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Integrated Annual Report 2019
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Strengthening the balance sheet

Gold Fields’ business strategy has consistently focused on growing margins and free cash-flow (FCF) for every ounce of gold produced, and to sustain this FCF in the long term. However, our drive to generate a FCF margin of at least 15% at a gold price of US$1,300/oz is balanced by the strategic imperative of strengthening the balance sheet and funding future growth.

For the past three years, the Group has been in a reinvestment phase. During this period, we spent approximately US$1bn in buying into two joint ventures and building two new mines, which have improved the quality of the overall portfolio by lowering Group All-in costs (AIC). Of this project capital, US$347m was spent on Damang and A$329m on Gruyere, in addition to the A$350m on acquiring 50% of Gruyere. Furthermore, Gold Fields spent US$162m in project and drilling costs at the Salares Norte project and US$185m to acquire our 45% stake of the Asanko gold mine (AGM) in Ghana. Better-than-expected gold prices for the most part of the past three years enabled us to limit the pick-up in net debt, despite the amount of capital incurred.

With the capex cycle rolling off during 2019, the Group is well positioned to generate significant FCF in 2020. For 2019, Gold Fields generated a FCF margin of 21% compared to 16% in both 2017 and 2018. Given the outlook for increased production and lower AIC, we anticipate this FCF margin to stay above our target in 2020, depending on the gold price.

During 2019, Gold Fields took advantage of the favourable equity market conditions to divest of a number of its non-core equity holdings, with the proceeds being used to pay down a portion of the debt. A total of US$179m was generated through these sales. We made a significant return on the sales of all these investments, which are detailed here.


Gold Fields’ 2019 results were boosted by the stronger gold price which increased the average gold price received by our mines in all three relevant currencies: the US Dollar gold price was up 11% to US$1,388/oz; the A$ gold price by 18% to A$2,007/oz and the rand gold price by 24% to R659,111/kg.

Priorities for FCF

Our priorities for the operational cash that we generate are:

  • Returning dividends to shareholders: Gold Fields has a long and well-established dividend policy of paying out 25% – 35% of normalised earnings to shareholders. During 2019, Gold Fields declared a total dividend of R1.60/share, which translates to 28% of normalised earnings, aligning with the average pay out over the past 10 years
  • Strengthening the balance sheet: At the height of the growth capital cycle at the end of 2018, the Group’s net debt:EBITDA (prior to adjusting for IFRS 16) peaked at 1.45x before decreasing to 1.08x by the end of 2019. With Gruyere and Damang now at or approaching steady state, the target is to use free cash generated in 2020 to further reduce net debt and strengthen the balance sheet
  • Funding growth projects: Construction of the Salares Norte project, which will begin towards the end of 2020, is anticipated to amount to US$860m (in 2020 terms), at which point a portion of our FCF will go towards funding capital. Apart from the Salares Norte project, there is no growth capital budgeted for the near to medium term

As a result of the higher prices received and improved production Group revenue for 2019 rose by 15% to US$2.97bn from US$2.58 in 2018.

Cost of sales were up 4% to US$1.42bn in 2019, but AIC and All-in sustaining costs (AISC) were below 2018 levels and below guidance for the year. AIC was 9% lower at US$1,064/oz and AISC came in at US$970/oz (2018: US$981/ oz) on the original World Gold Council (WGC) definition.

Other salient features during 2019 included:

  • Royalty expenses increased by 18% to US$74m in 2019
  • The taxation charge for the Group increased to US$176m in 2019 compared with a credit of US$66m in 2018, while normal taxation rose to US$191m (2018: US$146m)
  • Total capital expenditure of US$613m in 2019 significantly reduced from the US$814m in 2018
  • Losses on financial instruments were US$238m in 2019, largely due to losses on our gold hedges against the rising gold price

Taking into account all of the above, headline earnings for 2019 were US$163m (2018: US$61m).

A detailed analysis of our financial performance is provided in the management’s discussion and analysis of the financial statements in the 2019 Annual Financial Report (AFR). The consolidated income statement, statement of financial position and cash flow statement – extracted from the 2019 AFR.


