Risks and opportunities
Assessing the risks to Gold Fields' sustainability is a collective effort by management at Group, regional and operational levels. This, along with identifying the appropriate mitigating actions, is a critical internal management tool to reduce the potential impacts of identified risks.
Risk mitigations are included in the annual Group performance scorecard and cascaded down to the performance scorecards of management employees at regional and operational levels. The formal risk review process starts during management's annual strategic planning sessions, where strategic and emerging risks, as well as macro-trends, are analysed as part of developing the Company's risk register and mitigating actions. These are reviewed and updated quarterly and presented to the Board's Risk Committee twice a year for verification. As a global company, we continue to be shaped by the external dynamics in the regions where we operate. We discuss the impact of longer-term, emerging global trends in general and in Gold Fields in Emerging global trends.
Top 20 Group risks in 2020
| RISK | MITIGATING ACTION | |||
|
1 |
Covid-19The impact of Covid-19 on our employees, communities and business plan |
Our mines adhere strictly to the recommendations of the World Health Organization (WHO) as well as country-specific regulations, government decrees and protocols. Furthermore, we circulate hygiene awareness campaigns, implement social distancing programmes, and screen, test and monitor our employees across the Group. More recently, we started collaborating with governments to secure vaccines for our workforce while also providing infrastructure and know-how for the roll-out of their vaccination plans. We are also looking at ways of entrenching "new normal'' such as remote working and restricted travel in our ways of working. | ||
| 2 |
Gold/forex exchangeGold price and currency exchange rate volatility Potential impact of Covid-19 The gold price traded above US$1,800/oz since the start of the pandemic. Investors turned to gold as a safe haven following the outbreak of Covid-19 and the resultant global economic uncertainty. With the pandemic abating and greater political certainty following the US elections, investors have started to sell gold and gold stocks. |
We design our business plans based on a conservative gold price and set free cash-flow targets for our operations. These plans are then monitored through monthly and quarterly cost, capital and production reviews, where we discuss and implement remedial action, if required. We do not hedge metal or foreign exchange prices, unless we seek to protect cash-flows at times of significant capex or to address specific debt servicing requirements. | ||
| 3 |
South DeepLoss of investor confidence due to non-achievement of the mine's business plan |
South Deep achieved its Covid-19 risk-adjusted business plan of 7,000kg (225koz) at AIC of R610,000/kg (US$1,394/oz). The South Deep team will continue to use their established management system to drive disciplined execution of the mine's business plan, while implementing business improvement initiatives across the value chain to position the mine for sustainable production. | ||
| 4 |
Resource nationalismResource nationalism, regulatory uncertainty and government imposts Potential impact of Covid-19
The economic impact of the Covid-19 pandemic will likely be felt for the near future, and we expect that governments will eventually seek additional tax income from corporations. The gold industry could be a specific target, as governments perceived it to have benefitted from a higher gold price. |
Gold Fields, on its own and in conjunction with its peers, seeks to address the trust gap that often exists between government and miners. Our government action plants rely on strengthened engagement with governments at all levels, continued roll-out of Shared Value projects that benefit host communities and improved communication on the socio-economic benefits of mining for host countries and host communities. Legal actions are only considered as a last resort and then mostly with our peers in a country of operation. The Board is appraised of social and political risks annually through external reports. |
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| 5 |
Mineral Resources and Mineral ReservesReplacing Mineral Resources and Mineral Reserves in Australia, Ghana, Peru and Chile |
We continue to evaluate value-accretive opportunities to expand our business, including acquisitions, disposals, JVs, new mine builds and other strategic projects. The construction of our latest project, Salares Norte, is progressing against plan, and we have provided for additional exploration budget. Our regions all have comprehensive near-mine/on-site exploration programmes in place, and we monitor our performance against these programmes during our quarterly business reviews. Over the past 10 years, our Australian mines have consistently replaced depleted Mineral Reserves and more. | ||
| 6 |
