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Gold Fields shines on the global stage - African Mining

Tuesday, 23 May 2023

Gold Fields was praised at the Investing in African Mining Indaba for its production performance, ESG achievements and solar plant initiative at South Deep in South Africa in particular in 2022. The company has set itself apart from its peers on the global stage too, despite the Yamana1 setback last year.

In an exclusive interview with Sharyn Macnamara of African Mining in February at the  Mining Indaba earlier this year, Martin Preece, who has stepped in as interim CEO at Gold Fields after the resignation of Chris Griffith in December 2022, was optimistic about the year ahead. "From a price perspective, the market is very positive at the moment. Looking to the future – and of course there are many different views – if the price holds out for us, our business is well-positioned for long-term, sustainable growth. Our primary focus, at this stage, is on gold which our shareholders have indicated a preference for."

Preece took Macnamara through the three pillars of the company strategy: One – asset optimisation, through people and innovation; two – building on a leading ESG position; and three – growing the value and quality in the company's asset portfolio globally.

All that glistens, in this case, is gold

On 23 February this year, Gold Fields Limited announced the group's financial results for the year ended 31 December 2022, and it is no wonder that Preece was glowing with positivity at the time of the interview, although unable to talk numbers then. He said at the official announcement of the results, "Gold Fields remains in a strong position, with high-quality near-term production growth that sets us apart from our global peers." Setting out the company's focus for the year ahead he noted, "We have a disciplined capital allocation framework, focusing on maintaining a strong balance sheet; returning cash to shareholders; investing in our business; and seeking appropriate value accretive external opportunities."

The company is one of the few global gold producers to have exceeded the upper end of its 2022 guidance, which remained unchanged throughout the year. 2 Attributable gold equivalent production for 2022 was 2,399koz, a 3% increase YoY (FY2021: 2,340koz), exceeding the guidance range of 2,310koz-2,360koz. "Our balance sheet remains healthy and has been bolstered by the Yamana break fee, providing us with increased flexibility," added Preece.

Gold Fields finished 2022 with net debt of USD704-million, resulting in a net debt to EBITDA ratio of 0.29x, its lowest in well over a decade. The enhanced dividend policy that was announced in July 2022 has remained in place, with a commitment to pay out between 30% and 45% of normalised earnings from 2023 onwards. Recognising the windfall received from the break fee together with the strong financial performance, the company declared a final 2022 dividend of 445 SA cents per share. This takes the total dividend declared for the year to 745 SA cents per share, which represents a payout ratio of 47% of normalised earnings. And all this, per Preece, "despite the Yamana transaction occupying a significant amount of senior corporate management's time and attention."

The stability of the company's operating regions such as Australia (which constitutes over 50% of revenue) and South Africa were a highlight. Australia showed a 4% production growth, while South Africa's South Deep managed a 12% increase in production – no mean feat when one considers that the country's mining industry as a whole experienced a reduction in production levels due to major challenges in the energy space with rolling blackouts, among others. Preece pointed out the calibre of "the great work being done by the exceptional people of Gold Fields across the globe" running the company's assets as being a vital ingredient to the winning recipe Gold Fields has displayed.

ESG – Zero Harm

Preece's passion for Gold Fields' people is always almost tangible. He made it clear in his recent review of the financials, "My first commitment to our people is that of ‘Zero Harm.'" He spoke of a tragic loss of a colleague in a fatal incident at the underground Hamlet mine at St Ives in Western Australia, where a raise bore operator succumbed to injuries in a rock fall. This was the first fatality recorded by Gold Fields in Australia since the company started operating there in 2001. On 5 February 2023, there were two fatal injuries at the Asanko mine in Ghana, which is managed by Galiano Gold. The two contractor employees were involved in a vehicle incident at the mine. He noted that that South Deep had a fatality-free year for the first time since Gold Fields acquired the mine in 2006. The Group-wide TRIFR improved to 2.04 per million hours worked from 2.16 in 2021, while the number of serious injuries declined from nine in 2021 to five in 2022.

"Our concept of ‘Zero Harm' does not only cover physical injuries and health, but also includes the psychological well-being of our people. I will work with our teams across the globe to ensure that we achieve this," he said.