Gold Fields adopted the new lease accounting standards (IFRS 16) on 1 January 2019, which has impacted the reporting of net debt and the net debt:EBITDA ratio. Under the new IFRS 16 definition, which includes the capitalisation of leases – primarily those relating to our independent power purchasing agreements and pipeline rentals – Gold Fields’ ended 2019 with net debt of US$1,664m and a net debt:EBITDA ratio of 1.29x. Using the old classification (pre-IFRS 16), the net debt balance at the end of 2019 was US$1,331m (2018: US$1,687m), with a net debt:EBITDA ratio of 1.08x (2018: 1.45x). Going forward, Gold Fields will only be reporting net debt under the new IFRS 16 definition.

Having come to the end of the investment programme, the focus has shifted to reducing our debt position. With this in mind, management has set itself the target of reducing debt by US$300m – US$400m in 2020. To protect cash-flows and increase the probability of attaining this goal, we extended our hedging programme in 2019, putting additional hedges in place which will mature during 2020 (see details in the table on the next page). In addition, we streamlined our portfolio of equity investments, using the US$179m raised from the divestments of our non-core assets during 2019 to pay down some of the debt.

On attaining the targeted level of net debt:EBITDA, management will reassess the balance sheet, together with the capital requirements of the business and general economic backdrop. However, the intention is not to put additional hedges in place once the current hedge book expires, other than providing downside protection during our large capital expenditure for Salares Norte in 2021 and 2022.


Gold Fields’ policy allows for hedging to protect cash-flows, firstly, at times of significant expenditure, secondly, to address specific debt servicing requirements, and, thirdly, to safeguard the viability of higher cost operations. We do not enter into long-term systematic hedges, but rather evaluate the Company’s position and outlook on a regular basis to determine whether short-term hedging is appropriate.

Given the high levels of project capital incurred over the past three years, the Group has run an active hedging programme using short-term, tactical hedges to protect cash-flows and the balance sheet. This hedging programme resulted in net realised gains of US$14m in 2017 and US$54m in 2018, and a net realised loss of US$132m in 2019.

With the project capital having largely been spent by mid-2019, the underlying purpose of the hedging programme shifted to servicing debt, with management setting a target of paying down US$300m – US$400m by the end of 2020.

With the February 2020 approval by the Board to construct the Salares Norte mine at a current cost of US$860m, we have put in place foreign exchange hedges for the Chilean peso component of the 2020 – 2023 capital programme, which cover approximately two-thirds of the capital cost of the project. In addition, to protect Group cash-flows in the peak capex year (2021), we bought 300koz in put options against that year’s Group’s production. This hedging structure provides us with protection on the downside, while at the same time retaining full exposure to any upside potential in the gold price.

For more details of the gains and losses of our hedging programmes, see Risk management activities in the Annual Financial Statements.

