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Report from the Chief Executive Officer

Message from the Chief Executive Officer

"Our goal is to operate sustainably over the medium to long term at a 25 per cent free cash-flow margin on a NCE basis."

Introduction

Dear shareholders

In reviewing the performance of Gold Fields over the past year, the one fact that stands out is that the company offers investors an outstanding value opportunity in the current rising gold price environment. As we move forward we aim to advance our overarching strategic objective of generating free cash flow, and growing the Notional Cash Expenditure (NCE) margin on every ounce of gold we produce.

We believe that the following strategies, all of which are in the process of being implemented, will move us towards that objective and so underpin our value proposition to investors.

[ Strategic objective 1: Safe production ]

In addition to being our first value and an overarching moral imperative, safe production is the single most important driver of sustainable, profitable production. During financial 2010 we achieved a second record safety year in succession with appreciable improvements on all important safety indicators. In particular we saw a further 14 per cent reduction in the number of fatal injuries at our mines in South Africa, which follows on a 55 per cent improvement in financial 2009. All of our international mines were free of fatal accidents during financial 2010.

During financial 2010 we achieved a second record safety year in succession. The significant improvement in safety in general, and the more than 60 per cent improvement in fatal injuries in the South Africa Region over the past two years, in particular, together with the reduction of associated, often extended and unplanned safety closures, should reflect in increased production going forward.

As a result of the significant improvement in safety in the South Africa Region over the past two years, as well as closer co-operation with the Mining Inspectorate of the South African Department of Mineral Resources (DMR) in January 2010, we did not experience any extended unplanned safety closures at our mines during the second half of financial 2010. This is a trend which we intend to continue into financial 2011 and beyond.

While our ultimate goal is the total elimination of all serious and fatal injuries, we are planning a further 25 per cent improvement in all safety indicators at our mines in the South Africa Region as well as our international mines for the 12 months to end-June 2011. We will further enhance our extensive safety interventions with a new focus on “engineering out” safety risks, and advancing compliance by winning the hearts and minds of our people through positive behaviour re-enforcement.

The significant improvement in safety in general, and the more than 60 per cent improvement in fatal injuries in the South Africa Region over the past two years, in particular, together with the reduction of associated, often extended and unplanned, safety closures, should reflect in increased production going forward. Our health and safety interventions are discussed in more detail on pages 17 and 18 of this report, as well as on pages 107 to 109 of the sustainability section of this annual report.

[ Strategic objective 2: Growing the free cash flow margin per ounce produced ]

Gold Fields’ overarching strategy remains focused on the three core pillars of sweating our assets; growing Gold Fields; and securing our future, all aimed at enhancing our ability to generate free cash flow as measured on a Notional Cash Expenditure1 (NCE) basis.

While this strategy remains fully relevant and in place, the emphasis over the next 12 months will be on establishing and maintaining a 20 per cent NCE margin, up from the 15 per cent achieved during financial 2010. To this end a comprehensive Business Process Re-engineering project has commenced at all three of the established South African mines (Driefontein, Kloof and Beatrix), Tarkwa in Ghana and St Ives in Australia.

During financial 2011 the emphasis will be on establishing and maintaining a 20 per cent NCE margin, up from the 15 per cent achieved during financial 2010.

The region specific interventions are discussed in more detail in the regional overviews.

[ Strategic objective 3: A rising production trend ]

Gold Fields is on a rising production trend. During financial 2010 our attributable production increased by three per cent from 3.41 to 3.50 million ounces of gold. By mid-calendar 2011 we are planning to increase output to between 3.50 and 3.80 million attributable gold equivalent ounces2, as we continue to build up towards our strategic goal of approximately five million attributable ounces of gold, either in development or in production, by 2015. It is important to note that we aim to grow our production on a per share basis, which means growth without diluting shareholder value.

The target of five million ounces is underpinned by:

  • The completion of the South Deep project in South Africa and the build-up to its full production run rate of between 750,000 and 800,000 ounces per year by the end of 2014;
  • A return to stability and consistent production from the three mature mines in the South Africa Region (Driefontein, Kloof and Beatrix), albeit at lower levels than achieved in previous years, but similar to financial 2010 levels. This will be achieved on the back of the significant improvement in safety recorded over the past two years and the consequent reduction in unplanned safety closures, as well as an increase in ore reserve development and mining flexibility over the next two to three years;
  • A wide range of near mine and organic growth opportunities at our existing mines in the West Africa, Australasia, and South America regions; and
  • A rapidly maturing greenfields exploration pipeline headed by four advanced stage projects, of which at least two, Chucapaca in Peru and Yanfolila in Mali, are expected to reach construction decisions within the next three years.

Gold Fields is on a rising production trend. We are planning a further increase in production, to between 3.5 and 3.8 million attributable ounces of production by the second quarter of 2011, as we continue to build up to our strategic goal of five million ounces of gold, either in development or in production, during 2015.

Inherent in the 2015 target of five million ounces is the objective of rebalancing the portfolio by sourcing around 60 per cent of our production from our three international regions and approximately 40 per cent from the South Africa Region by 2015. During financial 2010 we saw attributable international production increase by 13 per cent from 1.38 million ounces to 1.56 million ounces and the geographic distribution of our production diversity further to 45 per cent from our international regions and 55 per cent from the South Africa Region. This compares with 40 per cent from our international regions and 60 per cent from the South Africa Region during financial 2009.

In support of this objective our exploration budget for the next four quarters is about US$150 million, almost unchanged from the financial 2010 number, which reflects the continued strong quality of the projects in the portfolio as well as the increased evaluation activities at the more advanced projects in the pipeline. All of the near mine and greenfields projects referred to above are discussed in more detail in the Growth strategy section on pages 21 to 24, as well as in the Exploration and business development section on pages 64 to 69.

[ Strategic objective 4: Maintaining a strong balance sheet ]

Considering the significant growth opportunities in the Group and amid continued tightness in bank lending, it is pleasing to report that Gold Fields’ balance sheet, already one of the healthiest in the industry, was further strengthened during financial 2010 with the completion of the restructuring of our debt profile.

During financial 2010 we accessed the commercial paper market in South Africa to benefit from lower interest rates. This was backed up with three to five-year committed facilities. We also completed the re-financing of a US$311 million facility with a US$450 million purchase, with tenure of three-and-a-half years. These transactions enabled the Group to significantly reduce its interest bill in financial 2010 and should result in improving our cost of funding going forward.

With net debt of only US$620 million, strong free cash flows and available secured credit facilities in excess of US$1 billion, Gold Fields is in an excellent financial health and able to fund the majority of its growth projects from existing sources.

As at 30 June 2010, Gold Fields had net debt of R4,697 million (US$620 million), comprising R5,232 million (US$691 million) short-term and R3,255 million (US$430 million) long-term debt with cash of R3,790 million (US$501 million). In addition the Group has a liquid investment portfolio, consisting primarily of investments in Mvelaphanda Resources (3.9 per cent) and Russian resources group Rusoro (26.4 per cent), which was valued at R627 million (US$83 million) at the end of June 2010.

