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Management’s discussion and analysis of the financial statements

Management’s discussion and analysis of the financial statements

Paul Schmidt
Financial Director
Paul Schimdt

 

 

 

 

 

 

(The following management’s discussion and analysis of the financial statements should be read together with the Gold Fields’ consolidated financial statements, including the notes appearing with these financial statements.)

The financial results have been prepared in accordance with International Financial Reporting Standards (IFRS) which is consistent with the previous year.

RESULTS FOR THE YEAR

Net earnings attributable to ordinary shareholders for financial 2010 were R3,631 million (or 515 cents per share), compared with R1,536 million (or 229 cents per share) achieved in the previous financial year. The reasons for this increase are discussed below.

Headline earnings excluding the after-tax effect of asset impairments and profits on the sale of investments and fixed assets amounted to R3,164 million or 449 cents per share for financial 2010, compared with R2,890 million or 431 cents per share in financial 2009.

These results are analysed as follows:

REVENUE

Revenue increased 9% from R29,087 million in financial 2009 to R31,565 million in financial 2010. The increase in revenue of R2,478 million was due to the increase in the rand gold price from R253,459 per kilogram to R264,468 per kilogram and an increase in gold sales. The rand gold price increase was due to a 24% increase in the US dollar gold price from an average of US$875 per ounce to US$1,085 per ounce year-on-year, partially offset by a stronger rand, which strengthened 16% from an average of 9.01 to 7.58 to the US dollar.

Gold sales increased 4% from 3,689,600 ounces in financial 2009 to 3,837,300 ounces in financial 2010. Gold sales at the South African operations decreased 5% from 2,038,700 ounces to 1,933,000 ounces while gold sales at the West African operations increased 14% from 812,800 ounces to 928,100 ounces. Gold sales at the South American operation (Cerro Corona) increased from 217,800 equivalent ounces to 389,900 equivalent ounces while at the Australasian operations, gold sales decreased 5% from 620,400 ounces to 586,300 ounces.

At the South African operations, the decrease in gold sales of 105,700 ounces was mainly as a result of safety-related mine stoppages and a slow start after the Christmas break.

At Driefontein, gold sales reduced by 14% from 829,900 ounces to 709,800 ounces as a result of lower underground volumes mined occasioned by safety factors and an 11% decrease in underground yields from 7.5 grams per tonne to 6.7 grams per tonne.

Gold sales at Kloof decreased by 12% from 643,000 ounces to 566,500 ounces as a result of safety-related mine stoppages. At Beatrix, gold output remained relatively flat at 391,900 ounces whilst at South Deep, gold sales increased 52% from 174,700 ounces to 264,800 ounces in line with the production build-up.

At the West African operations, gold sales at Tarkwa increased 18% from 612,400 ounces to 720,700 ounces mainly due to the commissioning of the new CIL plant, which allowed increased throughput. Damang’s gold sales increased 3% from 200,400 ounces to 207,400 ounces due to the commissioning of the secondary crusher in the June quarter which allowed more hard high-grade ore to be milled.

Gold sales at Cerro Corona in South America increased by 79% because of full-year’s production in financial 2010 compared with only six full months in financial 2009. Cerro Corona commenced commercial levels of production in January 2009.

At the Australasian operations production decreased 5% to 586,300 ounces. Gold sales at St Ives decreased by 2% from 428,300 ounces to 421,100 ounces due to less ore mined at Belleisle. At Agnew, gold sales declined by 14% from 192,100 ounces to 165,200 ounces due to depletion of Songvang surface stockpiles.

COST OF SALES

Cost of sales, which consists of operating costs, changes in gold inventories and amortisation and depreciation, increased from R21,766 million in financial 2009 to R23,829 million in financial 2010.

The table below presents the analysis of cost of sales:

    2010   2009  
     Analysis of cost of sales R million   R million  
  Total cash cost 18,782   17,145  
  Add/(deduct): General and administration 705   707  
        Rehabilitation 122   129  
        Gold inventory change – cash portion 104   192  
        Royalties* (543)   (339)  
  Operating costs 19,170   17,834  
  (Deduct)/add: Gold inventory change – total (178)   (210)  
        Amortisation and depreciation 4,837   4,142  
  Cost of sales per income statement 23,829   21,766  

* Royalties are deducted as they are included as part of total cash cost but are reflected as part of taxation in the income statement.

The analysis that follows provides a more detailed comparison of cost of sales and Notional Cash Expenditure (NCE) per ounce.

Operating costs – cost of sales less gold inventory change, and amortisation and depreciation

Operating costs increased by 7% from R17,834 million in financial 2009 to R19,170 million in financial 2010. The increase at the South African operations was 14% from R9,840 million to R11,204 million. At the West African operations, operating costs decreased 8% from R4,240 million in financial 2009 to R3,924 million but increased 10% in local currency from US$471 million to US$518 million. In South America at Cerro Corona, operating costs increased from R779 million to R1,024 million and in local currency terms from US$86 million to US$135 million as a result of the 79% increase in production. At the Australasian operations, operating costs increased from R2,976 million to R3,018 million but in local currency it was marginally higher at A$452 million.

At the South African operations the increase of R1,364 million was mainly due to the above-inflation annual wage increases of around 12% all-in, a 35% increase in electricity costs of R417 million and an increase in commodity costs, partially offset by the lower production levels and benefits achieved through our cost-saving initiatives, such as programmes to reduce surface labour, improved workshop delivery, more effective salvage and reclamation and a focus on core business training, amongst others.

At the West African operations, the increase of US$47 million was mainly due to the increase in production. At Tarkwa, operating costs increased from US$338 million to US$387 million due to the 18% increase in production which resulted in an increase in management fee, increased fuel consumption together with increased plant cost due to higher throughput. At Damang, despite the increase in production, operating costs were relatively unchanged at US$131 million compared with US$132 million in financial 2009.

At the Australasian operation, operating costs increased by A$6 million from A$345 million to A$351 million as a result of an increase in deferred waste charges and an increase in grade control drilling on the additional pit ounces mined, and inflationary increases partially offset by the lower production. At Agnew, costs were flat at A$101 million.

The following table sets out for each operation and the Group, total gold sales in ounces, total cash cost and total production cost in US$/oz and R/kg for the years ended 30 June 2010 and 2009.

