Fields’ copper concentrate sales in a period usually remain subject to final pricing, the forward price is a major determinant of recorded revenues and the average recorded copper price for the period.
LME copper prices averaged $6,881 per ton during the year ended December 31, 2014 (December 31, 2013: $7,324 and December 31, 2012: $7,951 per ton), compared with the Company’s recorded average price, net of refining charges, of $6,026 per ton (December 31, 2013: $6,575 and December 31, 2012: $7,322). The
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
applicable three month copper price at December 31, 2014 was $6,378 per ton, before taking into account refining charges. During the fiscal year ended December 31, 2014, changes in copper prices resulted in a provisional pricing mark-to-market loss of $8.1 million (December 31, 2013: loss of $7.9 million and December 31, 2012: gain of $15.6 million) (included in revenue).
Interest rate and liquidity risk
Fluctuations in interest rates impact on the value of investments and financing activities, giving rise to interest rate risk. The Group does not currently hedge its exposure to interest rate risk.
In the ordinary course of business, the Group receives cash proceeds from its operations and is required to fund working capital and capital expenditure requirements. The cash is managed to ensure surplus funds are invested to maximize returns while ensuring that capital is safeguarded to the maximum extent possible by investing only with top financial institutions.
Substantial contractual arrangements for uncommitted borrowing facilities are maintained with several banking counterparties to meet the Group’s normal contingency funding requirements.
Fair value
The fair value of a financial instrument is defined as the amount at which the instrument could be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The carrying amounts of receivables, accounts payable and cash and cash equivalents are a reasonable estimate of their fair values due to the short-term maturity of such instruments. The investments in the environmental trust fund approximate fair value, as the monies are invested in short-term maturity investments. The listed investments are carried at market value. Long-term loans at floating rates, approximate fair value as they are subject to market based floating rates.
The estimated fair values of the the Group’s financial instruments are:
| December 31, 2014 | December 31, 2013 | |||||||||||||||
| Carrying value | Fair value | Carrying value | Fair value | |||||||||||||
Financial assets | ||||||||||||||||
Cash and cash equivalents | 458.0 | 458.0 | 325.0 | 325.0 | ||||||||||||
Receivables | 122.4 | 122.4 | 146.7 | 146.7 | ||||||||||||
Non-current investments * | 286.5 | 279.9 | 268.9 | 269.7 | ||||||||||||
Financial liabilities | ||||||||||||||||
Long-term loans | 1,770.7 | 1,614.4 | 1,938.6 | 1,794.4 | ||||||||||||
Accounts payable and provisions | 460.6 | 460.6 | 402.1 | 402.1 | ||||||||||||
Interest payable | 11.2 | 11.2 | 12.4 | 12.4 | ||||||||||||
Short-term loans and current portion of long-term loans | 140.2 | 140.2 | 121.5 | 121.5 | ||||||||||||
Other non-current liabilities | 9.1 | 9.1 | 10.9 | 10.9 | ||||||||||||
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
The Group utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Group determines fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:
Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date.
Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability.
Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.
The following table sets forth the Group’s financial assets and liabilities measured at fair value by level within the fair value hierarchy. As required by Accounting Standard Codification, or ASC, fair value guidance, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.
Items listed below are included in the financial assets and liabilities total above:
| Fair value at December 31, 2014 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Listed investments | 4.4 | 4.4 | — | — | ||||||||||||
Trade receivable from provisional copper concentrate sales, net | 29.5 | — | 29.5 | — | ||||||||||||
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| 33.9 | 4.4 | 29.5 | — | |||||||||||||
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Liabilities: | ||||||||||||||||
Oil derivative contracts | — | — | 10.3 | — | ||||||||||||
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| — | — | 10.3 | — | |||||||||||||
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| Fair value at December 31, 2013 | ||||||||||||||||
| Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Listed investments | 3.2 | 3.2 | — | — | ||||||||||||
Trade receivable from provisional copper concentrate sales, net | 58.2 | — | 58.2 | — | ||||||||||||
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| 61.4 | 3.2 | 58.2 | — | |||||||||||||
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Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
The Group’s listed investments comprise equity investments in listed entities and are therefore valued using quoted market prices in active markets and classified within level 1 of the fair value hierarchy. The fair value of the listed investments is the product of the quoted market price and the number of shares held.
The Group investments held in environmental funds primarily comprise interest bearing short-term investments which are valued using quoted market prices.
The Group’s net trade receivable from provisional copper and gold concentrate sales in La Cima (Cerro Corona) is valued using quoted market prices based on the forward London Metal Exchange and classified within level 2 of the fair value hierarchy.
The Group’s financial instruments valued using pricing models are classified within level 2 of the fair value hierarchy. Where possible, the values produced by the valuation models are verified to market prices. Valuation models require a variery of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility and correlations of such inputs.
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. There were no transfers during the years ended December 31, 2014 and 2013.
Derivative contracts
On September 10, 2014, Gold Fields Australia (Pty) Limited entered into a Singapore Gasoil 10ppm cash settled swap transaction contract for a total of 136,500 barrels, effective September 15, 2014 until March 31, 2015 at a fixed price of US$115.00 per barrel. The 136,500 barrels are based on 50 per cent of usage for the seven month period – September 2014 to March 2015. Brent Crude at the time of the transaction was US$99.10 per barrel.
On November 26, 2014, Gold Fields Australia (Pty) Limited entered into further Singapore Gasoil 10ppm cash settled swap transaction contracts. A contract for 63,000 barrels for the period January – March 2015 was committed at a fixed price of US$94.00 per barrel, and a further 283,500 barrels was committed at a price of US$96.00 per barrel for the period April – December 2015. Brent Crude at the time of the transaction was US$78.50 per barrel.
As at December 31, 2014, the fair value of these oil derivative contracts was negative US$10.3 million. This amount is included in accounts payable and provisions (refer note 15).
St Ives Gold Mining Company (Pty) Ltd entered into a Singapore Gasoil 10PPM FOB cash settled swap transaction for 7,500 barrels per month effective 1 June 2013 until 31 March 2014 at a fixed price of US$115.0 per barrel. 30,000 barrels with a positive mark-to-market value of US$0.3 million were outstanding at the end of December 2013.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
20. ADDITIONAL CASH FLOW INFORMATION
|
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(a) | Supplemental cash flow disclosures | |||||||||||||
The following amounts were included in cash flows from operations: | ||||||||||||||
| Fiscal year Ended December 31, | ||||||||||||||
| 2014 | 2013 | 2012 | ||||||||||||
Royalties paid | 88.8 | 99.9 | 112.4 | |||||||||||
Income and mining taxes paid | 105.3 | 298.2 | 334.1 | |||||||||||
Interest paid before capitalization | 103.8 | 89.4 | 68.6 | |||||||||||
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(b) | Non cash-items | |||||||||||||
Marked to market gain/(loss) of listed investments | 6.9 | (1.3) | 18.7 | |||||||||||
Sibanye Gold spin-off (refer note 9.1), excluding cash transferred | — | 927.3 | — | |||||||||||
Shares issued on acquisition of Barrick Yilgarn assets (refer note 3(b)) | — | 127.3 | — | |||||||||||
Disposal of Yanfolila for acquisition of Hummingbird: | 5.1 | — | — | |||||||||||
Disposal of Yanfolila (refer note 3(c)) | (16.0) | — | — | |||||||||||
Acquistion of investment in Hummingbird (refer note 3(c)) | 21.1 | — | — | |||||||||||
| COMMITMENTS |
| December 31, 2014 | December 31, 2013 | |||||||
Capital commitments | ||||||||
Contracted for | 120.5 | 100.8 | ||||||
Lease commitments | ||||||||
Operating leases | ||||||||
Less than 12 months | 3.1 | 2.9 | ||||||
12 - 36 months | 3.5 | 3.8 | ||||||
36 - 60 months | 0.8 | 0.6 | ||||||
After 60 months | — | 1.0 | ||||||
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Total | 7.4 | 8.3 | ||||||
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| UNITED STATES DOLLAR | ||||||||
| 2016 | 2015 | |||||||
Capital expenditure | ||||||||
Contracted for | 46.2 | 48.9 | ||||||
Operating leases 1 | ||||||||
- within one year | 42.5 | 2.6 | ||||||
- later than one and not later than five years | 229.9 | 4.4 | ||||||
- later than five years | 277.3 | — | ||||||
Guarantees | ||||||||
The Group provides environmental obligation guarantees with respect to its South African, Peruvian and Ghanaian operations. These guarantees amounted to US$100.1 million at 31 December 2016 (2015: US$80.0 million) (refer note 25.1). | ||||||||
Included in net income are operating lease charges amounting to $3.2 million (fiscal 2013: $4.5 million and fiscal 2012: $3.9 million).
| (1) | The operating lease commitments consist mainly of power purchase agreements entered into at Tarkwa and Damang in 2016. Included in these amounts are payments fornon-lease elements in the arrangement. |
Guarantees and other commitments
The Group also provides environmental obligation guarantees with respect to its South African, Ghanaian and Australian operations. These guarantees, amounting to $67.0 million at December 31, 2014 (December 31, 2013: $121.1 million) have not been included in the amount of guarantees of $0.1 million (December 31, 2013: $0.1 million) because they are fully provided for under the related provision for environmental rehabilitation.
Capital commitments will be funded from internal cash resources and borrowings as necessary. All the contracted capital expenditure as at December 31, 2014 and December 31, 2013 relates to obligations within the next 12 months. The expenditure relates to mining development, infrastructure and hostel upgrades.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
| CONTINGENT LIABILITIES |
Randgold &and Exploration summons
On 21 August 2008, Gold Fields Operations (GFO)Limited (“GFO”), formerly known as Western Areas Limited (“WAL”), a subsidiary of Gold Fields Limited, received a summons from Randgold and Exploration Company Limited (“R&E”) and African Strategic Investment (Holdings) Limited. The summons claims that during the period that GFO was under the control of Brett Kebble, Roger Kebble and others, GFO was allegedly part of a scam whereby JCI Limited unlawfully disposedWAL assisted in the unlawful disposal of shares owned by R&E in Randgold Resources Limited, (“Resources”),or Resources, and Afrikander Lease Limited, now Uranium One.
The claims have been computed in various ways. The highest claims have been computed on the basis of the highest valueprices of the Resources and Uranium One share prices between the dates of the alleged thefts and March 2008 (between R 11approximately US$700 million and US$800 million (between R11 billion and R12 billion (approximately US$1 billion)). The quantifiable alternative claims have been computed on the basis of the actual amounts allegedly received by GFO to fund its operations (approximately R521R519 million or US$4534 million).
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 35. | CONTINGENT LIABILITIES (continued) |
During quarter three of 2015, simultaneously with delivering its plea, GFO joined certain third parties to the action (namely JCI Limited, JC Lamprecht, RAR Kebble and the deceased and insolvent estate of BK Kebble), in order to enable it to claim compensation against such third parties in the event that the plaintiffs are successful in one or more of their claims. In addition, notices in terms of section 2(2)(b) of the Apportionment of Damages Act, 1956 were served on various parties by GFO, in order to enable it to make a claim for a contribution against such parties in terms of the Apportionment of Damages Act, should the plaintiffs be successful in one or more of its claims.
It should be noted that the claims lie only against GFO, whose only interest is a 50% stake in the South Deep mine. This alleged liability is historic and relates to a period of time prior to the Group purchasing the company.Company.
GFO’s assessment remains that it has sustainable defensesdefences to these claims and, accordingly, GFO’sGold Fields Operation Limited’s attorneys were instructed to vigorously defend the claims.
The ultimate outcome of the claims cannot presently be determined and, accordingly, no adjustment for any effects on the Company that may result from these claims, if any, has been made in the consolidated financial statements.
Silicosis
The principal health risks associated with Gold Fields’ mining operations in South Africa arise from occupational exposure to silica dust, noise, heat and certain hazardous chemicals. The most significant occupational diseases affecting Gold Fields’ workforce include lung diseases (such as silicosis, tuberculosis, a combination of the two and chronic obstructive airways disease (“COAD”) as well as noise-induced hearing loss (“NIHL”). The Occupational Diseases in Mines and Works Act, 78 of 1973 (“ODMWA”) governs the compensation paid to mining employees who contract certain illnesses, such as silicosis. In 2011 the South African Constitutional Court ruled that a claim for compensation under ODMWA does not prevent an employeeemployees from seeking compensation from itstheir employer in a civil action under common law (either as individuals or as a class). While issues such as negligence and causation need to be proved on acase-by-case basis, it is possible that such ruling could expose Gold Fields to claims related to occupational hazards and diseases (including silicosis), which may be in the form of a class or similar group action. If Gold Fields were to face a significant number of such claims and the claims were suitably established against it, the payment of compensation for the claims could have a material adverse effect on Gold Fields’ results of operations and financial position.condition. In addition, Gold Fields may incur significant additional costs arising out of these issues, including costs relating to the payment of fees, levies or other contributions in respect of compensatory or other funds established (if any) and expenditures arising out of its efforts to resolve any outstanding claims or other potential action.
During 2012 and 2013,2014, two court applications were served on Gold Fields and its subsidiaries (as well as other mining companies) by various applicants purporting to represent classes of mine workers (and where deceased, their dependants) who were previously employed by or who are employees of, amongstamong others, Gold Fields or any of its subsidiaries and who allegedly contracted silicosis and/or tuberculosis.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
These arewere applications in terms of which the court iswas asked to certify a class action to be instituted by the applicants on behalf of the classes of affected people. According to the applicants, these are the first and preliminary steps in a process, where if the court were to certify the class action, the applicants may,will in athe second stage, bring an action wherein they will attempt to hold Gold Fields and other mining companies
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 35. | CONTINGENT LIABILITIES (continued) |
liable for silicosis and/or tuberculosis and the resultant consequences. The applicants contemplate dealing in the second stage with what the applicants describe as common legal and factual issues regarding the claims arising for the whole of the classes. If the applicants are successful in the second stage, they envisage that individual members of the classes could later submit individual claims for damages against Gold Fields and the other mining companies. These applications do not identify the number of claims that could be instituted against Gold Fields and the other mining companies or the quantum of damages the applicants may seek.
Gold Fields has delivered notices of intention to opposeopposed the applications and has instructed its attorneys to defend the claims.applications.
The two class applicationsactions were consolidated into one application on 17 October 2013 and the parties agreed a court-sanctioned process for the delivery2014. In terms of answering and replying affidavits and for the consolidated application, the court is asked to allow the class actions to be certified. The consolidated application was heard during the weeks of 12 and 19 October 2015. Judgment was reserved.
On 13 May 2016, the High Court ordered, among other things: (1) the certification of two classes: (a) a silicosis class comprising current and former mine workers who have contracted silicosis and the dependants of mine workers who have died of silicosis; and (b) a tuberculosis class comprising current and former mine workers who have worked on the mines for a period of not less than two years and who have contracted pulmonary tuberculosis and the dependants of deceased mine workers who died of pulmonary tuberculosis; and (2) that the common law be developed to provide that, where a claimant commences suing for general damages and subsequently dies whether arising from harm caused by a wrongful act or omission of a person or otherwise, before close of pleadings, and who would but for his or her death have been entitled to continue with such action, the claim for general damages will transmit to the estate of the deceased claimant.
The consolidated applicationprogression of the classes certified will be precededdone in two phases: (i) a determination of common issues, on anopt-out basis, and (ii) the hearing and determination of individualised issues, on anopt-in basis. In addition, costs were awarded in favour of the claimants. The High Court ruling did not represent a ruling on the merits of the cases brought by various legal technical applicationsthe claimants. The amount of damages has not yet been quantified for any of the claimants in the consolidated class application or for any other members of the classes.
Gold Fields and the other respondents believe that the judgment addressed a number of highly complex and important issues, including a far-reaching amendment of the common law, that have not previously been considered by other courts in South Africa. The High Court itself found that the scope and magnitude of the proposed claims is unprecedented in South Africa and that the class action would address novel and complex issues of fact and law. The companies applied for leave to appeal against the judgment because they believed that the court’s ruling on some of these issues is incorrect and that another court processes.may come to a different decision.
On 24 June 2016, the High Court granted the mining companies leave to appeal against the finding amending the common law in respect of the transmissibility of general damages claims. It refused leave to appeal on the certification of silicosis and tuberculosis classes.
On 15 July 2016, Gold Fields and the other respondents each filed petitions to the Supreme Court of Appeal for leave to appeal against the certification of the two separate classes for silicosis and tuberculosis. On 21 September 2016, the Supreme Court of Appeal granted the respondents leave to appeal against all aspects of the class certification judgment of the South Gauteng High Court delivered in May 2016. The appeal record has been filed. It is anticipated that an appeal hearing date may be allocated in the third quarter of 2017.
In addition to the consolidated class action application, an individual action has been instituted against Gold Fields and one other mining groupcompanies in terms of which the plaintiff claims R25.0some US$2 million (US$2.2(R25 million)
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 35. | CONTINGENT LIABILITIES (continued) |
in damages (andplus interest on that amount at 15.5% from May 2013 to date of payment and costs)costs, arising from his alleged contraction of silicosis which he claims was caused by the defendants. The matter is being defended. Gold Fields is proceeding with trial preparation in the normal course. No trial date has defended the action and has pleaded to the claim.yet been allocated.