With net debt of only US$620 million, positive free cash flows and committed credit facilities in excess of US$1 billion, Gold Fields is in excellent financial health and able to fund the majority of its growth projects from internal cash flows and existing sources. Over the next few months Gold Fields will continue to explore ways to further strengthen its balance sheet without diluting shareholder value and, specifically, to avoid dilution of the amount of gold produced on a per share basis.

During financial 2010 Gold Fields sold its 19.9 per cent stake in Sino Gold Limited to Eldorado Gold Corporation for a total consideration of approximately US$282 million paid in Eldorado shares, earning Gold Fields a profit of US$57 million. The Eldorado shares, including a subsequent “top-up”, were sold in financial 2010 for US$361 million earning a profit of US$46 million.

Table 1

The table sets out progress made against strategic objectives set for financial 2010

Strategic objective 1

To further enhance our health and safety performance.

During financial 2010 we saw a further significant improvement in the overall safety performance of the Group with the achievement of a second successive record safety year. In particular, the all-important Fatal Injury Frequency Rate improved by a further 14 per cent over the record improvement achieved in financial 2009 – fatal injuries improved from 22 in financial 2009 to 18 in financial 2010 while the serious injury frequency rate improved by 20 per cent. The first follow-up health and safety audit by DuPont in the South Africa Region indicated a significant improvement in the overall safety culture in the region, which indicates that our efforts to boost safety on a sustainable basis are delivering results, and that our first value, if we cannot mine safely, we will not mine, has been thoroughly entrenched throughout the company.

Strategic objective 2

To increase development and open up our ore bodies, in particular at Driefontein, Kloof and Beatrix in the South Africa Region, which will improve flexibility and underpin more stable production.

During financial 2010 overall development at these three mines increased by two per cent from 75,542 meters to 77,188 meters. However, the all-important mechanised flat-end development on all of the long-life shafts, which is critical to move us towards our ultimate goal of 24 months of opened-up ore reserves, increased from a total of 36 per cent during financial 2009 to 68 per cent by the end of financial 2010. This lays the foundation for achieving the target.

Strategic objective 3

To maintain momentum in the build-up of South Deep towards its target of producing between 750,000 and 800,000 ounces per annum by the end of 2014.

During financial 2010 gold production at South Deep increased by 52 per cent from 175,000 ounces in financial 2009 to 265,000 ounces. During the year a new capital control system, the PRISM system, was implemented at the mine to improve controls over capital expenditure. The mission critical shaft deepening project at the ventilation shaft commenced on schedule on 14 April 2010 and full calendar operations (Fulco) were re-introduced to underpin the planned production build-up over the next few years.

Strategic objective 4

To achieve greater stability, predictability and consistency in production, and to work towards a target of producing between 925,000 and 950,000 attributable ounces per quarter and between 3.50 and 3.80 million ounces for the 12 months to end-June 2011.

During financial 2010 Group gold production increased by two per cent from 3.4 to 3.5 million attributable ounces, which is within five per cent of the targeted quarterly range of between 925,000 and 950,000 ounces. It is also a significant improvement over the historical ten per cent planning gap between targets and actual production. To achieve greater stability, consistency and predictability in production performance, significant enhancements were made to the planning and forecasting systems on the mines.

Strategic objective 5

To increase skills levels across the company by improving our ability to attract and retain key personnel through a more aggressive programme of recruitment, review of remuneration models, and enhancing our education and training initiatives.

During financial 2010 significant progress was made to improve the ability of the Group to attract and retain key personnel and several initiatives were launched to address critical skills shortages. These are described on of page 26 my report as well as on pages 100 to 105 of the sustainability report. In addition, progress was made in providing technical services and capital project management skills to the international regions through the appointment of an Executive Vice-President, International Technical Services and Capital Projects, and the establishment of a specialist team of technical experts. They will provide the international regions with the required technical leadership as well as project management skills for capital projects.

Strategic objective 6

To further improve our performance in the field of sustainable development and, in particular, to improve our environmental footprint.

During the year under review the Gold Fields Sustainable Development Framework was embedded in the company. A wide range of projects was undertaken across all our mines to further enhance their sustainability. These range from social and community development projects to the commitment to further improve our environmental compliance in all of the regions in which we operate. These initiatives are described in more detail in the sustainable development section of this report. In addition a comprehensive review of environmental compliance was conducted in the South Africa, Australasia and West Africa regions and action plans formulated and implemented to address weaknesses and further improve environmental compliance.

Strategic objective 7

To further entrench the regionalisation strategy by bolstering the new executive teams in each of the regions, to drive the operational performance and advance our growth strategy.

During financial 2010 the new regional organisation structure was fully implemented and new executive teams put in place. The supporting structures in the regions are now being optimised. As a consequence of moving operational support and control from the corporate office to the regions, the corporate office in Johannesburg was rationalised to focus on the formulation and implementation of Group strategy; policies and standards; deciding on the allocation of capital; and the performance of Group quality assurance and quality control.


Table 2

The table sets out the specific objectives we have set ourselves over the next year

Strategic objective 1: Safety

To improve performance against all safety indicators by at least 25 per cent in the South Africa Region and by 20 per cent in the international regions.

Strategic objective 2: Production

To improve the key controllable elements of the business, namely mining mix, quality and volume, with a view to producing between 3.50 and 3.80 million attributable ounces of gold during the 12 months to end-June 2011.

Strategic objective 3: Notional Cash Expenditure margin

To achieve an NCE margin of 20 per cent in the 12 months to end-June 2011 across the Group. To this end a Business Process Re-engineering programme is being implemented at the Driefontein, Kloof and Beatrix Gold Mines in the South Africa Region as well as Tarkwa in Ghana and St Ives in Australia. This will entail a significant focus on operating costs, the rationalisation of on-mine and regional overhead cost structures and a review of the mine-to-mill processes.

Strategic objective 4: Regional organisational structure

To further strengthen the new Regional Organisational Structure and to optimise the supporting structures in the West Africa, Australasia and South America Regions for appropriately resourced operational, financial and human resources functions.

Strategic objective 5: Ore Reserve development and flexibility

Through increased Ore Reserve development to advance opening up of ore bodies to improve flexibility at the long-life shafts at Driefontein, Kloof and Beatrix. The aim is to achieve greater consistency and reliability of operational performance.

Strategic objective 6: Energy management and consumption

To develop strategies for the optimisation of energy management and consumption throughout the Group. Each region needs to offset known and anticipated cost increases by saving a further five per cent of electricity consumption up until the second quarter of calendar 2011.

Strategic objective 7: Skills requirements

To take the steps required to ensure that the Group has an adequate supply of critical skills in all key disciplines, specifically through competitive recruitment strategies and practices. Retention strategies are aimed at ensuring that existing employees are afforded opportunities for growth through improved education and training; talent management and mentorship; and leadership development.

Strategic objective 8: Group transformation

To significantly advance the transformation objectives of the Group in line with the requirements of the South African Mineral Resources Development Act of 2002 and the associated Mining Charter. These include the transformation of the Group’s Board of Directors and Executive Committee; the ongoing fulfilment of the Social and Labour Plan commitments at the South African mines; the implementation of the South Deep mining rights conversion; and the execution of the three transactions proposed for securing the 2014 requirements for Black Economic Empowerment ownership of the South African assets.

