SUSTAINABILITY Government and public policy
Host governments are among Gold Fields' most important stakeholders, as they issue mining licences, develop state policies and enforce regulations. First and foremost, this requires us to adhere to all relevant legislation, including paying taxes and other levies. We are committed to working with governments directly and via industry associations at national, regional and local levels to establish ethical, sound and transparent working relationships that benefit the countries where we operate and our host communities.
Gold Fields does not provide any financial contributions to political parties unless explicitly approved by the Board in accordance with the Company's Code of Conduct. No political donations have been made for several years.
Gold Fields' Tax Strategy is to proactively manage tax obligations in a way that is transparent, responsible and sustainable, while acknowledging differing stakeholder interests.
Many governments view the mining industry as an opportunity for higher taxes and other fiscal and regulatory imposts – especially during tough economic times. This is particularly relevant in Chile, Peru and Ghana, where tax revenues are declining while metal and gold prices recorded healthy gains over the past two years.
Political risk is now a top five Group risk, and addressing it requires increased actions and engagements.
Gold Fields, on its own and together with its ICMM and World Gold Council peers, seeks to address the trust gap between government and mining in several ways, including:
We conduct independent desktop country risk assessments at least every two years, which provide valuable input on how we can increase government and community trust and confidence. The resulting key proposals reinforce many of the strategies our operations already implement, such as strengthened engagement with governments at all levels, community value creation and improved communication on mining's socio-economic benefits.
Payments to governments by Gold Fields in 2022
|Dividend withholding tax||–||13||5||–|
|% of profit before tax and royalties||1||50||55||29|
|1||In lieu of the Ghana government's 10% stake in the Tarkwa and Damang mines|
Our engagement in Australia is largely at state level, where the incumbent Labor party government holds a substantial majority following the March 2021 state elections. The Labor party was also elected as the governing party at federal level in May 2022.
The Western Australian government has made significant progress on implementing its legislative reform agenda. The Work Health and Safety Act of 2020 (WHS Act) came into effect in March 2022, delivering on a key Western Australian government election commitment to streamline health and safety regulation. The WHS Act imposes expanded obligations, which include the identification and management of psychosocial hazards, as well as the consultation and representation of workers and contractors. It also introduces personal responsibility for officers to ensure compliance with applicable health and safety obligations.
Following the scrutiny of the Western Australian Aboriginal Heritage Act of 1971 in the wake of the Juukan Gorge incident, the state government passed the ACH Act in late 2021. The ACH Act is not yet fully operational, but is due to substantively commence in July 2023, subject to associated regulations being finalised. Gold Fields has been involved in the ongoing consultation and codesign process through the Chamber of Minerals and Energy (CME).
The ACH Act will set the highest bar among state regimes for protecting Aboriginal cultural heritage, with key features including:
A Western Australian parliamentary inquiry into the sexual harassment and assault of women in the mining sector handed down its findings and recommendations in June 2022 in the Enough is Enough report. The report made recommendations to government, industry and organisations, many of which Gold Fields is seeking to address in its Respectful Workplaces #listen programme. The Western Australian government tabled its response to the report in September 2022, in principle accepting the recommendations in full.
Gold Fields participates in the CME's Safe and Respectful Behaviours working group and engages with the government on this issue.
In November 2022, the Western Australian government announced a joint initiative with the Western Australian resources industry to establish the Resources Community Investment Initiative. Founding contributors (predominantly from the iron ore and energy sectors) collectively committed an initial investment of A$750m (US$570m) for a pipeline of legacy social infrastructure projects. The CME has been tasked with encouraging and coordinating further investment from the sector. Gold Fields and other gold sector participants are working constructively with the CME and government to assess participation options (individually or collectively). This will continue into 2023.
During 2022, Ghana's economy experienced a dramatic recession, with the Ghana Cedi depreciating by 39% against the US Dollar and inflation hitting a 22-year high of 54% in December. The Ghana government is facing a large fiscal deficit and public debt is at record levels.
In December 2022, the Ghana government reached a preliminary agreement on a US$3bn, three-year extended credit facility with the International Monetary Fund to be finalised in H1 2023. This bail out will require economic reforms and greater fiscal discipline and, if implemented appropriately, should return a level of stability to the economy.
The deteriorating economic situation led to a near-doubling in the country's discount rate and, coupled with higher mining costs, required Gold Fields to recognise a US$325m pre-tax impairment on its Ghanaian assets.
Our investments in the country are covered by the 2016 Development Agreement (DA) with the government for the Tarkwa and Damang mines. For the DA requirements to take effect, Gold Fields was expected to spend US$500m at each mine – over an 11-year period for Tarkwa and a nine-year period for Damang. The DA provides for a decrease in the corporate tax rate from 35% to 32.5%, and a sliding scale royalty tax based on the gold price. The government also holds a 10%interest in the entities controlling the Tarkwa, Damang and Asanko mines.
Between 2017 – 2022, we invested almost US$1.5bn at both mines, and the DA has cemented our status as one of the largest contributors to the country's fiscus. Also in 2022, Gold Field contributed US$253m in the form of taxes, royalties and dividends.
However, in the wake of the fiscal crisis, the Ghanaian government has conducted increasingly stringent audits on its biggest corporate taxpayers (many of them multinationals), including Gold Fields, and has imposed additional tax liabilities, which are under discussion. In addition, we are experiencing more onerous processes in claiming and renewing rebates and exemptions under the DA.
The two audits by the Ghana Revenue Authority are a transfer pricing audit covering 2014 – 2019 and a tax audit for 2018 – 2020. The earlier audit has been resolved while we have received a tax assessment of US$124m under the findings of the 2018 – 2020 audit. We are reviewing the assessment and are disputing the findings, which include the deductibility of waste stripping costs amounting to US$63m of the assessment, among others. Negotiations are under way following the payment of the required upfront deposit.