The ultimate outcome of these matters cannot presently be determined and, accordingly, no adjustment for any effects on the Company that may result from these actions, if any, has been made in the consolidated financial statements.
Acid mine drainage
Acid Mine Drainagemine drainage (“AMD”) or acid rock drainage (“ARD”), collectively called acid drainage (“AD”) is formed when certain sulphide minerals in rocks are exposed to oxidising conditions (such as the presence of oxygen, combined with water). AD can occur under natural conditions or as a result of the sulphide minerals that are encountered and exposed to oxidation during mining or during storage in waste rock dumps, ore stockpiles or tailings dams. The acidic water that forms usually contains iron and other metals if they are contained in the host rock.
Gold Fields has identified incidences of AD, generation, and the risk of potential short-term and long-term AD issues, specifically at Gold Fieldsits Cerro Corona, and South Deep and Damang mines is on-going. Immaterialand, at currently immaterial levels, of surface AD generation also occur at Gold Fieldsits Tarkwa Damang and St Ives mines. AnyThe AD which is currently generated, is contained on Gold Fields property across all operations where it occurs and is well managed as part of each mines operational water management strategy. The relevant regulatory authoritiesissues at Damang mine are also kept appraised of our effortsconfined to manage AD through various submissions and other communications.the Rex open pit.
Gold Fields continuescommissioned additional technical studies during 2016 to investigate technical solutionsidentify the steps required to prevent or mitigate the potentially material AD impacts at both its Cerro Corona, Damang and South Deep and Cerro Corona Mines to better inform appropriate mitigation strategies for long term AD management (mainly post-closure) and to work towards a reliable cost estimate of these potential issues. Noneoperations, but none of these studies have allowed Gold Fields to generate a reliable estimate of the total potential impact on the Group.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
Company. Gold Fields mine closure cost estimate (environmental rehabilitation provisions)estimates for 2014 contains2016 contain costs for the aspects of AD management (i.e. tailings facilities, waste rock dumps, ore stockpiles and other surface infrastructure), which the Company has reliably been able to reliably estimate.
Gold Fields continues to investigate technical solutions at both its South Deep, Cerro Corona and Damang mines to better inform appropriate short- and long-term mitigation strategies for AD management and to work towards a reasonable cost estimate of these potential issues. Further studies are planned for 2017.
No adjustment for any effects on the Company that may result from potentially material (mainly post-closure) AD, impacts at South Deep and Cerro Coronaif any, has been made in the consolidated financial statements other than through the Group’s normal environmental rehabilitation provisions (refer note 17)25.1).
Native claim
Gold Fields’ subsidiary, St Ives Gold Mining Company Pty Ltd (“St Ives”), which ownsOn 29 March 2016, the St Ives Gold Mine in Western Australia, had been joined as a respondent, alongside the State of Western Australia (the “State”) and another mining company, in proceedings commenced in the FederalFull Court of Australia by the Ngadju People, seeking determination of its claim for native title over a parcel of land in the Goldfields region of Western Australia.
“Native title” refers to the rights and interests held by Aboriginal people in Australia under traditional laws and customs, in relation to land and water to which those Aboriginal people have a connection, that are recognised under the common law of Australia.
In the course of these proceedings, the Ngadju People alleged that a number of mining tenements held by St Ives (being tenements that were originally granted to WMC Resources by the State under the terms of a State Agreement, and subsequently acquired in 2001 by St Ives) are invalid to the extent that they affect the Ngadju People’s native title rights. The process for obtaining the re-grant of those tenements (in 2014) under the provisions of the Mining Act 1978 (WA) was carefully considered and followed by Gold Fields at the time, acting in conjunction with the State.
In a decision handed down by a single judge of the Federal Court of Australia on 3overturned a July 2014 Federal Court decision that the court accepted the submissionsre-grant of the Ngadju People that the re-grant of thesecertain tenements to Gold Fields Australia’s St Ives mine in 2004 by the State was not compliant with the correct processes in the Native Title Act 1993 (Cth), and as such, the .
The Full Federal Court confirmed that St Ives’re-granted tenements are invalid tovalid for the extentpurpose of the Native Title Act, and that they affect native title. This means that to the extent that there is inconsistency between thewhile St Ives’ rights of St Ives as tenement holder and the Ngadju People’s native title rights (such asshall coexist, St Ives’ rights shall prevail should there be any inconsistencies.
Following the right to conduct ceremonies or to hunt), the rightsdecision of the Ngadju People will prevail. This decision was confirmed by a Determination of native title made by theFull Federal Court in November 2014.
The practical effectfavour of such a finding has never been tested under Australian law. However, it may meanSt Ives, the Ngadju People could seekgroup applied for permission to preventappeal that decision to the further exerciseHigh Court of rightsAustralia. On 14 October 2016, that request was declined by the High Court, leaving no other opportunity for review or appeal. St Ives on the tenements in a manner that is inconsistentcontinues to engage with the free exercise of their native title rights and/or seek damages for historical interference with their native title rights. The fact that the Ngadju People have only non-exclusive native title rights (and not the higher category of exclusive possession rights) may reduce the extentgroup in relation to which the two sets of rights are found to be inconsistent.
Importantly, the decision does not affect the grant of mining tenure to St Ives under the Mining Act 1978 (WA). St Ives still validly holds all of the tenements which underpin its mining operations at St Ives,routine heritage surveys and as these proceedings are not an action against St Ives for failure to take certain steps, the court has no ability to impose any sort of penalty against St Ives.
Gold Fields remains strongly of the view that it has at all times complied with its obligations under the Native Title Act 1993 (Cth) in respect of its dealings with these tenements. Gold Fields, together withother matters.
Gold Fields Limited
Notes to the Consolidated Financial Statementsconsolidated financial statements
($for the year ended 31 December
Figures in millions unless otherwise noted)stated
| CONTINGENT LIABILITIES (continued) |
another major resources company, filed
Accordingly, no adjustment for any effects on the Company has been made in the consolidated financial statements.
Regulatory investigation
On 22 June 2015, Gold Fields notified shareholders that it had been informed by the Foreign Corrupt Practices Act Unit of the United States Securities Exchange Commission (“the Commission”) that it had concluded its investigation in connection with the Black Economic Empowerment (“BEE”) transaction related to South Deep and, based on the information available to them, would not recommend to the Commission that enforcement action be taken against Gold Fields.
The notice was provided under the guidelines set out in the final paragraph of the Securities Act Release No 5310, which states in part that the notice must in no way be construed as indicating that the party has been exonerated or that no action may ultimately result from the staff’s investigation.
In South Africa, in 2013 the Directorate for Priority Crime Investigation (“the Hawks”) informed the Company that it had started a preliminary investigation into the BEE transaction to determine whether or not to proceed with a formal investigation, following a complaint by the Democratic Alliance, a political party in South Africa. The investigation is still in process and it is not possible to determine what effect the ultimate outcome of this investigation, any regulatory findings and any related developments could have on the Company or the timing thereof.
Accordingly, no adjustment for any effects on the Company that may result from the outcome of these investigations, if any, has been made in the consolidated financial statements.
South Deep tax dispute
The South Deep mine (“South Deep”) is jointly owned and operated by GFIJVH (50%) and GFO (50%).
At 31 December 2016, South Deep’s gross deductible temporary differences amounted to US$1,585.3 million (R22,242.2 million), resulting in a deferred tax asset balance of US$475.6 million (R6,672.7 million). This amount is included in the consolidated deferred tax asset of US$48.7 million on Gold Fields’ statement of financial position. South Deep’s gross deductible temporary differences comprises unredeemed capital expenditure balances of US$633.2 million (R8,884.0 million) (tax effect: US$190.0 million (R2,665.2 million)) at GFIJVH and US$606.4 million (R8,508.0 million) (tax effect: US$181.9 million (R2,552.4 million)) at GFO, a capital allowance balance (additional capital allowance) of US$163.4 million (R2,292.0 million) (tax effect: US$49.0 million (R687.6 million)) at GFIJVH and an appealassessed loss balance of US$182.3 million (R2,558.2 million) (tax effect: US$54.7 million (R767.5 million)) at GFO.
During the September 2014 quarter, the South African Revenue Service (“SARS”) issued a Finalisation of Audit Letter (“the Audit Letter”) stating that SARS has restated GFIJVH’s additional capital allowance balance reflected on its 2011 tax return from R2,292.0 million (US$151.8 million) to nil. The tax effect of this amount is R687.6 million (US$49.0 million), that being referred to above as the “additional capital allowance”.
The additional capital allowance was claimed by GFIJVH in terms of section 36(11)(c) of the South African Income Tax Act, 1962 (“the Act”). The additional capital allowance provides an incentive for new mining
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 35. | CONTINGENT LIABILITIES (continued) |
development and only applies to unredeemed capital expenditure. The additional capital allowance allows a 12% capital allowance over and above actual capital expenditure incurred on developing a deep level gold mine, as well as a further annual 12% allowance on the mine’s unredeemed capital expenditure balance brought forward, until the year that the mine starts earning mining taxable income (ie when all tax losses and unredeemed capital expenditure have been fully utilised).
In order to qualify for the additional capital allowance, South Deep must qualify as a“post-1990 gold mine” as defined in the Act. A“post-1990 gold mine”, according to the Act, is defined as “a gold mine which, in the opinion of the Director-General: Mineral and Energy Affairs, is an independent workable proposition and in respect of aspectswhich a mining authorisation for gold mining was issued for the first time after 14 March 1990”.
During 1999, the Director-General: Minerals and Energy Affairs (“DME”) and SARS confirmed, in writing, that GFIJVH is a “post-1990 gold mine” as defined, and therefore qualified for the additional capital allowance. Relying on these representations, GFIJVH subsequently filed its tax returns on this basis, as was confirmed by the DME and SARS.
In the Audit Letter, SARS stated that both the DME and SARS erred in issuing the confirmations as mentioned above and that GFIJVH does not qualify as a“post-1990 gold mine” and therefore does not qualify for the additional capital allowance.
The Group has taken legal advice on the matter and was advised by external Senior Counsel that SARS should not be allowed to disallow the claiming of the Federal Court’s decision. The appeal (beforeadditional capital allowance. GFIJVH has in the Full Court ofmeantime not only formally appealed against the Federal Court of Australia (three Judges)) has been listed to take placeposition taken by SARS, but also filed an application in May 2015. Gold Fields retains the ability to seek leave to further appeal to the High Court of Australia, if necessary. Gold Fieldsand will also take all steps necessary to ensure thatvigorously defend its position. A trial date in the St Ives operations are unaffected whilst this matter is resolved through the relevant court processes.Tax Court has been set for October 2017.
Accordingly, no adjustment for any effects on the Company that may result from the proceedings, if any, has been made in the consolidated financial statements.
| 36. | EVENTS AFTER THE REPORTING DATE |
Regulatory investigationsFinal dividend
On 15 February 2017, Gold Fields was informeddeclared a final dividend of 60 SA cents per share.
Darlot disposal
On 16 February 2017, Gold Fields announced their intention to dispose of its Darlot operations in September 2013 that it is the subject of a regulatory investigation in the United States by the US Securities and Exchange Commission relatingAustralia.
Notes to the Black Economic Empowerment transaction (BEE transaction) associated with the granting of the mining license for its South Deep operation. In South Africa, the Directorate for Priority Crime Investigation (the Hawks) informed the Company that it has started a preliminary investigation into the BEE transaction to determine whether or not to proceed with a formal investigation, following a complaint by the Democratic Alliance. The investigation is still in progress and it is not possible to determine what effect the ultimate outcome of these investigations, any regulatory findings and any related developments may have on the Company or the timing thereof.
Accordingly, no adjustment for any effects on the Company that may result from the outcome of this investigation, if any, has been made in the consolidated financial statements.statements
for the year ended 31 December
Figures in millions unless otherwise stated
The Group has unused linesestimated fair values of committed credit facilities availablethe Group’s financial assets and liabilities are:
| UNITED STATES DOLLAR | ||||||||||||||||
| 2016 | 2015 | |||||||||||||||
| Carrying amount | Fair value | Carrying amount | Fair value | |||||||||||||
Financial assets | ||||||||||||||||
Cash and cash equivalents | 526.7 | 526.7 | 440.0 | 440.0 | ||||||||||||
Trade and other receivables | 79.2 | 79.2 | 81.9 | 81.9 | ||||||||||||
Environmental trust fund | 44.5 | 44.5 | 35.0 | 35.0 | ||||||||||||
Investments | 19.7 | 19.7 | 10.9 | 10.9 | ||||||||||||
Financial liabilities | ||||||||||||||||
Trade and other payables | 505.6 | 505.6 | 393.1 | 393.1 | ||||||||||||
Borrowings | 1,504.9 | 1,496.7 | 1,761.6 | 1,527.8 | ||||||||||||
Current portion of borrowings | 188.0 | 188.0 | 58.7 | 58.7 | ||||||||||||
South Deep dividend | 6.4 | 6.4 | 6.5 | 6.5 | ||||||||||||
The following methods and assumptions were used to estimate the fair value of each class of financial instrument:
Trade and other receivables, trade and other payables and cash and cash equivalents
The carrying amounts approximate fair values due to the short maturity of these instruments, except for oil derivatives amounting to $1,016.9 millionUS$nil (2015: US$1.5 million) included in other payables which are measured at December 31, 2014 (December 31, 2013: $763.2 million)fair value. The fair values of these contracts are determined by using available market contract values for each trading date’s settlement volume.
Investments
The fair value of publicly traded instruments (listed investments) is based on quoted market values. Unlisted investments are accounted for at cost with adjustments for write-downs where appropriate and the following expiry dates.fair value approximates their carrying value. Derivative instruments are accounted for at fair value with adjustments to the fair value being recognised in profit or loss.
| December 31, 2014 | December 31, 2013 | |||||||
- within one year | — | — | ||||||
- later than one year and not later than two years | 64.9 | — | ||||||
- later than two years and not later than three years | — | 96.7 | ||||||
- later than three years and not later than five years | 952.0 | 666.5 | ||||||
|
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| |||||
| 1,016.9 | 763.2 | |||||||
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| |||||
The environmental trust fund is stated at fair value based on the nature of the fund’s investments.
Gold Fields LimitedBorrowings and current portion of borrowings
The fair value of borrowings and current portion of borrowings, except for the US$1 billion notes issue at a fixed interest rate, approximates their carrying amount as the impact of credit risk is included in the measurement of carrying amounts. The fair value of the US$1 billion notes issue is based on listed market prices.
South Deep dividend
The carrying amount approximates the fair value.
Notes to the Consolidated Financial Statementsconsolidated financial statements
($for the year ended 31 December
Figures in millions unless otherwise noted)stated
| 37. | FAIR VALUE OF ASSETS AND LIABILITIES (continued) |
The Group uses the following hierarchy for measuring the fair value of assets and liabilities at the reporting date:
Level 1: unadjusted quoted prices in active markets for identical asset or liabilities;
Level 2: inputs other than quoted prices in level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices); and
Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The Group recognises transfers between levels of the fair value hierarchy at the end of the reporting period during which the change has occurred. There were no transfers during the years ended 31 December 2016 and 2015.
The following table sets out the Group’s assets and liabilities measured at fair value by level within the fair value hierarchy at the reporting date:
UNITED STATES DOLLAR | ||||||||||||||||
2015 | 2016 | |||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Total | Level 1 | Level 2 | Level 3 | |||||||||
| Assets measured at fair value | ||||||||||||||||
| Trade receivables from provisional | ||||||||||||||||
— | 3.1 | — | 3.1 | copper concentrate sales | 10.6 | — | 10.6 | — | ||||||||
7.8 | — | — | 7.8 | Listed investments | 10.5 | 10.5 | — | — | ||||||||
— | — | — | — | Derivative instruments | 5.9 | — | 5.9 | — | ||||||||
| Liabilities measured at fair value | ||||||||||||||||
— | 1.5 | — | 1.5 | Oil derivative contracts | — | — | — | — | ||||||||
Trade receivables from provisional copper concentrate sales
Valued using quoted market prices based on the forward London Metal Exchange (“LME”) and, as such, is classified within Level 2 of the fair value hierarchy.
Listed investments
Comprise equity investments in listed entities and are therefore valued using quoted market prices in active markets.
Derivative instruments
Derivative instruments are measured at fair value through profit or loss. The fair value is determined using a standard European call option format based on a standard option theory model.
Oil derivative contracts
The fair values of these contracts are determined by using available market contract values for each trading date’s settlement volume.
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 38. | RISK MANAGEMENT ACTIVITIES |
In the normal course of its operations, the Group is exposed to commodity price, currency, interest rate, liquidity, equity price and credit risk. In order to manage these risks, the Group has developed a comprehensive risk management process to facilitate control and monitoring of these risks.
Controlling and managing risk in the Group
Gold Fields has policies in areas such as counterparty exposure, hedging practices and prudential limits which have been approved by Gold Fields’ Board of Directors. Management of financial risk is centralised at Gold Fields’ treasury department (“Treasury”), which acts as the interface between Gold Fields’ operations and counterparty banks. Treasury manages financial risk in accordance with the policies and procedures established by the Gold Fields Board of Directors and Executive Committee.
