Portfolio management

Mining is a long-term game. As a business, we need to balance the needs of our existing portfolio while investing in the future, through a variety of projects across the globe. Through our reinvestment projects as well as our growth projects we are able to balance short, medium and long-term value creation

Key measurements – Portfolio management

  2017   Status   2016   2015   2014   2013  
Attributable Gold Mineral Resources (Moz) 103.763     101.494   102.210   108.843   113.398  
Attributable Gold Mineral Reserves (Moz) 49.005     48.112   46.064   48.123   48.608  
Attributable Copper Mineral Resources (Mlb) 4,881     5,813   5,912   6,873   7,12  
Attributable Copper Mineral Reserves (Mlb) 764     454   532   620   708  
Near mine exploration (US$m) 87     79   72   58   32  
Near mine exploration – metres drilled 754,669     694,527   651,189   349,511   250,138  

2017 performance improvement on 2016 or achievement in line with strategy Attributable gold production
2017 performance drop against 2016  
2017 performance on par with 2016  
Results and impact
  • Use portfolio management and strategic planning to inform acquisitions and disposals
  • Life extension through brownfields exploration, mergers and acquisitions (M&A) and optimisation
  • Implement business improvement and efficiency projects to reduce costs
  • Reduce costs through innovation and technology projects
  • Deliver life extension, cost reduction, revenue enhancement and improved health and safety through innovation and technology and business improvement initiatives
  • Reduce Group life-of-mine, AIC/oz and increase reserve life per region through brownfields exploration, M&A and optimisation of existing mines
  • Deliver positive Salares Norte feasibility project that exceeds metrics set for the project
  • Mine closure costs, along with concurrent rehabilitation plans, incorporated into strategic plans

the quality
of our portfolio and
ensuring that current
levels of production
are sustainable for
the next eight to
ten years

  • A sustained and significantly lower gold price and currency exchange rate volatility
  • South Deep – Partial achievement of the production targets as defined in the rebase plan and the associated loss of investor confidence
  • South Deep – Logistics and utilities infrastructure
  • Non-delivery of Damang reinvestment and Gruyere projects
  • Replacing Resources and Reserves at international operations
Key stakeholders  
Shareholders and investors Employees Governments  

Managing our portfolio

Gold Fields manages its assets to improve the overall quality of its portfolio and ensure the sustainability of the cash-flow generated by this portfolio. In this regard, the focus is on reducing Group all-in costs (AIC), increasing the free cash-flow per ounce and extending the life of the assets.

Elements of the portfolio management process include:

  • Acquiring or developing lower-cost (than Group average), longer-life assets
  • Disposing of higher-cost, shorter-life assets that management believes can be better served by a company that has more time and resources to commit to them
  • Extending the life of current assets through near-mine brownfields exploration
  • Focusing on in-country opportunities to leverage off our existing footprint, infrastructure and skills set and capitalise on the experience we have gained from operating in these jurisdictions

Sustaining a quality portfolio of assets

On an annual basis, all assets in our portfolio are subject to the Group's strategic planning process. A scenario analysis is conducted for each operation, assessing how to best maximise cash-flow, life-of-mine and margin. The results of this analysis are then used in conjunction with the Group's capital profile and the current economic environment as inputs into our annual business planning.

As a result of this process, the following key decisions were implemented with regards to the existing portfolio during 2017:

  • Reinvestment into Damang in Ghana commenced at the beginning of the year, which will extend the mine's life to 2025. During 2017, US$115m in project capital was incurred, primarily on waste stripping see here
  • Gold Fields began operating the Gruyere project in Western Australia in February. We spent A$184m (US$141m) on the project during 2017. Gold Fields also bought a 9.9% stake in Gold Road Resources, the joint venture partner at Gruyere see here
  • Gold Fields continued to streamline its portfolio by selling Darlot in Western Australia to Red 5. The sale, which closed on 2 October 2017, saw Gold Fields receive A$7m (US$5m) in cash as well as Red 5 shares as part of the purchase consideration and as a consequence of partially underwriting a rights issue undertaken by Red 5. The net result is that Gold Fields has a 19.9% shareholding in Red 5 post the sale
  • Building up a 19.8% stake (partially diluted as at end-December 2017) in ASX-listed Cardinal Resources, which manages a number of greenfields exploration projects in Ghana
  • Subsequent to year-end, we sold the palladium-rich, polymetallic Arctic Platinum Project in Finland to private equity firm CD Capital for US$40m and future royalties. APP was a non-core asset in our portfolio

The only operating asset in the Group that still needs to be brought to full account is the South Deep mine in South Africa. After what was a key milestone for the mine when it broke even for the first time in 2016 by generating net cash inflow of US$12m, South Deep reported a net cash outflow of US$60m in 2017, similar to the loss forecast in the rebase plan. This negative swing was driven by a lower Rand gold price received in 2017 together with lower than planned production in Q1 2017, when we experienced two fatal accidents and three falls of ground. (Refer to managing our portfolio for an update on South Deep.)