Strategic objective 9: Stakeholder relations management

To further advance positive and mutually beneficial relationships between the company and its many stakeholders, specifically governments, organised labour and host communities, in each of the jurisdictions in which we operate.

Strategic objective 10: Growth projects

To continue the momentum achieved in the production build-up at the South Deep project and to ensure the delivery of the milestones required to achieve the production target of between 750,000 and 800,000 ounces of gold by the end of 2014. To complete the construction of the Athena underground mine at the St Ives Gold Mine in Australia and to commence production early in calendar 2011. Furthermore, to complete the feasibility study of the Hamlet project and to commence construction also in the first quarter of 2011.

To complete the feasibility study and commence construction of the oxide plant at the Cerro Corona Mine in Peru during the first quarter of calendar 2011.

Health and safety

Gold Fields’ health and safety philosophy is premised on our most important value and the overarching moral imperative that if we cannot mine safely, we will not mine. This gives rise to the objective of striving towards a Zero Harm working environment for all our people.

This philosophy is informed, first and foremost, by the fact that there is no price to be placed on human health and safety. There is also the economic reality that a stable, predictable and consistent operational performance is possible only in an environment free from accident-induced interruptions to operations or other threats to the health and safety of employees.

While our efforts have met with appreciable success across all safety indicators during financial 2010, led by a further 18 per cent improvement in the number of fatalities at our South African mines, I deeply regret each one of the 18 fatal injuries that we were unable to prevent. My executive team and I consider each one of these incidents as a fundamental failure of our safety systems. I can only reiterate the personal commitment I made in last year’s annual report to eliminate all serious and fatal injuries on our mines. I am conscious of the magnitude of this extraordinarily challenging commitment and the moral and commercial implications for our company of a failure to do so.

During financial 2010 the first priority was to ensure that we not only sustained the new approach to safety launched in financial 2009, but to ensure that it is firmly embedded and entrenched as our single most important value. A safe environment is, and will continue to be, a prerequisite foundation for consistent and predictable production.

The experience of employee dynamics over the years has led us to adopt a more comprehensive approach to the general well-being, and therefore the productivity, of our staff. To this end we pursue a broad range of interventions encapsulated in the 24 Hours in the Life of a Gold Fields Employee programme. This programme was first launched in the South Africa Region in financial 2009 and implemented in three international regions during financial 2010. Based on the Total Well-being Philosophy, the programme is aimed at improving every facet of the life of each employee and includes interventions in the fields of occupational health and safety, healthcare, living conditions, nutrition, sport and recreation and education.

Fundamental to this comprehensive approach is the principle of inclusiveness, especially in the field of occupational safety. During financial 2010 we continued to experience extraordinary co-operation on all safety-related matters from the vast majority of our employees, including those in the employ of contractors; the leadership of our employee representative organisations and unions at the mines; as well as the governments of the countries in which we operate. Without the support of each one of these stakeholder groups we would not have achieved the significant improvements in safety that we recorded in both financial 2009 and financial 2010. Special mention must be made of the Directorate for Mine Health and Safety in the Department of Mineral Resources (DMR) of South Africa, with whom we have developed a constructive working relationship, which continues to guide us as improvements in safety at our South African mines become more challenging to achieve. This improved relationship can also be credited, to some extent, for the significant improvement in safety in the South Africa Region, as well as the subsequent return to greater production stability, predictability and consistency in the region.

It is indeed gratifying to report that, while we were not able to match the improvements in safety performance recorded in financial 2009, our singular focus on injury prevention has for the second year in a row resulted in a record safety year with significant improvements in most safety indicators.

Fatal Injury Frequency Rate
(per million man hours worked)

Serious Injury Frequency Rate
(per million man hours worked)

The all important group Fatal Injury Frequency Rate for the Group showed a 15 per cent improvement from 0.13 per million man hours worked in financial 2009 to 0.11 in financial 2010, following on a 56 per cent improvement during financial 2009. The Lost Time Injury Frequency Rate showed a six per cent improvement to 4.07 per million man-hours worked in financial 2010 compared to 4.35 in financial 2009.

All our international mines completed the year without fatal accidents. Although the overall lost time injury frequency rate remained virtually unchanged year on year, it is pleasing to note that the Agnew Gold Mine in Australia and the Cerro Corona Mine in Peru managed to produce without a lost time injury for most of the year under review.

In the South Africa Region we formulated a set of safe production rules supported by a new project called the Safe Production Management Programme. The safe production rules have been rolled out to all employees in their preferred languages, and have also been integrated into the induction processes through which all new employees, employees returning from leave and contractors are exposed to operational safety standards, systems, rules and procedures. The Safe Production Management Programme, which is principally focused on the prevention of serious and fatal accidents, consists of two overarching themes, namely 1) “engineering out” of safety risks and, 2) to advance compliance by winning the hearts and minds of our people by reinforcing positive behaviour.

The safe production rules work hand-in-hand with the wellestablished stop, think, fix, verify and continue campaign, which has a significant impact on the safety behaviour and awareness of employees.

Following on its health and safety review commissioned in 2008 DuPont completed a follow-up review of all of the mines in the South Africa Region in April 2010. It confirmed that the various programmes have resulted in a greater maturity in our approach to safety and have served to entrench an improved safety mindset within the company. The review also identified a number of areas for further improvement and appropriate interventions are currently being implemented.

In support of the Safe Production Management Programme, a Seismic Task Team, comprising both internal and external experts, was established early in financial 2010 to study and advise Gold Fields on reducing the prevalence and impact of seismic-related incidents. The impact of the task team has been significant in that their recommendations have resulted in a reduction of 82 per cent in the number of seismic related fatalities, from 11 in financial 2009 to two in financial 2010.

During financial 2010 the implementation of the safe production rules at our international mines was complemented by a variety of region-specific safety interventions. DuPont will undertake followup health and safety reviews in the international regions during the next few months.

The OHSAS 18001 Safety Management System is a Group standard within Gold Fields as well as a certification requirement. With the achievement of certification by the Cerro Corona Mine during financial 2010, all mines in the Group are now OHSAS 18001 certified. During financial 2010 all of the other mines in the Group underwent external OHSAS 18001 compliance audits and maintained their certification.

While we have made significant progress in our overall safety performance over the past two years, we are fully aware that there remain a number of areas in which we still need to make a quantum shift. Foremost amongst these is the area of employee behaviour and adherence to safety standards and norms, specifically in the South Africa Region. Conventional wisdom is that seismicity and the deep level nature of the South African mines are the causes of the relatively high number of serious and fatal accidents. The reality, however, is that of the 18 fatal injuries recorded in our South African mines during financial 2010, only two can be attributed to seismicity. All of the remainder were preventable or so-called shop floor accidents resulting from risky behaviour, non-adherence to established safety protocols and standards, or inadequate supervision and leadership at different stages of the production process.

During the next 12 months we will continue to further entrench and improve our efforts across the full spectrum of safety interventions to achieve a further 25 per cent average improvement in all safety indicators in all our regions. Our main priority, however, will be to strengthen the values of personal and collective safety amongst our employees, which is a fundamental prerequisite for the behavioural change required to eliminate preventable shop-floor accidents on our mines.