Mining costsRising mining costs, including those relating to ESG Potential impact of Covid-19
Mining companies were already exposed to higher inflation prior to the pandemic, and Covid-19 may lead to additional costs. |
We have business, productivity and cost improvement processes and programmes in place at all our operations, which are supported by the implementation of our innovation and technology strategy to reduce costs and enhance revenue generation. We have monthly and quarterly business cost and capital reviews in place to ensure spending remains in line with plans. Each mine provides cost guidance to the market at the beginning of the financial year. | ||
| 7 |
SafetySafety and health of our employees, including occupational illnesses |
The safety, health and wellbeing of our employees is paramount. With safety as our number one priority, we continuously review and upgrade our safety systems, cultures and programmes. In 2019, we implemented our Courageous Safety Leadership programme throughout the Group, which is complemented by critical controls, behaviour-based safety and Visible Felt Leadership programmes in all our regions. All operations are certified to the leading ISO 45001 health and safety standard. | ||
| 8 |
EnergySecurity of power supply and cost of energy |
Over the past five years, we have gradually replaced diesel with low-carbon gas as the main form of electricity at our Ghanaian and Australian mines. More recently, we have shifted to renewable energy, which not only secures stable and cost-effective supply but also reduces our carbon emissions. In Australia, we commissioned renewable microgrids, supported by battery systems, at Granny Smith and Agnew and advanced plans to install a similar microgrid at Gruyere. Most recently, South Deep received regulatory approval for its 40MW solar plant and, at Salares Norte, Aggreko signed a 10-year contract to provide a 26MW hybrid solar and thermal power solution once the mine is operational. | ||
| 9 |
Climate changeFailure to implement climate change adaptation measures Potential impact of Covid-19 The focus on climate change issues was only temporarily abated because of the pandemic. While governments have prioritised Covid-19 recovery funding, investments in climate change programmes were generally not affected. |
Given the growing concern and uncertainty around extreme weather events, we are reviewing our climate change vulnerability risk assessments and, where necessary, adapting our approach in response to the changing environment. We continue to enhance the resilience of our operations - by, for example, rolling out renewable energy initiatives - while also improving our disclosure and implementing measures to adapt to climate-related changes at an operational level. We periodically assess and, where possible, mitigate the impact of climate change on our operations and our host communities. | ||
| 10 |
CybercrimeCybercrime/loss of information and communication technologies (ICT) data Potential impact of Covid-19
Cybercrime increased significantly during the pandemic, with cybercriminals taking advantage of employees working from home with limited ICT protection in place. |
We continue to protect operational technology to decrease disruptions and ensure business continuity. Due to the dramatic increase in cybercrime globally, we implemented a software platform across the Group to safeguard infrastructure critical to our sustainability. Furthermore, we embedded additional software precautions at the onset of Covid-19 to protect our business against attacks as our people transitioned to home offices. All our mines and offices achieved ISO 27001 cybersecurity certification in 2020. | ||
| 11 |
Social licenceImpact on social licence and relationships with host community Potential impact of Covid-19 The pandemic escalated economic hardships in our host communities, who now have heightened expectations that our mines will provide financial and other assistance to alleviate their burden. |
We continue to strengthen the relationships with our host communities through enhanced stakeholder engagement and community relations programmes. Furthermore, we continue to invest in Shared Value projects that benefit our operations and host communities in Ghana, Peru, Chile and South Africa. This focuses on host community employment, procurement and SED investments. In Australia, we developed an Indigenous Peoples framework and strategy for approval and implementation, as well as a Reconciliation Action Plan (RAP) to guide relations with and create opportunities for Indigenous Peoples at our mines. | ||
| 12 |
SkillsAttraction and retention of skills Potential impact of Covid-19 For now, the negative global financial and business impacts of Covid-19 resulted in a decrease in our turnover rate in most of the regions where we operate. The longer-term impacts of the pandemic, such as remote working and reduced travel, will fundamentally change the way we work. |
