Gold Fields

Capital discipline

Enhancing free cash-flow

Gold Fields recorded a net cash- outflow (net cash outflow from operating activities less net capital expenditure and environmental payments) of US$2m in 2017 compared to an inflow of US$294m in 2016. Included in the 2017 number is capital of US$115m and US$141m for Damang and Gruyere respectively, which was not incurred in 2016. South Deep recorded a net cash outflow of US$60m compared to a net cash inflow of US$12m in 2016.

At a mine level, cash generation remained strong in 2017. Excluding project capital and exploration expenditure, mine cash-flow was US$441m (US$188m in Australia, US$117m in Peru, US$179m in Ghana and US$43m in South Africa) versus US$444m in 2016.

FCF margin decreased slightly to 16% in 2017 from 17% in 2016, driven primarily by an increase in taxes paid. Encouragingly, this is ahead of our targeted 15% FCF margin at a US$1,300/oz gold price, despite the fact that the gold price received of US$1,255/oz was below the long-term planning level.

To put our cash-flow generation in context, during 2017 our international mines in Australia, Ghana and Peru collectively generated net cash-flow (excluding project capital) of US$484m (2016: US$432m), while South Deep slipped into a cash negative position, due to lower than planned production. This demonstrates the robustness of our international portfolio of assets.

Maintaining dividends

Gold Fields has a long and well-established policy of rewarding shareholders by paying out between 25% and 35% of normalised earnings as dividends. This policy is viewed as an important element of Gold Fields' investment case and we have consistently honoured this commitment with an average pay-out of approximately 30 - 35% of normalised earnings every year over the past eight years.

Despite recording a net cash-outflow, the Group maintained its dividend policy and declared a final dividend of R0.50/share for 2017. Together with the interim dividend of R0.40 per share (for the six months ended on 30 June 2017), this brings the total dividend for the year to R0.90/share, which translates to 39% of normalised earnings for the year. In 2016 we paid a total dividend of R1.10 per share.

Maintaining a healthy balance sheet

One of Gold Fields' strategic objectives has been to reduce the amount of debt on our balance sheet. In this regard, management met its target of reducing net debt/adjusted EBITDA to 1.0x by the end of 2016. However, having moved into a capital intensive phase of the Company's life-cycle, management guided the market for a pick-up in net debt during 2017. As such, the focus has shifted to limiting the cash outflow, minimising the increase in debt and maintaining the strength of the balance sheet through the peak capital expenditure years (2017 and 2018).

Net debt increased by US$137m during 2017 to US$1,303m at the end of December 2017 from US$1,166m at the end of December 2016. However, given the outperformance of the international portfolio, less capital expenditure incurred at Gruyere than planned and a higher gold price than budgeted, Gold Fields comfortably ended 2017 on a net debt/adjusted EBITDA ratio of 1.03x.

Having refinanced and extended the maturity of our credit facilities in June 2016, with the first material debt maturity falling due in June 2019, and having entered into an A$500m revolving credit facility in June 2017, Gold Fields' balance sheet is in a stable position with regards to solvency and liquidity. At the end of 2017, the Group had uncommitted loan facilities of R1.65bn and committed loan facilities totalling US$2.54bn, A$500m and R2.5bn, of which US$1.2bn, A$200m and R1.7bn respectively are unutilised. Our debt is currently rated Ba1 by Moody's and BB+ by Standard & Poor's, unchanged from 2016.

Improving investor and analyst confidence

Central to Gold Fields' vision of being the leader in sustainable gold mining is the generation of FCF to provide investors with positive leverage to the price of gold. We believe that the achievement of this objective is a prerequisite for improving the confidence with which both current and potential investors view the Company.

Gold Fields is a significantly smaller, more focused and leaner company than it was prior to the unbundling of the legacy South African gold mines into Sibanye Gold (now Sibanye-Stillwater) in 2013. The unbundling resulted in Gold Fields' portfolio transitioning into one that is focused on mechanised underground and open-pit mining and one that is more geographically diversified. During 2017, 42% of our production came from our Australian mines, 32% from Ghana, 14% from Peru and 12% from South Africa. Given the ramp-up schedule at South Deep, the reinvestment project at Damang and the development of Gruyere, the geographic spread of production is set to shift in years to come, but will remain well diversified on a global scale.

After three consecutive years of cash-flow generation, in which the Company produced a cumulative US$652m in net cash-flow, Gold Fields entered into a reinvestment phase in 2017. Investment at the Damang mine and Gruyere project commenced at the beginning of the year, while expenditure on near-mine exploration in Australia remained at similar levels to 2015 and 2016. Exploration drilling at Salares Norte in Chile continued during 2017 and we expect to complete the feasibility study by the end of 2018.

Notable investments made during 2017 include:

• A$184m (US$141m) was spent on the Gruyere project in Western Australia. More details here
• US$115m in project capital was spent at our Damang mine in Ghana. More details here
• Near-mine exploration spending of A$99m (US$75m) in Australia (including Gruyere) and US$11m in Ghana. More details here
• US$53m investment on further exploration and drilling at Salares Norte in Chile. More details here

Given the level of capital expenditure incurred during the year (project capital and Salares Norte exploration totalled US$270m in 2017), the Group recorded a net cash outflow of US$2m, compared to an inflow of US$294m in 2016. However, at a mine level, cash generation remained positive in 2017. Excluding project capital and Salares Norte exploration expenditure, mine cash-flow in 2017 was US$441m (US$188m in Australia, US$117m in Peru, US$179m in Ghana and an outflow of US$43m in South Africa) versus US$444m in 2016.

Aerial view of Salares Norte showing access to drill sites

Gold Fields also invested US$21m for a 19.8% stake (partially diluted as at end-December 2017) stake in ASX-listed Cardinal Resources, which owns a number of greenfields exploration sites in Ghana, and bought a 9.9% stake in Gold Road Resources, our joint venture partner in the Gruyere project, for US$55m. Gold Road holds exploration licences in other areas of the prospective Yamarna Goldfields in Western Australia.

During 2017 Gold Fields sold the Darlot mine in Western Australia to junior miner Red 5. Subsequent to year-end the Arctic Platinum Project in Finland, was sold for US$40m. In 2016 the Company injected its royalty portfolio with Toronto-listed Maverix Metals in exchange for a 32% interest. A summary of our investments is in the table below.

While the international portfolio had another good year, the first year of the rebase plan at South Deep proved challenging. But despite the slow start, the integrity of the rebase plan remains intact and delivery on the plan is a key focus area where management believes it can improve investor confidence. Unlocking the intrinsic value of the asset, which contains the world's second largest undeveloped gold resource, is an important element of the long-term strategy of the Company.

While many of the initiatives to build trust with our investors have a financial and operational focus, sustainability is entrenched throughout our business. This commitment is evident in the recognitions received. Gold Fields has consistently been ranked among the top five mining companies on the Dow Jones Sustainability Index since it first entered the index around six years ago, illustrating our commitment to sound environmental, social and governance principles.

Gold Fields' material investments

Investment	Shareholding			Value (US$m)
Cardinal Resources	19.8%1			29
Gold Road Resources	9.9%			47
Maverix Metals	27.9%			57
Red 5	19.9%			11
Hummingbird Resources	6.2%			10
Rusoro Mining	25.7%			8
Total value				162

¹ Partially diluted as at end-December 2017