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Gold Fields’ strategy is to improve margins by lowering the All-in costs (AIC) of existing mines and by investing in assets that lower the average Group AIC. We believe that this will ultimately improve free cash-flow (FCF) generation and enable us to achieve our underlying goal of generating a FCF margin of at least 15% per region at a gold price of US$1,300/oz.
While improving FCF per ounce of gold produced is management’s priority, ensuring the longevity of the portfolio and its cash generating ability is equally important. As such, we continued to invest in the portfolio during 2019:
Despite ongoing investments in our portfolio, strong operational performances from our Australian, West African and South American assets, together with the stabilisation of South Deep in South Africa, resulted in the Group meeting production and cost guidance for the year and generating higher than anticipated cash-flow. This, together with the sale of non-core equity investments (Maverix, Red 5, Hummingbird Resources and Gold Road), enabled Gold Fields to reduce its net debt from US$1,687m at end-2018 to US$1,331m (pre-IFRS 16) at the end of 2019. For a more in-depth update on the balance sheet and debt management, refer to Strengthening the balance sheet.
| 2020 Guidance | 2019 Actual | 2019 Guidance | 2018 Actual | ||||||||||||
| Prod (Moz) |
AIC (US$/oz) |
Prod (kg) |
AIC (US$/oz) |
Prod (kg) |
AIC (US$/oz) |
Prod (kg) |
AIC (US$/oz) |
||||||||
| Group | 2.28 – 2.32 | 1,035 – 1,055 | 2.20 | 1,064 | 2.13 – 2.18 | 1,075 – 1,095 | 2.04 | 1,173 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Gold Fields’ attributable gold-equivalent production increased by 8% to 2.195Moz in 2019 (2018: 2.036Moz), driven predominantly by the stabilisation of South Deep following the restructuring in 2018, the first full-year production contribution from the Asanko gold mine (AGM), a 15% increase in production at Damang, and the initial contribution from Gruyere (50koz attributable) in Western Australia.
The Group achieved AIC of US$1,064/oz in 2019, which was below guidance and 9% lower than the US$1,173/oz recorded in 2018. The year-on-year decrease in AIC was driven by the reduction in non-sustaining capital, coupled with the higher level of gold sold. Group All-in sustaining costs (AISC) also decreased, down to US$970/oz from US$981/oz in 2018, and were lower than guidance.
During 2019, Gold Fields maintained capex levels that, we believe, are critical to sustain the portfolio. As a result of the project capital at Damang and Gruyere tapering off during 2019, Group capex declined to US$613m (excluding AGM) from US$814m in 2018. This comprised sustaining capex of US$476m and growth capital of US$137m.
Regional capex included:
| 2020 Guidance | 2019 Actual | 2019 Guidance | 2018 Actual | ||||||||||||
| Prod (Moz) |
AIC (US$/oz) |
Prod (kg) |
AIC (US$/oz) |
Prod (kg) |
AIC (US$/oz) |
Prod (kg) |
AIC (US$/oz) |
||||||||
| South Deep | 8,000 (257koz) |
625,000 (US$1,340/ oz) |
6,907 (222koz) |
585,482 (US$1,259/ oz) |
6,000 (193koz) |
610,000 (US$1,394/ oz) |
4,885 (157koz) |
854,049 (US$2,012/ oz) |
|||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
As expected, South Deep got off to a slow start in 2019 following the restructuring programme implemented during the latter part of 2018, then recorded continuous improvements throughout the rest of the year.
Encouragingly, production for the year increased by 41% to 6,907kg (222koz) in 2019, up from 4,885kg (157koz) in 2018 – coming in 15% ahead of guidance.
Capex decreased by 38% to R479m (US$33m) in 2019 from R770m (US$58m) in 2018. South Deep did not spend any non-sustaining capex during 2019 due to the temporary suspension of new mine development activities as communicated as part of the restructuring announcement at the end of 2018. In 2020, capex will increase with guidance at R995m (US$68m), of which R775m (US$53m) will be sustaining capex and R220m (US$15m) non-sustaining capex.
During 2019, AISC decreased by 28% to R585,482/kg (US$1,259/oz), while AIC – which equalled AISC in 2019 because of the suspension of non-sustaining capex – was 31% lower than the R854,049/kg (US$2,012/oz) recorded in 2018. The decreases in AISC and AIC were mainly driven by the increased gold sold, as well as the reduced capex incurred during the year.
To cap the operational progress, South Deep generated net cash-flow of US$15m in 2019 compared with an outflow of US$146m in 2018.
| Production overview | 2020 Guidance |
2019 Actual |
2019 Guidance |
2018 Actual |
|||||||
| Gold-only production | koz | 158 | 156 | 153 | 150 | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| Copper production | kt | 27 | 31 | 28 | 32 | ||||||
| Gold-equivalent production | koz | 275 | 293 | 291 | 314 | ||||||
| AIC | US$/oz | 575 | 472 | 566 | 282 | ||||||
| AIC eq-oz | US$/oz | 830 | 810 | 802 | 699 |
At Cerro Corona in Peru total managed gold-equivalent production of 293koz in 2019 (2018: 314koz), was slightly higher than the gold-equivalent production guidance for the year.
