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Arrow F2009 Financial Highlights
Arrow Message from the Chairman
Arrow Board of Directors
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Arrow Message from the Chief Executive Officer
Arrow Gold Fields at a Glance
Arrow South Africa Region
   Arrow Driefontein Gold Mine
   Arrow Kloof Gold Mine
   Arrow Beatrix Gold Mine
   Arrow South Deep Project
Arrow West Africa Region
  Arrow Tarkwa Gold Mine
  Arrow Damang Gold Mine
Arrow Australasia Region
  Arrow St Ives Gold Mine
  Arrow Agnew Gold Mine
Arrow South America Region
  Arrow Cerro Corona Gold Mine
Arrow Exploration and Business Development
Arrow Mineral Resources and Reserves
   
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MESSAGE FROM THE CHAIRMAN

Alan J Wright - Chairman Most importantly, we have made progress with our number one priority: to improve our safety record. We reduced fatal accidents substantially and showed an improvement of 55 per cent…

The 2009 financial year has been a year of remarkable change and challenge globally, and for Gold Fields specifically.

While the effects of the economic turmoil were brought upon us harshly early in the year, I am pleased that we have, nonetheless, maintained a strong focus on advancing our strategy and, in the process, achieved great accomplishments. I can confidently state that Gold Fields is today in a much stronger position than 12 months ago.

Most importantly, we have made considerable progress with our number one priority: to improve our safety performance. We reduced fatal accidents substantially and showed an improvement of 55 per cent, with fatalities declining from 47 in F2008 to 21 this year. Despite this improvement, we deeply regret each one of these fatalities and we are committed to eliminating all serious and fatal injuries on our mines. Significantly, our developing South Deep Gold Mine in South Africa has been fatality free for the past year, as have all of our mines in West Africa, South America and Australasia. All other safety measures, globally, have also shown considerable improvement.

The Board is fully supportive of the safety initiatives being implemented by the management team, under the capable leadership of Nick Holland, the Chief Executive Officer. Understanding that we had to change radically our safety culture and performance, and with a full mandate from the Board, Nick and his team have, over the past year, conducted an all-encompassing re-examination of the Gold Fields approach to safety. Following this assessment, various initiatives have been successfully introduced, while others are in the process of being implemented. The Board is satisfied that these interventions are having the desired effect and that there has indeed been a step change in our approach to safety. This is now an integral part of the way Gold Fields conducts its business.

Gold Fields’ operations have progressively over the past year shown greater stability, predictability and consistency, which resulted in more profitable and sustainable operations in the second half of the financial year, and have established a platform for improved performance in the year ahead. Attributable gold production decreased by six per cent from 3.64 million ounces for the year ended June 2008 to 3.41 million ounces produced in F2009. Revenue increased by twenty six per cent from R23,010 million (US$3,165 million) to R29,087 million (US$3,228 million). The thirty three per cent higher average Rand per kilogram gold price of R253,459 per kilogram (US$875 per ounce) compares with last year’s R190,623 per kilogram (US$816 per ounce). Earnings excluding exceptional items, gains and losses on foreign exchange and financial instruments, losses of associates after taxation, and discontinued operations, amounted to R2,981 million (US$331 million) compared with R2,939 million (US$404 million) in F2008.

One of the consequences of the collapse of the global debt markets is that, by and large, junior exploration companies have considerably slowed their exploration and development activities. In addition, the number of new mines coming into production is generally less than historically expected, driven predominantly by the lack of a quality pipeline of new projects – mainly because of increased legislative and social challenges, a lack of investment, and no major technological advances. As a consequence, gold production globally is somewhat subdued and greenfields exploration continues to suffer from reduced investment.

On the other hand, demand for gold, driven in part by the rapidly increasing middle classes of certain emerging countries, continued tensions in many parts of the world and instability in some resource-rich African regions have, together with the maturing of the gold Exchange Traded Funds (ETF) business, reinforced the role of gold as a reliable store of value. After taking all of this into account, it seems as if the gold price could well be sustained at least at current levels, while significant upside potential exists.