The deteriorating fiscal situation also led to several economic actions by the government that impacted the mining sector – and Gold Fields – and required increased engagement with the authorities directly and via the Ghana Chamber of Mines:
In Chile, most political and social stakeholders support our decision to proceed with the Salares Norte mine's construction in the Atacama region of northern Chile. In a low-investment environment impacted by Covid-19 and amid general political uncertainty, Salares Norte has been one of Chile's largest investment projects over the past few years, and it was identified by the government as a key project for economic upturn in the Atacama region. The project is governed by an investment stability agreement with the Chilean government.
The political situation in the country in 2022 generated uncertainty surrounding the mining sector's regulatory framework.
Firstly, a left-wing government under President Gabriel Boric took office in March 2022, with a strong anti-business and anti-mining agenda. However, without a large majority in the senate, the government's ability to implement its manifesto is limited.
Secondly, the government proposed a new left-leaning constitution, which was rejected by most of the population in September 2022. A new constitutional process was agreed upon, and a more moderate draft will be put to a national vote in December 2023. The regulatory risk in this second process is expected to be lower due to stronger institutional controls and the presence of more moderate lawmakers and ministers in President Boric's cabinet.
Other regulatory uncertainties continue to loom, including a proposal to charge higher royalties on copper mining, which could be extended to gold if approved. The new government has also taken an activist approach to regulate the impact of mining on the environment. Several mining projects have been halted due to interventions by the Environmental Assessment Service, the environmental regulator.
The regulator halted our endangered Chinchillas relocation at Salares Norte in November 2020 after two Chinchillas died. The restrictions have not yet been lifted, read more in Environmental stewardship. However, the regulator decided not to review Salares Norte's environmental permit after a request to do so by the Ministry of the Environment after the deaths.
In 2022, our engagements in Chile focused on supporting communities near our project in coordination with regional and local governments. These efforts focused on promoting social development initiatives in the education and health sectors and will continue as we ramp-up Salares Norte to start operating in Q4 2023.
In Peru, we engage at local, regional and national government levels to address operational, social and sustainability matters.
The left-wing government of Pedro Castillo, which came into power in 2021, was characterised by political instability and regular changes in key cabinet portfolios. President Castillo was impeached by congress, and his Vice President, Dina Boluarte, was sworn in as President in December 2022. However, the new administration has faced social unrest across the country, particularly in the south, due to political anti-establishment sentiment.
President Castillo's election and pronouncements by his government generated high expectations among mining communities, escalating community-mine conflicts, particularly in southern Peru. These have not spread widely to the Cajamarca province where our Cerro Corona mine is located.
The Castillo government also attempted to make changes to the sector's regulatory and tax framework. This was without success as the government faced strong opposition in congress and in civil society sectors. Our engagement with national government and congress, particularly on regulatory matters, is primarily via the National Chamber of Mines, Oil and Energy (SNMPE).
The industry has good working relationships with various public bodies at all levels of government. Our main challenge has been the increase in public officials' turnover at national level due to political instability.
We continue to build trust between Cerro Corona and its host communities through ongoing stakeholder engagement and Shared Value projects, including rolling out comprehensive water infrastructure. We implemented social development projects in partnership with the government, through the Works for Taxes and government grants programmes.
As Cerro Corona gradually approaches its closure in 2031, we will develop more long-term community investment programmes that extend beyond the closure. Gold Fields' first legacy programme, as part of our 2030 ESG targets, will be dairy value chain development, benefiting farmers near the mine.
South Africa is currently experiencing negative economic growth, caused by ongoing electricity shortages, degradation of infrastructure and continued impacts of the Covid-19 pandemic. This has worsened already high levels of unemployment, particularly among the youths, rising poverty and a loss of critical skills.
In addition, South Africa continues to be confronted with challenges relating to economic disparity, poor service delivery, political instability, corruption and social instability, as a result of which there is a heightened risk of social unrest and rising social demands.
With a general election scheduled for 2024, the weak economic environment could well lead the governing African National Congress (ANC) party to adopt more populist economic measures as it is facing opposition from leftist parties. Anti-business rhetoric is also set to increase from a number of parties, including the ANC.
From a regulatory perspective, South Deep is guided primarily by the Mineral and Petroleum Resources Development Act No 28 of 2002 (MPRDA). One of the MPRDA's key requirements is to facilitate meaningful and substantial participation of Historically Disadvantaged South Africans in the mining industry.
The Mining Charter guides this requirement by providing for a range of empowerment actions and community investment programmes with a corollary timeframe. It requires all mining rights holders to submit an annual compliance assessment detailing progress against the Charter's annual targets. Gold Fields complies with this process.
The Department of Mineral Resources and Energy published Mining Charter 3 (MC3) in September 2018. The Minerals Council South Africa (MCSA), which represents the industry, objected to certain clauses in MC3, and the Supreme Court upheld these objections in September 2021.
This ruling has de facto confirmed South Deep's current BEE ownership level of 35%, which we believe meets the principles and spirit of the Mining Charter. It has also created the framework for the ongoing transformation of South Deep.
The Charter is a framework for the industry, and the MCSA and Gold Fields believe it encourages growth and empowers the sector. The MCSA is constructively engaging with the South African government to create policy and regulatory certainty and attract greater investment into the country's exploration and mining sectors.
The MCSA and Gold Fields also engaged with the government around reforms to regulations on self-generating electricity supplied by private sector companies. The regulatory approval process around South Deep's pioneering 50MW Khanyisa solar plant assisted in easing restrictions, facilitating self-generation power supply – particularly for those using renewable energy sources.