Greater details on the company’s health, safety and well-being initiatives are contained in the review of operations on pages 34 to 63 and the sustainability report on pages 106 to 109.

Operational review

During financial 2010 Group attributable gold production increased by two per cent to 3.50 million ounces from 3.41 million ounces for the year ended June 2009.

In the financial 2009 annual report I indicated that the strategic focus for Gold Fields in financial 2010 would be to consolidate the operational gains made during the prior year, and to further “sweat” our existing assets. In this context, the three outstanding features of the year under review were, firstly, the successful consolidation and further advances in operational gains made in the West Africa, Australasia and South America Regions; secondly, the significant impact of safety related production interruptions on the performance of the three mature mines in the South Africa Region and the steps taken to ameliorate this during the second half of the year and; thirdly, the significant progress made with the South Deep project, which boosted its production by more than 52 per cent during the year.

All three of the international regions enjoyed a successful year, further increasing their combined managed production by 16 per cent from 1.65 million ounces in financial 2009 to 1.91 million ounces in financial 2010.

Group revenue increased by nine per cent (29 per cent in US dollar terms) from R29,087 million (US$3,228 million) to R31,565 million (US$4,164 million). The four per cent higher average rand gold price received at R264,468 per kilogram compares with R253,459 per kilogram achieved for the year ended June 2009. In US dollar terms the average gold price increased by 24 per cent from US$875 per ounce to US$1,085 per ounce and, in Australian dollar terms the price rose by four per cent from A$1,194 per ounce to A$1,236 per ounce. The rand strengthened from US$1 = R9.01 to US$1 = R7.58, or 16 per cent, while the rand/Australian dollar was similar at A$1 = R6.68.

Operating costs, including gold-in-process movements, increased from R17,624 million to R18,992 million, or eight per cent. In dollar terms operating costs were up by 28 per cent from US$1,956 million to US$2,506 million, mainly due to the strengthening of the Rand against the US dollar. The cost increase in rand terms was mainly due to higher electricity costs at the South African and Ghanaian operations and above inflation wage rises at the South African operations. Total cash cost for the Group was up by five per cent from R149,398 per kilogram (US$516 per ounce) to R157,360 per kilogram (US$646 per ounce) due to the above factors combined with lower production from the South Africa and Australasia Regions.

Operating profit was up by 10 per cent from R11,463 million (US$1,272 million) to R12,573 million (US$1,659 million), while profit before taxation and non-recurring items increased by 11 per cent year-on-year from R5,554 million (US$616 million) to R6,179 million (US$815 million).

The movement on non-recurring items year-on-year was positive R2.3 billion (US$278 million) and includes:

  • A profit on the sale of our investment in Eldorado and Sino Gold of R1.2 billion (US$157 million) in financial 2010 compared with a net loss of R148 million (US$16 million) on the sale of Orezone Resources and IAMGold shares in financial 2009, and;
  • A loss on the write down of our investment in Rusoro of R1,065 million (US$118 million) in financial 2009 compared to a loss of R197 million (US$26 million) in financial 2010.

After accounting for the above items and taxation, net earnings amounted to R3,631 million (US$479 million), compared with R1,536 million (US$171 million) for the year ended June 2009, an increase of 136 per cent.

Earnings, excluding non-recurring items, gains and losses on foreign exchange, financial instruments and losses of associates after taxation, amounted to R2,912 million (US$384 million) for the year ended June 2010 compared with R2,981 million (US$331 million) for financial 2009.

Following is a summary of the key operational indicators of each of our four regions. More details are contained in the Review of Operations on pages 34 to 63 of this annual report.

South Africa

South Africa Region

    F2010   F2009  
  Production (oz) 1,933,000   2,038,700  
  Total cash cost (US$/oz) 740   510  
  NCE (US$/oz) 1,072   734  
  NCE margin (%) 1   16  
  Capex (Rm) 4,508   3,643  
  Operating profit (Rm) 4,695   6,226  
  Operating margin (%) 30   39  

Despite continuous improvements in their safety performances, production at the Driefontein and Kloof Gold Mines was severely impacted by a number of protracted mine-wide safety related closures imposed by the Department of Mineral Resources during the first half of the year. This led to a five per cent decline in gold production from the region, from 2.04 million ounces in financial 2009 to 1.93 million ounces during the year under review. The impact was particularly severe during the third quarter when the knock-on effects of the closures and the Christmas holiday resulted in a production low-point of 0.40 million ounces for the region.

The Driefontein Gold Mine’s production decreased by 14 per cent from 0.83 million ounces to 0.71 million ounces due to a decrease in underground grades and volumes mined. At Kloof production dropped by 11 per cent from 0.64 million ounces to 0.57 million ounces. Beatrix Gold Mine’s production was unchanged at 0.39 million ounces.

At South Deep, which is in a build-up phase to its full production target of between 750,000 and 800,000 ounces per annum by the end of 2014, gold production increased by 52 per cent from 0.17 million ounces to 0.26 million ounces. The capital development and infrastructure projects that support this buildup progressed broadly in line with plan and cost projections. We also started with the mission critical deepening of the ventilation shaft, which is scheduled for completion by the middle of the 2012 calendar year. Construction of the new tailings storage facility is approximately 50 per cent complete and the first tailings depositions are planned for May 2011.

To further improve our safety management systems and processes, and to mitigate the imposition of unplanned safety stoppages on operations in the South Africa Region, the Mining Inspectorate of the Department of Mineral Resources (DMR) was engaged in a series of workshops. One of the key objectives of these engagements was to form closer co-operation with the Inspectorate on safety issues as well as to discuss measures taken by both parties after an accident at our mines. It is pleasing to report that these interactions, supported by the ongoing improvement in our management of safety generally, ensured that we did not experience any extended, unplanned safety related mine closures during the second half of financial 2010. As a consequence we have seen a return to greater stability, consistency and predictability in the operational performance of the South Africa Region, with a 23 per cent improvement in production to 0.49 million ounces during the final quarter of the year. It is a strategic imperative that this trend be maintained during the next 12 months. The significant improvement in overall safety in the South Africa Region, in conjunction with the reduction of associated unplanned safety closures, should reflect in more consistent production from the region over the next four quarters.

Operating costs in the South Africa Region increased by 14 per cent from R9,840 million (US$1,092 million) for the year ended June 2009 to R11,204 million (US$1,478 million) for financial 2010. This was due to above inflation annual wage increases, the impact of an effective 35 per cent electricity tariff hike in June 2009 and the first of a three-year, 25 per cent per annum increase in electricity costs from April 2010. Costs of other input materials also increased.

West Africa

West Africa Region

    F2010   F2009  
  Production (oz) 928,100   812,800  
  Total cash cost (US$/oz) 564   555  
  NCE (US$/oz) 750   847  
  NCE margin (%) 32   4  
  Capex (Rm) 1,352   1,964  
  Operating profit (Rm) 3,855   2,367  
  Operating margin (%) 50   37  

In the West Africa Region total managed gold production increased by 15 per cent from 0.81 million ounces for the year ended June 2009 to 0.93 million ounces for financial 2010. Production at the Tarkwa Gold Mine (71 per cent attributable) increased by 18 per cent to 0.72 million ounces mainly due to the commissioning of the expanded Carbon in Leach (CIL) plant, which allowed increased throughput from a design capacity of 0.45 million tonnes per month to one million tonnes per month. Gold production from the Damang Gold Mine (71 per cent attributable) increased by five per cent to 0.21 million ounces. During the latter half of the year the installation and commissioning of the new secondary crusher was completed, which will allow the mine to process a greater percentage of harder but higher grade ore and raise production during financial 2011 to between 0.22 and 0.24 million ounces.