Against this background, we believe that Gold Fields is uniquely positioned to benefit from what we believe to be a rising tide in the gold market, and it is our intent to ensure that the interests of those who own our company, rise with the tide.

Our vision is for Gold Fields to be the global leader in sustainable gold mining.

The simplicity of this vision statement belies the thoughtful consideration given to the meaning and intent of each word, and therein lies its power. Our strategy was crafted accordingly.

At the core of our strategy is our long-standing conviction not to hedge our gold, because we believe in gold.

  • The first pillar of our threefold strategy is to “sweat our assets” – with attributable Mineral Resources in excess of 270 million gold equivalent ounces and attributable Mineral Reserves of some 80 million gold equivalent ounces, our first priority must be to bring these ounces to account in the most cost effective way. We have a world-class suite of mines and we know that each one of them is capable of more. It is for this reason that we have mandated the management team to increase investment, inter alia, in the integrity of our infrastructure, mechanisation and new technologies, and ore reserve development. These investments will not only enhance the stability, predictability and consistency of the operations, but enable them to ascend to greater levels of productivity and profitability, which is the principal objective of this strategy.
  • The second leg of our strategy is to “grow Gold Fields” – not simply for the sake of growth but growth in profitable production, earnings and returns to shareholders on a per share basis. Our objective is not merely to add ounces, but to add ounces that will improve the quality of our asset base. Furthermore, while we do not eschew the value that can be added through mergers and acquisitions, our preference is to leverage our vast Reserve and Resource base for brownfields growth, as well as to pursue growth through greenfields exploration success. Our target is, within a four to five year time-frame, to grow Gold Fields into a five million ounce per annum producer. To this end we have mandated the management team to pursue an aggressive internationalisation strategy, focused principally on the four well-endowed gold regions of the world where we have an operating presence. With South Africa expected to provide a stable production base-load of between 2.2 and 2.5 million ounces for many years into the future, we aim to grow attributable production to a million ounces per annum in each of West Africa, Australasia and South America. Management has also been mandated, with a view to the future, to establish a presence in what we consider to be the new frontiers of the gold industry – the Tian Shan belt in Asia and British Columbia in Canada.
  • The third leg of our strategy is to “secure our future” – founded in 1887, Gold Fields has served shareholders in the 19th, 20th and 21st centuries. As a Board we take this legacy seriously and we view the longevity of the company as central to our mandate. It is for this reason that we have embraced the concept of sustainable development and mandated the management team to secure the long-term sustainability of our business by giving due attention to the many social, environmental and economic considerations that will undoubtedly have a bearing on the future and that of the many and varied stakeholders throughout the world.

Our strategy to expand Gold Fields outside South Africa has advanced over the years and this year marked the end of significant capital programmes at both Tarkwa and Cerro Corona. We are particularly pleased that the Cerro Corona mine is now fully commissioned and at full production because this is an important step in the evolving of our strategy. As I indicated above, South America is one of the three international regions in which we intend to grow, and the Cerro Corona mine provides us with a solid platform from which to venture forth. Based on the current mines in operation, production from West Africa, South America and Australasia is now over one and a half million ounces of gold and these regions are now in a position to make an important contribution to the Group’s income stream. A direct result of this achievement is that the Group’s profile and attractiveness to international investors has been broadened considerably. We are also particularly pleased with the quality and quantum of advanced exploration projects in the portfolio, with an equally pleasing level of early stage possibilities not far behind.

In the South Africa Region we are satisfied with the progress that has been made with the South Deep Project. South Deep is indeed the mine of the future, in more ways than one. As a totally mechanised mine it is at the core of our long-term strategy in South Africa, and will in due course become the mainstay of our production from this region.

Our businesses continue to face major challenges. Climate change imperatives are at the forefront of our decision making processes and efficient energy usage has been a primary focus over the past year. While the economic downturn may have lessened electricity supply pressures, significant investment in electricity capacity is still required, especially in South Africa. For this reason, we have participated in various initiatives to assist in alleviating this concern. Example are our commitment in Ghana to share in the construction costs of a facility that will provide power to communities and operations in the areas in which we mine, while in South Africa we continue to implement energy savings initiatives on all of our mines in order to conserve power.