    Year ended 30 June 2010   Year ended 30 June 2009  
        Total   Total       Total   Total  
    Gold sold   cash cost5   cash cost5   Gold sold   cash cost5   cash cost5  
    (’000 oz)   (US$/oz)   (R/kg)   (’000 oz)   (US$/oz)   (R/kg)  
                           
  • Driefontein 709.8   692   168,568   829.9   448   129,837  
  • Kloof 566.5   768   187,154   643.0   507   146,930  
  • Beatrix 391.9   740   180,358   391.1   552   159,799  
  • South Deep 264.8   811   197,669   174.7   717   207,803  
  South African operations 1,933.0   740   180,392   2,038.7   510   147,657  
  • Tarkwa1 720.7   536   130,636   612.4   521   150,814  
  • Damang2 207.4   660   160,890   200.4   660   191,179  
  West African operations 928.1   564   137,397   812.8   556   154,589  
  Peru – Cerro Corona3 389.9   348   84,737   217.8   369   106,777  
  • St Ives 421.1   710   173,085   428.3   596   172,707  
  • Agnew 165.2   539   131,323   192.1   401   116,120  
  Australasian operations4 586.3   662   161,315   620.4   536   155,188  
  Total operations 3,837.3           3,689.6          
  Weighted average cost     646   157,360       516   149,398  

1 In financial 2010 and 2009, 512,400 ounces and 435,400 ounces respectively were attributable to Gold Fields.
2 In financial 2010 and 2009, 147,500 ounces and 142,500 ounces respectively were attributable to Gold Fields.
3 In financial 2010 and 2009, 314,700 equivalent ounces and 175,800 equivalent ounces were respectively attributable to Gold Fields.
4 Total production costs for the Australasian operations are not split between the two operations.
5 Total cash cost is calculated in accordance with the Gold Industry standard.

The weighted average total cash cost per kilogram increased by 5% from R149,398 per kilogram (US$516 per ounce) in financial 2009, to R157,360 per kilogram (US$646 per ounce) in financial 2010.

The weighted average total cash cost at the South African operations in rand terms increased 22% from R147,657 per kilogram (US$510 per ounce) in financial 2009 to R180,392 per kilogram (US$740 per ounce) in financial 2010. This increase was as a result of the decline in gold production and the increase in costs described earlier.

At the West African operations total cash cost increased from US$556 per ounce to US$564 per ounce, an increase of 1%.

At Cerro Corona in South America, total cash costs decreased from US$369 per ounce to US$348 per ounce, a decrease of 6%. This was due to an increase in gold equivalent ounces sold.

At the Australasian operations, total cash cost increased from A$724 per ounce (US$536 per ounce) to A$751 per ounce (US$662 per ounce) as a result of the decrease in gold production and the increase in costs described earlier.

General and administration (G&A) costs

Net general and administration costs, which are included in operating costs, at R705 million in financial 2010 compared with R707 million in financial 2009.

Costs falling under the definition of general and administration costs included the following:

  • Recovered corporate expenditure for financial 2010 was R306 million compared with R254 million in financial 2009;
  • Management fees in Ghana of R151 million, compared with R136 million in financial 2009. In dollar terms they increased from US$15 million to US$20 million and was as a result of the higher revenue generated by the two West African operations;
  • The cost of regional offices in Australasia, West Africa and South America increased by R11 million from R102 million financial 2009 to
    R113 million in financial 2010. This was in line with our regionalisation strategy to increase and strengthen the knowledge base at the
    offshore regional offices;
  • World Gold Council fees amounted to R46 million in financial 2010, charged at an average of US$1.93 per ounce of attributable gold
    production. The financial 2009 charge was R56 million at an average of US$1.80 per ounce of attributable gold production. The lower fees
    in financial 2010 was due to the stronger rand;
  • Off-site training amounted to R72 million in financial 2010 compared with R149 million in financial 2009 due to a deliberate decision to
    downscale training and relocate certain training functions back to the mines in order to focus on on-mine training; and
  • Other costs relating to Chamber of Mines and special technical projects.

Gold inventory change

Gold inventory change in financial 2010 was a R178 million credit to costs, compared with a credit to costs of R210 million in financial 2009.

At Tarkwa, there was a credit to costs in financial 2010 of US$11 million compared with a credit of US$18 million in financial 2009. The US$11 million credit in fiscal 2010 was due to a slower than expected release from the North heap leach facility. The US$18 million credit in financial 2009 was due to gold lock-up in the new plant, a build-up at the North heap leach and increased stockpiles at year end.

At Damang, there was a charge to costs of US$2 million in financial 2010 compared with a credit of US$2 million in financial 2009. The charge in financial 2010 was due to the utilisation of the crushed ore stockpile created in financial 2009 to create mill feed flexibility, partly as a result of the crusher rebuild and the commissioning of a secondary crusher commissioned late in the fourth quarter of financial 2010. The credit in financial 2009 was mainly due to the deliberate stockpiling of crushed ore to improve mill feed flexibility.

Cerro Corona unsold stock decreased from US$4 million at the end of financial 2009 to US$1 million at the end of financial 2010. In both years, the level of the stock was driven by sales and shipping schedules.

At St Ives, there was a credit to costs of A$15 million in financial 2010 compared with a credit to costs in financial 2009 of A$2 million. The increase in the credit to cost was mainly as a result of stockpiling lower-grade ore and heap leach gold in-process, as more high-grade ore was available from the underground mines. In financial 2009 low-grade Leviathan ore was stockpiled.

At Agnew, there was a charge to costs in financial 2010 of A$1 million compared with a charge of A$3 million in financial 2009. Both amounts were due to the processing of surface stockpiles, including the Songvang stockpile.

Amortisation and depreciation

Amortisation and depreciation increased by R695 million, from R4,142 million in financial 2009 to R4,837 million in financial 2010.

At the South African operations amortisation increased from R2,036 million in financial 2009 to R2,416 million in financial 2010, an increase of R380 million. Driefontein decreased from R625 million to R622 million due to lower production; Kloof increased from R693 million to R800 million and Beatrix from R435 million to R542 million due to a reduction in short-life ore reserve development. South Deep increased from R283 million to R453 million mainly due to the increase in production in line with the build-up.

At the West African operations, amortisation increased from US$74 million in financial 2009 to US$128 million in financial 2010. Tarkwa increased from US$55 million in financial 2009 to US$111 million in financial 2010 due to increased production and the additional amortisation on the CIL expansion and HPGR projects. Damang was similar year-on-year at US$17 million.

In South America, amortisation at Cerro Corona increased from US$39 million in financial 2009 to US$55 million in financial 2010 as a result of the increase in production.

At the Australasian operations, amortisation decreased from A$142 million in financial 2009 to A$133 million in financial 2010 due to lower production and an increase in reserves at St Ives and Agnew partially offset by amortisation of A$14 million on the buy-back of the Morgan Stanley royalty.

Notional cash expenditure (NCE)

Notional cash expenditure is defined as operating costs (including general and administration costs) plus capital expenditure, which includes brownfields exploration, and is reported on a per ounce basis. The objective is to provide the all-in cost for the Group, and for each operation. The NCE per ounce is an important measure, as it determines how much free cash flow is generated in order to pay taxation, interest, greenfields exploration and dividends.

