Government relations

As the issuers of mining licences, developers of policy and implementers of regulations, host governments are among Gold Fields’ most important stakeholders. This first and foremost requires full adherence to all relevant legislation, including the payment of taxes and other levies. We are committed to working with governments at national, regional and local levels to establish sound and transparent working relationships that benefit the countries and host communities.

Gold Fields does not provide financial contributions to political parties and lobby groups unless explicitly approved by the Board of Directors in accordance with the Company’s Code of Conduct. No political donations were made during 2019.

Gold Fields’ tax strategy is to proactively manage tax obligations in a transparent, responsible and sustainable manner, acknowledging the differing interests of all our stakeholders. Our full tax strategy and policy can be found at www.goldfields.com/integrated-annual-reports.php.

Resource Nationalism

Many governments, particularly in developing countries, view the mining industry as an easy target for higher taxes and other fiscal and regulatory imposts, especially during tough economic times. In many of these jurisdictions, the legal and tax environments recently became less conducive to the long-term viability of the sector.

Among the countries in which Gold Fields operates, and those who have significantly raised the imposts on the mining sector, South Africa stands out. Governments in our other operating jurisdictions – Peru, Chile, Australia and Ghana – regularly raise the rhetoric against the industry.

At Gold Fields, a strong social licence to operate is embedded in our societal value proposition and is a prerequisite for long-term value generation for governments and the communities living in close proximity to our mines.

Gold Fields, on its own and in conjunction with its peers, sought to address the trust gap that exists between government and miners in a number of ways, including the following:

• Over the past three years, Gold Fields consistently created between US$2bn and US$3bn in total annual value for our wide range of stakeholders – accounting for around 90% of revenue on average (Value creation for our stakeholders)
• Gold Fields is actively promoting host community employment and procurement in an effort to strengthen its social licence to operate. In 2019, about 33% of our total value creation benefited host communities through these initiatives (Shared value creation in our communities)
• We are working with international mining bodies, such as the ICMM, to promote industry-wide best practice and showcase the benefits that a responsible and fairly regulated industry can bring

During 2019, we conducted independent resource nationalism assessments in Ghana and Chile. These assessments provided insight into the political environment in these countries, as well as the likelihood of future fiscal and other regulatory actions against the mining sector. Most critically though, the assessments also provided valuable input on how to increase trust and confidence among governments and communities. Among the key proposals were:

• Strengthened engagement with governments at all levels, as well as host communities)
• Continued roll-out of Shared Value projects that benefit host communities, in particular those that create jobs in these areas
• Improved communication on the socio-economic benefits of mining for host countries and host communities

Our regions have started acting on these recommendations and are seeking to work with our mining peers in these countries on enacting others.

AMERICAS REGION

Our engagement in Peru is focused at local, regional and national government levels to address operational, social and sustainability matters. A business-friendly national government is in power in Lima, and our engagement with the relevant departments is largely carried out via the National Chamber of Mines, Oil and Energy, especially on regulatory matters. Gold Fields Peru’s legal stability agreement, signed with the Peruvian government in 1997 to facilitate the build-up of our Cerro Corona mine, expired during 2017. Gold Fields is now subject to the same taxation regime as the rest of the mining sector in the country.

Despite the political uncertainty in Peru during 2019, such as the change in the presidency and the closing of parliament, overall we had good working relationships with various national ministries and have entered into a number of agreements. Traditionally, regional and local-level officials in the Cajamarca province, which is home to our Cerro Corona mine, have adopted anti-mining strategies and policies, reflecting wider public sentiment among communities. However, a more business-friendly government was elected in 2018, which has stressed the need to build trust between mines and communities. This made it easier for us to enter into five formal agreements with government entities to develop agricultural projects and combat violence against women in our communities, among other projects.

In 2019, we also intensified our engagement activities following our tailings leak in December 2018, which received wide publicity in the Cajamarca province and led to protest action at the mine despite having a negligible impact on the environment. It has also expanded our area of influence to communities downstream of our mine, including the Bambamarca municipality. The extension of Cerro Corona’s life-of-mine to 2030 will also require more long-term community investment programmes and strategies. In the run-up to national and regional elections in 2020 and 2021, we expect anti-mining rhetoric among politicians to intensify.

AUSTRALIA REGION

The engagements in Australia are primarily focused at state and local government levels to address economic and sustainability matters.

The Labour State Government in Western Australia is pursuing a broad-ranging legislative reform initiative aimed at improving regulation and regulatory practice to encourage investment in the region. A key component of this agenda is the proposed reform of environmental approvals in the mining sector, through the wholesale amendment of the Environmental Protection Act 1986. A discussion paper and exposure draft bill have been published, and are expected to progress during 2020, with Gold Fields continuing to participate in the review process through the Chamber of Minerals and Energy (CME).

The current framework for the protection of Aboriginal heritage in Western Australia is also the subject of a four-stage review and public consultation process, which is expected to result in the replacement of the existing Aboriginal Heritage Act. It is expected that this new legislation will result in a more efficient process for industry, while addressing key cultural requirements. Gold Fields has provided feedback to the first stage of this process.

The state government has also progressed a comprehensive reform of workplace safety laws, which are intended to replace the existing parallel regimes for general workplaces and mine sites with a single law, and specific regulations for general industry, mining and petroleum. One of the main features of the proposed new legislation is the introduction of two new offences of corporate manslaughter, carrying a maximum penalty of 20 years’ imprisonment for an individual and a fine of up to A$10m for a corporation. Gold Fields is participating in the public consultation process through the CME.