The strength of our international portfolio is evident in the continued net cash-flow generation of our assets in Australia, Ghana and Peru, which collectively generated US$484m (excluding project capital) during 2017 (2016: US$432m). Furthermore, our portfolio's free cash-flow (FCF) margin was 16% in 2017 from 17% in 2016, which is ahead of our targeted 15% long-term planning target at a US$1,300/oz gold price.

Investing in the future – a quality portfolio

The gold mining business is a long-term game, which has to be sustainable through price cycles and volatility of the commodity markets. Therefore, in order to grow and sustain cash-flow, investment is necessary. After three consecutive years of strong cash-flow generation, Gold Fields reached a point where reinvestment in the portfolio became necessary in order to ensure the longevity of this cash generation. As such, the Group entered 2017 with the focus on reinvesting in the business to ensure that we are able to deliver sustainable free cash-flow for the benefit of all stakeholders.

Importantly, management has only embarked on investments and capital expenditure that it believes have excellent potential for pay-backs and returns. In addition, our investment drive in 2017 and 2018 does not mean that our overall strategy has changed. We remain focused on generating cash to reduce our debt, pay dividends to shareholders and share the value we create with employees, governments and host communities.

While the Group spent more than it generated in 2017, the final cash outflow at US$2m was significantly lower than anticipated at the beginning of the year. All project capital incurred was in countries in which Gold Fields currently operates, allowing us to leverage our knowledge of the business environment, our existing footprint and infrastructure and the skills set at our mines there. Over the next few pages we discuss the Company's growth and exploration projects, whose implementation will be critical in sustaining Gold Fields for the long term.

Damang reinvestment project

In October 2016, Gold Fields announced its reinvestment plan for the Damang mine in Ghana, which will extend its life-of-mine (LoM) to 2025. The reinvestment has enhanced the Group's presence in one of our key regions and resulted in significant social benefits for the country, including the creation and preservation of 1,850 direct and indirect employment positions.

The reinvestment plan entails a major cutback to both the eastern and western walls of the Damang Pit Cutback (DPCB). The cutback will have a total depth of 341m, comprising 265m pre-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 while the Damang pre-strip is in progress, mining is taking place at the hydrothermal Amoanda pit as well as the paleaoplacer satellite pits (Lima South, Kwesi Gap and Tomento East). In addition, the processing plant feed will be supplemented by low-grade surface stockpiles.

The DPCB project, which commenced on 23 December 2016, got off to a strong start and is currently tracking well against the project plan. During 2017, total tonnes mined were 39.7Mt against the original project schedule of 32.6Mt, driven by a good performance from both of the contractors (BCM and E&P). Gold produced of 144koz was 29% higher than guidance of 120.0koz, underpinned by high-grade material from the Amoanda pit, while AIC of US$1,827/oz was significantly below guidance of US$2,250/oz. Project capital of US$115m was spent during 2017, compared to the budget of US$120m.

Construction of the Far East Tailings Storage Facility (FETSF) commenced during Q1 2017, and the facility was commissioned by year-end, on time and within budget. The FETSF will provide cost effective tailings capacity of 44Mt. Decommissioning of the East Tailings Storage Facility (ETSF) commenced during Q1 2018.

Production guidance for 2018 is 160koz at an AIC of US$1,520/oz with project capital of US$105m.

Damang metallurgical plant

South Deep

2017 was a year of two halves for South Deep, with Q1 2017 negatively impacted by two fatal accidents and three falls of ground in the higher grade section of the mine which resulted in a deferral of mining higher grade areas. Production recovered through the rest of the year, with production in H2 2017 increasing by 36% to 5,038kg (162koz) from 3,710kg (119koz) in H1 2017.

Production for the year was 11% below original guidance - as flagged in the Q3 2017 operating results in October 2017 - at 8,748kg (281koz), compared to 9,032kg (290koz) in FY16. AIC increased 3% year-on-year to R600,109/kg (US$1,400/oz) from R583,059/kg (US$1,234/oz) in 2016, 3% higher than guidance of R585,000/kg. Performance of key activities included:

  • The mine recorded net cash outflow of R804m (US$60m) in 2017 compared with the rebase plan which forecast an outflow of R830m
  • Development decreased by 1% to 6,897 metres in 2017 from 6,933 metres in 2016. New mine development increased by 20% year-on-year to 976 metres from 811 in 2016
  • Long hole stoping volumes increased by 3% to 767kt in 2017 (2016: 745kt)
  • Destress mining increased by 3% year-on-year to 33,419m² (2016: 32,333m²)
  • Backfill placed was 11% lower year-on-year at 333m3

While good progress has been made on the technical front, with the implementation of the mining method receiving positive feedback from the Geotechnical Review Board, a group of pre-eminent international recognised geotechnical experts, the execution of the full mining value chain remains sub-optimal.