    Year ended 30 June 2010  
    Gold   Operating   Capital          
    produced   costs   expediture   NCE   NCE  
    (’000 oz)   US$ million   US$ million   US$/oz   R/kg  
  • Driefontein 709.8   505.6   150.3   924   225,208  
  • Kloof 566.5   451.8   145.7   1,054   256,962  
  • Beatrix 391.9   299.9   85.8   984   239,867  
  • South Deep 264.8   220.9   212.8   1,638   399,211  
  South African                    
  operations 1,933.0   1,478.1   594.7   1,072   261,323  
  • Tarkwa 720.7   387.0   148.6   743   181,115  
  • Damang 207.4   130.7   29.8   774   188,591  
  West African                    
  operations 928.1   517.7   178.4   750   182,786  
  South American                    
  operations                    
  – Cerro Corona (Peru) 393.6   135.1   85.6   561   136,650  
  • St Ives 421.1   308.9   103.0   978   238,345  
  • Agnew 165.2   89.3   55.2   875   213,132  
  Australian operations 586.3   398.2   158.2   949   231,239  
  Group operations/                    
  projects 3,841.0   2,529.1   1,016.9   923   224,979  

    Year ended 30 June 2009  
    Gold   Operating   Capital          
    produced   costs   expenditure   NCE   NCE  
    (’000 oz)   US$ million   US$ million   US$/oz   R/kg  
  • Driefontein 829.9   391.8   114.8   610   176,838  
  • Kloof 643.0   342.3   106.4   698   202,140  
  • Beatrix 391.1   226.1   69.9   757   219,254  
  • South Deep 174.7   131.9   113.3   1,403   406,423  
  South African                    
  operations 2,038.7   1,092.1   404.3   734   212,629  
  • Tarkwa 612.4   338.1   201.1   881   255,066  
  • Damang 200.4   132.4   16.9   745   215,851  
  West African                    
  operations 812.8   470.5   218.0   847   245,398  
  South American                    
  operations                    
  – Cerro Corona (Peru) 219.3   86.4   116.8   926   268,382  
  • St Ives 428.3   255.4   68.8   757   219,299  
  • Agnew 192.1   74.8   30.8   550   159,240  
  Australian operations 620.4   330.2   99.6   693   200,705  
  Group operations/                    
  projects 3,691.2   1,979.3   838.7   763   221,153  

The above calculation is based on the average rand to the US dollar exchange rate for the year of 7.58 and 9.01 for financial 2010 and financial 2009 respectively.

The NCE for financial 2010 of US$923 per ounce was higher than the US$763 per ounce achieved in financial 2009 because of the higher operating and capital expenditure together with the stronger rand, partially offset by the higher production.

Net operating profit

Net operating profit increased by 6% from R7,321 million in financial 2009 to R7,736 million in financial 2010. This is due to the increased revenue as a result of the increased gold sales and a higher average gold price received which more than offset the higher cost of sales.

INVESTMENT INCOME

Income from investments increased 36% from R225 million in financial 2009 to R305 million in financial 2010. The increase was mainly due to higher average cash balances in financial 2010 compared with financial 2009.

The interest received in financial 2010 of R305 million comprises R1 million in dividend income, R66 million on monies invested in the South African environmental rehabilitation trust funds and R238 million on other cash and cash equivalent balances.

The interest received in financial 2009 of R225 million comprised R12 million in dividend income, R82 million on monies invested in the South African environmental rehabilitation trust funds and R131 million on other cash and cash equivalent balances.

Interest received on the funds invested in rehabilitation trust funds decreased from R82 million in financial 2009 to R66 million in financial 2010 due to lower interest rates in financial 2010 compared with financial 2009.

Interest on other cash balances increased from R131 million in financial 2009 to R238 million in financial 2010 mainly due to higher average cash and cash equivalent balances held in financial 2010.

FINANCE EXPENSE

Finance expense decreased from R873 million in financial 2009 to R493 million in financial 2010.

The finance expense of R493 million in financial 2010 comprised R45 million interest payable on the preference shares, R38 million relating to the accretion of the environmental rehabilitation liability and R499 million on various Group borrowings, partially offset by interest capitalised of R88 million.

The finance expense of R873 million in financial 2009 comprised R88 million interest charges on the preference shares, R18 million interest paid on the Mvela loan, R38 million relating to the accretion of the environmental rehabilitation liability and R807 million in respect of other interest charges, partially offset by interest capitalised of R78 million.

Below is an analysis of the components making up other interest, stated on a comparative basis:

    2010   2009  
      R million   R million  
  Interest on Commercial Paper 208   14  
  Interest on borrowings to fund capital expenditure and operating costs at the South African operations 182   383  
  Forward cover costs on the foreign exchange contract taken out on the revolving credit facility 38   341  
  Interest on project finance loan – Gold Fields La Cima 39   26  
  Interest on the revolving credit facility used to partially fund capital expenditure at Cerro Corona and in        
  financial 2009, the purchase of investments in Sino Gold Limited 27   41  
  Other interest charges 5   2  
    499   807  

Other interest charges decreased from R807 million in financial 2009 to R499 million in financial 2010 due to:

  • The cancellation of the forward cover contract on the Western Areas loan in September 2009 resulting in the forward cover costs decreasing from R341 million in financial 2009 to R38 million in financial 2010.
  • A strategy in South Africa to move away from traditional bank debt and to access the commercial paper market in order to benefit from the
    lower interest rates offered by the commercial paper.

Interest on the preference shares in financial 2010 is 49% lower than in financial 2009 because in October 2008, R600 million (including R23 million of associated interest) of the initial issue of R1,200 million preference shares to Rand Merchant Bank on 24 December 2007, were redeemed.

During financial 2010, R88 million (financial 2009: R78 million) of interest was capitalised in terms of IAS 21 Borrowing Cost. IAS 21 requires capitalisation of borrowing costs whenever general borrowings are used to finance qualifying projects. The qualifying project during financial 2010 included South Deep (financial 2009: South Deep and Cerro Corona).

Environmental rehabilitation interest charges were flat, year-on-year, at R38 million.

REALISED GAIN/(LOSS) ON FINANCIAL INSTRUMENTS

Currency forward contracts

During financial 2010 the Group had three different forward contracts. They were:

Western Areas US dollar/rand forward purchases – As a result of the draw-down under the bridge loan facility to settle the close-out of the gold derivative structure, US dollar/rand forward cover was purchased during the March 2007 quarter for the amount of US$551 million for settlement on 6 August 2007, at an average forward rate of R7.3279/US$. Subsequent to this date the cover was extended for periods between one and three months throughout financial 2008, financial 2009 and financial 2010. The forward cover was also reduced with the partial repayments of US$61 million, US$172 million and US$44 million against the loan on 6 December 2007, 31 December 2007 and 15 June 2009 respectively.