AISC and AIC amounted to US$472/oz in 2019 compared with US$282/oz in 2018. On a gold-equivalent basis, AISC and AIC were slightly above guidance in 2019 at US$810/oz (2018: US$699/oz). The increase in AISC and AIC was primarily due to lower by-product credits and lower gold sold.
Capex increased by 70% to US$56m (2018: US$33m) as a result of the construction of a new waste storage facility and the reallocation of infrastructure expenses (such as access roads, blasting supplies warehouse, and general warehouse) for the life extension plan.
Cerro Corona reported net cash-inflow of US$86m during 2019 (2018: US$112m).
| 2020 Guidance | 2019 Actual | 2019 Guidance | 2018 Actual | |||||||||||
| Prod (koz) |
AIC (A$/oz) |
Prod (koz) |
AIC (A$/oz) |
Prod (koz) |
AIC (A$/oz) |
Prod (koz) |
AIC (A$/oz) |
|||||||
| St Ives | 360 | 1,320 (US$924) |
371 | 1,385 (US$963) |
362 | 1,342 (US$1,007) |
367 | 1,207 (US$902/oz) |
||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Agnew | 225 | 1,440 (US$995) |
219 | 1,656 (US$1,152) |
221 | 1,538 (US$1,154) |
239 | 1,374 (US$1,026) |
||||||
| Granny Smith | 265 | 1,415 (US$975) |
275 | 1,325 (US$922) |
260 | 1,370 (US$1,028) |
280 | 1,239 (US$925) |
||||||
| Gruyere (50%) | 135 | 1,150 (US$795) |
50 | 4,170 (US$2,900) |
59 | 4,4501 (US$3,092) |
||||||||
| Region | 985 | 1,350 (US$932) |
914 | 1,418 (US$986) |
902 | 1,518 (US$1,139) |
886 | 1,262 (US$943/oz) |
||||||
1 The guidance included the remaining project capital, largely for H1 2019
Gold Fields’ Australian operations delivered another strong performance in 2019. Attributable gold production of 914koz was better than full-year guidance of 902koz, underpinned by the inclusion of Gruyere production during H2 2019. AIC of A$1,418/oz (US$986/ oz) was below guidance. Production was 3% higher than in 2018 (886koz).
Capex decreased to A$458m (US$319m) from A$553m (US$413m) in 2018, due to reduced spending on Gruyere in 2019. This includes near-mine exploration expenditure of A$84m (US$58m), slightly lower than the A$85m (US$63m) spent in 2018.
The Australia region reported a net cash-inflow of A$199m (US$139m) in 2019, including Gruyere growth capital of A$104m (US$72m), compared with A$40m (US$30m) in 2018, when Gruyere reported a cash-outflow of A$218m (US$163m).
St Ives continued its transition to being a predominantly underground operation during 2019, with mining of the Invincible open pit being largely phased out during the year. Invincible Underground, Hamlet Underground and the Neptune open pit are now the main sources of ore at St Ives. The shift to an underground focus at St Ives requires a different focus in terms of engineering, mining and HR management.
Production increased by 1% to 371koz in 2019 from 367koz in 2018, and was 2% above guidance. AIC increased 15% to A$1,385/oz (US$963/oz) in 2019 from A$1,207/oz (US$902/oz) in 2018, and was 3% above full-year guidance.
Capex decreased by 17% to A$141m (US$98m) in 2019 from A$170m (US$127m) in 2018, due to reduced pre-stripping of the open pits combined with lower spend on mining infrastructure in 2019. St Ives generated net cash-flow of A$158m (US$110m) for the year.
A review of the mine’s brownfields exploration activity in 2019 and can be found (Asset portfolio management).
At Agnew, gold production decreased 8% to 219koz in 2019 from 239koz in 2018, and was 1% lower than guidance. AIC increased by 21% to A$1,656/oz (US$1,152/oz) in 2019 from A$1,374/oz (US$1,026/oz) in 2018 due to a decrease in gold sold and increases in cost of sales before amortisation and depreciation, as well as higher capex. As a result, Agnew generated lower net cash-flow of A$16m (US$11m) in 2019, compared with A$92m (US$69m) in 2018.
Capex increased 12% to A$109m (US$76m) in 2019 from A$98m (US$73m) in 2018. The increase was driven by the A$32m (US$22m) cost of building a new accommodation village (we previously rented rooms from BHP Billiton in near-by Leinster). The first buildings for the camp arrived on 15 December 2018 and construction commenced in January 2019.
Commissioning of the 450 rooms and the central facilities occurred on schedule in May 2019.
In addition, in June 2019 Gold Fields and global energy group, EDL, announced a A$112m investment in a world-leading energy microgrid, which combines wind, solar, gas and battery storage and will result in over 50% of Agnew’s energy requirements being supplied from renewable and low-carbon sources. The 23MW power station that integrates solar with gas and diesel was commissioned in November 2019, while construction of the five wind turbines was completed in February 2020 and can be found here.
The significant investments in Agnew’s camp and microgrid is a testament to our confidence in the future of the operation, as reflected in its successful near-mine exploration activities, which saw Mineral Reserves improve markedly in 2019 and can be found here.