Gold Fields’ Board of Directors has approved dealing limits for money market, foreign exchange and commodity transactions, which Gold Fields’ Treasury is required to adhere to. Among other restrictions, these limits describe which instruments may be traded and demarcate open position limits for each category as well as indicating counterparty credit-related limits. The dealing exposure and limits are checked and controlled each day and reported to the Chief Financial Officer.
The objective of Treasury is to manage all financial risks arising from the Group’s business activities in order to protect profit and cash flows. Treasury activities of Gold Fields Limited and its subsidiaries are guided by the Treasury Policy, the Treasury Framework as well as domestic and international financial market regulations. Treasury activities are currently performed within the Treasury Framework with appropriate resolutions from the Board of Gold Fields Limited, which are reviewed and approved annually by the Audit Committee.
The financial risk management objectives of the Group are defined as follows:
Liquidity risk management: The objective is to ensure that the Group is able to meet its short-term commitments through the effective and efficient usage of credit facilities and cash resources.
Currency risk management: The objective is to maximise the Group’s profits by minimising currency fluctuations.
Funding risk management: The objective is to meet funding requirements timeously and at competitive rates by adopting reliable liquidity management procedures.
Investment risk management: The objective is to achieve optimal returns on surplus funds.
Interest rate risk management: The objective is to identify opportunities to prudently manage interest rate exposures.
Counterparty exposure: The objective is to only deal with approved counterparts that are of a sound financial standing and who have an official credit rating. The Group is limited to a maximum investment of 2.5% of the financial institutions’ equity, which is dependent on the institutions’ credit rating. The credit rating used is Fitch Ratings’ short-term credit rating for financial institutions.
Commodity price risk management: Commodity risk management takes place within limits and with counterparts as approved in the Treasury Framework.
Operational risk management: The objective is to implement controls to adequately mitigate the risk of error and/or fraud.
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 38. | RISK MANAGEMENT ACTIVITIES (continued) |
Banking relations management: The objective is to maintain relationships with credible financial institutions and ensure that all contracts and agreements related to risk management activities are co-ordinated and consistent throughout the Group and that they comply where necessary with all relevant regulatory and statutory requirements.
Credit risk
Credit risk represents risk that an entity will suffer a financial loss due to the other party of a financial instrument not discharging its obligation.
The Group has reduced its exposure to credit risk by dealing with a number of counterparties. The Group approves these counterparties according to its risk management policy and ensures that they are of good credit quality.
Receivables are reviewed on a regular basis and an allowance for impairment is raised when they are not considered recoverable.
The combined maximum credit risk exposure of the Group is as follows:
| UNITED STATES DOLLAR | ||||||||
| 2016 | 2015 | |||||||
Environmental trust funds | 44.5 | 35.0 | ||||||
Trade and other receivables | 79.2 | 81.9 | ||||||
Cash and cash equivalents | 526.7 | 440.0 | ||||||
Trade receivables comprise banking institutions purchasing gold bullion and refineries purchasing copper concentrate. These receivables are in a sound financial position and no impairment has been recognised.
Trade and other receivables above exclude VAT, prepayments and diesel rebates amounting to US$91.0 million (2015: US$87.0 million).
Receivables that are past due but not impaired total US$nil (2015: US$nil). At 31 December 2016, receivables of US$0.2 million (2015: US$0.1 million) are considered impaired and are provided for.
Concentration of credit risk on cash and cash equivalents andnon-current assets is considered minimal due to the above mentioned investment risk management and counterparty exposure risk management policies.
Liquidity risk
In the ordinary course of business, the Group receives cash proceeds from its operations and is required to fund working capital and capital expenditure requirements. The cash is managed to ensure surplus funds are invested to maximise returns while ensuring that capital is safeguarded to the maximum extent possible by investing only with top financial institutions.
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 38. | RISK MANAGEMENT ACTIVITIES (continued) |
Uncommitted borrowing facilities are maintained with several banking counterparties to meet the Group’s normal and contingency funding requirements.
The following are the contractually due undiscounted cash flows resulting from maturities of all financial liabilities, including interest payments:
| UNITED STATES DOLLAR | ||||||||||||||||
| Within one year | Between one and five years | After five years | Total | |||||||||||||
2016 | ||||||||||||||||
Trade and other payables | 505.6 | — | — | 505.6 | ||||||||||||
Borrowings 1 | ||||||||||||||||
- US$ borrowings 2 | ||||||||||||||||
- Capital | 127.0 | 1,510.9 | — | 1,637.9 | ||||||||||||
- Interest | 64.6 | 145.1 | — | 209.7 | ||||||||||||
- Rand borrowings 3 | ||||||||||||||||
- Capital | 61.0 | — | — | 61.0 | ||||||||||||
- Interest | 5.1 | — | — | 5.1 | ||||||||||||
Environmental rehabilitation costs 4 | 3.6 | 29.8 | 347.4 | 380.8 | ||||||||||||
South Deep dividend | 1.4 | 5.2 | 6.2 | 12.8 | ||||||||||||
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Total | 768.3 | 1,691.0 | 353.6 | 2,812.9 | ||||||||||||
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2015 | ||||||||||||||||
Trade and other payables | 393.1 | — | — | 393.1 | ||||||||||||
Borrowings 1 | ||||||||||||||||
- US$ borrowings 2 | ||||||||||||||||
- Capital | 42.0 | 1,769.0 | — | 1,811.0 | ||||||||||||
- Interest | 71.6 | 203.9 | — | 275.5 | ||||||||||||
- Rand borrowings 3 | ||||||||||||||||
- Capital | 16.7 | — | — | 16.7 | ||||||||||||
- Interest | 1.3 | — | — | 1.3 | ||||||||||||
Environmental rehabilitation costs 4 | — | 34.7 | 318.5 | 353.2 | ||||||||||||
South Deep dividend | 1.3 | 5.3 | 6.6 | 13.2 | ||||||||||||
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Total | 526.0 | 2 012.9 | 325.1 | 2 864.0 | ||||||||||||
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| (1) | Spot rate: R14.03 = US$1.00. (2015: R15.10 = US$1.00). |
| (2) | US$ borrowings - Spot LIBOR (one month fix) rate adjusted by specific facility agreement: 0.75611% (2015: 0.4175% (one month fix)). |
| (3) | ZAR borrowings - Bank overnight borrowing rate on uncommitted credit facilities: average of 8.3% (2014: 7.5%). |
| (4) | Although environmental rehabilitation costs do not meet the definition of a financial liability, the Group included the gross closure cost estimate in the undiscounted cash flows as it represents a future cash outflow (refer note 25.1). In South Africa and Ghana, US$44.5 million (2015: US$35.0 million) of the environmental rehabilitation costs is funded through the environmental trust funds. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 38. | RISK MANAGEMENT ACTIVITIES (continued) |
Market risk
Gold Fields is exposed to market risks, including foreign currency, commodity price, equity securities price and interest rate risk associated with underlying assets, liabilities and anticipated transactions. Following periodic evaluation of these exposures, Gold Fields may enter into derivative financial instruments to manage some of these exposures.
IFRS 7 sensitivity analysis
IFRS 7 requires sensitivity analysis that shows the effects of reasonably possible changes of relevant risk variables on profit or loss or shareholders’ equity. The Group is exposed to commodity price, currency, interest rate and equity price risks. The effects are determined by relating the reasonably possible change in the risk variable to the balance of financial instruments at reporting date.
The amounts generated from the sensitivity analysis below are forward looking estimates of market risks assuming certain adverse or favourable market conditions occur. Actual results in the future may differ materially from those projected results and therefore should not be considered a projection of likely future events and gains/losses.
Foreign currency sensitivity
General and policy
In the ordinary course of business, Gold Fields enters into transactions, such as gold sales, denominated in foreign currencies, primarily US Dollar. In addition, Gold Fields has investments and indebtedness in US Dollar, as well as South African Rand.
Gold Fields may from time to time establish currency financial instruments to protect underlying cash flows.
Gold Fields’ revenues and costs are very sensitive to the Australian Dollar/US Dollar and South African Rand/US Dollar exchange rates because revenues are generated using a gold price denominated in US Dollar, while costs of the Australian and South African operations are incurred principally in Australian Dollar and South African Rand, respectively. Depreciation of the Australian Dollar and/or South African Rand against the US Dollar reduces Gold Fields’ average costs when they are translated into US Dollar, thereby increasing the operating margin of the Australian and/or South African operations. Conversely, appreciation of the Australian and/or South African Rand results in Australian and/or South African operating costs increasing when translated into US Dollar, resulting in lower operating margins. The impact on profitability of changes in the value of the Australian Dollar and South African Rand against the US Dollar could be substantial.
Although this exposes Gold Fields to transaction and translation exposure from fluctuations in foreign currency exchange rates, Gold Fields does not generally hedge its foreign currency exposure, although it may do so in specific circumstances, such as financing projects or acquisitions. Also, Gold Fields on occasion undertakes currency hedging to take advantage of favourable short-term fluctuations in exchange rates when management believes exchange rates are at unsustainable levels.
Currency risk only exists on account of financial instruments being denominated in a currency that is not the functional currency and being of a monetary nature. The Group had no significant exposure to currency risk relating to financial instruments at 31 December 2016 and 2015. Differences resulting from the translation of financial statements into the Group’s presentation currency are not taken into account.
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 38. | RISK MANAGEMENT ACTIVITIES (continued) |
Foreign currency hedging experience
On 25 February 2016, South Deep entered into US$/Rand forward exchange contracts for a total delivery of US$69.8 million starting at July 2016 to December 2016. The average forward rate achieved over thesix-month period was R16.8273. The hedge was delivered in July and August and the balance closed out in September 2016. The average rate achieved on delivery and close out was R13.8010, resulting in a profit of R211.2 million (US$14.4 million). At 31 December 2016 and 2015, there were no material foreign currency contract positions.
Commodity price hedging policy
Gold and copper
The market prices of gold and to a lesser extent copper have a significant effect on the results of operations of Gold Fields, the ability of Gold Fields to pay dividends and undertake capital expenditures, and the market price of Gold Fields’ ordinary shares. Gold and copper prices have historically fluctuated widely and are affected by numerous industry factors over which Gold Fields does not have any control. The aggregate effect of these factors on the gold and copper price, all of which are beyond the control of Gold Fields, is impossible for Gold Fields to predict.
Oil
The market price of oil has a significant effect on the results of the offshore operations of Gold Fields. The offshore operations consume large quantities of diesel in the running of their mining fleets. Oil prices have historically fluctuated widely and are affected by numerous factors over which Gold Fields does not have any control.
Commodity price hedging experience
Gold and copper
The Group’s policy is to remain unhedged to the gold and copper price. However, hedges are sometimes undertaken as follows:
to protect cash flows at times of significant expenditure;
for specific debt servicing requirements; and
to safeguard the viability of higher cost operations.
To the extent that it enters into commodity hedging arrangements, Gold Fields seeks to use different counterparty banks consisting of local and international banks to spread risk. None of the counterparties is affiliated with, or related parties of, Gold Fields.
Oil
On 26 November 2014, GFA entered into further Singapore Gasoil 10ppm cash settled swap transaction contracts. A contract for 63,000 barrels for the period January to March 2015 was committed at a fixed price of US$94.00 per barrel and a further 283,500 barrels was committed at a price of US$96.00 per barrel for the period April to December 2015. Brent Crude at the time of the transaction was US$78.45 per barrel.
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 38. | RISK MANAGEMENT ACTIVITIES (continued) |
At 31 December 2015, the fair value of these oil derivative contracts was negative US$1.5 million. At 31 December 2016, there were no material oil derivative contracts outstanding.
Equity securities price risk
General
The Group is exposed to equity securities price risk because of investments held by the Group which are classified asavailable-for-sale. To manage its price risk arising from investments in equity securities, the Group diversifies its portfolio. Diversification of the portfolio is done in accordance with limits set by the Group.
The Group’s equity investments are publicly traded and are listed on one of the following exchanges:
JSE Limited
Toronto Stock Exchange
Australian Stock Exchange
London Stock Exchange
At 31 December 2016 and 2015, the Group had no significant exposure to equity security price risk.
Interest rate sensitivity
General
As Gold Fields has no significantinterest-bearing assets, the Group’s income and operating cash flows are substantially independent of changes in market interest rates. Gold Fields’ interest rate risk arises from borrowings.
As of 31 December 2016, Gold Fields’ borrowings amounted to US$1,692.9 million (2015: US$1,820.3 million). Gold Fields generally does not undertake any specific action to cover its exposure to interest rate risk, although it may do so in specific circumstances.
Interest rate sensitivity analysis
The portion of Gold Fields’interest-bearing borrowings at year-end that is exposed to interest rate fluctuations is US$846.5 million (2015: US$827.7 million). These borrowings are normally rolled for periods between one and three months and are therefore exposed to the rate changes in this period. The remainder of the borrowings bear interest at a fixed rate.
US$785.5 million (2015: US$811.0 million) of the total borrowings at reporting date is exposed to changes in the LIBOR rate and US$61.0 million (2015: US$16.7 million) is exposed to the South African prime (“prime”) interest rate. The relevant interest rates for each facility are described in note 24.
The table below summarises the effect of a change in finance expense on the Group’s profit or loss had LIBOR and prime differed as indicated. The analysis is based on the assumption that the applicable interest
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 38. | RISK MANAGEMENT ACTIVITIES (continued) |
rate increased/ decreased with all other variables held constant. All financial instruments with fixed interest rates that are carried at amortised cost are not subject to the interest rate sensitivity analysis.
| UNITED STATES DOLLAR | ||||||||||||||||||||||||
| Change in interest expense for a nominal change in interest rates | ||||||||||||||||||||||||
Sensitivity to interest rates | (1.5 | %) | (1.0 | %) | (0.5 | %) | 0.5 | % | 1.0 | % | 1.5 | % | ||||||||||||
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2016 | ||||||||||||||||||||||||
Sensitivity to LIBOR interest rates | (12.0 | ) | (8.0 | ) | (4.0 | ) | 4.0 | 8.0 | 12.0 | |||||||||||||||
Sensitivity to JIBAR and prime interest rates 1 | (0.6 | ) | (0.4 | ) | (0.2 | ) | 0.2 | 0.4 | 0.6 | |||||||||||||||
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Change in finance expense | (12.6 | ) | (8.4 | ) | (4.2 | ) | 4.2 | 8.4 | 12.6 | |||||||||||||||
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2015 | ||||||||||||||||||||||||
Sensitivity to LIBOR interest rates | (12.8 | ) | (8.5 | ) | (4.3 | ) | 4.3 | 8.5 | 12.8 | |||||||||||||||
Sensitivity to JIBAR and prime interest rates 1 | (0.5 | ) | (0.3 | ) | (0.2 | ) | 0.2 | 0.3 | 0.5 | |||||||||||||||
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Change in finance expense | (13.3 | ) | (8.8 | ) | (4.5 | ) | 4.5 | 8.8 | 13.3 | |||||||||||||||
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| (1) | Average rate: R14.70 = US$1.00 (2015: R12.68 = US$1.00). |
| 39. | CAPITAL MANAGEMENT |
The primary objective of managing the Group’s capital is to ensure that there is sufficient capital available to support the funding requirements of the Group, including capital expenditure, in a way that:
optimises the cost of capital;
maximises shareholders’ returns; and
ensures that the Group remains in a sound financial position.
There were no changes to the Group’s overall capital management approach during the current year.
The Group manages and makes adjustments to the capital structure as and when borrowings mature or as and when funding is required. This may take the form of raising equity, market or bank debt or hybrids thereof. Opportunities in the market are also monitored closely to ensure that the most efficient funding solutions are implemented.
The Group monitors capital using the ratio of net debt to adjusted EBITDA. Adjusted EBITDA is defined as net operating profit before depreciation and amortisation, adjusted for exploration expenses and certain other costs. The definition of adjusted EBITDA is as defined in the US$1,290 million term loan and revolving credit facilities agreement. Net debt is defined as total borrowings less cash and cash equivalents. The Group’s long-term target is a ratio of net debt to adjusted EBITDA of one times or lower. The bank covenants on external borrowings require a net debt to adjusted EBITDA ratio of 2.5 or below and the ratio is measured based on amounts in United States Dollar.