The balance of US$274 million forward cover was extended to 15 July 2009, 17 August 2009 and 17 September 2009 at average forward rates of R8.0893/US$, R8.3839/US$ and R8.0387/US$ respectively.

On 17 September 2009 the forward cover of US$274 million was settled. The realised foreign exchange loss on the settlement was exactly offset by R34 million cumulative positive gains on the forward cover purchased at an original rate of R7.3279. The forward cover costs were accounted for as part of interest.

For accounting purposes, this forward cover was designated as a hedging instrument, resulting in the gains and losses on the forward cover being accounted for under gain/(loss) on foreign exchange along with gains and losses on the underlying loan that was hedged. The forward cover points were accounted for as part of interest.

South Africa – During financial 2010, South African rand forward cover contracts were taken out to cover commitments of the South African operations in various currencies:

  • An initial US dollar forward contract of US$20 million was entered into during the year. At the end of the financial year, US$3 million was
    outstanding; and
  • An initial Australian dollar forward contract of AS$12 million was entered into during the year. At the end of the financial year, AS$9 million
    was outstanding.

During financial 2009 the Group had three different currency forward contracts. They were:

Western Areas US dollar/rand forward purchases – As a result of the draw-down under the bridge loan facility to settle the close-out of the gold derivative structure, US dollar/rand forward cover was purchased during the March 2007 quarter for the amount of US$551 million for settlement on 6 August 2007, at an average forward rate of R7.3279/US$. Subsequent to this date the cover was extended for periods between one and three months throughout financial 2008 and financial 2009. The forward cover was also reduced with the partial repayments of US$61 million and US$172 million against the loan on 6 December 2007 and 31 December 2007 respectively.

During financial 2009, a further amount of US$44 million was repaid against the loan and the forward cover was reduced by the same amount. The balance of US$274 million forward cover was extended to 15 July 2009, being the next repayment date on the loan, at an average forward rate of R8.0893/US$. For accounting purposes, this forward cover was designated as a hedging instrument. As a result, the gains and losses on the forward cover was accounted for under gain/(loss) on foreign exchange, along with gains and losses on the underlying loan that has been hedged. The forward cover points was accounted for as part of interest.

South Africa – US dollar/rand forward sales – In October 2008, US$150 million of expected gold revenue for the December quarter was sold forward on behalf of the South African operations. In December 2008, the US$150 million was extended to the March quarter at an average forward rate of R10.3818. During the March quarter US$30 million was settled at a gain for the quarter of R7 million. The outstanding balance of US$120 million was extended into the June quarter at an average forward rate of R10.2595. In the June quarter, the remaining forward cover of US$120 million was partly delivered into and the balance closed out, resulting in a gain of R54 million. This was accounted for in the income statement in the June quarter.

Australia – US dollar/Australian dollars forward sales – In October 2008, US$70 million of expected gold revenue for the December quarter was sold forward on behalf of the Australasian operations. In December 2008, US$56 million was extended to the March quarter at an average forward rate of A$0.6650. During the March quarter an additional US$8 million of the same instruments was taken out. The total of US$64 million was extended into the June quarter at an average forward rate of A$0.6445. In the June quarter the forward cover of US$64 million was partly delivered into and the balance closed out, resulting in a gain of A$2 million (R13 million). This was accounted for in the income statement.

International Petroleum Exchange gasoil call option

In financial 2009, the Ghanaian operations purchased four monthly Asian-style Intercontinental Exchange (“ICE”) gasoil call options with strike prices ranging from US$0.90 per litre to US$1.11 per litre, which equated to a Brent crude price of between US$92 and US$142 per barrel, with final expiry on 28 February 2010. The call options resulted in an upfront premium of US$10.4 million.

The Australasian operations purchased two monthly Asian-style Singapore 0.5 gasoil call options with strike prices ranging from US$0.9128 per litre to US$1.0950 per litre with a final expiry on 28 February 2010. The call options resulted in an upfront premium of A$4.4 million.

Copper financial instruments

During June 2009, 8,705 tonnes of Cerro Corona’s expected copper production for financial 2010 was sold forward for monthly deliveries, from 24 June 2009 to 23 June 2010. The average forward price for the monthly deliveries was US$5,001 per tonne. An additional 8,705 tonnes of Cerro Corona’s expected copper production for financial 2010 was hedged by means of a zero cost collar, guaranteeing a minimum price of US$4,600 per tonne with full participation up to a maximum price of US$5,400 per tonne.

The above contracts were delivered into during financial 2010. As at 30 June 2010, there were no outstanding copper financial instruments.

The financial instruments discussed above increased from a loss of R56 million in financial 2009 to a gain of R210 million in financial 2010. The increase is explained below:

    2010   2009  
      R million   R million  
  International Petroleum Exchange gasoil call option (2)   (126)  
  Gain on receipt of four million top-up shares in Eldorado Gold Corporation 402    
  Copper financial instruments (196)    
  US dollar/rand currency hedge   (3)  
  US dollar/rand forward sales   61  
  US dollar/Australian dollar forward sales   13  
  Other 6   (1)  
    210   (56)  

(LOSS)/GAIN ON FOREIGN EXCHANGE

The loss on foreign exchange in financial 2010 was R65 million compared with a gain of R92 million in financial 2009.

    2010   2009  
      R million   R million  
  (Loss)/gain on repayment of Australian dollar-denominated intercompany loans (49)   125  
  Gain on US dollar proceeds in respect of the South Deep fire insurance claim   35  
  Exchange losses on cash balances held in currencies other than the functional currencies of the Group’s        
  various subsidiary companies (16)   (68)  
    (65)   92  

OTHER COSTS

Other operating costs of R203 million in financial 2009 compared with R209 million in financial 2010. The charge for financial 2010 is mainly made up of:

  • Social contributions and sponsorships;
  • Loan facility charges;
  • Research and development into mechanised mining; and
  • Fair value writedown of the rose cultivars at Living Gold.

The charge for financial 2009 is mainly made up of:

  • Restructuring costs at the training academy;
  • New loan facility charges;
  • Research and development into mechanised mining;
  • Fair value writedown of the rose cultivars at Living Gold; and
  • Sale agreement adjustment with Orezone Resources Inc. with reference to the sale of Essakane in the previous financial year.

SHARE-BASED PAYMENTS

Gold Fields recognises the cost of share options granted (share-based payments) in terms of International Financial Reporting Standard (IFRS) 2.

Gold Fields has adopted appropriate valuation models (Black-Scholes and Monte Carlo simulation) to fair value share-based payments. The value of the share options is determined at the grant date of the options and expensed on a straight-line basis over the three-year vesting period, adjusted for forfeitures as appropriate.

