Gold Fields

4.2 Operational performance overview

Group production and guidance

2016 Guidance

2015 Actual

2015 Guidance

2014 Actual

Prod (Moz)

AISC (US$/oz)

AIC (US$/oz)

Prod (Moz)

AISC (US$/oz)

AIC (US$/oz)

Prod (Moz)

AISC (US$/oz)

AIC (US$/oz)

Prod (Moz)

AISC (US$/oz)

AIC (US$/oz)

2.05

1,000

1,035

– 2.10

– 1,010

– 1,045

2.16

1,007

1,026

2.17

1,055

1,075

2.22

1,053

1,087

In 2015, Gold Fields’ attributable gold production declined by 2.7% to 2.16 million ounces (2014: 2.22 million ounces). This reflected:

• Higher production at St Ives in Australia, South Deep in South Africa and at Tarkwa in Ghana
• Lower production at Granny Smith, Agnew, Darlot in Australia, at Damang in Ghana and Cerro Corona in Peru

Central to Gold Fields’ strategy of growing our margin and maximising FCF, is a relentless focus on managing costs on an AIC basis.

During 2015, the Group recorded AIC of US$1,026/oz, from attributable gold equivalent production of 2.16 million ounces. Compared with 2014, the Group’s AIC improved by 6% from US$1,087/oz. If the South Deep mine, which is not yet at steady-state levels of production, is excluded from the results for 2015, then the Group’s AIC was US$944/oz.

The overall drop in Gold Fields’ costs over the last three years is mainly due to lower operating costs, improved rationalisation and restructuring as well as prioritisation of growth capital expenditure allocation.

Over the past few years, Gold Fields has implemented a number of cost-focused initiatives that continued into 2015 and were pivotal to lowering the Group’s cost base

These included:

• Stopping of marginal mining at all of the Group’s mines
• The restructuring and rightsizing of our corporate, regional and operational structures, focused on relocating operational responsibility and accountability in the regions and at the operations. Our overall corporate costs have been reduced to approximately US$10/oz, which is amongst the lowest in the industry
• A 12% reduction in our global workforce between 2013 and 2015
• Restructuring of the Group’s Growth and International Projects division in late 2013 and the divestment of associated greenfields growth projects that did not meet the Group’s 15% FCF margin criteria
• The cancellation of all on- or near-mine growth projects that demonstrated inadequate returns
• The ongoing rationalisation and prioritisation of capital expenditure and the deferral of non-essential capital, while not affecting the sustainability of our mines’ ore bodies

While the bulk of these initiatives were initiated and implemented during 2013 and 2014, consolidations of the gains made continued into and throughout 2015 through ongoing business process re-engineering and general cost savings. In particular the following initiatives were implemented:

The further rationalisation of our growth portfolio during 2015 with the sale of Gold Fields’ 51% interest in the Woodjam project in British Columbia (p77). The Group is also looking to divest its holding in the Arctic Platinum project in Finland (p87).

The stabilisation of our workforce in 2015 after a net reduction of 12% in the preceding three years. During 2015 Gold Fields had to retrench 148 staff, led by 67 retrenchments each at our Ghanaian and Australian operations. However, at South Deep we recruited 164 critical skills in line with the rebasing strategy at the mine.

Unlike in previous years, Gold Fields did not cut back its capital expenditure. With a focus on extending the life of our ore bodies

• The further rationalisation of our growth portfolio during 2015 with the sale of Gold Fields’ 51% interest in the Woodjam project in British Columbia (p77). The Group is also looking to divest its holding in the Arctic Platinum project in Finland (p87)
• The stabilisation of our workforce in 2015 after a net reduction of 12% in the preceding three years. During 2015 Gold Fields had to retrench 148 staff, led by 67 retrenchments each at our Ghanaian and Australian operations. However, at South Deep we recruited 164 critical skills in line with the rebasing strategy at the mine
• Unlike in previous years, Gold Fields did not cut back its capital expenditure. With a focus on extending the life of our ore bodies at all our international mines we raised overall Group capital expenditure to US$634 million in 2015 from US$609 million in 2014. Regional capital expenditure included:
• Australia: Our Australian mines increased capital expenditure from A$304 million (US$274 million) in 2014 to A$372 million (US$281 million) in 2015, largely as a result of the rise in near-mine exploration spending to A$91 million (US$65 million) in 2015 (2014: A$60 million (US$54 million))
• South Africa: Capital expenditure at South Deep decreased from R994 million (US$92 million) to R848 million (US$67 million), despite acquiring a number of new heavy underground vehicles in 2015
• South America: At Cerro Corona capital expenditure increased from US$51 million to US$65 million amid ongoing construction of new tailings dams raises
• West Africa: Capital expenditure increased from US$190 million in 2014 to US$221 million in 2015, largely the result of new equipment acquisition at Tarkwa