At Granny Smith, production decreased by 2% to 275koz in 2019 from 280koz in 2018, but still came in 6% ahead of guidance. AIC increased by 7% to A$1,325/oz (US$922/oz) in 2019, up from A$1,239/oz (US$925/oz) in 2018, largely due to the decrease in gold production.
Capex was 1% lower in 2019 at A$104m (US$72m) (2018: A$105m (US$79m)). The mine generated net cash-flow of A$134m (US$93m) in 2019, a 3% increase on 2018.
A review of the mine’s brownfields exploration activity in 2019 is detailed here.
Gruyere poured its first gold at the end of June 2019, in line with the revised project schedule. Production ramped up successfully, with the mine producing 99koz (100% basis) during H2 2019 and reaching steady state production levels by the end of the year.
AIC post-commercial levels of production (end-September) were A$983/oz (US$684/oz), falling below the revised forecast range of A$1,050/oz – A$1,150/ oz, with both mining and processing volumes at the upper end of expectations. AIC for the full year of A$4,170/oz (US$2,900/oz), were within revised guidance and inflated by the minimum levels of production during the commissioning and ramp-up stages and also impacted by the remaining project capital that was spent during the year.
Now in steady state, Gruyere is set to contribute meaningfully to low cost production of the Group. For more details on Gruyere, refer here.
| 2020 Guidance | 2019 Actual | 2019 Guidance | 2018 Actual | ||||||||||||
| Prod (koz) |
AIC (US$/oz) |
Prod (koz) |
AIC (US$/oz) |
Prod (koz) |
AIC (US$/oz) |
Prod (koz) |
AIC (US$/oz) |
||||||||
| Tarkwa | 510 | 970 | 519 | 958 | 514 | 949 | 525 | 951 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Damang | 215 | 1,030 | 208 | 1,147 | 218 | 1,100 | 181 | 1,506 | |||||||
| AGM¹ | 115 | 1,130 | 113 | 1,214 | 1063 | 1,1403 | 45 | 1,175 | |||||||
| Region | 840 | 1,006 | 840 | 1,039 | 838 | 1,102 | 750 | 1,098² | |||||||
1 45% stake, equity-accounted
2 Includes AGM contribution for August – December 2018
3 Gold Fields’ 45% share of the mid-point of AGM 2019 guidance
The Ghanaian region is the second biggest producer in the Gold Fields portfolio, contributing 35% to Group attributable production in 2019. Gold Fields has a shareholding of 90% in both Tarkwa and Damang, with the Ghanaian government holding the remaining 10%. During 2018, Gold Fields acquired a 45% stake of AGM, with our JV partner Asanko Gold holding 45% and the Ghanaian government the remaining 10%.
Total managed gold production for the region was in line with guidance of 838koz, increasing by 12% in 2019 to 840koz, mainly due to a 15% increase in Damang’s production, together with a full year contribution from AGM as opposed to only five months in 2018. Total attributable production increased to 768koz from 680koz in 2018.
Capex (excluding AGM) decreased to US$202m in 2019 from US$295m in 2018, mainly due to lower expenditure on capital waste stripping at Damang. AIC for the region, including AGM, was US$1,039/oz, 6% below guidance and 5% lower than the US$1,098/oz reported in 2018. The region reported a material increase in net cash-flow in 2019, excluding AGM, to US$174m (2018: US$45m).
Production at Tarkwa decreased 1% to 519koz in 2019 (2018: 525koz), but was slightly ahead of guidance. AISC and AIC increased by 1% to US$958/oz in 2019 from US$951/oz in 2018, also marginally ahead of guidance. Tarkwa generated net-cash inflow of US$150m during 2019 compared with US$112m in 2018.
A review of the mine’s brownfields exploration activity in 2019 is detailed here.
Damang produced 208koz in 2019, which is 15% higher than the 181koz produced in 2018 and 4% below guidance of 218koz. The underperformance relative to guidance was driven by negative grade reconciliation as the mine transitioned through the Huni sandstone lithology. This transition will be completed during H1 2020, at which point mining will occur in the relatively higher (and more consistent) grade Tarkwa phyllites.
AISC decreased to US$809/oz in 2019 from US$813/oz in 2018, due to higher gold sold, and was partially offset by higher cost of sales before amortisation and depreciation.
AIC declined by 24% to US$1,147/oz in 2019 from US$1,506/oz in 2018, due to higher gold sold and lower total capex, which was reduced by 45% to US$76m in 2019 (2018: US$139m).
Damang recorded a net cash-inflow of US$24m in 2019 compared with an outflow of US$68m in 2018.
AGM produced 251koz in 2019, of which 113koz was attributable to Gold Fields. This compares to the 45koz attributable to Gold Fields for the five months from August to December 2018. Production was impacted by a pit wall failure in November at the west wall of the Nkran pit. No injuries or damage to equipment occurred. AISC increased 4% to US$1,112/oz in 2019 from US$1,069/oz in 2018, while AIC was up 3% to US$1,214/oz in 2019 (2018: US$1,175/oz) as can be seen in Asset portfolio management.
