Integrated Annual Review 2012 Annual Financial Report 2012 Mineral Resources and Mineral Reserves Regional overview  

2.1 Vision of the Chair

Dear Shareholders,

This is my first report as Chair of Gold Fields after four years as a non-executive independent director of the company. I am in an extremely privileged position to lead this company at a time when it is embarking on the next critical phase of its rich and eventful 125 year history.

The Gold Fields board and its management spent much of last year analysing, debating and committing to a new way forward for the company. This was in response to the ongoing underperformance of gold industry share prices, including Gold Fields, against the gold price – and the inability of the industry to deliver the full benefits of the decade-long gold bull market.

This was illustrated in Gold Fields share price performance last year. Continuing the trend from previous years the price declined from around R111/share in the beginning of 2012 to R91 by year-end. It reflected similar price movements of our peers, despite a stable gold price during 2012. The bearish sentiment towards gold counters continued into early 2013.

I believe that CEO Nick Holland’s analysis of the state of gold mining at the Melbourne Mining Club in July 2012 has marked a critical juncture in the development of the sector and, more particularly, in that of Gold Fields. What followed was a critical analysis of all aspects of Gold Fields business through a substantive portfolio review of our operational and growth assets.

The unbundling of the KDC and Beatrix mines into Sibanye Gold – and its subsequent listing on the JSE and New York Stock Exchange – is the most obvious consequence of the review. But all areas of the business have been impacted, which are outlined in detail in this Integrated Annual Review. What is emerging is a more focused, leaner mid-tier operator dedicated to the generation of solid cash returns. The new driver is to offer current and future investors a healthy return on their risk capital.

We believe this deal offers significant benefits to Sibanye Gold too. Its destiny is now in its own hands, determined by its dedicated and specialised management team.

This management will now have access to the substantial cash flows generated by Beatrix and KDC, and will be unencumbered by the demands of a globally-focused holding company. Sibanye Gold also represents a suitable and willing catalyst for the long-overdue consolidation of the South African gold mining sector – something I believe is essential for the industry’s long-term survival.

Critically, Gold Fields emerged from the review with a commitment to five key guiding principles, which will underpin the company’s strategy going forward. The principles, which are detailed by our CEO in his report, are:

  • Focus on cash generation by reviewing the portfolio to optimise cash generation; prioritise low risk, high return near-mine growth opportunities; and pursue only high yielding greenfields projects
  • Deliver the South Deep mine to full production of around 700,000 ounces a year by 2016
  • Leverage the balance sheet for growth on a per share basis
  • Pay-out 25% to 35% of normalised earnings in the form of dividends
  • Focus on the long-term sustainability of the business which entails, inter alia, the health and safety of our people, respectful environmental stewardship, and the creation and equitable sharing of value for all our stakeholders

The Board believes that this strategy is the right one for Gold Fields. While the market has yet to reward this new focus, we believe investors will do so once it is reflected in Gold Fields’ bottom line performance.