Based on these models, R408 million was accounted for in financial 2010 compared with R303 million in financial 2009. The corresponding entry for the above adjustments was share-based payment reserve within shareholders’ equity.

The reasons for the increase in share-based payments was mainly a result of new allocations during financial 2010 and the effect of the additional March grant in financial 2009 which were expensed for a full year in financial 2010 compared with only three months in financial 2009.

EXPLORATION EXPENSE

Gold Fields spent R613 million (US$81 million) on exploration in financial 2010 compared with R508 million (US$56 million) in financial 2009. The bulk of the expenditure was incurred on a diversified pipeline of projects in Africa, Australia, China and North, South and Central America. The increase in financial 2010 is due to spend on advanced stage exploration projects, Chucapaca in Peru (US$11 million) and Yanfolila in Mali (US$13 million). Subject to continued exploration success, expenditure is expected to be US$100 million in financial 2011.

SHARE OF RESULTS OF ASSOCIATES AFTER TAXATION

Gold Fields equity accounts for two associates; Rand Refinery Limited and Rusoro Mining Limited. The Group’s 35% share of after-tax profits in Rand Refinery Limited was R14 million in financial 2009 compared with R64 million in financial 2010.

The Group’s 26% share of after-tax profits in Rusoro Mining Limited was a loss of R156 million in financial 2009 compared with a gain of R54 million in financial 2010. The share of Rusoro’s financial 2010 profit takes into account R84 million translation gain as a result of applying hyperinflationary accounting to its investments in Venezuela.

RESTRUCTURING COSTS

Restructuring costs decreased from R126 million in financial 2009 to R17 million in financial 2010. The costs in both years relate to the restructuring of the South African operations.

SOUTH DEEP INSURANCE CLAIM

South Deep insurance claim of R131 million received in financial 2009 related to the receipt of the insurance claim proceeds from the incident in financial 2007.

DRIEFONTEIN 9 SHAFT CLOSURE COSTS

During financial 2008, Driefontein suspended its 9 Shaft project due to a lack of power supply. An estimated R24 million was provided for the closure in the same year. In financial 2009, a R2 million overprovision was reversed after finalisation of the total closure costs.

IMPAIRMENT OF INVESTMENTS AND ASSETS

Impairment of investments decreased from R1,210 million in financial 2009 to R258 million in financial 2010.

The impairment charge in financial 2010 of R258 million comprised an impairment charge of R197 million of Rusoro to its market value of R235 million (US$31 million). The balance of the impairment charge related to a writedown of R61 million of sundry offshore listed exploration equity investments.

The impairment charge in financial 2009 of R1,210 million comprised an impairment charge of R1,066 million of Rusoro to its market value of R390 million (US$48 million). The balance of the impairment charge related to a writedown of R144 million of sundry offshore listed exploration equity investments.

The Group assesses, at each reporting date, whether there are indicators of impairment for any of its assets. If there are any indicators of impairment, the assets’ recoverable amount needs to be estimated. The carrying value is compared with the higher of “value-in-use” or “fair value less costs to sell”.

Various internal and external sources of information were considered and management has concluded that no indicators of impairment of assets existed at 30 June 2010.

Unlike assets, goodwill needs to be tested for impairment annually.

The following estimates and assumptions were used by management in reviewing the long-term assets and associated goodwill for impairment:

  • A gold price of R260,000 per kilogram for financial 2011 and financial 2012 and R290,000 per kilogram thereafter (2009: R245,000 per
    kilogram for financial 2010 and financial 2011 and R280,000 per kilogram thereafter);
  • Discount rate of 6.1% – 6.8% (financial 2009: 6%);
  • The extraction of proved and probable reserves as per the most recent life-of-mine plan; and
  • Operating costs and capital expenditure estimates as per the most recent life-of-mine plan.

In both financial 2010 and financial 2009, the application of the above estimates and assumptions did not result in any impairment charge to the Group’s mining assets.

PROFIT/(LOSS) ON DISPOSAL OF INVESTMENTS

The profit on the sale of investments in financial 2010 amounted to R847 million compared with a loss of R148 million in financial 2009.

The profit on disposal of investments in financial 2010 comprises:

      R million  
  Gain on exchange of 58 million Sino Gold shares for 28 million shares in Eldorado Gold Corporation 447  
  Gain on sale of 32 million Eldorado Gold Corporation shares acquired through the Sino Gold Inc. share exchange    
  (28 million) plus a further four million top-up shares 350  
  Gain from sale of Troy Resources shares 30  
  Gain from sale of Orezone Resources shares 10  
  Gain from sale of equity shares held through the New Africa Mining Fund 8  
  Gain from the sale of Aquarius Platinum Limited 2  
    847  

The loss on disposal of investments in financial 2009 comprised:

      R million  
  Loss on exchange of 42 million Orezone Resources Inc. shares for 3 million IAMGold Limited shares as a result of    
  the acquisition of all Orezone shares by IAMGold (209)  
  Gain from the subsequent sale of the abovementioned 3 million shares in IAMGold Limited 65  
  Loss from the sale of 70% holding in IRCA (Pty) Limited Group (3)  
  Loss from the sale of shares in Lakota Resources Inc. (1)  
    (148)  

PROFIT ON DISPOSAL OF PROPERTY, PLANT AND EQUIPMENT

Profit on disposal of property, plant and equipment decreased from R4 million in financial 2009 to R3 million in financial 2010.

The major disposals in financial 2010 related to the sale of surplus housing at Beatrix whereas in financial 2009, they related to the sale of surplus housing at Driefontein, Kloof and Beatrix.

MINING AND INCOME TAX

The table below indicates Gold Fields’ effective tax expense rate for financial 2010 and financial 2009.

    2010   2009  
      R million   R million  
  Income and mining tax        
  Effective tax expense rate 40.3   55.9  

In financial 2010, the effective tax expense rate of 40% was lower than the maximum South African mining statutory tax rate of 43% mainly due to the tax effect of the following:

  • R701 million adjustment to reflect the actual realised company tax rates in South Africa and offshore;
  • R126 million reduction relating to the South African mining tax formula rate adjustment;
  • R537 million adjustment relating to profit on disposal of investments and a gain on financial instruments on Eldorado top-up shares, which
    is subject to capital gains tax rather than income tax; and
  • R199 million of non-taxable income across the various operations.

The above were offset by the following tax-effected charges:

  • R551 million non-deductible charges comprising share-based payments (R176 million), exploration expense (R264 million) and impairment charges (R111 million);
  • R668 million of royalties and levies at the South African, West African, Australasian and South American operations; and
  • R181 million of capital gains tax on taxable gains on disposal of investments.