Operating costs, including gold-in-process movements, rose from US$450 million for financial 2009 to US$508 million for the year under review, mainly due to costs associated with higher production.

Australasia

Australasia Region

    F2010   F2009  
  Production (oz) 586,300   620,400  
  Total cash cost (US$/oz) 662   536  
  NCE (US$/oz) 949   693  
  NCE margin (%) 13   22  
  Capex (Rm) 1,199   897  
  Operating profit (Rm) 1,918   1,957  
  Operating margin (%) 40   40  

Gold production decreased by five per cent from 0.62 million ounces in financial 2009 to 0.59 million ounces in financial 2010. At St Ives production declined by two per cent from 0.43 million ounces to 0.42 million ounces mainly due to less ore mined at the Belleisle underground mine. Production at the Agnew Gold Mine decreased by 11 per cent from 0.19 million ounces to 0.17 million ounces, mainly due to the depletion of Songvang stockpiles in financial 2009. Operating costs, including gold-inprocess movements, dropped from A$448 million in financial 2009 to A$437 million in the year under review, mainly due to the buy-back of the Morgan Stanley royalty.

South America

South America Region

    F2010   F2009  
  Production (oz) 393,600   219,300  
  Total cash cost (US$/oz) 348   369  
  NCE (US$/oz) 561   926  
  NCE margin (%) 47   (10)  
  Capex (Rm) 649   1,052  
  Operating profit (Rm) 2,105   915  
  Operating margin (%) 67   55  

The Cerro Corona Mine (81 per cent attributable) completed its build-up with gold equivalent production increasing by 77 per cent from 0.22 million gold equivalent ounces in financial 2009 to 0.39 million gold equivalent ounces in the year under review. Operating costs, including gold-in-process movements, rose from US$82 million to US$134 million due to the inclusion of Cerro Corona for the full year.

Greater details on the various operations are contained in the review of operations on >pages 34 to 63.

Growth strategy

Gold Fields is on a rising production trend and our targeted production goal is five million ounces per year, either in production or in development, by 2015. The goal is for the South Africa Region to contribute at least two million ounces to that target, and for the international regions (South America, West Africa and Australasia) to contribute approximately one million attributable ounces per year each.

We have well formulated strategies in place to achieve our 2015 production goal through near-mine opportunities and organic growth derived from sweating our assets; bringing our large Mineral Resource and Mineral Reserve base to account; and through exploration success, leveraging off our existing production footprints in the West Africa, South America, Australasia and South Africa regions.

However, we do not pursue growth simply to add incremental ounces to our portfolio. Hence our philosophy that every incremental ounce should be better than the previous ounce in terms of all-in (NCE) costs and, equally important, should offer shareholders growth in ounces per share and enhanced returns on a per share basis.

Despite the slogan No Mergers & Acquisitions Heroics, we will consider attractive investment opportunities by pursuing an opportunistic strategy on acquisitions of producing or late stage development assets. However, we do believe that a continuing lack of quality gold discoveries in the industry has led to escalating competition for advanced exploration and production assets. This makes value accretive growth through mergers and acquisitions increasingly onerous and prone to dilution of existing shareholders. For this reason we believe that exploration success generally offers the most cost effective path to accretive and value-adding growth.

Our growth strategy is thus premised on creating our own high quality growth opportunities mainly through an aggressive focus on near-mine exploration at our existing assets and an equally aggressive greenfields exploration programme in the regions where we are based and in a limited number of other highly prospective ”new frontiers” around the world.

During financial 2010 Gold Fields spent US$152 million on exploration, which included US$81 million on greenfields exploration and US$71 million on near-mine exploration. The exploration budgets that have been set for the 12 months to end-June 2011 are again higher at US$100 million for greenfields and US$50 million for near-mine exploration, which reflects the improving quality of the projects in the portfolio.

Near-mine exploration

Over the past two years we have identified several significant opportunities to create value from our resource positions at existing mines, over and above our existing Mineral Resource and Mineral Reserve base.

During financial 2008 we discovered the highly prospective new Argo-Athena camp on the lease area of the St Ives Gold Mine in Western Australia, which has the potential to add around five million ounces of gold to the St Ives Mineral Reserve base, and to double the life of this mine from its current level of approximately six years to more than ten years. During financial 2010 we commenced the development of the Athena Project which has an inventory of more than one million ounces and is the first fully defined project within this new camp. The focus during the year under review was on completing the Athena portal and developing the decline to the ore zone, which was intersected on 13 May 2010. Initial production from Athena is scheduled to commence early in the fourth quarter of calendar 2010 and full production is expected to be reached in early 2011.

After completion of the Athena feasibility study, near-mine exploration shifted to the Hamlet discovery about one kilometer east of Athena, where we announced an Indicated and Inferred Mineral Resource of 1.03 million ounces of gold on 20 May 2010. Drilling to expand and upgrade the Mineral Resource base to support a feasibility study is under way and a construction decision is expected during the first quarter of calendar 2011.

Other near-mine opportunities in the Argo-Athena camp were discovered and tested with initial drilling to assess open-pit and underground mining opportunities. The intention over the next 12 months is to advance the exploration of at least two of these discoveries with infill and extensional drilling.

At the Agnew Gold Mine, also in Western Australia, significant progress was made towards the goal of increasing the life of this mine to between five and ten years. Drilling was focused on the underground extension and Mineral Reserve delineation of the Kim South deposit within the Waroonga Complex. Drill testing of the shallow Cinderella deposit, located a short distance from the Agnew processing plant, commenced late in financial 2010 and the intention is to assess the open pit mining potential of the deposit before the end of calendar 2010.

At the Damang Gold Mine in Ghana we increased the Mineral Reserve position to close to two million ounces, which represents a mine life of more than eight years at current production levels. Significant opportunities exist for further growth beyond the current drilling area. The emphasis has been on extensional drilling to the south of the main Damang mine and between some of the smaller surface mines. The objective over the next year is to advance the Greater Damang Super Pit project with additional infill drilling to support a feasibility study decision on an enlarged surface mining operation.

At the Cerro Corona Mine in Peru, a detailed design and feasibility study is under way for the installation of an oxide processing plant to treat 7.5 million tonnes of life-of-mine oxide ore, the bulk of which has already been stored on surface. Should the feasibility study prove positive and the required permits are obtained, construction of the plant will commence in 2011. Early indications are that the oxide stockpiles contain approximately 300,000 ounces of recoverable gold, which could be brought to account over a period of five years. Conversion of additional Mineral Resources into Mineral Reserves at Cerro Corona is another key strategic objective. During the next four quarters we will continue to analyse alternatives to the current tailings storage capacity constraints and to develop an infill drilling programme.