Gold Fields' business depends on fit-for-purpose human resource (HR) structures to meet operational requirements. We focus on developing a high-performance culture through our performance management system and by having the appropriate succession plans and talent reviews in place. Above all, we seek to provide competitive and incentive-focused remuneration packages that attract and retain sought after skills. We have also developed and implemented a diversity and inclusion dashboard, to track our progress in building a more diverse workforce. | ||
| 13 |
WaterWater pollution, security and reduction in freshwater consumption |
All our operations are certified to the ISO 14001 environmental standard, which require sound water management and disclosure. Furthermore, we developed and integrated three-year regional water management plans with our 2021 business plans at all our operations. Finally, water recycling, reuse and conservation practices are in place in all regions, with targets achieved for 2020. | ||
| 14 |
GeotechnicalIncreased geotechnical risk underground and in open pits associated with mining at depth, ageing pits and evolving mining operations |
Work conducted by the Geotechnical Review Boards, consisting of independent and in-house industry experts, continued at South Deep for all major projects, the Australian underground operations, when necessary, and for all pit cutbacks at our other operations in Australia, Ghana and Peru. | ||
| 15 |
Ghana contractorsChallenges with local mining contractors in Ghana |
We are working closely with the two Ghanaian mining contractors at our Tarkwa and Damang operations to ensure that they meet their contractual obligations to the mines while at the same time remaining financially sound. This has required renegotiations of their contracts and bringing in OEMs to provide technical assistance for fleet maintenance, as well as financial support to provide debt relief and to procure additional fleet. | ||
| 16 |
ChileDelays and cost overrun relating to the Salares Norte project |
With construction starting at Salares Norte during 2020, our team implemented robust project control systems. Performance against our project plan is monitored weekly and monthly and is tracking against plan. We continue to adhere to government-related Covid-19 restrictions, rules and laws, and have increased camp capacity to accommodate the required workforce. The team also maintains a close working relationships with authorities, environmentalists and local communities on the Chinchilla relocation project. | ||
| 17 |
Political risksPolitical uncertainty in the areas where we operate |
Our strategy of geographic de-risking towards mining-friendly jurisdictions ensures that we operate in countries in which political risks are limited in the first place. Continuous engagement with our host communities and governments, either directly or through industry associations, is a primary tool in seeking to address emerging political risks. We conduct political risk assessments on a regular basis in all the countries in which we operate. | ||
| 18 |
InfrastructureAgeing infrastructure Potential impact of Covid-19 The pandemic illustrated that automation and digitisation are going to be major themes in mining – not just as a way to lower costs and improve productivity, but also to support remote workforces and reduce on-site presence. |
Planned on-site maintenance and condition monitoring, which is conducted by third-party specialists, is key to ensuring the integrity of our fixed assets. Critical and long lead-time spares are kept on-site, and maintenance of critical spares is ongoing. To complement this, we instituted a process of independent risk management, fire prevention and infrastructure audits, which are conducted annually by insurance risk engineers and third parties. However, some of the inspections could not be carried out due to Covid-19 restrictions. We have sought in-country expertise to carry out independent assessments, where necessary. | ||
| 19 |
Information and technologyFailure to modernise operations |
We continue to implement our innovation and technology strategy in pursuit of a Gold Fields Mine of the Future. As part of this, we have real-time software and telecommunications in place to track movement of equipment, people and production. We also work closely with original equipment manufacturers (OEMs) and suppliers to ensure that we are fast followers of new, beneficial mine technologies. A shift to renewable energies as well as the roll-out of electrical machinery and equipment also helps to modernise operations, while at the same time improving costs and safety. | ||
| 20 |
EZULWINI AND COOKE 3, 2 AND 1rewatering impact on South Deep |
The reinforced concrete water plugs between South Deep and Ezulwini are subject to robust inspections, regularly planned maintenance and a condition-monitoring programme to ensure their integrity. There is a legal process for Ezulwini's closure in place, in which we participate as an interested party backed by a robust legal strategy. South Deep is also seeking to work with Ezulwini to find alternative solutions to use the mine water. | ||