At year-end, there was a goodwill impairment of R3.5bn (US$278m) (gross and after tax) related mainly to a reduction in the gold price assumption used in the life-of-mine impairment model to R525,000/kg from R600,000/kg and the slow start to the rebase plan (announced in February 2017) in 2017. Post this impairment, the carrying value of South Deep is R24.7bn (US$1.96bn).

We now expect a more gradual build-up to steady state production of approximately 500koz by 2022, with most of the metrics unchanged from the original rebase plan. In October 2017, we noted that there would be a knock-on impact on 2018 production. We expect production for 2018 to be 10,000kg (321koz), 10% lower than the rebase plan. However, we expect AIC to be R540,000/kg, compared to R567,910/kg in the rebase plan. The table below provides detail on the more gradual build-up to steady state.

Key to achieving the rebase plan is an increased focus on the North of Wrench area (new mine), which will allow for bulk, non-selective mining. The contribution from the new mine will increase to 70% at steady state in 2023 from the current level of 43%.

As the mine continues its ramp-up, there is continued focus on stakeholder management. In particular, there are a number of initiatives in place with organised labour to drive productivity, improve efficiencies and align workforce structures with the cost profile of the mine.

South Deep rebase plan - key metrics

    2017   2018 2019 2020 2021 2022
Gold production kg 8,748   10,002 10,846 11,924 13,287 14,926
  koz 281   321 349 383 427 480
Destress metres m2 32,333   43,242 53,013 50,202 50,264 45,689
Cost of sales1 Rm 4,062   4,035 4,185 4,365 4,371 4,524
Total capital expenditure Rm 1,099   1,102 1,705 1,494 1,643 1,424
AISC R/kg 574,406   500,000 518,123 474,967 430,415 409,686
AIC R/kg 600,109   540,000 557,457 504,662 464,774 409,686

1 Cost of sales before amortisation and depreciations

South Deep - Comparison between current and new mining areas

Current mine

  • Mining method: Scattered and selective remnant mining
  • Infrastructure: Legacy. Rail bound transport of ore
  • Reserves: 1.7Moz
  • Current production contribution: 53%
  • Steady state production contribution: 30%

North of Wrench (New mine)

  • Mining method: Bulk, non-selective mechanised mining
  • Infrastructure: Tailored to mining method. Trackless with transport of ore to be via conveyor
  • Reserves: 9.0Moz
  • Current production contribution: 47%
  • Steady state production contribution: 70%

The South Deep mine in South Africa


In November 2016, Gold Fields entered into a 50:50 joint venture with Australian exploration company, Gold Road Resources, for the development and operation of the Gruyere gold project, one of the country's largest undeveloped gold projects. The joint venture comprises the Gruyere gold deposit and a number of exploration tenements.

Gruyere is a large shear hosted porphyry gold deposit, with a combined total Mineral Resource of 6.72Moz and Mineral Reserve of 3.74Moz, 50% of which is attributable to Gold Fields. It is located in Australia's newest goldfields, the Yamarna Belt, 200km east of Laverton in Western Australia, where our Granny Smith mine is located.

Early work at Gruyere began in December 2016, with Gold Fields taking over operatorship of the project on 1 February 2017. The project construction schedule remains unchanged, with engineering progress at 72% and construction progress at 32% as at end-December 2017. Gruyere remains on track to pour first gold during Q1 2019.

Costs incurred to date are also in line with the project budget, which was slightly increased to A$532m (US$411m) (100% basis) in early 2017 following a detailed review of the feasibility study. A$477m (US$358m) of the total capital cost has been committed, with A$186m (US$143m) already spent.

The Gruyere village, which includes 648 rooms, offices and recreational facilities, was commissioned during H1 2017, as was the borefield that will supply potable water for the project. The Bulk Earthworks contract was awarded to MACA Civil in May 2017. The 28km Gruyere main access road and sealed airstrip were completed in H2 2017, while the pit and tailings storage facility (TSF) areas were cleared during Q4 2017. Construction of the TSF embankment walls is scheduled for completion during H1 2018.

The engineering, procurement and construction contract for the Gruyere processing plant and the associated infrastructure was awarded to Amec Foster Wheeler Civmec JV. Construction of the seven carbon-in-leach tanks is progressing to plan. During H1 2017, a power supply contract was signed with APA Group, a leading Australian energy infrastructure business. APA has received final approval from the Western Australian Department of Mines for the 198km Yamarna gas pipeline, which is scheduled for completion in H1 2018. Civil and structural works have also begun at the 45MW gas-powered Gruyere power plant, which will be connected to the gas pipeline, and will supply the mine's energy needs for the life-of-mine.