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 39. | CAPITAL MANAGEMENT (continued) |
| UNITED STATES DOLLAR | ||||||||||||
| Notes | 2016 | 2015 | ||||||||||
Borrowings | 24 | 1,692.9 | 1,820.3 | |||||||||
Less:Cash and cash equivalents | 21 | 526.7 | 440.0 | |||||||||
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Net debt | 1,166.2 | 1,380.3 | ||||||||||
Adjusted EBITDA | 1,232.2 | 1,002.3 | ||||||||||
Net debt to adjusted EBITDA | 0.95 | 1.38 | ||||||||||
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Reconciliation of net operating profit, per the consolidated income statement, to adjusted | ||||||||||||
EBITDA: | ||||||||||||
Net operating profit | 682.8 | 479.3 | ||||||||||
Adjusted for: | ||||||||||||
Amortisation and depreciation | 2 | 679.2 | 609.9 | |||||||||
Exploration expense | (92.2 | ) | (53.5 | ) | ||||||||
Social contributions and sponsorships | 7 | (19.3 | ) | (12.2 | ) | |||||||
Global compliance costs | 7 | (0.1 | ) | (3.6 | ) | |||||||
Facility charges on borrowings | 7 | (8.1 | ) | (1.7 | ) | |||||||
Offshore structure costs | (8.9 | ) | (13.0 | ) | ||||||||
Corporate related costs | (4.4 | ) | (0.2 | ) | ||||||||
Other reconciling items | 3.2 | (2.7 | ) | |||||||||
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| 1,232.2 | 1 002.3 | |||||||||||
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| 40. | RELATED PARTY TRANSACTIONS |
| UNITED STATES DOLLAR | ||||||||||||
| 2016 | 2015 | 2014 | ||||||||||
Key management remuneration (Executive Committee) | ||||||||||||
Salary | 5.6 | 5.1 | 5.6 | |||||||||
Annual bonus | 5.1 | 4.7 | 5.2 | |||||||||
Severance | 1.6 | — | 0.9 | |||||||||
Pension scheme contribution | 0.5 | 0.7 | 0.7 | |||||||||
Proceeds from exercise of equity-settled awards | 2.5 | 3.4 | 2.0 | |||||||||
Other | 0.7 | 0.9 | 0.9 | |||||||||
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| 16.0 | 14.8 | 15.3 | ||||||||||
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For the year ended 31 December 2016, US$1.0 million (2015: US$0.8 million and 2014: US$1.0 million) was paid innon-executive directors’ fees.
None of the directors and officers of Gold Fields or, to the knowledge of Gold Fields, their families, had any interest, direct or indirect, in any transaction during the last three fiscal periods or in any proposed transaction which has affected or will materially affect Gold Fields or its investment interests or subsidiaries, other than as stated above.
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 40. | RELATED PARTY TRANSACTIONS (continued) |
None of the directors or officers of Gold Fields or any associate of such director or officer is currently or has been at any time during the past three fiscal yearsperiods indebted to Gold Fields.
Final dividendAt 31 December 2016, the Executive Committee andnon-executive
On February 11, 2015, Gold Fields declared a final dividend directors’ beneficial interest in the issued and listed share capital of R0.20 ($0.02) per share.the Company was 0.21% (2015: 0.1557%). No one director’s interest individually exceeds 1% of the issued share capital or voting control of the Company.
Gold Fields Limited
Notes to the Consolidated Financial Statementsconsolidated financial statements
($for the year ended 31 December
Figures in millions unless otherwise noted)stated
Gold Fields
| UNITED STATES DOLLAR | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| South Africa | Ghana | Peru | Australia |
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| South Deep 1 | Tarkwa | Damang | Total Ghana | Cerro Corona | St Ives | Agnew/ Lawlers | Darlot | Granny Smith | Gruyere | Total Australia | Corporate and other 2 | Group | ||||||||||||||||||||||||||||||||||||||||
INCOME STATEMENT | ||||||||||||||||||||||||||||||||||||||||||||||||||||
for the year ended 31 December 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | 358.2 | 708.9 | 183.4 | 892.3 | 322.3 | 452.3 | 285.4 | 83.1 | 355.8 | — | 1,176.7 | — | 2,749.5 | |||||||||||||||||||||||||||||||||||||||
Operating costs | (272.3 | ) | (344.7 | ) | (136.4 | ) | (481.2 | ) | (143.7 | ) | (192.8 | ) | (145.7 | ) | (57.3 | ) | (141.1 | ) | — | (536.9 | ) | 1.1 | (1,433.0 | ) | ||||||||||||||||||||||||||||
Gold inventory change | 0.7 | 17.5 | 0.4 | 17.8 | 3.8 | 11.0 | 5.1 | (0.4 | ) | 7.4 | — | 23.1 | — | 45.5 | ||||||||||||||||||||||||||||||||||||||
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Operating profit | 86.6 | 381.6 | 47.3 | 428.9 | 182.5 | 270.5 | 144.9 | 25.4 | 222.1 | — | 662.9 | 1.1 | 1,362.0 | |||||||||||||||||||||||||||||||||||||||
Amortisation and depreciation | (71.5 | ) | (184.4 | ) | (17.8 | ) | (202.2 | ) | (115.6 | ) | (144.7 | ) | (77.1 | ) | (14.4 | ) | (45.1 | ) | — | (281.3 | ) | (8.6 | ) | (679.2 | ) | |||||||||||||||||||||||||||
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Net operating profit/(loss) | 15.0 | 197.2 | 29.5 | 226.7 | 66.9 | 125.8 | 67.8 | 11.0 | 177.0 | — | 381.6 | (7.5 | ) | 682.8 | ||||||||||||||||||||||||||||||||||||||
Other income/(costs) | 13.5 | (7.8 | ) | (0.6 | ) | (8.4 | ) | (13.1 | ) | 13.6 | 6.3 | — | 2.3 | — | 22.2 | 25.0 | 3 | 39.2 | ||||||||||||||||||||||||||||||||||
Share-based payments | (2.3 | ) | (2.5 | ) | (0.3 | ) | (2.8 | ) | (2.0 | ) | (1.2 | ) | (0.8 | ) | (0.4 | ) | (0.9 | ) | — | (3.3 | ) | (4.0 | ) | (14.4 | ) | |||||||||||||||||||||||||||
Long-term incentive plan | (1.0 | ) | (2.3 | ) | (0.5 | ) | (2.8 | ) | (1.8 | ) | (0.8 | ) | (0.7 | ) | (0.5 | ) | (0.8 | ) | — | (2.8 | ) | (2.6 | ) | (11.0 | ) | |||||||||||||||||||||||||||
Exploration expense | — | — | — | — | — | (21.1 | ) | (9.6 | ) | (6.1 | ) | (10.6 | ) | — | (47.4 | ) | (44.8 | ) | (92.2 | ) | ||||||||||||||||||||||||||||||||
Restructuring costs | — | (0.2 | ) | (9.9 | ) | (10.1 | ) | — | — | — | — | (1.2 | ) | — | (1.2 | ) | (0.4 | ) | (11.7 | ) | ||||||||||||||||||||||||||||||||
Impairment of investments and assets | — | — | (10.0 | ) | (10.0 | ) | (66.4 | ) | — | — | — | — | — | — | (0.1 | ) | (76.5 | ) | ||||||||||||||||||||||||||||||||||
Investment income | 1.1 | 1.8 | — | 1.8 | — | — | — | — | — | — | — | 5.4 | 8.3 | |||||||||||||||||||||||||||||||||||||||
Finance expense | (5.5 | ) | (3.9 | ) | (3.5 | ) | (7.4 | ) | (4.7 | ) | (2.7 | ) | (1.0 | ) | (0.2 | ) | (1.0 | ) | — | (4.9 | ) | (55.8 | ) | (78.3 | ) | |||||||||||||||||||||||||||
Royalties | (1.8 | ) | (35.4 | ) | (9.2 | ) | (44.6 | ) | (4.6 | ) | — | 4 | — | 4 | — | 4 | — | 4 | — | 4 | (29.3 | ) | — | (80.4 | ) | |||||||||||||||||||||||||||
Current taxation | — | (52.4 | ) | — | (52.4 | ) | (45.9 | ) | — | 4 | — | 4 | — | 4 | — | 4 | — | 4 | (95.7 | ) | (10.7 | ) | (204.7 | ) | ||||||||||||||||||||||||||||
Deferred taxation | (6.0 | ) | 22.6 | — | 22.6 | (1.5 | ) | — | 4 | — | 4 | — | 4 | — | 4 | — | 4 | 0.3 | (2.8 | ) | 12.6 | |||||||||||||||||||||||||||||||
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Profit/(loss) for the year | 13.0 | 116.9 | (4.5 | ) | 112.5 | (73.1 | ) | — | 4 | — | 4 | — | 4 | — | 4 | — | 4 | 219.5 | (98.3 | ) | 173.7 | |||||||||||||||||||||||||||||||
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Profit/(loss) attributable to: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
- Owners of the parent | 13.0 | 105.2 | (4.0 | ) | 101.3 | (72.8 | ) | — | 4 | — | 4 | — | 4 | — | 4 | — | 4 | 219.5 | (98.3 | ) | 162.8 | |||||||||||||||||||||||||||||||
-Non-controlling interest holders | — | 11.7 | (0.5 | ) | 11.2 | (0.3 | ) | — | 4 | — | 4 | — | 4 | — | 4 | — | 4 | — | — | 10.9 | ||||||||||||||||||||||||||||||||
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STATEMENT OF FINANCIAL POSITION | ||||||||||||||||||||||||||||||||||||||||||||||||||||
at 31 December 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets (excluding deferred taxation) | 1,075.0 | 1,667.0 | 132.6 | 1,799.6 | 822.5 | 622.3 | 426.4 | 10.1 | 292.7 | 272.5 | 1,624.0 | 964.9 | 6,286.0 | |||||||||||||||||||||||||||||||||||||||
Total liabilities (excluding deferred taxation) | 1,162.0 | 219.0 | 96.3 | 315.3 | 195.4 | 136.3 | 66.3 | 22.5 | 63.1 | 272.4 | 560.6 | 446.3 | 2,679.6 | |||||||||||||||||||||||||||||||||||||||
Net deferred taxation (assets)/liabilities | (32.4 | ) | 282.4 | — | 282.4 | 95.6 | — | 4 | — | 4 | — | 4 | — | 4 | — | 4 | 87.0 | (15.7 | ) | 416.8 | ||||||||||||||||||||||||||||||||
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Capital expenditure 5 | 77.9 | 168.4 | 37.9 | 206.3 | 42.8 | 140.0 | 70.0 | 21.4 | 90.3 | — | 321.7 | 1.3 | 649.9 | |||||||||||||||||||||||||||||||||||||||
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Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 41. | SEGMENT REPORT (continued) |
The above is a geographical analysis presented by location of assets.
The Group is primarily involved in gold mining, exploration and related activities. Activities are conducted and investments held both inside and outside of South Africa.
The segment results have been prepared and presented based on management’s reporting format. The Group prepares its financial records in accordance with International Financial Reporting Standards, or IFRS, and such IFRS information by segment is what the Group’s chief operating decision maker reviews in allocating resources and making investment decisions. The Company’s goldGold mining operations are managed and internally reported based uponon the following geographicgeographical areas: in South Africa, the South Deep mine, in Ghana, the Tarkwa and Damang mines, in Australia, St.St Ives, Agnew/Lawlers, Granny Smith, Darlot mines and Gruyere Gold Project and in Peru, the Cerro Corona mine. Whilst the Gruyere Gold Project does not meet the quantitative criteria for disclosure as a separate segment, it is expected to become a significant contributor to the Group’s performance in future years as the project is being developed. The Group also has exploration interests which are included in the “Corporate and other” segment. Refer to accounting policies on segment reporting on page F-22.
US Dollar figures may not add as they are rounded independently.
| (1) | The income statement and statement of financial position of South Deep is that of the operating mine and does not include any of the adjustments made in respect of the purchase price allocation relating to the acquisition of South Deep (refer note 14). South Deep Gold mine, being an unincorporated joint venture, is not liable for taxation. Taxation included in South Deep is indicative, as tax is provided in the holding companies at a rate of 30%. |
| (2) | ”Corporate and other” represents the items to reconcile segment data to consolidated financial statement totals, including the elimination of intercompany transactions and balances as well as the Group’s exploration interests. This does not represent a separate segment as it does not generate revenue. Included in “Corporate and other” is the adjustment made in respect of the purchase price allocation, including goodwill relating to the acquisition of South Deep. |
| (3) | Other income “Corporate and other” comprise share of loss of associates after taxation of US$2.3 million, profit on disposal of investments of US$2.3 million, profit on disposal of assets of US$48.0 million and the balance of US$23.0 million consists mainly of corporate related costs. |
| (4) | The Australian operations are entitled to transfer andoff-set profits and losses from one company to another, therefore it is not meaningful to split the royalties, income or deferred taxation. |
| (5) | Capital expenditure for the year ended 31 December 2016. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 41. | SEGMENT REPORT (continued) |
| UNITED STATES DOLLAR | ||||||||||||||||||||||||||||||||||||||||||||||||
| South Africa | Ghana | Peru | Australia |
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| South Deep 1 | Tarkwa | Damang | Total Ghana | Cerro Corona | St Ives | Agnew/ Lawlers | Darlot | Granny Smith | Total Australia | Corporate and other 2 | Group | |||||||||||||||||||||||||||||||||||||
INCOME STATEMENT | ||||||||||||||||||||||||||||||||||||||||||||||||
for the year ended 31 December 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | 232.3 | 680.7 | 194.8 | 875.5 | 292.2 | 431.8 | 273.9 | 91.3 | 348.4 | 1,145.4 | — | 2,545.4 | ||||||||||||||||||||||||||||||||||||
Operating costs | (236.6 | ) | (334.2 | ) | (184.3 | ) | (518.5 | ) | (143.8 | ) | (195.0 | ) | (142.6 | ) | (59.8 | ) | (135.9 | ) | (533.2 | ) | 0.8 | (1,431.3 | ) | |||||||||||||||||||||||||
Gold inventory change | — | 7.3 | (2.1 | ) | 5.2 | (1.0 | ) | (25.3 | ) | 1.1 | 0.6 | (5.4 | ) | (29.0 | ) | — | (24.9 | ) | ||||||||||||||||||||||||||||||
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Operating profit | (4.3 | ) | 353.8 | 8.5 | 362.2 | 147.4 | 211.5 | 132.5 | 32.1 | 207.1 | 583.2 | 0.8 | 1,089.2 | |||||||||||||||||||||||||||||||||||
Amortisation and depreciation | (67.9 | ) | (162.3 | ) | (26.4 | ) | (188.7 | ) | (100.1 | ) | (109.9 | ) | (62.0 | ) | (25.8 | ) | (54.1 | ) | (251.8 | ) | (1.4 | ) | (609.9 | ) | ||||||||||||||||||||||||
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Net operating (loss)/profit | (72.2 | ) | 191.5 | (18.0 | ) | 173.5 | 47.3 | 101.6 | 70.5 | 6.3 | 153.0 | 331.4 | (0.6 | ) | 479.3 | |||||||||||||||||||||||||||||||||
Other income/(costs) | 1.7 | (0.7 | ) | (2.4 | ) | (2.9 | ) | (14.7 | ) | 4.9 | 2.2 | 0.6 | (1.8 | ) | 5.9 | (11.9 | )3 | (22.1 | ) | |||||||||||||||||||||||||||||
Share-based payments | (1.0 | ) | (1.5 | ) | (0.3 | ) | (1.8 | ) | (1.2 | ) | (1.2 | ) | (0.7 | ) | (0.2 | ) | (0.4 | ) | (2.5 | ) | (4.4 | ) | (10.9 | ) | ||||||||||||||||||||||||
Long-term incentive plan | (0.7 | ) | (1.1 | ) | (0.3 | ) | (1.4 | ) | (0.8 | ) | (0.2 | ) | (0.5 | ) | (0.2 | ) | (0.3 | ) | (1.2 | ) | (1.2 | ) | (5.3 | ) | ||||||||||||||||||||||||
Exploration expense | — | — | — | — | — | (21.5 | ) | (4.0 | ) | (1.7 | ) | (3.6 | ) | (30.8 | ) | (22.7 | ) | (53.5 | ) | |||||||||||||||||||||||||||||
Restructuring costs | (0.7 | ) | (5.3 | ) | (0.3 | ) | (5.6 | ) | — | (3.0 | ) | — | — | (0.1 | ) | (3.1 | ) | — | (9.3 | ) | ||||||||||||||||||||||||||||
Impairment of investments and assets | — | — | (43.8 | ) | (43.8 | ) | (6.7 | ) | — | — | (14.2 | ) | — | (14.2 | ) | (156.4 | ) | (221.1 | ) | |||||||||||||||||||||||||||||
Investment income | 0.9 | 1.3 | 0.1 | 1.4 | — | — | — | — | — | — | 4.0 | 6.3 | ||||||||||||||||||||||||||||||||||||
Finance expense | (4.1 | ) | (3.4 | ) | (2.9 | ) | (6.3 | ) | (5.5 | ) | (2.9 | ) | (1.3 | ) | (0.3 | ) | (1.1 | ) | (5.6 | ) | (61.4 | ) | (82.9 | ) | ||||||||||||||||||||||||
Royalties | (1.2 | ) | (34.0 | ) | (9.7 | ) | (43.8 | ) | (3.1 | ) | — | 4 | — | 4 | — | 4 | — | 4 | (28.0 | ) | — | (76.0 | ) | |||||||||||||||||||||||||
Current taxation | — | (34.6 | ) | (0.7 | ) | (35.4 | ) | (33.0 | ) | — | 4 | — | 4 | — | 4 | — | 4 | (66.7 | ) | (7.8 | ) | (142.9 | ) | |||||||||||||||||||||||||
Deferred taxation | 22.1 | (24.7 | ) | (11.0 | ) | (35.7 | ) | (75.7 | ) | — | 4 | — | 4 | — | 4 | — | 4 | (9.5 | ) | (5.4 | ) | (104.2 | ) | |||||||||||||||||||||||||
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(Loss)/profit for the year | (55.2 | ) | 87.5 | (89.3 | ) | (1.8 | ) | (93.4 | ) | — | 4 | — | 4 | — | 4 | — | 4 | 175.7 | (267.8 | ) | (242.6 | ) | ||||||||||||||||||||||||||
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(Loss)/profit attributable to: | ||||||||||||||||||||||||||||||||||||||||||||||||
- Owners of the parent | (55.2 | ) | 78.8 | (80.5 | ) | (1.7 | ) | (93.0 | ) | — | 4 | — | 4 | — | 4 | — | 4 | 175.7 | (267.8 | ) | (242.1 | ) | ||||||||||||||||||||||||||
-Non-controlling interest holders | — | 8.7 | (8.8 | ) | (0.1 | ) | (0.4 | ) | — | 4 | — | 4 | — | 4 | — | 4 | — | — | (0.5 | ) | ||||||||||||||||||||||||||||
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STATEMENT OF FINANCIAL POSITION | ||||||||||||||||||||||||||||||||||||||||||||||||
at 31 December 2015 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total assets (excluding deferred taxation) | 976.8 | 1,546.7 | 139.0 | 1,685.7 | 880.5 | 555.3 | 393.7 | 9.1 | 221.7 | 1,179.8 | 1,100.8 | 5,823.6 | ||||||||||||||||||||||||||||||||||||
Total liabilities (excluding deferred taxation) | 1,078.4 | 195.6 | 98.5 | 294.1 | 133.7 | 135.2 | 66.9 | 23.2 | 61.5 | 286.8 | 829.4 | 2,622.4 | ||||||||||||||||||||||||||||||||||||
Net deferred taxation (assets)/liabilities | (36.0 | ) | 305.0 | — | 305.0 | 94.1 | — | 4 | — | 4 | — | 4 | — | 4 | 87.6 | (17.5 | ) | 433.2 | ||||||||||||||||||||||||||||||
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Capital expenditure 5 | 66.9 | 204.2 | 16.9 | 221.1 | 64.8 | 114.5 | 73.0 | 20.0 | 72.4 | 279.9 | 1.4 | 634.1 | ||||||||||||||||||||||||||||||||||||
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Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 41. | SEGMENT REPORT (continued) |
The above is a geographical analysis presented by location of assets.