In financial 2009, the effective tax expense rate of 56% was higher than the maximum South African mining statutory tax rate of 43% mainly
due to the tax effect of the following:

  • R507 million adjustment to reflect the actual realised company tax rates in South Africa and offshore;
  • R250 million reduction relating to the South African mining tax formula rate adjustment; and
  • R25 million of assessed losses previously unrecognised at GFL Mining Services Limited and Gold Fields protection Services Limited.

The above were offset by the following tax-effected charges:

  • R870 million non-deductible charges comprising share-based payments (R131 million), exploration expense (R219 million) and impairment
    charges (R520 million); and
  • R339 million of royalties and levies at the West African and Australasian operations.

Profit attributable to ordinary shareholders of the company

As a result of the factors discussed above, Gold Fields posted earnings attributable to ordinary shareholders of the company of R3,631 million in financial 2010 compared with R1,536 million in financial 2009.

Profit attributable to non-controlling interest

Profits attributable to non-controlling interest were R643 million in financial 2010 compared with R319 million in financial 2009. Profits attributable to non-controlling interest increased as a result of the increase in profits at Tarkwa, Damang and Cerro Corona. The non-controlling interest remained unchanged in Gold Fields Ghana (Tarkwa) and Abosso Goldfields (Damang) at 28.9%, in Gold Fields La Cima (Cerro Corona) at 19.3% and in Living Gold (Pty) Limited at 35.01%.

The amount making up the non-controlling interest is shown below:

    Minority   2010   2009  
      interest   R million   R million  
  Gold Fields Ghana Limited – Tarkwa 28.9%   412   260  
  Abosso Goldfields – Damang 28.9%   101   24  
  Gold Fields La Cima – Cerro Corona 19.3%   133   44  
  Living Gold (Pty) Limited 35.0%   (3)   (9)  
        643   319  

LIQUIDITY AND CAPITAL RESOURCES

Cash resources

Cash flows from operating activities
Cash inflows from operating activities increased from R6,001 million in financial 2009 to R8,507 million in financial 2010. The increase of
R2,506 million was due to:

      R million  
  Increase in cash generated from operations due to increased revenues arising from higher gold prices    
  and increased gold sales 943  
  Increase in interest received as a result of higher cash balances 107  
  Release of working capital investment arising mainly from trade receivables 1,201  
  Lower interest payments due to lower borrowings and lower interest rates 327  
  Decrease in taxes paid 49  
  Lower dividends received (10)  
  Increase in dividends paid to ordinary and minority shareholders (111)  
    2,506  

Cash flows from investing activities

Cash outflows from investing activities increased from R7,284 million in financial 2009 to R7,432 million in financial 2010. The items comprising these numbers are discussed below.

Additions to property, plant and equipment

Capital expenditure increased from R7,649 million in financial 2009 to R7,742 million in financial 2010.

Capital expenditure at the South African operations increased from R3,643 million in financial 2009 to R4,508 million in financial 2010. The increase in capital expenditure of R865 million was due to:

  • Driefontein increasing from R1,034 million in financial 2009 to R1,140 million in financial 2010. This was mainly due to increased expenditure
    on ORD and the uranium project partially offset by decreased expenditure on high- and low-density accommodation and various other capital projects;
  • Kloof increasing from R959 million in financial 2009 to R1,104 million in financial 2010. This was due to accelerated expenditure on the main shaft pump column and increased expenditure on housing projects and hydro power equipment;
  • South Deep increasing from R1,021 million in financial 2009 to R1,613 million in financial 2010. This increase was due to expenditure on increased development, the ventilation shaft deepening, the new tailings facility and infrastructure as per the project plan build-up; and
  • Beatrix increasing from R629 million in financial 2009 to R651 million in financial 2010. This was mainly due to increased ORD and infrastructure upgrades.

Capital expenditure at the West African operations decreased from US$218 million in financial 2009 to US$178 million in financial 2010.

  • Tarkwa decreased from US$201 million in financial 2009 to US$148 million in financial 2010. This was mainly due to the high spend on the CIL expansion project that was completed in financial 2009; and
  • Damang increased from US$17 million in financial 2009 to US$30 million in financial 2010. This was due to expenditure on the secondary crusher and additional on-mine exploration.

Capital expenditure at the Australasian operations increased from A$135 million in financial 2009 to A$180 million in financial 2010.

  • St Ives increased from A$93 million to A$117 million in financial 2010. The increase was due to accelerated capital development at Athena underground mine of A$31 million, with nothing expensed on this project in financial 2009; and
  • Agnew increased from A$42 million in financial 2009 to A$63 million in financial 2010. The increase was due to the acquisition of a mining
    fleet to commence owner-mining.

Capital expenditure at Cerro Corona in Peru decreased from US$117 million in financial 2009 to US$86 million in financial 2010. This was mainly due to the completion of the project construction in the second quarter of financial 2009.

Proceeds on the disposal of property, plant and equipment

Proceeds on the disposal of property, plant and equipment decreased from R32 million in financial 2009 to R9 million in financial 2010. In both years, this related to the disposal of various redundant assets at the South African mining operations.

Royalty termination

On 27 August 2009, Gold Fields reached agreement with Morgan Stanley Bank to terminate, for A$308 million (R1,999 million), the royalty agreement between St Ives Gold Mining Company (Pty) Limited and Morgan Stanley Bank’s subsidiaries. The terminated royalty agreement required St Ives to pay a 4% net smelter volume royalty on all of its revenues once total gold produced from 30 November 2001 exceeded 3.3 million ounces which was triggered early in financial 2009, and provided that if the gold price exceeded A$600 per ounce, to pay an additional 10% of the revenue difference between the spot gold price, in Australian dollars per ounce, and the price of A$600 per ounce.

Purchase of Glencar asset

During financial 2010, Gold Fields acquired, for cash, 100% of Glencar Mining Plc., a company whose principal asset, and only defined resource, is its Komana project in Southern Mali, West Africa. The cash consideration paid was R340 million (US$43 million).

(Purchase)/sale of subsidiary

In financial 2009, the Group disposed of its entire 70% controlling interest in the IRCA (Pty) Limited Group for R45 million.

Purchase of investments

Investment purchases decreased from R99 million in financial 2009 to R97 million in financial 2010.

  The purchase of investments in financial 2010 comprised: R million  
  Purchase of a shareholding in Atacama Pacific Gold Corporation 5  
  Loans advanced to GBF Underground Mining Company 91  
  Other 1  
    97  

  The purchase of investments in financial 2009 comprised: R million  
  Rights offer in Sino Gold Limited to maintain the Group’s 19.9% shareholding 95  
  Purchase of a 9.1% holding in Glencar Mining Plc. 17  
  Purchase of 5.4% holding in Clancy Exploration Limited 2  
  Purchase of a 0.5% holding in Cascadero Copper Corporation 1  
  Loans repaid by GBF Underground Mining Company (16)  
    99  

Proceeds on the disposal of investments

Proceeds on the disposal of investments increased from R482 million in financial 2009 to R2,831 million in financial 2010.

