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Since the decline in the gold price in 2013 – with a meaningful recovery only commencing in 2019 – the global gold mining industry has been in survival mode. This resulted in aggressive cost cutting, headed by sharp reductions in capital expenditure and exploration.
Seven years on the industry appears significantly under-invested, which may result in declining gold production and increased costs in the future. The consolidation and acquisition activities in the industry during 2018 and 2019 were, we believe, a response to this underinvestment. In the coming years, gold miners will inevitably be forced to raise spending on new projects and exploration to merely maintain their production profiles at current levels. Notwithstanding this, we believe the years of under-investment will result in a decline in gold production in years to come.
I am pleased to say that Gold Fields went against the trend. With its strategic focus on organic growth, during late 2016 and early 2017, the Gold Fields Board approved a number of large projects that combined into a three-year, US$1bn investment programme to ensure that our portfolio of mines continue to generate cash sustainably into the foreseeable future. The investments the Company has made during this time were significant. We have essentially built two new mines – Gruyere in Australia and Damang in Ghana – bought 45% of the prospective Asanko mine in Ghana and have taken a greenfields project – Salares Norte in Chile – to a positive construction decision. There is also the continued investment in near-mine exploration at our Australian operations to secure their longevity.
While the investments certainly were counter-cyclical, and criticised by some market participants, it has proved to be the right strategy for the Group, and we started to see early, but significant, benefits during 2019. In fact, I would consider 2019 the most successful in my tenure as Chairperson. For myself, the top achievement by our Company was the progress made at South Deep in South Africa.
After a difficult 2018, in which we undertook a significant restructuring process, which resulted in reducing our workforce by a third, South Deep can now report material and steady progress towards sustainable growth. With costs cut by 31% and production up by over 40%, South Deep stemmed its decadelong cash burn in 2019 and contributed US$15m in net cash compared to an outflow of US$146m in 2018. As significant, the leadership team has managed to facilitate a new culture of performance at the mine, as exemplified by a 30% improvement in employee and fleet productivity. It truly is remarkable progress, and we are cautiously optimistic about further entrenching these developments during 2020.
I share our Chief Executive Officer’s (CEO’s) sentiment that our portfolio is now in a strong position to maintain sustainable production of 2.0Moz – 2.5Moz per year for the next 10 years. The Group has again exceeded its production and cost targets, and, aided by the stronger gold price, cash-flow from our mines totalled over US$550m. This enabled Gold Fields to exceed its financial targets for the year, funding the last phase of the investment programme while paying a meaningful dividend and repaying debt at the same time. The US$860m (in 2020 terms) construction of Salares Norte will also not put undue strain on the balance sheet, after we successfully raised US$249m in new equity on favourable terms as part of the funding solution for this project.
The cash generated by our mines has enabled us to invest in the Company’s future growth, while also creating significant value for our key stakeholders and paying off debt. During 2019, Gold Fields' total value distribution to our stakeholders amounted to US$2.6bn in the form of payments to governments, capital providers, business suppliers and our workforce.
Over the past few years, Gold Fields particularly focused on strengthening relations with our host communities, whose partnerships are critical in sustaining our mines. Our efforts have seen good progress and our operations successfully improve the economic wellbeing of these communities through host community employment and procurement, as well as significant community investment projects. As a result, about a third of our total value creation during 2019, around US$782m, remained with our host communities.
My optimism about the future of the Company is not only based on its sound operational and financial performance in 2019, but also on its firm commitment to sustainability. This year, for the first time, Gold Fields reported no serious environmental incidents. We are also making early and successful forays into renewable energy at our Australian mines, thus further reducing our carbon footprint.
Above all, I have the utmost faith in the people of Gold Fields – our achievements would not be possible without them. While relatively young, the team is dedicated, hard-working and skilled. And, pleasingly, increasingly diverse. We strongly back a further increase in the diversity and gender representation in the workforce, which is captured in a formal diversity policy approved by the Board last year.
We have made reasonable progress on diversity to date. Around 20% of our total workforce and management are now female, half of whom work in core mining activities. Furthermore, about half of management and technical positions at South Deep are held by Historically Disadvantaged South Africans (HDSA), while we also seek to reflect the diversity of the countries we work in among the workforce at all our mines. We aim to do better, but we believe this is a good first step as we seek to attract more women to our mines around the world and further entrench diversity among our workforce.
Our commitment to the safety and health of Gold Fields’ employees and the people impacted by our mines, particularly those from our host communities, remains the most critical part of our work. Turning to safety first, the Board shares management's commitment to eliminate all fatalities and serious injuries. Tragically, however, we recorded one fatality – that of Maria Ramela, a trackless crew leader at South Deep – and 12 serious injuries. We owe it to Maria and the countless other miners who have lost their lives over the years that we further intensify our efforts until we have achieved zero harm. During 2019, we did however make significant improvements in our safety culture, systems and leadership, and we saw a decline in the number of serious injuries, as well as the severity of these injuries.
When it comes to safety, occupational health and operational issues that have the potential to adversely impact our people and communities, the Board often gets more directly involved. For example, we have worked closely with management in ensuring that the governance and management of Gold Fields’ 34 tailings facilities are monitored regularly. This included mine visits to all facilities by a member of the Board. This issue has moved up the Board’s agenda following the tragic tailings failure at Brumadinho in Brazil during January 2018, which took the lives of 270 people. We have also actively participated with the International Council on Mining & Metals (ICMM) in the formulation of new global tailings standards.
This year, the Board also welcomed the final court endorsement of the R5bn (US$380m) settlement reached between six gold mining companies, including Gold Fields, and attorneys representing ex-mineworkers suffering from Silicosis and Tuberculosis (TB). An independent trust is set to start paying out settlements around mid-2020. It cannot come soon enough for the thousands of affected ex-mineworkers and their relatives.
Finally, and most critically at present, we fully support management’s proactive and comprehensive approach towards mitigating the impact of the Covid-19 (coronavirus) pandemic on our people, as well as its full adherence to all relevant government regulations, culminating in the lockdown of many of the countries in which we operate. For further details see the CEO Report.
During 2019, there were no changes to the Board or Executive Committee (Exco) of the Company. I am confident that we can maintain this stability and retain this team of dedicated, able men and women. Their experience, knowledge and commitment was undoubtedly a key reason for Gold Fields’ success in 2019. However, this does not absolve the Board from its critical duty to ensure succession for the most critical roles within the Company. Succession planning has moved up in the Board’s agenda over recent years, and we are applying our minds to ensure continuity when key members of the executive retire or leave.
I would like to end by thanking my fellow directors and Gold Fields’ executive leadership team along with the employees of this Company for their dedication and commitment to the sustainability of our business. The successes of 2019 are a tribute to them.