The Group is primarily involved in gold mining, exploration and related activities. Activities are conducted and investments held both inside and outside South Africa. The segment results have been prepared and presented based on management’s reporting format. Gold mining operations are managed and internally reported based on the following geographical areas: in South Africa, South Deep mine, in Ghana, Tarkwa and Damang mines, in Australia, St Ives, Agnew/ Lawlers, Granny Smith and Darlot mines and in Peru, the Cerro Corona mine. The Group also has exploration interests which are included in the Corporate“Corporate and otherother” segment. Corporate costsRefer to accounting policies on segment reporting on page F-22.
US Dollar figures may not add as they are allocated between segments based upon the time spent on each segment by members of the executive team.rounded independently.
| Fiscal Year Ended December 31, 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| South Africa | Ghana | Australia | Peru | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| South Deep | Tarkwa | Damang | Total | St Ives | Agnew/ Lawlers | Darlot | Granny Smith | Total | Cerro Corona | Corporate and other # | Total per IFRS | Reclassifications | Reconciling items | Continuing operations | ||||||||||||||||||||||||||||||||||||||||||||||
Statement of operations - continuing operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | 254.8 | 706.7 | 224.6 | 931.3 | 458.8 | 342.5 | 106.2 | 399.8 | 1,307.3 | 375.5 | — | 2,868.8 | — | — | 2,868.8 | |||||||||||||||||||||||||||||||||||||||||||||
Operating costs (excluding amortization and depreciation)1, 2 | (245.5 | ) | (373.9 | ) | (177.6 | ) | (551.5 | ) | (292.3 | ) | (173.0 | ) | (81.9 | ) | (182.6 | ) | (729.8 | ) | (158.2 | ) | — | (1,684.9 | ) | (97.2 | ) | (125.4 | ) | (1,907.4 | ) | |||||||||||||||||||||||||||||||
Gold inventory change 1, 2, 3 | — | 2.3 | (2.1 | ) | 0.2 | 9.9 | 0.3 | (1.7 | ) | — | 8.4 | (1.5 | ) | — | 7.2 | — | 7.2 | 14.4 | ||||||||||||||||||||||||||||||||||||||||||
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Adjusted operating profit/(loss) before amortization and depreciation 2, 4 | 9.3 | 335.1 | 45.0 | 380.1 | 176.4 | 169.8 | 22.5 | 217.2 | 586.0 | 215.8 | — | 1,191.1 | (97.2 | ) | (118.1 | ) | 975.7 | |||||||||||||||||||||||||||||||||||||||||||
Amortization and depreciation2 | (74.5 | ) | (141.6 | ) | (20.9 | ) | (162.5 | ) | (140.5 | ) | (96.4 | ) | (16.6 | ) | (84.6 | ) | (338.1 | ) | (79.6 | ) | (2.0 | ) | (656.7 | ) | (0.4 | ) | (20.2 | ) | (677.3 | ) | ||||||||||||||||||||||||||||||
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Adjusted operating (loss)/profit2, 5 | (65.2 | ) | 193.5 | 24.1 | 217.6 | 35.9 | 73.4 | 5.9 | 132.6 | 248.0 | 136.1 | (2.0 | ) | 534.4 | (97.6 | ) | (138.4 | ) | 298.4 | |||||||||||||||||||||||||||||||||||||||||
Exploration expenditure | — | — | — | — | (8.2 | ) | (3.7 | ) | (1.8 | ) | (1.5 | ) | (15.2 | ) | — | (32.0 | ) | (47.2 | ) | (4.1 | ) | 15.1 | (36.2 | ) | ||||||||||||||||||||||||||||||||||||
Finance expense | (19.6 | ) | (7.8 | ) | (3.5 | ) | (11.3 | ) | (3.9 | ) | (1.6 | ) | (1.0 | ) | (1.8 | ) | (8.3 | ) | (3.6 | ) | (56.5 | ) | (99.2 | ) | 18.4 | — | (80.8 | ) | ||||||||||||||||||||||||||||||||
Investment income | 0.9 | 1.7 | 0.1 | 1.8 | 0.3 | 0.2 | — | — | 0.5 | — | 1.1 | 4.2 | — | — | 4.2 | |||||||||||||||||||||||||||||||||||||||||||||
Asset impairments and write-offs | (8.4 | ) | — | — | — | (1.3 | ) | (4.3 | ) | — | — | (5.6 | ) | — | 1.5 | (12.5 | ) | (4.7 | ) | 3.2 | (14.0 | ) | ||||||||||||||||||||||||||||||||||||||
(Loss)/profit on disposal of property, plant and equipment | (0.3 | ) | (0.1 | ) | — | (0.1 | ) | 1.1 | — | 0.7 | 0.1 | 1.9 | (2.6 | ) | (0.2 | ) | (1.3 | ) | — | — | (1.3 | ) | ||||||||||||||||||||||||||||||||||||||
Other items as detailed in statement of operations | (22.6 | ) | (23.1 | ) | (4.3 | ) | (27.4 | ) | (21.6 | ) | (15.3 | ) | (3.9 | ) | (10.6 | ) | (51.5 | ) | (10.7 | ) | (31.9 | ) | (144.0 | ) | 88.0 | 79.9 | 23.9 | |||||||||||||||||||||||||||||||||
Royalty | (1.3 | ) | (35.3 | ) | (11.2 | ) | (46.5 | ) | N6 | N6 | N6 | N6 | (32.6 | ) | (5.8 | ) | — | (86.1 | ) | — | — | (86.1 | ) | |||||||||||||||||||||||||||||||||||||
Current taxation | — | (31.1 | ) | — | (31.1 | ) | N6 | N6 | N6 | N6 | (74.9 | ) | (60.7 | ) | 32.5 | (134.2 | ) | — | — | (134.2 | ) | |||||||||||||||||||||||||||||||||||||||
Deferred taxation | 33.6 | * | (14.2 | ) | (1.8 | ) | (16.0 | ) | N6 | N6 | N6 | N6 | 32.1 | 13.8 | (47.4 | ) | 16.1 | — | (3.5 | ) | 12.6 | |||||||||||||||||||||||||||||||||||||||
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(Loss)/income before impairment of equity investees, share of equity investees’ losses and discontinued operations7 | (83.0 | ) | 83.7 | 3.4 | 87.1 | N6 | N6 | N6 | N6 | 94.5 | 66.5 | (134.9 | ) | 30.2 | — | (43.6 | ) | (13.4 | ) | |||||||||||||||||||||||||||||||||||||||||
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Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
| (1) |
| ”Corporate and |
| (3) | Other costs “Corporate and other” comprise share of loss of associates after taxation of US$5.7 million, profit on disposal of investments of US$0.1 million and the balance of US$6.3 million consists mainly of corporate related costs. |
| (4) | The Australian operations are entitled to transfer andoff-set profits and losses from one company to another, therefore it is not meaningful to split the royalties, income or deferred taxation. |
| (5) | Capital expenditure for the year ended 31 December 2015. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 41. | SEGMENT REPORT (continued) |
| UNITED STATES DOLLAR | ||||||||||||||||||||||||||||||||||||||||||||||||
| South Africa | Ghana | Peru | Australia |
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| South Deep 1 | Tarkwa | Damang | Total Ghana | Cerro Corona | St Ives | Agnew/ Lawlers | Darlot | Granny Smith | Total Australia | Corporate and other 2 | Group | |||||||||||||||||||||||||||||||||||||
INCOME STATEMENT | ||||||||||||||||||||||||||||||||||||||||||||||||
for the year ended 31 December 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | 254.8 | 706.7 | 224.6 | 931.3 | 375.5 | 458.8 | 342.5 | 106.2 | 399.8 | 1,307.3 | — | 2,868.8 | ||||||||||||||||||||||||||||||||||||
Operating costs | (245.5 | ) | (373.9 | ) | (177.6 | ) | (551.5 | ) | (158.2 | ) | (292.3 | ) | (173.0 | ) | (81.9 | ) | (182.6 | ) | (729.8 | ) | — | (1,684.9 | ) | |||||||||||||||||||||||||
Gold inventory change | — | 2.3 | (2.1 | ) | 0.2 | (1.5 | ) | 9.9 | 0.3 | (1.7 | ) | — | 8.4 | — | 7.2 | |||||||||||||||||||||||||||||||||
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Operating profit | 9.3 | 335.1 | 45.0 | 380.1 | 215.8 | 176.4 | 169.8 | 22.5 | 217.2 | 586.0 | — | 1,191.1 | ||||||||||||||||||||||||||||||||||||
Amortisation and depreciation | (74.5 | ) | (141.6 | ) | (20.9 | ) | (162.5 | ) | (79.6 | ) | (140.5 | ) | (96.4 | ) | (16.6 | ) | (84.6 | ) | (338.1 | ) | (2.0 | ) | (656.7 | ) | ||||||||||||||||||||||||
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Net operating (loss)/profit | (65.2 | ) | 193.5 | 24.1 | 217.6 | 136.1 | 35.9 | 73.4 | 5.9 | 132.6 | 248.0 | (2.0 | ) | 534.4 | ||||||||||||||||||||||||||||||||||
Other costs | (4.7 | ) | (0.5 | ) | 0.5 | — | (9.5 | ) | (13.3 | ) | (13.2 | ) | (1.2 | ) | (8.3 | ) | (36.0 | ) | (14.0 | ) 3 | (64.2 | ) | ||||||||||||||||||||||||||
Share-based payments | (2.8 | ) | (4.2 | ) | (0.6 | ) | (4.8 | ) | (2.6 | ) | (2.7 | ) | (1.3 | ) | (0.5 | ) | (1.0 | ) | (5.5 | ) | (10.3 | ) | (26.0 | ) | ||||||||||||||||||||||||
Long-term incentive plan | (0.6 | ) | (1.5 | ) | (0.2 | ) | (1.7 | ) | (1.2 | ) | (1.2 | ) | (0.7 | ) | (0.4 | ) | (0.7 | ) | (3.0 | ) | (2.2 | ) | (8.7 | ) | ||||||||||||||||||||||||
Exploration expense | — | — | — | — | — | (8.2 | ) | (3.7 | ) | (1.8 | ) | (1.5 | ) | (15.2 | ) | (32.0 | ) | (47.2 | ) | |||||||||||||||||||||||||||||
Restructuring costs | (14.9 | ) | (16.9 | ) | (4.0 | ) | (20.9 | ) | — | (3.3 | ) | (0.1 | ) | (1.0 | ) | (0.6 | ) | (5.0 | ) | (1.2 | ) | (42.0 | ) | |||||||||||||||||||||||||
Impairment of investments and assets | (8.4 | ) | — | — | — | — | (1.3 | ) | (4.3 | ) | — | — | (5.6 | ) | (12.7 | ) | (26.7 | ) | ||||||||||||||||||||||||||||||
Investment income | 0.9 | 1.7 | 0.1 | 1.8 | — | 0.3 | 0.2 | — | — | 0.5 | 1.0 | 4.2 | ||||||||||||||||||||||||||||||||||||
Finance expense | (19.6 | ) | (7.8 | ) | (3.5 | ) | (11.3 | ) | (3.6 | ) | (3.9 | ) | (1.6 | ) | (1.0 | ) | (1.8 | ) | (8.3 | ) | (56.4 | ) | (99.2 | ) | ||||||||||||||||||||||||
Royalties | (1.3 | ) | (35.3 | ) | (11.2 | ) | (46.5 | ) | (5.8 | ) | — | 4 | — | 4 | — | 4 | — | 4 | (32.6 | ) | — | (86.1 | ) | |||||||||||||||||||||||||
Current taxation | — | (31.1 | ) | — | (31.1 | ) | (60.7 | ) | — | 4 | — | 4 | — | 4 | — | 4 | (74.9 | ) | 32.5 | (134.2 | ) | |||||||||||||||||||||||||||
Deferred taxation | 33.6 | (14.2 | ) | (1.8 | ) | (16.0 | ) | 13.8 | — | 4 | — | 4 | — | 4 | — | 4 | 32.1 | (47.4 | ) | 16.1 | ||||||||||||||||||||||||||||
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(Loss)/profit for the year | (83.0 | ) | 83.7 | 3.4 | 87.1 | 66.5 | — | 4 | — | 4 | — | 4 | — | 4 | 94.5 | (144.7 | ) | 20.4 | ||||||||||||||||||||||||||||||
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(Loss)/profit attributable to: | ||||||||||||||||||||||||||||||||||||||||||||||||
- Owners of the parent | (83.0 | ) | 75.3 | 3.1 | 78.4 | 66.2 | — | 4 | — | 4 | — | 4 | — | 4 | 94.5 | (143.3 | ) | 12.8 | ||||||||||||||||||||||||||||||
-Non-controlling interest holders | — | 8.4 | 0.3 | 8.7 | 0.3 | — | 4 | — | 4 | — | 4 | — | 4 | — | (1.4 | ) | 7.6 | |||||||||||||||||||||||||||||||
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STATEMENT OF FINANCIAL POSITION | ||||||||||||||||||||||||||||||||||||||||||||||||
at 31 December 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||
Total assets (excluding deferred taxation) | 1,267.3 | 1,561.5 | 215.4 | 1,776.9 | 1,041.9 | 559.1 | 394.2 | 24.0 | 142.1 | 1,119.4 | 1,589.8 | 6,795.3 | ||||||||||||||||||||||||||||||||||||
Total liabilities (excluding deferred taxation) | 1,316.3 | 209.0 | 96.9 | 305.9 | 158.4 | 145.4 | 81.0 | 25.6 | 70.4 | 322.4 | 704.4 | 2,807.4 | ||||||||||||||||||||||||||||||||||||
Net deferred taxation (assets)/liabilities | (22.7 | ) | 280.4 | (11.0 | ) | 269.4 | 18.3 | — | 4 | — | 4 | — | 4 | — | 4 | 87.9 | (28.3 | ) | 324.6 | |||||||||||||||||||||||||||||
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Capital expenditure 5 | 91.9 | 174.1 | 16.0 | 190.1 | 51.0 | 117.5 | 83.4 | 14.7 | 58.9 | 274.4 | 1.4 | 608.9 | ||||||||||||||||||||||||||||||||||||
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Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 41. | SEGMENT REPORT (continued) |
The above is a geographical analysis presented by location of assets.
The Group is primarily involved in gold mining, exploration and related activities. Activities are conducted and investments held both inside and outside South Africa. The segment results have been prepared and presented based on management’s reporting format. Gold mining operations are managed and internally reported based on the following geographical areas: in South Africa, South Deep mine, in Ghana, Tarkwa and Damang mines, in Australia, St Ives, Agnew/ Lawlers, Granny Smith and Darlot mines and in Peru, the Cerro Corona mine. The Group also has exploration interests which are included in the “Corporate and other” segment. Refer to accounting policies on segment reporting on page F-22.