The Yeo borefield will serve as the main process water source for the Gruyere processing plant. All 32 production boreholes have been drilled and installation of the 95km water pipeline to the processing plant has commenced. Installation of the 22kV overhead power line servicing the borefield is scheduled to commence in Q2 2018.

Finally, the mining services contract, which has a cost of approximately A$400m (US$300m) over a five-year term, was executed with Downer EDI in Q4 2017. Downer began mobilising their workforce during Q1 2018 to begin construction of the mining infrastructure. Mining activities are planned to commence in Q4 2018.

Total project capital of A$311m (US$249m) (100% basis) has been budgeted for 2018.

The tenements comprising the Gruyere Project are held subject to the native title rights of the traditional owners of the land, with many of its members residing in the nearby Cosmo Newberry town. The joint venture partners have a Native Title Agreement in place which provides access to the area, subject to a number of heritage protection protocols and the provision of financial, contracting, and employment benefits to the local Aboriginal people. They are required to establish a corporation (known as a Prescribed Body Corporate) to hold and administer the native title rights and interests on behalf of all group members, which has commenced. The JV partners have implemented a number of projects with the local Aboriginal people, including cultural awareness training for Gruyere employees and contractors. Contractors at Gruyere have also been mandated to employ members of the local Aboriginal people - a target of 18 employees has been set for mid-2018.

Salares Norte

The Salares Norte project is 100% Gold Fields owned and is focused on a gold-silver deposit in the Atacama region of northern Chile. Mineralisation is contained within a high-sulphidation epithermal system, offering high-grade oxides. The project is located within a core 1,800ha concession area. Gold Fields has an option to purchase an adjoining concession that would add a further 1,200ha. The Group spent US$53m on feasibility study work and further drilling in 2017 (2016: US$39m), during which time the studies for the Brecha Principal and Agua Amarga orebodies were merged into one study. In late 2017 Salares Norte was progressed to interim feasibility status.

During 2018, US$83m is budgeted for completion of the feasibility study and district exploration in a 20km radius around the project on prospective ground. The interim results from the feasibility study indicate the following metrics for the project:

  • A Mineral Resource of 23.3Mt at 4.9g/t of gold and 66g/t of silver, with 95% in the Indicated category
  • Annual throughput of 2Mt per annum
  • 3.5Moz produced over LoM
  • An AISC of US$575/oz
  • Project capital of US$850m

The project envisages open-pit operations with a processing plant that includes both CIP and Merrill Crowe processes, due to the high silver content of the ore.

Importantly, land easement was granted on 30 May 2016 (for 30 years) and water rights for the project were obtained on 29 December 2016, with the regulator granting Gold Fields access to 114 litres/second (more than double what the project requires).

During 2017 Salares Norte also completed the environmental and social baseline to support the project schedule as part of its Environmental and Social Impact Assessment (ESIA). This work entails baseline research comprising social, hydro-geological, flora and fauna studies, including research and recommendations on the protection of the endangered Short-tailed Chinchilla in the area. Once the ESIA and baseline studies have been concluded - expected in April 2018 - the team will present the findings to the relevant Chilean regulators.

While there are no indigenous claims or community presence on the concession or the dedicated access routes, Salares Norte has embarked on an extensive early engagement programme with communities and other stakeholders in the wider vicinity of the project as part of the ESIA. During 2017, US$265,000 was spent on community initiatives.

Far Southeast

The Far Southeast project is a proposed underground mine located in northern Luzon province - 250km north of Manila. The 900 million tonne copper-gold porphyry ore body has grades of approximately 0.7g/t gold and approximately 0.5% copper. At the end of December 2012, it declared an Inferred Mineral Resource of 19.8Moz of gold and 9,921Mlb of copper. This has not been updated.

The project is held by Far Southeast Gold Resources (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 of the Philippines holds the remaining 60% interest and manages the existing mining operation. Gold Fields impaired its investment in Far Southeast to US$129m in 2015, as determined by an evaluation of Lepanto'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 (FTAA) is required from the Philippine Government, and is dependent on obtaining the Free, Prior and Informed Consent (FPIC) of the local Kankana-ey indigenous people. A further condition is the renewal for a further 25 years of the existing mining tenement in which most of the FSE deposit occurs. This is pending resolution.

The application for a FTAA was denied by the Mines and Geo-Sciences Bureau (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 (NCIP), which will complete the FPIC process, is also under consideration by the NCIP. This process was held in abeyance by the NCIP pending renewal of the existing mining tenement.

Amid the legal and administrative delays, the holding costs of this project have been reduced to approximately US$180,000/month, related mainly to detailed studies of existing drill core, environmental 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.