  The proceeds on the disposal of investment in financial 2010 comprised: R million  
  Sale of shares in:    
  Eldorado Gold Corporation 2,731  
  Troy Resources NL 53  
  Orezone Resources Inc. 29  
  Great Basin Gold Limited and Lupa Joint Venture held through New Africa Mining Fund 12  
  Aquarius Platinum Limited 5  
  Cascadero Copper Corporation 1  
    2,831  

  The proceeds on disposal of investments in financial 2009 comprised: R million  
  Sale of IAMGold Corporation shares 282  
  Redemption of preference shares held in a wholly owned subsidiary of Mvela Resources Limited 200  
    482  

Environmental trust funds and rehabilitation payments

During financial 2010 Gold Fields paid R60 million into its South African environmental trust funds and spent R33 million on ongoing rehabilitation, resulting in a total cash outflow of R93 million for the year.

During financial 2009 Gold Fields paid over R58 million to its environmental trust funds and spent R36 million on ongoing rehabilitation resulting in a total cash outflow of R94 million for the year.

Cash flows from financing activities

Net cash generated by financing activities decreased from R2,087 million in financial 2009 to net cash utilised of R75 million in financial 2010. The items comprising these amounts are discussed below.

Loans (repaid to)/received from minority shareholders

Minority shareholders’ loans repaid were R116 million in financial 2010 compared with loans received of R10 million in financial 2009. The R116 million repaid in financial 2010 related to loan repayments of US$15 million by Tarkwa to IAMGold.

The R10 million received in financial 2009 related to an advance and a repayment between Tarkwa and its minority shareholder, IAMGold of US$6 million. The R10 million related to different exchange rates used to convert the advance and repayment to South African rand.

Loans raised

Loans raised increased from R11,704 million in financial 2009 to R12,276 million in financial 2010.

  The loans raised in financial 2010 comprised: R million  
  Notes issued as Commercial Paper loans to refinance existing facilities 7,902  
  US$221 million was raised under the split-tenor revolving credit facility to partially fund the St Ives Royalty    
  and the acquisition of Glencar Mining 1,642  
  US$200 million was raised under syndicated revolving loan facility for purposes of refinancing existing facilities 1,548  
  Borrowings by GFIMSA from various local banks to fund short-term working capital requirements and capital expenditure 1,040  
  Proceeds on the scrip lending of three million Mvelaphanda shares 144  
    12,276  

  The R11,704 million received in financial 2009 comprised: R million  
  Drawn down on a credit facility in order to repay the Mvela loan. Mvela then used the proceeds from the loan repayment    
  to subscribe for its 15% interest in GFIMSA by paying the R4,139 million to GFIMSA. Immediately upon receipt of the    
  GFIMSA shares, Mvela exercised its right to use the GFIMSA shares to subscribe for 50 million new ordinary shares in    
  Gold Fields 4,139  
  Borrowings by GFIMSA from various local banks to fund short-term working capital requirements and capital expenditure 3,900  
  US$138 million drawn down on the US$750 million syndicated facility to fund the capital expenditure on Cerro    
  Corona and the acquisition, in financial 2009, of additional Sino Gold Limited shares 1,325  
  Notes issued as Commercial Paper loans to refinance existing facilities 1,143  
  US$116 million was raised under the syndicated revolving loan facility for purposes of refinancing existing facilities 993  
  US$20 million was drawn down under the short-term syndicated facility to fund capital expenditure 204  
    11,704  

Loans repaid

Loans repaid increased from R9,724 million in financial 2009 to R12,291 million in financial 2010.

  Loans repaid in financial 2010 comprised: R million  
  Commercial Paper loans 5,443  
  Group committed and uncommitted facilities 2,140  
  Syndicated revolving loan facility – US$272 million 2,019  
  Split-tenor revolving credit facility – US$290 million 2,155  
  Project finance facility at Cerro Corona – US$50 million 383  
  Syndicated facility – short term US$20 million 151  
    12,291  

  The loans repaid in financial 2009 comprised: R million  
  Mvelaphanda loan 4,623  
  Group committed and committed facilities 2,802  
  Syndicated revolving loan facility – US$44 million 377  
  Split-tenor revolving credit facility – US$150 million 1,299  
  Preference shares 623  
    9,724  

Shares issued

Shares issued decreased from R97 million in financial 2009 to R57 million in financial 2010.

The R57 million in financial 2010 related to proceeds received from shares issued in terms of the Group’s employee share scheme.

The R97 million in financial 2009 included R25 million received from the issue of 50,000,000 shares as a result of the completion of the Mvelaphanda transaction and R72 million received from shares issued in terms of the Group’s employee share scheme.

Net cash generated/(utilised)

As a result of the above, net cash generated for financial 2010 amounted to R999 million compared with net cash utilised of R804 million in financial 2009, a net increase of R1,803 million.

Total Group cash and cash equivalents amounted to R3,791 million at 30 June 2010, as compared with R2,804 million at the end of financial 2009.

STATEMENT OF FINANCIAL POSITION

Borrowings

Total debt (short and long-term) decreased from R8,896 million in financial 2009 to R8,487 million in financial 2010. Net debt (total debt less cash and cash equivalents) decreased from R6,092 million in financial 2009 to R4,697 million in financial 2010. These decreases are in line with management’s intention of decreasing the net debt position in both the short and long term. During financial 2010, the debt maturity profile was further extended by the conclusion of three new facilities:

  • US$450 million 3.5-year facility at LIBOR plus 175 basis points, 100 basis points lower than the existing facility it replaced;
  • R1 billion 3-year facility at JIBAR plus 300 basis points; and
  • R500 million 3-year facility at JIBAR plus 285 basis points.

During financial 2010, Gold Fields extensively accessed the Commercial Paper market in South Africa in order to benefit from the lower interest rates being charged on this paper relative to the traditional bank debt.

Long-term provisions

Long-term provisions at the end of financial 2010 were R2,318 million as compared with R2,320 million at the end of financial 2009 and included a provision for post-retirement health care costs of R22 million (financial 2009: R21 million), a provision for environmental rehabilitation costs of R2,296 million (financial 2009: R2,268 million) and other long term provisions of Rnil (financial 2009: R31 million).

Provision for post-retirement health care costs

The Group medical scheme, Medisense, provides benefits to employees and certain of its former employees. The Group remains liable for 50% of these retired employees’ medical contributions to the medical scheme after retirement. This is applicable to employees of the Free State operations who retired on or before 31 August 1997 and members of the West Wits operations who retired on or before 1 January 1999.