Table of hedges
Hedge Country Quantity hedged Hedging instrument and price Hedge term  
Gold hedge Australia 283koz (31% of guidance) Swaps; Average (Ave) strike price of A$1,751/oz Jan 2019 – Dec 2019  
  Australia 173koz (19% of guidance) Zero-cost collars; Ave floor price of A$1,720/oz,
Ave cap price of A$1,789/oz
Jan 2019 – Dec 2019  
  Australia 456koz (51% of guidance) Zero-cost collars; Ave floor price of A$1,800/oz,
Ave cap price of A$1,869/oz
Jan 2019 – Dec 2019  
  South Africa 113koz (59% of guidance) Forwards; Ave strike price of between R615,103/kg and R620,000/kg June 2019 – Dec 2019  
A$ forex hedge Australia US$366m Average strike price between US$0.7075 – 0.7330/A$ Jan 2019 – Dec 2019  
Oil hedge Ghana 126Mℓ (50% of annual diesel consumption) Swaps; Equivalent Brent crude swap price US$49.80/bbl June 2017 – Dec 2019  
  Australia 78Mℓ (50% of annual diesel consumption) Swaps; Equivalent Brent crude swap price US$49.92/bbl June 2017 – Dec 2019  
Hedge Country Quantity hedged Hedging instrument and price Hedge term  
Gold hedge Australia 210koz (21% of guidance) Swaps; Ave strike price of A$1,957/oz Jan 2020 – Dec 2020  
  Australia 270koz (27% of guidance) Zero-cost collars; Ave floor price of A$1,933/oz,
Ave cap price of A$2,014/oz
Jan 2020 – Dec 2020  
  Ghana 175koz (21% of guidance) Zero-cost collars; Ave floor price of US$1,364/oz,
Ave cap price of US$1,449/oz
Jan 2020 – Dec 2020  
  Ghana 100koz (12% of guidance) Swaps; Ave strike price of US$1,382/oz Jan 2020 – Dec 2020  
  Ghana 100koz (12% of guidance) Zero-cost collars; Ave floor price of US$1,400/oz,
Ave cap price of US$1,557/oz
Jan 2020 – Dec 2020  
  South Africa 100koz (39% of guidance) Swaps; Ave strike price of R681,400/kg Jan 2020 – Dec 2020  
  South Africa 100koz (39% of guidance) Zero-cost collars; Ave floor price of R660,000/kg,
Ave cap price of R727,000/kg
Jan 2020 – Dec 2020  
Oil hedge Ghana 123Mℓ (50% of annual diesel consumption) Swaps; Equivalent Brent crude swap price US$59.20/bbl Jan 2020 – Dec 2022  
  Australia 75Mℓ (50% of annual diesel consumption) Swaps; Equivalent Brent crude swap price US$57.40/bbl Jan 2020 – Dec 2022  
Debt refinancing – new bonds and refinancing of bank debt

In addition to reducing the amount of debt, one of management’s financial targets in the 2019 Balanced Scorecard (BSC) was to improve the liquidity and profile of the Group’s debt. In this regard, we were active in the debt markets during 2019, putting in place two new bonds and refinancing bank debt.

In May 2019, we successfully raised two new bonds, which extended and staggered the maturity profile. A total of US$1bn was raised at an average coupon of 5.625%, with the maturity spread between five and 10 years:

  • US$500m five-year bond with a coupon of 5.125%
  • US$500m 10-year bond with a coupon of 6.125%

The proceeds of the debt raising were used to repay amounts outstanding under the US$1,290m Credit Facilities Agreement and repurchase certain other existing indebtedness.

Following the bond issuances on 9 May 2019, Gold Fields commenced a tender process to buy back up to US$250m of the 2020 notes. The buy-back of US$250m of the outstanding 2020 notes was completed on 24 May 2019 at 102% of par.

In July 2019, the Group entered into a US$1,200m revolving credit facility (RCF) agreement with a syndicate of international banks and financial institutions. The new facilities comprise two tranches:

  • A US$600m three-year RCF, with two one-year extension options subject to lenders consent, at a margin of 1.45% over Libor
  • A US$600m five-year RCF, with two one-year extension options subject to lenders consent, at a margin of 1.70% over Libor

Our financial covenants attached to the new RCF were revised to accommodate the treatment of operating leases in line with IFRS 16. As such, the covenants were improved as follows:

  • Net debt:EBITDA covenant moved from ≤2.5x to ≤3.5x
  • Consolidated EBITDA to consolidated net finance charges covenant reduced from ≥5x to ≥4x

The new facilities were used to refinance the US$1,290m Credit Facilities Agreement and to fund general corporate and working capital requirements of the Group. They will also be used to repay the outstanding bonds maturing in 2020.

As a result of the new bonds and refinanced RCF, Gold Fields’ debt maturity profile has improved significantly. Apart from the outstanding US$601m of the 2020 bond, which will be retired using the new RCF and FCF, the first sizeable maturity payment for Gold Fields is now in December 2024. During 2020, we also plan to refinance and extend our A$500m (US$351m) facility, due in June 2021, as a potential source for future funding requirements.