US Dollar figures may not add as they are rounded independently.
| December 31, 2014 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| South Africa | Ghana | Australia | Peru | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| South Deep | Tarkwa | Damang | Total | St Ives | Agnew/ Lawlers | Darlot | Granny Smith | Total | Cerro Corona | Corporate and other # | Total per IFRS | Reclassifications | Reconciling items | Group Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||
Balance sheet | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets (excluding deferred tax assets) | 13.1 | 1,561.5 | 215.4 | 1,776.9 | 559.1 | 394.2 | 24.0 | 142.1 | 1,119.4 | 1,041.9 | 2,844.0 | 6,795.3 | — | (62.4 | ) | 6,733.0 | ||||||||||||||||||||||||||||||||||||||||||||
Total liabilities excluding deferred tax | 62.0 | 209.0 | 96.9 | 305.9 | 145.4 | 81.0 | 25.6 | 70.4 | 322.4 | 158.4 | 1,958.7 | 2,807.4 | — | (11.1 | ) | 2,796.3 | ||||||||||||||||||||||||||||||||||||||||||||
Deferred tax (assets)/liabilities | (22.7 | ) | 280.4 | (11.0 | ) | 269.4 | N1 | N1 | N1 | N1 | 87.9 | 18.3 | (28.3 | ) | 324.6 | — | (79.2 | ) | 245.4 | |||||||||||||||||||||||||||||||||||||||||
Capital expenditure | 91.9 | 174.1 | 16.0 | 190.1 | 117.5 | 83.4 | 14.7 | 58.9 | 274.4 | 51.0 | 1.4 | 608.9 | — | (128.4 | ) | 480.5 | ||||||||||||||||||||||||||||||||||||||||||||
| (1) |
| ”Corporate and |
| (3) | Other costs “Corporate and other” comprise share of loss of associates after taxation of US$2.4 million, profit on disposal of investments of US$0.5 million, profit on disposal of Chucapaca of US$4.6 million and the balance of US$16.7 million consists mainly of corporate related costs. |
| (4) | The Australian operations are entitled to transfer andoff-set profits and losses from one company to another, therefore it is not meaningful to split the royalties, income or deferred taxation. |
| (5) | Capital expenditure for the year ended 31 December 2014. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 42. | MAJOR GROUP INVESTMENTS – DIRECT AND INDIRECT |
| Group beneficial interest | Carrying value in holding company | |||||||||||||||||||||||||||||||||
| Shares held | Shares | Loans 6 | ||||||||||||||||||||||||||||||||
| Notes | 2016 | 2015 | 2016 % | 2015 % | 2016 R million | 2015 R million | 2016 R million | 2015 R million | ||||||||||||||||||||||||||
SUBSIDIARIES | ||||||||||||||||||||||||||||||||||
Unlisted | ||||||||||||||||||||||||||||||||||
Abosso Goldfields Ltd 7 | ||||||||||||||||||||||||||||||||||
- Class “A” shares | 1 | 49,734,000 | 49,734,000 | 90.0 | 90.0 | — | — | — | — | |||||||||||||||||||||||||
- Class “B” shares | 1 | 4,266,000 | 4,266,000 | 90.0 | 90.0 | — | — | — | — | |||||||||||||||||||||||||
Agnew Gold Mining Company Pty Ltd | 2 | 54,924,757 | 54,924,757 | 100.0 | 100.0 | — | — | — | — | |||||||||||||||||||||||||
Beatrix Mines Ltd | 3 | 96,549,020 | 96,549,020 | 100.0 | 100.0 | 206.8 | 206.8 | — | — | |||||||||||||||||||||||||
Beatrix Mining Ventures Ltd | 3 | 9,625,001 | 9,625,001 | 100.0 | 100.0 | 120.4 | 120.4 | (136.8 | ) | (136.8 | ) | |||||||||||||||||||||||
Darlot Mining Company Pty Ltd | 2 | 1 | 1 | 100.0 | 100.0 | — | — | — | — | |||||||||||||||||||||||||
Driefontein Consolidated (Pty) Ltd | 3 | 1,000 | 1,000 | 100.0 | 100.0 | — | — | (13.1 | ) | (13.1 | ) | |||||||||||||||||||||||
GFI Joint Venture Holdings (Pty) Ltd | 3 | 311,668,564 | 311,668,564 | 100.0 | 100.0 | — | — | (0.4 | ) | (0.4 | ) | |||||||||||||||||||||||
GFL Mining Services Ltd | 3 | 235,676,387 | 235,676,387 | 100.0 | 100.0 | 18,790.5 | 18,790.5 | (8,004.2 | ) | (8,004.2 | ) | |||||||||||||||||||||||
Gold Fields Ghana Ltd 8 | 1 | 900 | 900 | 90.0 | 90.0 | — | — | — | — | |||||||||||||||||||||||||
Gold Fields Group Services (Pty) Ltd | 3 | 1 | 1 | 100.0 | 100.0 | — | — | 355.5 | (1,282.8 | ) | ||||||||||||||||||||||||
Gold Fields Holdings Company (BVI) Ltd | 5 | 4,084 | 4,084 | 100.0 | 100.0 | — | — | — | — | |||||||||||||||||||||||||
Gold Fields La Cima S.A. 9 | 4 | 1,426,050,205 | 1,426,050,205 | 99.5 | 99.5 | — | — | — | — | |||||||||||||||||||||||||
Gold Fields Operations Ltd | 3 | 156,279,947 | 156,279,947 | 100.0 | 100.0 | — | — | (0.4 | ) | (0.4 | ) | |||||||||||||||||||||||
Gold Fields Orogen Holdings (BVI) Ltd | 5 | 258 | 258 | 100.0 | 100.0 | — | — | — | — | |||||||||||||||||||||||||
Gruyere Mining Company Pty Ltd | 2 | 1 | — | 100.0 | — | — | — | — | — | |||||||||||||||||||||||||
GSM Mining Company Pty Ltd | 2 | 1 | 1 | 100.0 | 100.0 | — | — | — | — | |||||||||||||||||||||||||
Kloof Gold Mining Company Ltd | 3 | 138,600,000 | 138,600,000 | 100.0 | 100.0 | 602.8 | 602.8 | (610.2 | ) | (610.2 | ) | |||||||||||||||||||||||
Newshelf 899 (Pty) Ltd 10 | 3 | 90,000,000 | 90,000,000 | 100.0 | 100.0 | 23,210.9 | 23,210.9 | — | — | |||||||||||||||||||||||||
St Ives Gold Mining Company Pty Ltd | 2 | 281,051,329 | 281,051,329 | 100.0 | 100.0 | — | — | — | — | |||||||||||||||||||||||||
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| |||||||||||||||||||||||||||
Total | 42,931.4 | 42,931.4 | (8,409.6 | ) | (10,047.9 | ) | ||||||||||||||||||||||||||||
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| (1) | Incorporated in Ghana. |
| (2) | Incorporated in Australia. |
| (3) | Incorporated in the Republic of South Africa. |
| (4) | Incorporated in Peru. |
| (5) | Incorporated in the British Virgin Islands. |
| (6) | The loans are unsecured, interest free and have no fixed repayment terms. These loans eliminate on consolidation. |
| (7) | Abosso Goldfields Ltd (“Abosso”) owns the Damang operation in Ghana. The accumulatednon-controlling interest of Abosso at 31 December 2016 amounts to US$3.6 million (2015: US$4.1 million). No dividends were paid tonon-controlling interest during 2016 or 2015. Refer to the segment report, note 41, for summarised financial information of Damang. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 42. | MAJOR GROUP INVESTMENTS – DIRECT AND INDIRECT (continued) |
| 8 | Gold Fields Ghana Ltd (“GFG”) owns the Tarkwa operation in Ghana. The accumulatednon-controlling interest of GFG at 31 December 2016 amounts to US$116.6 million (2015: US$104.6 million). No dividends were paid tonon-controlling interest during 2016 (2015: US$11.5 million). Refer to the segment report, note 41, for summarised financial information of Tarkwa. |
| 9 | Gold Fields La Cima S.A. (“La Cima”) owns the Cerro Corona operation in Peru. The accumulatednon-controlling interest of La Cima at 31 December 2016 amounts to US$2.5 million (2015: US$3.1 million). A dividend of US$0.2 million was paid tonon-controlling interest during 2016 (2015: US$0.4 million). Refer to the segment report, note 41, for financial information of Cerro Corona. |
| 10 | Refer note 25.2. Newshelf is the holding company of GFIJVH and GFO which own the South Deep mine. In terms of the South Deep BEE agreement, there is an agreedphase-in participation of BEE partners over 20 years. The BEE partners’ stake will ultimately be 10%, resulting in a 90% holding by Newshelf. |
| Shares held | Group beneficial interest | |||||||||||||||
| 2016 | 2015 | 2016 % | 2015 % | |||||||||||||
OTHER 1 | ||||||||||||||||
Listed associates | ||||||||||||||||
Bezant Resources PLC 2 | — | 17,945,922 | — | 21.6 | % | |||||||||||
Maverix Metals Incorporated (“Maverix”) 3 | 42,850,000 | — | 32.3 | % | — | |||||||||||
Rusoro Mining Limited | 140,000,001 | 140,000,001 | 25.7 | % | 26.4 | % | ||||||||||
Joint venture | ||||||||||||||||
Far Southeast Gold Resources Incorporated | 1,737,699 | 1,737,699 | 40.0 | % | 40.0 | % | ||||||||||
Listed equity investments | ||||||||||||||||
Bezant Resources PLC 2 | 17,945,922 | — | 8.8 | % | — | |||||||||||
Cardinal Resources Limited | 13,700,270 | — | 4.5 | % | — | |||||||||||
Cardinal Resources Limited (Options) | 19,705,790 | — | 17.0 | % | — | |||||||||||
Cascadero Copper Corporation | 2,025,000 | 2,025,000 | 1.1 | % | 1.3 | % | ||||||||||
Clancy Exploration Limited | 17,764,783 | 17,764,783 | 0.7 | % | 6.9 | % | ||||||||||
Consolidated Woodjam Copper Corporation | 12,848,016 | 12,848,016 | 17.8 | % | 19.1 | % | ||||||||||
Fjordland Exploration Incorporated | 1,818,182 | 1,818,182 | 1.8 | % | 1.9 | % | ||||||||||
Hummingbird Resources PLC | 21,258,503 | 21,258,503 | 6.2 | % | 19.9 | % | ||||||||||
Orsu Metals Corp | 26,134,919 | 26,134,919 | 19.7 | % | 14.3 | % | ||||||||||
Radius Gold Incorporated | 3,625,124 | 3,625,124 | 4.2 | % | 4.2 | % | ||||||||||
Sibanye Gold Limited | — | 856,330 | — | — | 4 | |||||||||||
| (1) | Only major investments are listed individually. |
| (2) | During 2016, the Group’s holding was diluted from 21.6% to 8.8% following the issue of new shares by Bezant. In line with the Group’s accounting policy, this resulted in Bezant no longer being accounted for as an equity-accounted investee and wasre-classified toavailable-for-sale financial investments. |
| (3) | On 23 December 2016, Gold Fields sold a portfolio of eleven producing andnon-producing royalties to Maverix in exchange for 42.85 million common shares and 10.0 million common share purchase warrants of Maverix. The warrants are classified as derivative instruments and are included in investments. |
| (4) | Percentage interest less than 0.1%. |
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 43. | RECONCILIATION OF PRIOR PERIOD US GAAP FINANCIAL STATEMENTS TO IFRS FINANCIAL STATEMENTS |
Preparation of US GAAP financial statements
With effect from 1 January 2016 and for all future periods, the Group will only report its financial results in accordance with IFRS as issued by the International Accounting Standards Board (IASB) in all financial communications, including reports to the United States Securities and Exchange Commission (SEC). Up to and including the year ended 31 December 2015, in addition to preparing and reporting its financial statements in accordance with IFRS as issued by the IASB, the Group also prepared its financial results for SEC reporting purposes in accordance with United States Generally Accepted Accounting Principles (US GAAP).
In accordance with paragraph 6345.2 of the Division of Corporation Finance Financial Reporting Manual, a reconciliation from US GAAP to IFRS as of and for the years ended 31 December 2015 and 2014, for the consolidated statements of financial position and the consolidated statements of income has been presented.
With effect from 1 January 2016, the decision was taken to prepare IFRS financial statements for SEC reporting purposes. Comparative US GAAP financial statements can be reconciled to the IFRS financial statements as follows:
| UNITED STATES DOLLAR | ||||||||||
| 2015 | 2014 | |||||||||
Income statement reconciliation | ||||||||||
Net loss per previously reported US GAAP financial statements | (347.4 | ) | (25.2 | ) | ||||||
Reconciling items in cost of sales | ||||||||||
Exploration costs | (e) | 25.9 | 21.3 | |||||||
Provision for rehabilitation | (f) | 2.2 | (3.0 | ) | ||||||
Cut-backs | (d) | 173.7 | 107.1 | |||||||
Gold inventory change | (h) | 8.6 | (7.2 | ) | ||||||
Reconciling items in amortisation and depreciation | ||||||||||
Amortisation of reserves | (b) | 4.9 | 18.0 | |||||||
Cut-backs | (d) | (71.8 | ) | (33.9 | ) | |||||
Amortisation - asset impairments andwrite-offs | (i) | 24.1 | 25.0 | |||||||
Amortisation - inclusion of future costs | (c) | 23.0 | 9.7 | |||||||
Amortisation - capitalised interest | (j) | 5.7 | 4.7 | |||||||
Provision for rehabilitation | (f) | (1.4 | ) | (3.3 | ) | |||||
Reconciling items in exploration expense | ||||||||||
Exploration costs | (e) | (30.8 | ) | (15.1 | ) | |||||
Reconciling items items in impairment of investments and assets | ||||||||||
Asset impairments andwrite-offs | (i) | 26.7 | (3.2 | ) | ||||||
Reconciling items in profit on disposal of Chucupaca | ||||||||||
Profit on sale of investments | (l) | — | (68.2 | ) | ||||||
Reconciling items in other costs | ||||||||||
Rehabilitation adjustment | (f) | 8.0 | (11.8 | ) | ||||||
Other | 0.2 | — | ||||||||
Reconciling items in mining and income taxation | ||||||||||
Mining and income taxation | (m) | (92.2 | ) | 3.5 | ||||||
Reconciling items in share of results of equity-accounted investees after taxation | ||||||||||
Share of results of equity-accounted investees after taxation | (n) | (1.9 | ) | 1.9 | ||||||
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(Loss)/profit per IFRS financial statements | (242.6 | ) | 20.4 | |||||||
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Figures may not add as they are rounded independently.independently
Gold Fields Limited
Notes to the Consolidated Financial Statementsconsolidated financial statements
($for the year ended 31 December
Figures in millions unless otherwise noted)stated
| Fiscal Year Ended December 31, 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| South Africa | Ghana | Australia | Peru | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| South Deep | Tarkwa | Damang | Total | St Ives | Agnew/ Lawlers | Darlot | Granny Smith | Total | Cerro Corona | Corporate and other # | Total per IFRS | Reclassifications | Reconciling items | Continuing operations | ||||||||||||||||||||||||||||||||||||||||||||||
Statement of operations - continuing operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | 425.7 | 893.1 | 216.4 | 1,109.6 | 569.0 | 302.8 | 26.0 | 82.3 | 980.1 | 390.9 | — | 2,906.3 | — | — | 2,906.3 | |||||||||||||||||||||||||||||||||||||||||||||
Operating costs (excluding amortization and depreciation)1, 2 | (321.8 | ) | (473.7 | ) | (171.1 | ) | (644.8 | ) | (345.5 | ) | (135.0 | ) | (21.6 | ) | (48.8 | ) | (550.8 | ) | (161.3 | ) | — | (1,678.7 | ) | (74.7 | ) | (162.4 | ) | (1,915.8 | ) | |||||||||||||||||||||||||||||||
Gold inventory change1, 2, 3 | — | (30.8 | ) | 11.1 | (19.6 | ) | 8.8 | (1.2 | ) | 1.3 | 3.7 | 12.7 | 18.8 | — | 11.8 | — | (1.2 | ) | 10.6 | |||||||||||||||||||||||||||||||||||||||||
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Adjusted operating profit/(loss) before amortization and depreciation 2, 4 | 103.9 | 388.7 | 56.4 | 445.1 | 232.3 | 166.7 | 5.7 | 37.3 | 442.0 | 248.4 | — | 1,239.4 | (74.7 | ) | (163.6 | ) | 1,001.1 | |||||||||||||||||||||||||||||||||||||||||||
Amortization and depreciation2 | (98.9 | ) | (137.6 | ) | (30.6 | ) | (168.3 | ) | (194.3 | ) | (71.1 | ) | (3.6 | ) | (21.0 | ) | (290.0 | ) | (48.8 | ) | (5.0 | ) | (610.9 | ) | — | 42.4 | (568.5 | ) | ||||||||||||||||||||||||||||||||
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Adjusted operating profit/(loss)2, 5 | 5.0 | 251.1 | 25.8 | 276.9 | 38.0 | 95.6 | 2.1 | 16.3 | 152.1 | 199.7 | (5.0 | ) | 628.5 | (74.7 | ) | (121.2 | ) | 432.6 | ||||||||||||||||||||||||||||||||||||||||||
Exploration expenditure | — | — | — | — | (5.1 | ) | (1.4 | ) | — | — | (6.5 | ) | (0.2 | ) | (59.1 | ) | (65.9 | ) | (7.2 | ) | (4.8 | ) | (77.9 | ) | ||||||||||||||||||||||||||||||||||||
Feasibility and evaluation | — | — | — | — | — | — | — | — | — | — | (47.7 | ) | (47.7 | ) | — | (20.3 | ) | (68.0 | ) | |||||||||||||||||||||||||||||||||||||||||
Finance expense | (8.8 | ) | (1.2 | ) | (4.7 | ) | (5.9 | ) | — | — | (0.2 | ) | (1.2 | ) | (1.4 | ) | (2.2 | ) | (51.2 | ) | (69.5 | ) | 2.4 | (5.3 | ) | (72.4 | ) | |||||||||||||||||||||||||||||||||
Investment income | 0.6 | 0.4 | — | 0.4 | 3.8 | 3.8 | — | — | 7.6 | 0.4 | (0.6 | ) | 8.5 | — | — | 8.5 | ||||||||||||||||||||||||||||||||||||||||||||
Asset impairments and write-offs | — | (204.5 | ) | (188.9 | ) | (393.4 | ) | (265.5 | ) | (0.4 | ) | — | — | (265.9 | ) | (11.0 | ) | (128.9 | ) | (799.2 | ) | 1.5 | 582.4 | (215.3 | ) | |||||||||||||||||||||||||||||||||||
Profit on disposal of property, plant and equipment | 0.2 | 0.1 | — | 0.1 | 1.3 | — | — | — | 1.3 | — | — | 1.6 | — | 8.6 | 10.2 | |||||||||||||||||||||||||||||||||||||||||||||
Other items as detailed in statement of operations | (23.1 | ) | (11.8 | ) | (2.2 | ) | (14.0 | ) | (2.7 | ) | (14.2 | ) | (3.2 | ) | (17.1 | ) | (37.2 | ) | (11.5 | ) | (76.8 | ) | (162.6 | ) | 78.0 | (5.3 | ) | (89.8 | ) | |||||||||||||||||||||||||||||||
Royalty | (2.1 | ) | (44.7 | ) | (10.8 | ) | (55.5 | ) | N6 | N6 | N6 | N6 | (24.1 | ) | (8.9 | ) | — | (90.5 | ) | — | — | (90.5 | ) | |||||||||||||||||||||||||||||||||||||
Current taxation | — | (39.7 | ) | (0.9 | ) | (40.6 | ) | N6 | N6 | N6 | N6 | (49.7 | ) | (66.3 | ) | (4.8 | ) | (161.3 | ) | — | (3.8 | ) | (165.1 | ) | ||||||||||||||||||||||||||||||||||||
Deferred taxation | 6.6 | * | 33.9 | 63.4 | 97.3 | N6 | N6 | N6 | N6 | 106.9 | (19.6 | ) | (9.9 | ) | 181.4 | — | (122.0 | ) | 59.4 | |||||||||||||||||||||||||||||||||||||||||
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(Loss)/income before impairment of equity investees, share of equity investees’ losses and discontinued operations7 | (21.6 | ) | (16.2 | ) | (118.3 | ) | (134.6 | ) | N6 | N6 | N6 | N6 | (116.8 | ) | 80.5 | (383.9 | ) | (576.7 | ) | — | 308.4 | (268.2 | ) | |||||||||||||||||||||||||||||||||||||
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Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
Segment information on the statement of operations related to Sibanye Gold, which include the KDC and Beatrix mines, is not presented as Sibanye Gold is presented as a discontinued operation (refer note 9.1).