Greenfields exploration

Gold Fields’ greenfields exploration portfolio has matured significantly during financial 2010. We now have a highly prospective pipeline of projects around the world which includes four in the advanced drilling stage. In line with our strategy to grow our international production base by leveraging off our existing footprints in West Africa, South America, and Australasia, our exploration activity is focused largely in these regions.

Good progress was made on the four advanced stage projects and we expect to be in a position to make construction decisions on at least two of these projects, the Chucapaca joint venture project in Peru and the Yanfolila project in Mali, within the next three years.

In May 2010 Gold Fields and its joint venture partner Compania de Minas Buenaventura S.A., (“BVN”) announced an Inferred Mineral Resource estimate of 5.6 million gold-equivalent ounces at the Chucapaca project in Peru. In June 2010 the decision was made to advance the project towards pre-feasibility and the next phase of drilling commenced in July 2010.

At the Yanfolila project in Mali, Gold Fields has consolidated a large land position after acquiring Glencar Mining plc in August 2009. Yanfolila includes the Komana, Solona and Sankarani (formerly a joint venture with Gold Fields) projects in the Yanfolila Belt in south-western Mali. Since November 2009 Gold Fields has completed over 100,000 meters of drilling. The initial aim is to drill out a targeted two million ounce deposit within a 30 kilometer radius of the Komana area and reach a construction decision on a “starter project” with three years.

At the Talas joint venture project in Kyrgyzstan, Gold Fields completed its earn-in during February 2010 and now holds a 60 per cent interest in the project with joint venture partner Orsu Metals Corporation holding the remaining 40 per cent. Gold Fields completed a 22,013 meter drilling programme on the Taldybulak deposit at Talas and defined an Indicated and Inferred Mineral Resource estimate of 11.71 million gold-equivalent ounces.

Exploration work at Chucapaca
Exploration work at Chucapaca

Field work was stopped in April 2010 as a result of the political events in Kyrgyzstan. Work will remain suspended until political stability has returned following the successful installation of a new government. In the interim, metallurgical optimisation studies are proceeding to investigate the possibility of increasing recoveries and extracting metals from the oxidised ores.

At the Arctic Platinum project in Finland, Gold Fields has been investigating the use of various on-site hydrometallurgical processing options, instead of off-site smelting, to recover copper, nickel, gold and platinum group elements (platinum, palladium, and rhodium) from the flotation concentrates. The preliminary test work returned positive results and further engineering work was conducted to provide initial operating and capital cost estimates. Planning is under way to process a metallurgical sample through a pilot plant facility during the second half of 2011. Should these efforts deliver positive results Gold Fields will conduct a feasibility study for completion during the second half of 2012.

Objectives for 12 months to end-June 2011

Our strategic exploration objectives are the following:

  1. Complete a pre-feasibility study on the Chucapaca project by early calendar 2011 and to declare an Indicated Mineral Resource.
  2. Move closer to establishing a two million ounce Mineral Reserve at the Yanfolila project in Mali.
  3. Continue the aggressive near-mine exploration programmes at the St Ives, Agnew and Damang Gold Mines to further grow their life-of-mine Mineral Reserves.
  4. Complete a feasibility study on the Hamlet deposit at St Ives Gold Mine and commence construction of the project.
  5. Find one additional ore source at the Agnew Gold Mine.
  6. Add another advanced stage exploration project to our greenfields portfolio.

All of the above projects are described in greater detail in the exploration section on pages 64 to 69.

Sustainable development

The fact that sustainability was introduced as a specific element in our new vision statement, to be the global leader in sustainable gold mining, reflects the importance with which this subject is viewed by Gold Fields. We view sustainable development as a balance between the optimal financial and operational performance of the Group; maintaining of world-class environmental management standards; and contributing meaningfully to socio-economic benefits for the communities in which we operate.

Gold Fields continues to be an active member of the International Council on Metals and Minerals (ICMM) and is a signatory to the United Nations Global Compact. All mines in the Group, as well as the exploration division, have ISO 14001 certified environmental management systems in place and have retained their certifications after undergoing compliance audits during financial 2010.

During financial 2010 Gold Fields also became the first mining house to achieve full Cyanide Code accreditation for its operations. The OHSAS 18001 Safety Management System is a company standard and certification a Group requirement. With Cerro Corona being OHSAS 18001 certified and all the other mines successfully undergoing independent audits verifying their compliance during financial 2010, all mines in the company are now certified.

During the year under review the Gold Fields Sustainable Development Framework was improved and a wide range of projects undertaken at our mines to further enhance their sustainability. These are described in more detail in the sustainable development section of this report. A comprehensive review of environmental compliance was conducted in the South Africa, Australasia and West Africa regions and action plans formulated and implemented to address weaknesses.

Carbon and energy

Addressing energy management is a key deliverable throughout the Group. Rising energy costs and growing concerns about the effect of climate change have elevated the importance of energy efficiency and carbon management on the global agenda. Against this backdrop Gold Fields has been actively aligning the company to a carbon-constrained economy. Our intention is to make low-carbon behaviour and energy efficiency the norm within the company. Therefore existing policies and strategies are being reviewed to move the Group closer to the attainment of these goals. (See chapter on Energy and Carbon Management on pages 114 to 117.)

Integral to this strategy is energy efficiency amid ever-rising energy costs. Specifically in the South Africa Region the target is to deliver an additional five per cent reduction in electricity consumption in each of calendar 2011 and 2012, to offset the 25 per cent per year escalation in electricity costs over the next three years. Similar levels of savings in electricity consumption were achieved in South Africa during financial 2009 and 2010.

Given the high electricity cost increases mooted by the Public Utilities Regulatory Commission (PURC) in Ghana, similar levels of electricity savings will be pursued by our Ghanaian operations.

In line with this new approach to carbon management, Gold Fields has launched a number of initiatives to reduce the greenhouse gases emitted by our operations. In May 2010 we took a significant step on this path by becoming the world’s first gold mining company to sell Certified Emissions Reductions (CERs), the financial securities used to trade carbon emissions. Gold Fields will derive the CERs from the capture of methane gas at the Beatrix Gold Mine in South Africa’s Free State province. The company will sell 1,700,000 CERs to European energy trading company Mercuria Energy Trading SA under forward contracts which will run until 2016. The Gold Fields/Mercuria CER transaction was recognised by London-based Energy Risk magazine as the “Deal of the Year” for 2010.

For a case study on this project turn to page 116 of the sustainability report.

Stakeholder relationship management

A central pillar of the Gold Fields Sustainable Development Framework is the proactive engagement with and management of the relationships with all stakeholders who have an influence over the affairs of the company or who are impacted by its activities. These include in particular the relationships with our employees and their representative organisations and unions; local, regional and national governments; and the host communities in which we operate or that are affected by our operations.

While we have achieved significant progress in this respect during financial 2010 and all our mines have implemented the ASA 1000 Stakeholder Engagement Standard, a higher level of engagement has become essential to underpin the sustainability of our operations.