The company has also taken the bold step of implementing an external review into gender safety at its offices and operations to enable the development and implementation of a response plan. At the end of 2022, 23% of total company employees were women – up from 22% a year earlier and on track to achieve a 30% target by 2030. These are stand-out numbers when one considers the fact that globally women make up only 8–17% of the mining industry. 3

Energy – "Part of the solution, not part of the problem"

In addition, on the ESG (Environmental, Social and Governance) front, the company is targeting a 30% reduction in emissions overall by 2030 off a 2016 base, as it continues to roll-out renewable energy projects at its operations globally. For example, despite some delays, the 12MW solar plant at the Gruyere mine in Western Australia was successfully commissioned within budget (USD20-million) last year, while the Gold Fields South Deep Mine was singled out by South African minister of Mineral Resources and Energy, Gwede Mantashe, at the Investing in African Mining Indaba 2023 as being a company with foresight and initiative in the renewables space, referring to the construction of the R715-million 50MW Khanyisa solar plant at South Deep. The solar plant went operational in Q4 2022.

"We want to be part of the solution, and not part of the problem," Preece commented. Khanyisa has been successfully commissioned and is currently being optimised. The company's plan at the time of writing in March, was to add another 10% capacity to the plant in the first quarter of 2023. A 140m-high met mast has also been installed to explore the potential of wind energy at the mine, to back up the solar at night. Preece expanded, "The results to date have been pleasing. The wind energy we are recording is suggesting that a 3-4MW wind turbine will be a viable option for the mine. The study will take the better part of a year and the mine is already working on the Environmental Impact Assessment in terms of regulatory requirements.

Preece added, "Another benefit to being ahead of the curve, when it comes to innovative operational solutions, lies in the attraction and retention of people and skills. People want to work in a business that can operate, despite the energy constraints, in South Africa in particular."

Overall, electricity from renewables accounted for 14% of the group's total consumption in 2022, with renewables providing 54% of electricity consumed by the Agnew mine in Australia and the hydro electricity supply to the Cerro Corona mine in Peru certified 100% renewable from hydropower.

Lessons learned, future challenges/opportunities

The next ten years are expected to see production from the Gold Fields Australian region produce c.1Moz pa; Tarkwa in Ghana at c.500-600koz, production growth from 2024 onwards at Salares Norte (to 500koz) and a continued build-up at South Deep (to 380koz) in South Africa – there are, however, also assets in the portfolio that are maturing, like Damang and Cerro Corona. Preece explained, "Gold Fields has limited organic growth opportunities in our current portfolio, and as such, will need to pursue inorganic opportunities to bolster our pipeline. These options will include greenfields targets, development projects or bolt-on acquisitions of producing assets in the future."

Having learned from the Yamana experience, instead of transformational projects, the company will look to: opportunities in regions in which it is already currently operating; opportunities with an established ESG footprint, LOM and lower-all-in cost (with potential exploration included) and opportunities where the company can upgrade the quality of its portfolio over a period of time. Preece emphasised, "We will continue to seek to upgrade the quality of our portfolio of assets focusing on profitable ounces (high grade assets, with low costs)."

A perfect example of this form of growth lies in the recent Gold Fields and AngloGold Ashanti proposed joint venture in Ghana between Gold Fields' Tarkwa and AngloGold Ashanti's neighbouring Iduapriem mines4. The Tarkwa Mine is held by Gold Fields Ghana, in which Gold Fields currently owns a 90% share and the government of Ghana (GoG) holds 10%. The Iduapriem Mine is currently 100% owned by AngloGold Ashanti. Both mines are located near the town of Tarkwa in the country's Western Region.

The parties have agreed in principle on the key terms of the proposed JV announced on 23 March 2022. Having commenced with preliminary, high-level and constructive engagements with senior government officials in Ghana, and with continuous engagement going forward  with the GoG, relevant regulators and other key stakeholders – with a view to implementing the JV as soon as practically possible – Gold Fields and AngloGold Ashanti have agreed to mutual exclusivity. It is intended that the JV will be an incorporated joint venture, constituted within Gold Fields Ghana and operated by Gold Fields. AngloGold Ashanti will contribute its 100% interest in Iduapriem to Gold Fields Ghana in return for a shareholding in that company.

"The proposed JV is an exciting opportunity to combine mining operations that are essentially part of the same mineral deposit and is something that Gold Fields and AngloGold Ashanti have discussed many times before over the years. The ability to optimise mining and the use of shared infrastructure across the combined operation will result in significant flexibility in mine planning, materially enhancing the economics of the mine and ensuring quality and scale of operation that will be world class. That unlocked value will underpin the proposed JV's continued contribution to our host communities and Ghana for decades to come. For Gold Fields, it will also significantly enhance the overall quality of our portfolio," said Preece.


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