Another pleasing development over the past year was our continued focus on the nurturing of talent in the organisation. Various interventions are underway to ensure that we continue to have sufficient and appropriately skilled people for our existing operations around the world, as well as for any new operations as we continue to expand globally. There have been numerous senior appointments made from within the Group over the last twelve months, which is an indication that our succession plan is working. The challenge today is to identify, develop and nurture another generation of people that will have the capability to lead Gold Fields into the next decade and beyond.

Equally important is the relationship with our employees and employee representative organisations and unions in the various jurisdictions in which we operate. I am pleased to report that the relationships with all of these organisations remain fundamentally sound and that we have experienced a growing maturity and pragmatism in all interactions with them.

In March 2009, Standard and Poor’s Rating Services assigned Gold Fields a “BBB-/A3” long-term and short-term global corporate credit rating and “zaA/zaA-1” long-term and short-term South Africa national scale corporate credit rating. The long-term ratings refl ect Gold Fields’ satisfactory business risk and intermediate financial risk profiles, while the short-term ratings reflect Gold Fields’ adequate liquidity. The satisfactory business risk profile reflects our market position as the world’s fourth largest gold producer, an industry-leading long reserve life of over 20 years, and healthy profitability underpinned by persistently strong gold prices. The stable outlook reflects the expectation that Gold Fields should continue to report healthy cash flow generation, supported by ongoing strong gold prices and a weak exchange rate.

In terms of the R4.1 billion Black Economic Empowerment (BEE) transaction approved by shareholders of Gold Fields during March 2004, Mvelaphanda Resources, through its wholly owned subsidiary Mvelaphanda Gold, subscribed for approximately seven per cent of the ordinary shares of Gold Fields, in March 2009.

On behalf of the Board of Gold Fields I welcome the newly appointed Presidents of South Africa and Ghana into office. The support and commitment of Gold Fields as a responsible operator and dedicated corporate citizen will be maintained, as it has been in all the areas in which we operate.

At the end of April 2009, the Department of Mineral Resources (DMR) gazetted the “Codes of Good Practice for the South African Minerals Industry”. This is an attempt to set out administrative principles for effective implementation of the minerals and mining legislation and to enhance implementation of the Broad-Based Socio-Economic Charter applicable to the industry. These codes are aimed at how BEE will be measured. The DMR has indicated that it intends to discuss the new codes with industry and we remain supportive of dialogue as this will create common understanding between all the stakeholders.

On behalf of the Board, I would like to express my appreciation to the management team, as well as all employees, for the tremendous commitment displayed over the year. Your dedication has been outstanding.

I also pay tribute to my fellow directors for the considerable effort and contribution made during the last twelve months. In November 2008, Rick Menell joined the Board, and in March 2009 we welcomed Cheryl Carolus and Roberto Dañino to the Board. We have already benefited greatly from the experience and deep knowledge that Rick, Cheryl and Roberto have brought to Gold Fields. More recently, on 21 August 2009, we welcomed Alan Hill to the Board of Directors. Alan is a former executive of Barrick Gold Corporation, and a mining engineer, and his vast experience will be of great benefit to Gold Fields.

Early in August of this year, after the period covered by this report, but prior to its publication, the President of South Africa announced the appointment of Gill Marcus, one of our fellow directors, as the new Governor of the Reserve Bank of South Africa. Gill accepted the appointment and consequently resigned from the Board, with immediate effect. On behalf of my fellow directors and all of the people of Gold Fields, I wish to congratulate Gill on her appointment and thank her for the immense contribution that she has made to Gold Fields. While we regret her departure, we know that we will continue to benefit, together with the rest of South Africa, from her wisdom and leadership as she assumes her important new role.

Looking towards next year, we are well positioned to continue progressing our strategy, and in doing so, delivering on the targets and objectives that we have set for ourselves, whilst being ever mindful of our responsibility to our communities. Gold Fields and its people remain committed to ensuring a strong and sustainable future for all of our stakeholders, for today and tomorrow.

Thank you for your ongoing support.

Alan J Wright
Chairman