This has become evident over the past few years with governments, communities, non-governmental organisations and trade unions in all our jurisdictions seeking and, in some cases, implementing greater cost imposts on the mining industry. The most visible example of this during the past year was the hitherto unsuccessful attempt by the Australian government to impose a 40 per cent super tax on the mining industry. Of great concern, however, is that similar trends are evident in the cost of electricity and other levies imposed by governments in many of the countries in which we operate. There is a very real risk that such additional punitive imposts on mining projects will raise input costs to unsustainable levels, which would have negative consequences for the projects and, by implication, for the affected countries. In the near future Gold Fields will – directly and through various industry forums – escalate its engagement with stakeholders to achieve greater appreciation for the impact these often ill considered demands are having on the sector.

An analysis of Gold Fields’ economic impact can be found in the sustainability report on pages 98 and 99.

Black Economic Empowerment

In the South African environment, Black Economic Empowerment (BEE) and transformation in terms of the requirements of the Mineral and Petroleum Resources Development Act of 2002, and the associated Mining Charter, remains a key business imperative and sustainability issue.

During May 2010 the South African Department of Mineral Resources approved the conversion of the South Deep oldorder mining rights into a new-order mining right. Included in this approval was an additional portion of ground known as Uncle Harry’s, which is contiguous to South Deep. The cumulative effect of this approval, together with the previous conversions for the Driefontein, Kloof and Beatrix Gold Mines granted in January 2007, is that all of Gold Fields’ South African mines have now received their new-order mining rights.

In addition, we have developed three further empowerment transactions which, when concluded by the end of the 2010 calendar year, will ensure that we have met our 2014 BEE equity ownership targets. These transactions include an Employee Share Option Plan for 10.75 per cent of GFIMSA; a broad-based BEE transaction for ten per cent of South Deep; and a broadbased BEE transaction for a further one per cent of GFIMSA, excluding South Deep. The three transactions have a combined value of approximately R2.4 billion and are expected to dilute existing shareholders by between two and three per cent.

These transactions represent not only a significant milestone for Gold Fields in terms of our compliance with the BEE objectives of the Mining Charter, but are a reflection of the spirit and intent with which we have embraced transformation as an imperative for our company, our industry and our country. Our philosophy is to advance the sustainability of our business by engaging the transformation process substantively, as opposed to following a “tick the box” approach.

As such Gold Fields has been an active participant, through the Chamber of Mines, in the Mining Industry Growth, Development and Employment Task Team (MIGDETT), through which the Department of Mineral Resources (DMR), business and the trade unions are seeking to promote sustainable growth and meaningful transformation of the mining sector. The parties in MIGDETT on 30 June 2010 signed a stakeholder declaration that committed them to achieving a wide range of objectives and targets by 2014 which, once finalised, will be incorporated into an updated Mining Charter.

Gold Fields subscribes to the declaration and is investing funds and resources towards achieving all the commitments spelt out in the declaration, which range from BEE equity ownership to human resource development. Where the company may struggle to achieve some of the targets it will timeously engage with the DMR to seek a mutually acceptable solution.

Having said that, we are showing good progress in transforming Gold Fields into a company that is starting to reflect the demographics of the wider population and one which supports local economic development and preferential procurement. Already we are close to executing the deals that will meet our 2014 BEE equity ownership targets, as outlined earlier in this section.

Human resources

Gold Fields’ 57,000 employees and contractors are the most critical stakeholders in the company’s effort to become the global leader in sustainable gold mining. If we are to achieve the ambitious production goals we have set ourselves – namely to have five million ounces of gold a year either in development or in production by 2015 – we need to have a well informed, appropriately skilled, motivated, productive and healthy workforce.

One of the key challenges that we face across all our operations is the availability of sufficient appropriately skilled and qualified people. Global shortages in technical, engineering and mineral resources skills remain a challenge. For that reason our key priority area for financial 2010 was the development of strategies to address the risk of skills flight and programmes to attract, develop and retain the best skills available.

The adoption of a more competitive remuneration philosophy for the Group is critical in this regard. Our aim is to provide all employees with guaranteed remuneration at the median, and with total remuneration approaching the top quartile. We aim to foster a culture of outstanding rewards for outstanding achievements and, accordingly, high achievers have the opportunity to earn significantly above these levels. This new remuneration philosophy is being rolled-out across the Group.

We have always put a strong emphasis on training our staff and during financial 2010 we invested over R260 million in internal training and skills development initiatives. The accredited Gold Fields Business and Leadership Academy continues to play a vital role in developing the skills required by the company and during the year almost 10,000 employees completed courses at the Academy.

Equally important is that we have a steady supply of new entrants into the company. In financial 2010 Gold Fields awarded 112 university bursaries, 378 technical learnerships and 40 postgraduate assignments. To further strengthen the skills pipeline we also announced a further R28 million investment in skills development in South Africa through a three-year sponsorship of the mining faculties of the University of the Witwatersrand and the University of Johannesburg. In other countries too, Gold Fields is developing closer relationships with tertiary institutions. In Ghana we have a close association with the Takoradi Technical Institute (TTI) in Tarkwa while in Peru our existing relationships with the University of Piura and DBM Perú will soon be augmented by associations with three other universities.

During financial 2010 the regional organisational structures were largely bedded down. Over the next few months the focus will be on optimising these structures and, in particular, ensuring that the operational, financial and human resource structures are optimally staffed and resourced. Focused and region-specific talent management, mentorship and leadership programmes are part of this strategy, as is the mobility of talented people to move between regions as well as between the corporate and regional level at Gold Fields.

An overriding motive though is to nurture and develop domestic talent in each of the countries in which we operate. Transformation and the creation of a diverse and demographically representative workforce is an important sustainability issue. As such the company strongly supports legislation and guidelines that promote equal opportunity and demographic representation of the workforce. In South Africa, in particular, we are making good strides in complying with Black Economic Empowerment guidelines and regulations.

All these initiatives outlined are focused on protecting and nurturing our human and intellectual capital and developing the leadership at Gold Fields required to achieve our vision of being the global leader in sustainable gold mining. But we also recognise that achievement of this vision will only be possible if we elevate our human resource management practices to a new level of sustainability. Furthermore it means extending our responsibility towards our staff beyond the average eight hours they spend at the workplace to the other 16 hours of the day as well. For this reason we spent the 2010 financial year entrenching our 24 Hours in the Life of a Gold Fields Employee programme, which was launched early last year in the South Africa Region and rolled out to the international regions during the year under review.

Over the next 12 months we will build further on the progress made in all areas of our human resources strategy and specifically focus on the following interventions:

  • Intensify our efforts to retain and attract the best quality people to our company;
  • Foster a culture of outstanding rewards for outstanding achievements by further entrenching our new remuneration philosophy across the Group;
  • Develop an employee value proposition and employee branding strategy with a suite of supporting strategies to encapsulate the benefits accruing to Gold Fields employees.
    These will be implemented over the next 12 months;
  • Implement a work-life balance programme across all levels of the company; and
  • Refine our approach to education and training to enable our employees to develop a clear and meaningful career path.

The company’s human resources activities are explained in more detail in the sustainability report on pages 98 to 103.

Share price

Based on Bloomberg data the Gold Fields share price opened financial 2010 at R96.74 (US$12.54) per share and closed the year at R103.80 (US$13.37), an increase of seven per cent during the year, which broadly reflects the upward movement in the gold market.