Production What Gold Fields guided for 2015: 2.17 million attributable gold equivalent ounces What Gold Fields achieved in 2015: 2.16 million attributable gold equivalent ounces

Costs What Gold Fields guided for 2015: AISC of US$1,055/oz; AIC of US$1,075/oz What Gold Fields achieved in 2015: AISC of US$1,007/oz; AIC of US$1,026/oz

Group and regional managed production

	2015 Actual		2015 %		2014 Actual		2014 %
Australia	988.0		44.2		1,031.1		44.9
Peru	295.6		13.2		326.6		14.2
Ghana	753.9		33.7		736.0		32.1
South Africa	198.0		8.9		200.5		8.7
Group	2,235.6		100		2,294.2		100

Effect of oil prices on AIC

For Gold Fields, the impact of the lower oil price during 2015 was not significant. This is because in Ghana and Peru fuel price stability mechanisms are followed by government and short-term variations in prices are not always passed onto consumers and industry. All other things being equal the impact of a decrease of US$10 per barrel of Brent crude on AIC is a reduction of US$18/oz for Ghana, A$6/oz (US$5/oz) for Australia and US$7/oz for Peru.

The Australian operations entered into a hedge at a base price of US$99.10 per barrel of Brent crude on 10 September 2014. On 26 November 2014, an additional hedge at a base price of US$78.45 per barrel of Brent crude was entered into. This resulted in 100% of diesel requirements for the March 2015 quarter and 75% of diesel requirements for the remaining nine months (April to December) of 2015 for Australia being hedged.

Borehole drilling at our Australian operation

Group regional performance – overview

Americas region

	2016 Guidance			2015 Actual		2015 Guidance			2014 Actual
Gold only produced (koz)	150			158.8		147			150.8
Copper produced (tonnes)	28			28.7		28			32.3
Gold-equivalent produced (koz)	260			295.6		280			326.6
AIC/AISC (US$/oz)	790			718		800			316
AIC/AISC gold-equivalent ounces (US$/oz)	860			777		915			702

Despite the significant 28% decline in the price of copper during 2015, Cerro Corona in Peru recorded a relatively good performance with total managed gold equivalent production of 295,600 ounces which was 6% better than the guidance for 2015 of 280,000 ounces. It was, however, 9% lower than the 326,600 ounces produced in 2014, mainly as a result of the lower copper price (as a consequence of its impact on gold-equivalent production) and a planned decline in gold and copper grades, as per the life-of-mine plan.

Net operating costs decreased by 9% from US$160 million in 2014 to US$145 million in 2015 mainly the result of the lower Nuevo Sol exchange rate against the US Dollar, good cost management and lower ore tonnes mined. Capital expenditure increased from US$51 million in 2014 to US$65 million in 2015, mainly related to the ongoing construction of the tailings storage facility as well as the construction of a new camp as the existing camp will be flooded later in 2016, as the tailings dam expands.

AISC and AIC amounted to US$718/oz in 2015 compared with US$316/oz in 2014 – and, on a gold equivalent basis, US$777/oz in 2015 compared with US$702/oz in 2014 – due to lower gold sold, lower by-product credits and higher capital expenditure, partially offset by lower net operating costs.

The region reported net cash inflow of US$35 million during 2015.