| UNITED STATES DOLLAR | ||||||||||||
| 2015 | 2014 | |||||||||||
Net assets reconciliation | ||||||||||||
Total equity per previously reported US GAAP financial statements | 2,637.0 | 3,691.3 | ||||||||||
Reconciling items to property, plant and equipment | ||||||||||||
Business combination - purchase of South Deep | (a) | 23.2 | 30.4 | |||||||||
Amortisation of reserves | (b) | 168.8 | 183.6 | |||||||||
Amortisation - inclusion of future costs | (c) | (135.5 | ) | (176.5 | ) | |||||||
Cut-backs | (d) | 701.9 | 605.9 | |||||||||
Exploration costs | (e) | 124.8 | 154.2 | |||||||||
Deferred stripping | (g) | (7.6 | ) | (6.6 | ) | |||||||
Asset impairments andwrite-offs | (i) | (198.7 | ) | (290.5 | ) | |||||||
Amortisation - interest capitalised | (j) | 20.9 | 23.1 | |||||||||
Interest capitalisation | (j) | (68.4 | ) | (62.7 | ) | |||||||
Provision for rehabilitation | (f) | (20.9 | ) | (18.3 | ) | |||||||
Other | (1.8 | ) | (0.2 | ) | ||||||||
Reconciling items to goodwill | ||||||||||||
Business combination - purchase of South Deep | (a) | (283.7 | ) | (370.6 | ) | |||||||
Reconciling items to assets held for sale | ||||||||||||
Asset impairments andwrite-offs | (i) | — | 9.0 | |||||||||
Reconciling items to inventory | ||||||||||||
Inventory | (h) | (17.1 | ) | (21.6 | ) | |||||||
Inventory stockpiles | (k) | 5.7 | 1.2 | |||||||||
Reconciling items to equity accounted investees | ||||||||||||
Other | (n) | — | 1.9 | |||||||||
Reconciling items to provisions | ||||||||||||
Provision for rehabilitation | (f) | 0.3 | (11.1 | ) | ||||||||
Reconciling items to deferred tax assets/liabilities | ||||||||||||
Deferred mining and income taxation | (m) | (180.9 | ) | (79.2 | ) | |||||||
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Total equity per IFRS financial statements | 2,768.0 | 3,663.3 | ||||||||||
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Figures may not add as they are rounded independently.independently
| December 31, 2013 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| South Africa | Ghana | Australia | Peru | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| KDC | Beatrix | South Deep | Tarkwa | Damang | Total | St Ives | Agnew/ Lawlers | Darlot | Granny Smith | Total | Cerro Corona | Corporate and other# | Total per IFRS | Reclassifications | Reconciling items | Group Consolidated | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance sheet | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets (excluding deferred tax assets) | N1 | N1 | 192.9 | 1,528.3 | 197.8 | 1,726.1 | 650.9 | 400.7 | 25.0 | 69.6 | 1,146.2 | 1,054.1 | 3,125.0 | 7,244.3 | — | (40.6 | ) | 7,203.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities excluding deferred tax | N1 | N1 | 128.4 | 174.8 | 85.2 | 260.0 | 167.1 | 70.4 | 26.7 | 73.2 | 337.5 | 145.8 | 1,979.9 | 2,851.5 | (5.0 | ) | (14.3 | ) | 2,832.2 | |||||||||||||||||||||||||||||||||||||||||||||||||
Deferred tax liabilities/(assets) | N1 | N1 | 9.8 | 266.2 | (12.8 | ) | 253.4 | N2 | N2 | N2 | N2 | 128.2 | 32.1 | (76.2 | ) | 347.5 | 5.0 | (73.6 | ) | 273.7 | ||||||||||||||||||||||||||||||||||||||||||||||||
Capital expenditure | 37.5 | 10.3 | 202.4 | 207.0 | 50.1 | 257.1 | 132.3 | 52.3 | 1.5 | 7.8 | 193.9 | 56.3 | 29.6 | 739.2 | — | (195.5 | ) | 543.7 | ||||||||||||||||||||||||||||||||||||||||||||||||||
Figures may not add as they are rounded independently.
Gold Fields Limited
Notes to the Consolidated Financial Statementsconsolidated financial statements
($for the year ended 31 December
Figures in millions unless otherwise noted)stated
| Fiscal Year Ended December 31, 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
| South Africa | Ghana | Australia | Peru | |||||||||||||||||||||||||||||||||||||||||||||||||
| South Deep | Tarkwa | Damang | Total | St Ives | Agnew | Total | Cerro Corona | Corporate and other # | Total per IFRS | Reclassifications | Reconciling items | Continuing operations | ||||||||||||||||||||||||||||||||||||||||
Statement of operations - continuing operations | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue | 450.8 | 1,198.9 | 277.8 | 1,476.7 | 752.2 | 294.4 | 1,046.6 | 556.6 | — | 3,530.6 | — | — | 3,530.6 | |||||||||||||||||||||||||||||||||||||||
Operating costs (excluding amortization and depreciation)1, 2 | (302.9 | ) | (494.4 | ) | (179.1 | ) | (673.5 | ) | (378.0 | ) | (148.1 | ) | (526.1 | ) | (171.4 | ) | — | (1,673.8 | ) | (69.8 | ) | (199.2 | ) | (1,942.9 | ) | |||||||||||||||||||||||||||
Gold inventory change 1, 2, 3 | — | 24.8 | 3.6 | 28.4 | (14.7 | ) | (2.6 | ) | (17.4 | ) | 11.0 | — | 22.0 | — | 0.1 | 22.1 | ||||||||||||||||||||||||||||||||||||
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Adjusted operating profit/(loss) before amortization and depreciation 2, 4 | 147.9 | 729.3 | 102.3 | 831.6 | 359.4 | 143.7 | 503.0 | 396.2 | — | 1,878.8 | (69.8 | ) | (199.1 | ) | 1,609.8 | |||||||||||||||||||||||||||||||||||||
Amortization and depreciation2 | (82.4 | ) | (125.4 | ) | (22.8 | ) | (148.2 | ) | (160.4 | ) | (53.7 | ) | (214.1 | ) | (48.8 | ) | (5.7 | ) | (499.2 | ) | — | 73.4 | (425.8 | ) | ||||||||||||||||||||||||||||
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Adjusted operating profit/(loss)2, 5 | 65.6 | 603.8 | 79.5 | 683.3 | 199.0 | 90.0 | 288.9 | 347.4 | (5.7 | ) | 1,379.6 | (69.8 | ) | (125.7 | ) | 1,184.0 | ||||||||||||||||||||||||||||||||||||
Exploration expenditure | — | — | — | — | (9.8 | ) | (9.6 | ) | (19.4 | ) | (2.2 | ) | (106.9 | ) | (128.5 | ) | (61.1 | ) | 54.3 | (135.3 | ) | |||||||||||||||||||||||||||||||
Feasibility and evaluation | — | — | — | — | — | — | — | — | (44.1 | ) | (44.1 | ) | — | (59.4 | ) | (103.5 | ) | |||||||||||||||||||||||||||||||||||
Finance expense | (0.9 | ) | (2.3 | ) | (2.5 | ) | (4.8 | ) | (1.2 | ) | (0.3 | ) | (1.5 | ) | (3.9 | ) | (44.2 | ) | (55.3 | ) | 2.8 | (3.1 | ) | (55.6 | ) | |||||||||||||||||||||||||||
Investment income | 0.6 | 0.4 | 0.1 | 0.5 | 6.4 | 6.3 | 12.7 | 1.8 | 0.7 | 16.3 | — | — | 16.3 | |||||||||||||||||||||||||||||||||||||||
Asset impairments and write-offs | — | (4.5 | ) | — | (4.5 | ) | (58.0 | ) | (24.2 | ) | (82.2 | ) | (0.9 | ) | — | (87.6 | ) | 53.5 | (7.5 | ) | (41.6 | ) | ||||||||||||||||||||||||||||||
Profit/(loss) on disposal of property, plant and equipment | 0.4 | — | — | — | (0.2 | ) | — | (0.2 | ) | 0.1 | — | 0.3 | (0.1 | ) | — | 0.2 | ||||||||||||||||||||||||||||||||||||
Other items as detailed in statement of operations | (44.1 | ) | (18.2 | ) | (9.6 | ) | (27.8 | ) | (9.8 | ) | (3.5 | ) | (13.3 | ) | (17.8 | ) | (9.0 | ) | (112.0 | ) | 74.7 | 2.3 | (35.0 | ) | ||||||||||||||||||||||||||||
Royalty | (2.3 | ) | (59.9 | ) | (13.9 | ) | (73.8 | ) | N6 | N6 | (26.0 | ) | (14.7 | ) | — | (116.7 | ) | — | — | (116.7 | ) | |||||||||||||||||||||||||||||||
Current taxation | — | (163.1 | ) | (7.6 | ) | (170.7 | ) | N6 | N6 | (53.6 | ) | (104.7 | ) | (7.6 | ) | (336.6 | ) | — | (17.3 | ) | (353.9 | ) | ||||||||||||||||||||||||||||||
Deferred taxation | (4.5 | )* | (92.5 | ) | (21.5 | ) | (114.0 | ) | N6 | N6 | 4.2 | 12.4 | (18.1 | ) | (120.0 | ) | — | 114.5 | (5.5 | ) | ||||||||||||||||||||||||||||||||
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Income/(loss) before impairment of equity investees, share of equity investees’ losses and discontinued operations7 | 14.9 | 263.7 | 24.6 | 288.3 | N6 | N6 | 109.9 | 217.6 | (234.9 | ) | 395.4 | — | (41.9 | ) | 353.3 | |||||||||||||||||||||||||||||||||||||
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Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
Figures may not add as they are rounded independently.
| December 31, 2012 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| South Africa | Ghana | Australia | Peru | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| KDC | Beatrix | South Deep | Tarkwa | Damang | Total | St Ives | Agnew | Total | Cerro Corona | Corporate and other# | Total per IFRS | Reconciling items | Group Consolidated | |||||||||||||||||||||||||||||||||||||||||||
Balance sheet | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total assets (excluding deferred tax assets) | 2,126.3 | 313.1 | 208.3 | 1,775.6 | 386.2 | 2,161.8 | 1,066.7 | 372.4 | 1,439.1 | 1,165.8 | 3,613.9 | 11,028.3 | (418.3 | ) | 10,624.2 | |||||||||||||||||||||||||||||||||||||||||
Total liabilities excluding deferred tax | 740.8 | (26.8 | ) | 104.0 | 377.2 | 93.2 | 470.4 | 189.7 | 47.8 | 237.5 | 234.4 | 2,005.9 | 3,766.2 | (77.9 | ) | 3,687.9 | ||||||||||||||||||||||||||||||||||||||||
Deferred tax liabilities/(assets) | 379.2 | 110.3 | 19.2 | 300.2 | 50.6 | 350.8 | N1 | N1 | 264.5 | 12.4 | (65.3 | ) | 1,071.1 | (526.3 | ) | 895.6 | ||||||||||||||||||||||||||||||||||||||||
Capital expenditure | 296.2 | 80.4 | 314.5 | 259.9 | 92.1 | 352.0 | 315.3 | 62.3 | 377.7 | 93.8 | 86.2 | 1,600.6 | (277.8 | ) | 1,322.8 | |||||||||||||||||||||||||||||||||||||||||
Figures may not add as they are rounded independently.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
26. GEOGRAPHICAL AND SEGMENT INFORMATION (continued)
| Fiscal Year Ended December 31, | Fiscal Year Ended December 31, | Fiscal Year Ended December 31, | ||||||||||||||
| 2014 | 2013 | 2012 | ||||||||||||||
The following provides a breakdown of the reconciling items for each line item presented | ||||||||||||||||
Continuing operations | ||||||||||||||||
Operating costs | ||||||||||||||||
Exploration, evaluation and feasibility costs | (e) | (21.3 | ) | (22.4 | ) | (35.2 | ) | |||||||||
Provision for rehabilitation | (f) | 3.0 | 4.7 | (0.4 | ) | |||||||||||
Cut-backs | (d) | (107.1 | ) | (146.6 | ) | (184.0 | ) | |||||||||
Deferred stripping | (g) | — | 1.9 | 20.4 | ||||||||||||
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| (125.4 | ) | (162.4 | ) | (199.2 | ) | |||||||||||
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Gold inventory change | ||||||||||||||||
Inventory | (h) | 7.2 | (1.2 | ) | 0.1 | |||||||||||
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Amortization and depreciation | ||||||||||||||||
Amortization of reserves | (b) | (18.0 | ) | (15.8 | ) | (12.5 | ) | |||||||||
Cut-backs | (d) | 33.9 | 38.3 | 41.1 | ||||||||||||
Amortization - asset impairments and write-offs | (i) | (25.0 | ) | (36.9 | ) | — | ||||||||||
Amortization - inclusion of future costs | (c) | (9.7 | ) | 58.6 | 47.0 | |||||||||||
Amortization - capitalized interest | (j) | (4.7 | ) | (4.4 | ) | (4.3 | ) | |||||||||
Provision for rehabilitation | (f) | 3.3 | 2.5 | 2.1 | ||||||||||||
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| (20.2 | ) | 42.4 | 73.4 | |||||||||||||
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Exploration, evaluation and feasibility costs | (e | ) | 15.1 | (25.1 | ) | (5.1 | ) | |||||||||
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Asset impairments and write-offs | (i | ) | 3.2 | 582.4 | (7.5 | ) | ||||||||||
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Other items as detailed in the statement of operations | ||||||||||||||||
Interest capitalization | (j | ) | — | (5.3 | ) | (3.1 | ) | |||||||||
Profit on sale of investments | (l | ) | 68.2 | — | — | |||||||||||
Rehabilitation adjustment | (f | ) | 11.8 | — | — | |||||||||||
Other | (0.1 | ) | 3.3 | 2.3 | ||||||||||||
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Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
26. GEOGRAPHICAL AND SEGMENT INFORMATION (continued)
| Fiscal Year Ended December 31, | Fiscal Year Ended December 31, | Fiscal Year Ended December 31, | ||||||||||||||
| 2014 | 2013 | 2012 | ||||||||||||||
Total liabilities | ||||||||||||||||
Provision for rehabilitation | (f | ) | (11.1 | ) | (14.3 | ) | (77.9 | ) | ||||||||
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Total assets | ||||||||||||||||
Business combination - purchase of South Deep | (a | ) | 340.2 | 380.3 | 481.8 | |||||||||||
Amortization of reserves | (b | ) | (183.6 | ) | (184.0 | ) | (197.5 | ) | ||||||||
Amortization - inclusion of future costs | (c | ) | 176.5 | 203.5 | 175.9 | |||||||||||
Cut-backs | (d | ) | (605.9 | ) | (600.4 | ) | (498.8 | ) | ||||||||
Exploration, feasibility and evaluation costs | (e | ) | (154.2 | ) | (318.9 | ) | (379.3 | ) | ||||||||
Provision for rehabilitation | (f | ) | 18.3 | 0.2 | (75.4 | ) | ||||||||||
Investments in equity investees | (k | ) | — | — | (3.4 | ) | ||||||||||
Deferred stripping | (g | ) | 6.6 | 8.7 | (12.9 | ) | ||||||||||
Inventory | (h | ) | 21.6 | 14.6 | 15.4 | |||||||||||
Asset impairments and write-offs | (i | ) | 281.5 | 414.7 | (52.8 | ) | ||||||||||
Amortization - Interest capitalised | (j | ) | (23.1 | ) | (20.9 | ) | (18.5 | ) | ||||||||
Interest capitalization | (j | ) | 62.7 | 62.8 | 84.2 | |||||||||||
Inventory stockpiles | (k | ) | (1.2 | ) | (1.2 | ) | (1.2 | ) | ||||||||
Amortization - discontinued operations | (m | ) | — | — | (28.1 | ) | ||||||||||
Business combination - formation of Original Gold Fields | (n | ) | — | — | 66.3 | |||||||||||
Business combination - formation of Gold Fields | (o | ) | — | — | 26.0 | |||||||||||
Other | (1.8 | ) | — | — | ||||||||||||
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Notes to the reconciliation of segment informationprior period US GAAP financial statements to the historicalIFRS financial statements
| (a) | Business combinations - purchase of South Deep |
For management reporting purposes, traded equity securities issued as consideration in a business combination were valued on the date they were issued. Under U.S.US GAAP, at the time of the acquistion,acquisition, traded equity securities issued as consideration in a business combination were valued a few days before and after the terms of the transaction were announced. Under IFRS, traded equity securities issued as consideration in a business combination were valued on the date they were issued.