Early in the year the price reached a low of R90.51 (US$10.99) on 9 July 2009, where after the share price again performed strongly through to 3 December 2009, when it reached a high for the year of R114.74 (US$15.82). The price then started a decline in sympathy with the broader gold market, until it bottomed out again at R83.30 (US$11.00) per share in early February 2010. The average share price for the year was R99.24 (US$13.06).

While the decline early in calendar 2010 can be ascribed to the general softness in all gold equities, South African equities, including Gold Fields, continued to underperform their international peers. Gold Fields’ share price performance since January 2010 can also be ascribed to the decline in output during the third quarter, resulting from the production interruptions in the South Africa Region late in quarter two, compounded by the extended Christmas break.

Change of year-end to December

To be consistent with industry practice, Gold Fields has decided to change its year-end from June to December, with effect from December 2010. As a result of this an abridged annual report and set of accounts will be produced for the six months to December. The production of the Annual Mineral Resources and Mineral Reserves Declaration will be delayed to coincide with the new year-end. Included in this annual report, however, is a Mineral Resources and Mineral Reserves Report to June 2010, which incorporates material changes to that date.

The gold market

Throughout financial 2010 gold consolidated its position as an important “new” asset class, offering investors relative security at a time when many other asset classes were under significant pressure. During the year gold extended its 10-year bull run by again establishing an all-time high price at US$1,265 per ounce. Given the ever-present threat of financial and economic volatility, combined with the well documented constraints in new mine supply globally, the positive outlook for gold is unlikely to change in the foreseeable future.

As I mentioned last year, one of the most significant underpins to the gold price is the real all-in cost (NCE) of producing an ounce of gold. Last year we estimated that to be between US$700 to US$800 per ounce globally. We believe that, on the back of cost pressures that started to emerge again, this range rose to more than US$900 per ounce during financial 2010, with further increases expected over the next 12 months. This should provide a natural long-term floor for the price of gold. While from time to time gold is expected to test this level on the downside, it has real potential to move above that level over the longer term.

Gold Fields share price in Rand/US$

Gold Fields share price in Rand/US$

Executive changes

The Gold Fields executive team was strengthened during the year under review.

Paul Schmidt was appointed as Financial Director on 6 November 2009. Prior to this he was acting Chief Financial Officer from 1 May 2008 and Financial Controller from 1 April 2003. Mr Schmidt has more than 14 years’ experience in the mining industry.

Ben Zikmundovsky joined Gold Fields on 1 August 2009 as Executive Vice-President and Head of International Capital Projects and Technical Services. He is also a member of the Group Executive Committee. Mr Zikmundovsky has over 30 years’ experience in the mining, mineral processing, construction and equipment industries worldwide. This is a new position created to take responsibility for project development in our international portfolio, as well as the international technical group. This role is essential to support the new regional structure, as well as the large number of growth projects in progress or in the pipeline at our three international regions.

In December 2009 Glen Baldwin resigned as the Executive Vice- President for the Australasia Region. He was replaced by Richard Weston, who joined the company on 1 June 2010. Mr Weston was formerly senior Vice-President, Operations, for Coeur d’Alene Mines, a gold and silver mining company. In June 2010 Italia Boninelli resigned as Head of Human Resources for the Group. I thank both Mr Baldwin and Ms Boninelli for their outstanding service to Gold Fields and welcome Mr Zikmundovsky and Mr Weston to the Group.

Retirement of Alan Wright as Chair

On 31 May 2010 we announced that Alan Wright intended to retire as Chair and director of Gold Fields with effect from the next annual general meeting on 2 November 2010, and that he will be replaced as Chair by prominent businesswoman and political and social activist, Dr Mamphela Ramphele.

Mr Wright’s departure in November will bring to an end a long and distinguished career at Gold Fields, which he joined in 1969. As Chief Executive Officer of Gold Fields of South Africa, an antecedent company to Gold Fields Limited, he was instrumental in the formation of Gold Fields in its current form in 1997. He was Deputy Chair of Gold Fields from 1997 until he took over as Chair in 2005. During his time in the Chair he has successfully guided Gold Fields through some of the most challenging years in the industry and he has overseen the expansion of the company from its South African base to the globally diversified company that it is today. He has also guided us successfully through a period of significant socio-political transformation, which is further underscored by his retirement and replacement by Dr Ramphele as Chair. His wealth of experience as well as commitment to the company will be missed by all employees. On a personal level, he has been my mentor and I will miss his guidance in the exciting years ahead.

Dr Ramphele joined the Board as non-executive director and Deputy Chair on 1 July 2010 and takes over as Chair at the annual general meeting in November. Dr Ramphele, a former executive of the World Bank and Vice-Chancellor of the University of Cape Town, is a director of Remgro, Anglo American, Medi-Clinic and social entrepreneurial company Letsema Circle.

In Dr Ramphele we have found the ideal person to take over from Mr Wright and, as we advance on our path to being the world’s leading sustainable gold producer, I can think of few better candidates than Dr Ramphele to lead us there.

Operational guidance

Over the 12 months to 30 June 2011 Gold Fields plans to produce between 3.5 and 3.8 million attributable equivalent ounces of gold. Total cash costs are estimated at between US$650 per ounce and (R157,000 per kilogram) and US$690 per ounce (R166,000 per kilogram). Notional Cash Expenditure (NCE) per ounce/kilogram, defined as operating costs plus capital expenditure divided by gold production, is estimated between US$925 per ounce (R223,000 per kilogram) and US$975 per ounce (R235,000 per kilogram). This estimate is based on an exchange rate of R7.50:US$1.00 and US$1.00/A$0.88. This guidance is subject to the forward looking statements published on the inside flap of this report. This estimated financial information has not been reviewed and reported on by Gold Fields’ auditors in accordance with section 8.40 (a) of the Listings Requirements of the JSE Limited.

Dividend

During financial 2010 Gold Fields continued to apply its policy of paying 50 per cent of its earnings in dividends, after taking account of investment opportunities and growth capital, and in so doing maintained its position as one of the highest dividend payers in the industry. Notwithstanding the difficulties in financial markets, and a commitment to various growth initiatives, an interim dividend of R0.50 per share was declared on 4 February 2010 and paid on 1 March 2010 and a final dividend of R0.70 per share was declared on 7 August 2010 and paid on 30 August 2010.

Conclusion

Financial 2010 was a year of extraordinary challenges, but also a year of extraordinary responses by the people of Gold Fields all over the world. The measure of the spirit and commitment of our people is evident in the manner in which they have responded to the many and varied challenges that came their way. I would like to thank the entire Gold Fields team for their ongoing commitment and the dedication with which they approach the task at hand every day. Without their support none of the achievements described in this annual report would have been possible.

Finally, I would like to express my deepest appreciation to our Chair and the Board of Directors for their ongoing support and the strategic guidance which they gave the executive team and me during the past year.

The next 12 months will undoubtedly bring its own challenges, but together we will continue steadfast on the road towards building Gold Fields to be the global leader in sustainable gold mining. With the support of every member of the team in corporate office, in the regions, and every Gold Fields employee all over the world, I know that our vision of being the global leader in sustainable gold mining is attainable.

NJ Holland
Chief Executive Officer