On 1 January 2019, the Modern Slavery Act 2018 came into force, requiring companies with an annual turnover of A$100m to report on their actions to ensure transparency in their supply chains, including the steps they are taking against modern slavery. Gold Fields published a voluntary statement in February 2020 (providing its preliminary assessment of human rights risks in our supply chain) and is required to publish its official statement by June 2021. We have also provided our suppliers with a toolkit on the Act.

WEST AFRICA REGION

In March 2016, Gold Fields Ghana entered into a Development Agreement (DA) with the government of Ghana for both the Tarkwa and Damang mines. The highlights of the agreement, which comes into effect if we spend US$500m at each of the two mines (over an 11-year period for Tarkwa and a nine-year period for Damang), include a reduction in the corporate tax rate from 35% to 32.5% and a sliding scale royalty tax based on the gold price. The US$1,384/oz average gold price our mines received during 2019 attracted an average royalty of 3.6% in terms of the formula.

The DA does not apply to the Asanko Gold Mine (AGM), in which Gold Fields acquired a 45% stake during 2018. However, this transaction and our US$340m investment in Damang illustrate the confidence we have in Ghana’s fiscal and regulatory framework.

Another commitment by Gold Fields was funding the construction of the 33km road between Tarkwa and Damang at a cost of US$27m. This project was handed over to the Ghana Highway Authority in July 2019 and brings numerous social and economic benefits to the estimated 100,000 community members living near the road. Further projects in the area are under consideration.

The DA has cemented our status as one of the largest contributors to the country’s fiscus. In 2019, Gold Fields paid over US$116m in direct taxes, royalties and dividends to the government of Ghana (2018: US$90m). The government holds a 10% interest in the legal entities controlling our Tarkwa and Damang mines.

Ahead of national elections this year, we expect resource nationalism to feature in the rhetoric by political parties. We are working directly and through the Ghana Chamber of Mines to illustrate the benefit responsible mining brings to the country. The Chamber also continues to engage government on the proposed requirement to sell a portion of gold produced for local refining and value-addition purposes.

SOUTH AFRICA REGION

From a regulatory perspective, Gold Fields’ South Deep mine is guided primarily by the Mineral and Petroleum Resources Development Act (MPRDA). One of the key requirements of the MPRDA, which Gold Fields supports, is to facilitate meaningful and substantial participation of Historically Disadvantaged South Africans (HDSAs) in the mining industry. To provide guidance on this open-ended requirement, the Mining Charter, as drafted by the South African Department of Mineral Resources and Energy (DMRE), provides for a range of empowerment actions and community investment programmes with a corollary time frame. In terms of the Mining Charter, all mining rights holders are required to submit an annual compliance assessment to the DMRE on progress made against the annual targets in the Charter. Gold Fields continues to comply with this process.

The DMRE published Mining Charter 3 in September 2018. The Minerals Council South Africa (MCSA), which represents the industry, considers most aspects of the Charter a framework within which the industry can live. There are, however, critical areas over which Gold Fields and the industry has very deep concerns, namely that the Charter does not fully recognise the black economic empowerment (BEE) ownership credentials of previous BEE transactions. This is also applicable to not only new mining right applications, but also in respect of mining right renewals and transfers of these rights. Such a requirement has a severely dampening effect of the attractiveness of South African mining in the eyes of investors and appears also a breach of the MPRDA, but also a court declaratory order, which supported the so-called “once empowered, always empowered” principle. During 2019, the DMRE was granted leave to appeal the declaratory order.

The MCSA continues to engage with the DMRE to resolve the concerns around the Mining Charter 3, it has also filed an application in March 2019 for a judicial review and setting aside certain clauses of the Charter.

Gold Fields supports achieving a solution that is viable to support economic growth and transformation while, at the same time, fostering a sustainable mining industry in South Africa in which investment is encouraged and rewarded.

While the renewal of South Deep’s mining licence is only due in 2040, we are concerned by the prospect of having to renegotiate our licence under completely different circumstances to those that prevailed when the licence was awarded in 2010. We believe that our current BEE ownership level of 35% meets the principles and spirit of the original Mining Charter, and has created the framework for the ongoing transformation of South Deep.

Mining Charter Scorecard

All mining rights holders in South Africa (including South Deep) are required to submit an annual compliance assessment to the DMRE on progress made against the annual targets in the Mining Charter.

Gold Fields reviewed its 2019 performance against Mining Charter 3 (MC3). South Deep’s 2019 scorecard, which is detailed below, illustrates Gold Fields’ achievements against the Charter. In aligning with MC3, South Deep conducted a gap analysis against the scorecard guidelines released by the DMRE in December 2018, though there are still some areas of uncertainty and ongoing consultations between the DMRE and the MCSA.

As part of its obligations under its mining licence, South Deep also submits a five-year Social and Labour Plan (SLP). The SLP includes projects benefiting communities that are impacted by mining, both in host communities and laboursending areas. An SLP requires the mining industry to develop and implement comprehensive skills and human resource development (including employment equity plans and facilitated home ownership) and mine community development.

A draft SLP for the period 2018 to 2022 was submitted to the DMRE in December 2017 – and resubmitted in August 2018 – and approved for implementation in 2019. The SLP outlines future financial commitments of over R283m (US$20m), with the bulk of this – R258m (US$18m) – being dedicated to human resource development programmes, including learnerships, bursaries and skills development, for both the workforce and members of our host communities. Of the mine community development commitments, R17m (US$1.2m) is targeted at our host communities in Westonaria and R8m (US$0.6m) at communities in labour-sending areas, particularly the Eastern Cape.

The SLP is published on our website at https://www.goldfields.com/pdf/operations/south-deep-spl/southdeep-spl.pdf.