2016 Guidance

• Gold only production: 150,000 ounces
• Copper production: 28,000 tonnes
• Gold equivalent production: 260,000 ounces
• AIC/AISC: US$790/oz
• AIC/AISC (gold-equivalent production): US$860/oz

Tailing Storage Facility at Cerro Corona

2016 Guidance

2015 Actual

2015 Guidance

2014 Actual

Prod (Koz)

AIC/ AISC (A$/oz)

Prod (Koz)

AIC/ AISC (A$/oz)

Prod (Koz)

AIC/ AISC (A$/oz)

Prod (Koz)

AIC/ AISC (A$/oz)

St Ives

350

1,380 (US$1,010)

371.9

1,287 (US$969)

350

1,300 (US$1,040)

361.7

1,289 (US$1,164)

Agnew

223

1,350 (US$990)

236.6

1,276 (US$959)

260

1,190 (US$950)

270.7

1,096 (US$990)

Darlot

58

1,660 (US$1,215

78.4

1,403 (US$1,057)

83

1,420 (US$1,130)

83.6

1,353 (US$1,222)

Granny Smith

270

1,170 (US$855)

301.1

1,016 (US$764)

290

1,050 (US$840)

315.2

896 (US$809)

Region

901

1,330 (US$970)

988.0

1,211 (US$912)

983

1,210 (US$965)

1,031.1

1,124 (US$1,015)

During 2015 the Group's four mines in Western Australia – St Ives, Agnew, Darlot and Granny Smith – collectively delivered a strong operational performance, with gold production of 988,000 ounces at an AIC of A$1,211/oz (US$912/oz), which was broadly in line with full year guidance for the region of 983,000 ounces at an AIC of A$1,210/oz (US$965/oz).

Compared to 2014, production decreased by 4% from 1,031,100 ounces mainly as a result of planned lower production from Granny Smith, Agnew and Darlot, offset by higher production from St Ives. Both St Ives and Granny Smith exceeded their guidance for the year, compensating for Darlot and Agnew, both of which delivered below guidance.

Net operating costs in the region decreased by 7% from A$799 million (US$721 million) to A$747 million (US$562 million), mainly due to tight cost control, while capital expenditure increased from A$304 million (US$274 million) to A$373 million (US$281 million) following the opening up and development of new ore sources at the mines as well as higher expenditure on near-mine exploration across the region.

Total AIC for the region of A$1,211/oz (US$912/oz) in 2015 compared with A$1,124/oz (US$1,015/oz) in 2014.

The region reported net cash inflow of US$255 million during 2015. The lower value of the Australian Dollar against the US Dollar had a beneficial impact on the region's performance as the average gold price received rose from A$1,404/oz in 2014 to A$1,541/oz in 2015. Taking into account the 43,100 ounce drop in production in the region, this had the impact of boosting revenue by A$75 million.

Mine performances
St Ives had an outstanding year as it started to make the transition from a predominantly underground mine to a predominantly open pit mine. Gold production increased by 3% from 361,700 ounces in 2014 to 371,900 ounces in 2015, against guidance of 350,000 ounces for the full year. The increase in production was mainly due to higher grades mined from the new high grade Invincible open pit, partially offset by lower production from the Athena underground mine which is scheduled to close in early 2016.

Net operating costs decreased by 6% from A$313 million (US$282 million) in 2014 to A$293 million (US$220 million) due to good cost control. Total AIC of A$1,287/oz (US$969/oz) in 2015 compared with A$1,289/oz (US$1,164/oz) in 2014, which was 1% better than guidance of A$1,300/oz for the year.

The good cost performance at St Ives was mainly due to the higher production as well as tight cost control, partially offset by higher capital expenditure of A$152 million. The higher capital expenditure was associated with increased exploration across the site; the development of the Invincible open pit mine; and the commencement of the stripping campaigns at the Neptune and A5 pits. These two pits are expected to complement the Invincible Pit as St Ives moves towards being a predominantly open pit operation after the closure of the Athena underground mine.

St Ives generated net free cash flow of US$119 million for the year.

A brief review of the mine's brownfields exploration activity during 2015 is on page 79.