Provision for environmental rehabilitation costs

The amount provided for environmental rehabilitation costs increased from R2,268 million in financial 2009 to R2,296 million in financial 2010. This provision represented the present value of closure, rehabilitation and other environmental obligations incurred up to 30 June 2010. This provision is updated annually to take account of inflation, the time value of money and any new environmental obligations incurred.

The inflation and range of discount rates applied in financial 2010 and financial 2009 for each region are shown in the table below:

    South Africa   Ghana   Australia   Peru  
  Inflation rates                
  Financial 2009 7.0%   3.0%   2.5%   5.4%  
  Financial 2010 7.0%   2.0%   2.5%   2.0%  
  Discount rates                
  Financial 2009 7.0 – 8.7%   4.1 – 4.4%   6.2 – 6.3%   6.7%  
  Financial 2010 7.0 – 8.3%   6.1 – 6.4%   5.7 – 5.9%   5.2%  

The inflation adjustment for financial 2010 was R122 million compared with R129 million in financial 2009 and the interest adjustment for both financial 2010 and 2009 was R38 million.

Adjustments for new disturbances and changes in environmental legislation during financial 2010 and 2009, after applying the above inflation and discount rates were:

    2010   2009  
      R million   R million  
  South Africa (19)   162  
  Ghana (33)   70  
  Australia 29   3  
  Peru (50)   (31)  
  Total (73)   204  

The South African operations contribute to dedicated environmental trust funds to provide financing for final closure and rehabilitation costs. The amount invested in the fund is shown as a non-current asset in the financial statements and increased from R887 million in financial 2009 to R1,013 million in financial 2010. The increase consists of contributions of R60 million and interest income of R66 million. The South African operations are required to contribute annually to the trust fund over the remaining lives of the mines, to ensure that sufficient funds are available to discharge commitments for future rehabilitation costs.

Other long-term provisions

During financial 2009, Gold Fields La Cima, a subsidiary of Gold Fields Limited, formally declared its intention to jointly participate with Minera Yanacocha SRL in financing of the Kunter Wasi Road as an alternative route from the coast to the Cerro Corona Mine. Gold Fields La Cima agreed to pay a maximum of 20% (US$12 million) of the estimated cost of the project. The project commenced during financial 2010 and is expected to be completed by June 2011. The portion of the long-term provision of R31 million included in financial 2009 has now been reclassified as a short-term under accounts payable.

INFORMATION COMMUNICATION AND TECHNOLOGY (ICT)

ICT at Gold Fields has made great strides in supporting the Gold Fields Group in achieving its business strategy. The purpose of ICT at Gold Fields is to ensure the effective and efficient management of ICT resources to facilitate the achievement of Gold Fields objectives.

During the course of the year, the goals of ICT at Gold Fields were clearly articulated in the ICT Governance Charter as follows:

  • Ensure high availability and recoverability of all critical systems and information;
  • Ensure continuous alignment of the ICT strategy to the Gold Fields business strategy;
  • Ensure compliance with internal policies, selected industry standards, external laws and regulations;
  • Maintain high performance of all business systems through service level adherence;
  • Ensure that ICT resources are adequately secured;
  • Monitor and evaluate ICT investment and expenditure;
  • Manage ICT risks; and
  • Innovate.

ICT service delivery is being standardised and over the course of the year, numerous strategic initiatives have been concluded. These include the transition of SAP support into a more robust and suitable contract. A capital control system at South Deep was implemented enabling the tracking and monitoring of earned value for our key capital investment projects.

The reliance of many companies on successful ICT delivery has caused the King III Code of Corporate Governance to re-evaluate the role and governance of ICT. This has ensured that ICT governance is an important component of the overall management of ICT at Gold Fields. The governance structure adopted is based on the King III Code of Corporate Governance and is responsible for ICT delivering on its goals. This structure sees the regional ICT leaders reporting into the ICT management committee (Manco) monthly. The ICT Manco reports to the Chief Financial Officer quarterly and to the Executive Committee annually.

The key programmes within ICT remain focused on the following themes:
1. Safety;
2. Information management and communications;
3. Productivity;
4. Cost management; and
5. ICT operational and delivery excellence.

In order to deliver the key ICT strategic focus areas, the ICT operating model is being continuously reviewed for improvement. At this stage the ICT operating model is being reorganised to better align to supporting the Gold Fields business. This model will see ICT at Gold Fields being organised according to the following areas:

  • Commercial;
  • Mining and MRM;
  • Engineering;
  • Environmental, health, safety, risk and medical;
  • Infrastructure; and
  • Projects and vendor management.

The Gold Fields ICT operating model enables ICT to focus on business imperatives and providing business support, while the non-core services are outsourced i.e. infrastructure and applications support. This model allows the ICT team to engage with the business, service providers and vendors to implement new projects through the projects office and transition these projects into business as usual (BAU) through a core ICT team.

The oversight by this core team has been key to ensuring that projects are delivered to Gold Fields’ standards and transitioned to BAU with the proper contracts and service level agreements in place that best support the business.

Financials

ICT continues to focus on generating cost savings through the careful execution of its strategy. These savings are being used to finance the necessary investments in technology and business projects for the future.

Gold Fields ICT fiscal 2010 highlights

  • Transition SAP support into a new global support model;
  • The deployment of an IT solution to manage capital projects;
  • The introduction of the new ICT operating model and strategy;
  • The conclusion of phases 1 and 2 of the records and document management programme; and
  • The conclusion of a security review and progress towards ISO certification.

Gold Fields ICT fiscal 2011 highlights

Financial 2011 ICT is expected to continue its focus on global standardisation and improved service delivery through the following strategic projects:

  • The renegotiation of the outsource environment to generate savings on outsourced components;
  • Development of the ICT global delivery excellence programme;
  • The development of a global telepresence platform;
  • The restructuring of ICT hardware and the negotiation of a new hardware hosting environment;
  • The launch of a records and document management system; and
  • Deployment of a consolidated business intelligence platform.

SARBANES-OXLEY

Gold Fields, being a foreign private issuer under US SEC rules, needs to comply with the requirements of the Sarbanes-Oxley Act, 2002. Management’s compliance programme consists of self-assessments, focused walk-throughs and operating effectiveness testing executed throughout the year, on a quarterly basis.

At the time of reporting, management has completed control design and operating effectiveness testing for the Group across all significant locations, with the exception of the processes relating to preparation of US GAAP reporting (20F).

The results to date of said compliance programme indicate a very high level of compliance and no indication of a material breakdown in controls as noted.

PA Schmidt
Financial Director
10 September 2010