For management reporting purposes, the entire interest acquired in South Deep was fair value upon gaining a controlling interest. Under U.S.US GAAP, only the additional interest acquired was accounted for at fair value; assets acquired before obtaining control are stated at historical carrying amounts. Under IFRS, the entire interest acquired in South Deep was fair valued upon gaining a controlling interest. In addition, U.S.US GAAP requires retrospective equity accounting from the date the interest is acquired until the Group obtains control and the investment becomes a subsidiary. For management reporting purposes,Under IFRS, no retrospective equity accounting is applied.
For management reporting purposes,Under US GAAP, any excess over the purchased price paid and the fair value of the net identifiable assets and liabilities are recorded as goodwill (“parent company model”). Under IFRS, any excess arising over the purchase price paid and the fair value of the net identifiable assets and liabilities acquired for additional interests in subsidiaries from minority shareholdersnon-controlling interests that do not result in a change in control, are recorded directly in equity (‘(“economic entity model’model”). Under U.S. GAAP, any excess over the purchased price paid and the fair value of the net identifiable assets and liabilities are recorded as goodwill (‘parent company model’).
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
26. GEOGRAPHICAL AND SEGMENT INFORMATION (continued)
| (b) |
For management reporting purposes, a portion of ore resources at the Australian operations, based on the philosophy of “endowment”, is used for calculating depreciation and amortization. Under U.S.US GAAP, depreciation and amortizationamortisation is calculated based upon existing proven and probable reserves. Under IFRS, where it is anticipated that the mine life will significantly exceed the proved and probable reserves, the mine life is estimated using a methodology that takes account of current exploration information to assess the likely recoverable gold from a particular area. Such estimates are adjusted for the level of confidence in the assessment and the probability of conversion to reserves. The probability of conversion is based on historical experience of similar mining and geological conditions.
| (c) |
For management reporting purposes,Under US GAAP, future development costs are not included in the calculation of amortisation and depreciation. Under IFRS, future mine development costs were included in mining assets at the Australian operations in calculating amortisation and depreciation, and amortization. Under U.S. GAAP, future development costs are not included in the calculation of depreciation and amortization.prior to July 2014.
| (d) | Cut-backs |
For management reporting purposes, waste laybacks at surface operations are capitalized as mine development costs. Under U.S.US GAAP, once the production phase of a mine has commenced, waste laybacks are considered variable production costs that should be included as a component of inventory to be recognizedrecognised in Productionproduction costs exclusive of depreciation and amortizationamortisation in the same period as the revenue from the sale of inventory. As a result, capitalizationcapitalisation of waste laybacks is appropriate only to the extent product inventory exists at the end of a reporting period. Under IFRS, waste laybacks at surface operations are capitalised as mine development costs.
For the reasons discussed above, the carrying values of the assets under US GAAP are different to those under IFRS, which results in a different amortisation and depreciation expense.
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 43. | RECONCILIATION OF PRIOR PERIOD US GAAP FINANCIAL STATEMENTS TO IFRS FINANCIAL STATEMENTS (continued) |
| (e) | Exploration |
For management reporting purposes, exploration costs are capitalized from the date the drilling program confirms sufficient evidence of mineralization to proceed with a feasibility study. Under U.S.US GAAP, exploration costs are capitalizedcapitalised from the date a bankable feasibility study is completed.completed and prior to a bankable feasibility study all exploration costs are expensed. Under IFRS, exploration activities at certain of the Group’snon-South African operations are broken down into defined areas within the mining lease boundaries. These areas are generally defined by structural and geological continuity. Exploration costs in these areas are capitalised to the extent that specific exploration programmes have yielded targets and/or results that warrant further exploration in future years.
| (f) | Provision for rehabilitation |
Revisions to the provision for environmental rehabilitation
For management reporting purposes, allUnder US GAAP, changes in the carrying amount of the provision for environmental rehabilitation, other than accretion expense, are recognized as an increase or decrease in the carrying amount of the associated rehabilitation asset. Changes resulting from revisions in the timing or amount of estimated cash flows are recognizedrecognised as an increase or decrease in the carrying amount of the provision for environmental rehabilitation and the associated rehabilitation asset for U.S.US GAAP.
In addition, Under IFRS, all changes in the current discount rate is applied to measurecarrying amount of the provision for environmental rehabilitation, for management reporting purposes. other than accretion expense, are recognised as an increase or decrease in the carrying amount of the associated rehabilitation asset.
Under U.S.US GAAP, any decreases in the provision for environmental rehabilitation as a result of downward revisions in cash flow estimates should be treated as a modification of an existing provision for environmental rehabilitation and should be measured at the historical discount rate used to measure the initial provision for environmental rehabilitation.
Gold Fields Limited
Notesrehabilitation, while any increases in the provision for environmental rehabilitation are measured at the current discount rate. Under IFRS, the current discount rate is applied to measure the Consolidated Financial Statements
($ in millions unless otherwise noted)
26. GEOGRAPHICAL AND SEGMENT INFORMATION (continued)provision for environmental rehabilitation.
Accretion of the provision for environmental rehabilitation and amortizationamortisation of the associated rehabilitation asset
For reasons discussed above, the carrying values of the provision for environmental rehabilitation and associated rehabilitation asset, for management reporting purposesunder IFRS, are different to those under U.S.US GAAP, which in combination with different discount rates result in a different amortization chargeamortisation and depreciation expense and accretion expense.
Rehabilitation adjustment
ForUnder both management reporting purposesUS GAAP and U.S. GAAP,IFRS, to the extent that an asset is taken out of service or no longer in use, an increase or decrease in the related carrying amount of the provision for environmental rehabilitation is immediately recognizedrecognised in profit or loss. For reasons discussed above, the carrying value of the provision for environmental rehabilitation for management reporting purposesunder US GAAP differs to thosethat under U.S. GAAP,IFRS, related to assets taken out of service or no longer in use which, in turn, results in a different amount recognizedrecognised in profit or loss.
| (g) | Deferred stripping |
For management reporting purposes,Under US GAAP, waste stripping costs are considered costs of the extracted minerals and recognised as a component of inventory to be recognised in production costs exclusive of amortisation and depreciation in the same period as the revenue from the sale of inventory.
Notes to the consolidated financial statements
for the year ended 31 December
Figures in millions unless otherwise stated
| 43. | RECONCILIATION OF PRIOR PERIOD US GAAP FINANCIAL STATEMENTS TO IFRS FINANCIAL STATEMENTS (continued) |
Under IFRS, prior to the adoption of IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine, the CompanyGroup deferred the waste stripping costs in excess of the expected average pitlife stripping ratio. IFRIC 20 was adopted on 1 January 1, 2013.
IFRIC 20 requires that production stripping costs in a surface mine be capitalised tonon-current assets if, and only if, all of the following criteria are met:
It is probable that the future economic benefit associated with the stripping activity will flow to the entity;
The entity can identify the component of the ore body for which access has been improved; and
The costs relating to the stripping activity associated with that component can be measured.
If the above criteria are not met, the stripping costs are recognised directly in profit or loss.
Under U.S. GAAP, waste stripping costs are considered costs of the extracted minerals and recognized as a component of inventory to be recognized in production costs exclusive of depreciation and amortization in the same period as the revenue from the sale of inventory.
| (h) | Inventory |
Under U.S.US GAAP, additional amortization,amortisation, waste stripping costs and cut backscut-backs expensed are included in the cost of inventory produced. No such absorption of costs occurred for management reporting purposes.occurs under IFRS. Under U.S.US GAAP, management iswas required to record inventory at the lower of cost and market value prior to 2015. Under IFRS, inventory is measured at the lower of cost and net realisable value.
Gold Fields Limited
Notes to the Consolidated Financial Statements
($ in millions unless otherwise noted)
26. GEOGRAPHICAL AND SEGMENT INFORMATION (continued)
| (i) |
For management reporting purposes,Under US GAAP, after performing impairment tests, both the Agnew mine was notDarlot and Cerro Corona cash-generating units and certain other assets at Cerro Corona were considered to be impaired in 2015. Under IFRS, the Darlot cash- generating units as well as certain other specific assets at Damang and Cerro Corona were determined to be impaired in prior years. 2015.
In addition, Arctic Platinum, classified as held for sale, was not considered impaired under US GAAP in 2014, but considered impaired under IFRS as the fair value less cost of disposal did not exceed the carrying value in 2014. In 2015, Arctic Platinum was impaired under US GAAP. For IFRS purposes, Arctic Platinum was also impaired in 2015, but at a different amount due to having a different carrying value under US GAAP.
Under U.S.US GAAP, the Agnew mine was determined to be impaired and an impairment charge was recognized.
For management reporting purposes,recognised in prior years. Under IFRS, the Tarkwa, Damang and St Ives cash-generating units as well as certain other assets at Tarkwa wereAgnew mine was not determined to be impaired in fiscal 2013. For US GAAP purposes, after performing impairment tests, only the Damang mine was considered to be impaired and at a different amount due to the different impairment model prescribed under U.S. GAAP. In addition, Arctic Platinum, classified as held for sale, was impaired for management reporting purposes in fiscal 2014 and fiscal 2013, but not considered impaired under US GAAP as the fair value less cost to sell exceeded the carrying value under U.S GAAP.prior years.
For reasons discussed above, certain assets carrying values for management reporting purposes areunder US GAAP were different to those under U.S. GAAP,IFRS, which resultsresulted in a different amortization charge.amortisation and depreciation expense.
| (j) | Interest |
For management reporting purposes,Under US GAAP, total outstanding debt financing is taken into account in calculating the amount of borrowing cost to be capitalised. Under IFRS, borrowing costs are capitalizedcapitalised to the extent that qualifying assets are financed through specific debt financing or general outstanding debt not for any specific purpose other than funding the operations of the Group. Under U.S. GAAP, total outstanding debt financing is taken into account
Notes to the consolidated financial statements
for the year ended 31 December
Figures in calculating the amount of borrowing cost to be capitalized.millions unless otherwise stated
| 43. | RECONCILIATION OF PRIOR PERIOD US GAAP FINANCIAL STATEMENTS TO IFRS FINANCIAL STATEMENTS (continued) |
| (j) | Interest capitalisation (continued) |
For reasons discussed above, certain assets carrying values for management reporting purposesunder US GAAP are different to those under U.S. GAAP,IFRS, which resultsresulted in a different amortization charge.amortisation and depreciation expense.
| (k) | Inventory stockpiles |
For management reporting purposes, previous impairment charges writing down stockpiles to market values are reversed when the net realizable value rises above the original cost. Under U.S.US GAAP, the market value is deemed the new base cost and impairment charges are not reversed. Under IFRS, previous impairment charges writing down stockpiles to net realisable value are reversed when the net realisable value rises above the original cost.
| (l) | Profit on sale of investments |
For management reporting purposes,Under US GAAP, exploration costs at the Chucapaca exploration project were previously capitalized and are included in the assets disposed of when calculating the profit on sale. Under U.S. GAAP these exploration costs were not capitalizedcapitalised and are not included in the assets disposed of when calculating the profit on sale. Under IFRS, these exploration costs were previously capitalised and are included in the assets disposed of when calculating the profit on sale.
| (m) |
For management reporting purposes, Sibanye Gold was accounted forThe reconciling item relates to net deferred tax liabilities arising as a discontinued operationconsequence of the differences in fiscal 2012 and the relatedbook values of the underlying assets and liabilities were classifiedbetween those under US GAAP and IFRS as held for distribution. As a result, depreciation ceased duewell as differences between US GAAP and IFRS relating to the classificationrecognition of deferred tax assets and the assets as heldrecognition of deferred tax liabilities relating to unremitted earnings for distribution. Under U.S. GAAP,foreign subsidiaries and the Spin-off was not accounted for as a discontinued operations in 2012 as the Sibanye Goldeffect of basis differences related to foreignnon-monetary assets and liabilities continue to be as classified as held for use untilthat are remeasured from the Spin-off date. As a result depreciation did not cease in fiscal 2012 and is charged untillocal currency into the Spin-off date.functional currency.
| (n) |
For management reporting purposes, the formationDifference between US GAAP and IFRS relating to share of Original Gold Fields was accounted for as a uniting-of-interests. Under U.S. GAAP, the Company accounted for the assets and liabilities acquired from Gold Fieldsresults of South Africa Limited at historical cost, and the assets and liabilities acquired from Gencor and outside shareholders as a purchase.equity-accounted investees after taxation
For management reporting purposes, the difference between the purchase price and net asset value of acquired assets that arose on this transaction was set-off against shareholders’ equity. Under U.S. GAAP, the excess purchase price was capitalized to property, plant and equipment and is being amortized over its useful life.
Schedule 1 - Valuation and Qualifying Accounts
Valuation allowances on deferred tax assets
| Balance at beginning of year | Valuation allowance reversed | Valuation allowance raised | Arising on acquisition/ disposal of subsidiaries | Charged to unredeemed capital expenditure/ tax losses | Foreign currency translation adjustment | Balance at end of year | ||||||||||||||||||||||
Fiscal Year Ended December 31, 2014 | ||||||||||||||||||||||||||||
Valuation allowance | 330.2 | — | 38.3 | — | 59.4 | (41.1 | ) | 386.8 | ||||||||||||||||||||
Fiscal Year Ended December 31, 2013 | ||||||||||||||||||||||||||||
Valuation allowance | 324.4 | — | 1.1 | (5.4 | ) | 60.2 | (50.1 | ) | 330.2 | |||||||||||||||||||
Fiscal Year Ended December 31, 2012 | ||||||||||||||||||||||||||||
Valuation allowance | 152.4 | (58.2 | ) | — | — | 222.8 | 7.4 | 324.4 | ||||||||||||||||||||
S-1F-95