2016 Guidance:

• Gold production: 350,000 ounces
• AISC/AIC: A$1,380/oz (US$1,010/oz)

At Agnew, gold production decreased by 13% from 270,700 ounces in 2014 to 236,600 ounces in 2015. The reduced production was mainly due to lower tonnes mined as well as lower grades. The change to sequence was caused mainly by challenging geotechnical conditions at Waroonga's Kim ore body, where ground conditions necessitated rehabilitation and extra ground support. This resulted in slower rates of mining in some higher grade areas and the consequent substitution of higher grade tonnages with lower grade areas elsewhere in the Waroonga complex.

Waroonga is in transition as the Kim load matures. During the year the new drive from the Kim decline to the high grade Fitzroy, Bengal and Hastings (FBH) ore bodies was completed and development activities commenced. Production from FBH is scheduled to increase during 2016. In addition, decline development started to the Cinderella ore body in the New Holland complex. Cinderella straddles the tenement boundary between New Holland and Waroonga and will be accessed through the existing New Holland infrastructure.

The lower production combined with good cost control resulted in the net operating costs decreasing from A$191 million (US$173 million) in 2014 to A$188 million (US$141 million) in 2015. Total AIC for Agnew of A$1,276/oz (US$959/oz) in 2015 compared with A$1,096/oz (US$990/oz) in 2014, due to lower gold production and higher capital expenditure, partially offset by the lower net operating costs. The higher capital expenditure of A$97 million was as a result of increased expenditure on exploration as well as capital developments associated with accessing the FBH and Cinderella deposits.

Despite the difficult production issues, Agnew generated US$47 million of net free cash during 2015.

A brief review of the mine's brownfields exploration activity during 2015 is on page 79.

2016 Guidance:

• Gold production: 223,000 ounces
• AISC/AIC: A$1,350/oz (US$990/oz)

Darlot had a challenging year due to the constraints of mining in scattered remnant areas over a relatively large footprint, while developing towards the higher grade Lords South Lower virgin ore body. As a consequence gold production decreased by 6% from 83,600 ounces in 2014 to 78,400 ounces in 2015 due to lower tonnes mined and processed. This was partially offset by higher grades mined in the new Lords South Lower deposit, where production commenced during the second half of the year.

Notwithstanding the difficulties associated with mining in remnant areas, Darlot is continuing its strategy of self-funding a meaningful exploration programme in order to extend the mine's life and to find a ‘game changer’, which is targeted to return the mine to a 15% free cash flow margin.

Net operating costs decreased by 15% from A$93 million (US$84 million) in 2014 to A$79 million (US$59 million) in 2015. Total AIC of A$1,403/oz (US$1,057/oz) in 2015 compared with A$1,353/oz (US$1,222/oz) in 2014, due to lower gold output and higher capital expenditure of A$27 million, partially offset by lower operating costs.

Darlot generated US$11 million of net free cash flow for the year.

A brief review of the mine's brownfields exploration activity during 2015 is on page 79.

2016 Guidance:

• Gold production: 58,000 ounces
• AISC/AIC: A$1,660/oz (US$1,215/oz)

Granny Smith enjoyed another strong operational performance during 2015. Production guidance anticipated a 5% decline in gold production from the 315,200 ounces in 2014 to 301,100 ounces in 2015, but the mine managed to beat the guidance by 4% instead.

The mine generated US$111 million of net free cash for the year.

Attention to cost control and efficiencies realised through a margin improvement programme resulted in a 7% decrease in net operating costs from A$202 million (US$183 million) in 2014 to A$188 million (US$141 million) in 2015. Total AIC of A$1,016/oz (US$764/oz) in 2015 compared with A$896/oz (US$809/oz) in 2014 due to the lower gold production and higher capital expenditure, with these effects being partially offset by the lower operating costs.

The higher capital expenditure of A$96 million was due to a record programme of mine development and a very substantial increase in exploration activity. The mine development programme saw 5.4km of horizontal capital development advanced (2014: 2.2km), providing access to lower ore horizons at the Wallaby mine. These zones will provide the bulk of the operation's ore for 2016.

A brief review of the mine's brownfields exploration activity during 2015 is on page 80.

2016 Guidance:

• Gold production: 270,000 ounces
• AISC/AIC: A$1,170/oz (US$855/oz)

South Africa region

	2016 Guidance			2015 Actual		2015 Guidance			2014 Actual
Gold only produced (kg/(koz))	8,000 (257)			6,160 (198.0)		7,100 (228.0)			6,237 (200.5)
AISC (R/kg (US$/oz))	550,000 (1,200)			607,429 (1,490)		520,000 (1,400)			538,254 (1,548)
AIC (R/kg (US$/oz))	575,000 (1,250)			635,622 (1,559)		545,000 (1,470)			602,363 (1,732)

At the South Deep mine, production remained steady during 2015 with production of 198,000 ounces compared with 200,500 ounces in 2014, mainly due to lower grades, partially offset by increased volumes. Higher wage increases and rises in other operating costs led to net operating costs rising by 13% from R2.66 billion (US$246 million) in 2014 to R3 billion (US$237 million) in 2015. Capital expenditure at South Deep decreased from R994 million (US$92 million) in 2014 to R848 million (US$67 million) in 2015.

AIC of R635,622/kg (US$1,559/oz) in 2015 compared with AIC of R602,363/kg (US$1,732/oz) in 2014 due to lower gold sold and higher operating costs, partially offset by lower capital expenditure.

The 17% weakening of the South African Rand against the US Dollar during 2015 had a beneficial impact on South Deep as the average Rand gold price received strengthened from R441,981/kg in 2014 to R478,263/kg in 2015. South Deep's revenues in 2015 benefited by around R190 million (US$15 million), taking into account the marginal drop in production and all other variables being equal. Progress on the re-basing of the South Deep mine can be found on pages 73 and 74.

2016 Guidance:

• Gold production: 257,000 ounces
• AISC: US$1,200/oz
• AIC: US$1,250/oz
• De-stress development: 36,000m² (2015: 29,071m²)

South Africa region

	2016 Guidance			2015 Actual			2015 Guidance			2014 Actual
2015	Prod (Koz)	AISC/AIC (A$/oz)		Prod (Koz)	AISC/AIC (A$/oz)		Prod (Koz)	AISC/AIC (A$/oz)		Prod (Koz)	AISC/AIC (A$/oz)
Tarkwa	560	940		586.1	970		580	1,040		558.3	1,068
Damang	150	1,160		167.8	1,326		180	1,220		177.8	1,175
Region	710	986		753.9	1,049		760	1,180		736.0	1,094

Gold Fields' two mines in Ghana, Tarkwa and Damang, produced a strong operational performance in 2015. Total managed gold production of 753,900 ounces was less than 1% below guidance of 760,000 ounces for the year and 2% higher than the 736,000 ounces produced in 2014. Strong cost management ensured a 7% decrease in net operating costs from US$551 million in 2014 to US$513 million in 2015, while capital expenditure increased from US$190 million in 2014 to US$221 million in 2015. As consequence AIC for the region of US$1,049/oz was 12% better than the guidance of US$1,180/oz for the year and 4% better than the US$1,094/oz reported in 2014.

While the aggregate performance of the region was outstanding during 2015, it somewhat masks the exemplary performance of Tarkwa on the one hand, and the significant operational challenges faced by Damang on the other hand. The region as a whole reported net cash inflow of US$44 million during 2015, of which Tarkwa contributed US$76 million while Damang had a negative cash flow of US$32 million for the year.

Electricity challenges
One of the key challenges facing Gold Fields Ghana is the curtailment on electricity usage by the industry. Government has enforced a 33% power-shedding programme on all mining and industrial companies. In response Gold Fields Ghana has signed a purchasing power agreement with independent power producer Genser, whereby the company is installing three 11MW solar turbines at Tarkwa and four solar 5.5MW turbines at Damang. These plants are scheduled to be operational in the second half of 2016.

Mine performances
At Tarkwa, which is the largest and one of the most consistent producers in the Gold Fields Group, gold production increased by 5% from 558,300 ounces in 2014 to 586,100 ounces in 2015, which was also 1% higher than the guidance of 580,000 ounces for the year. This improvement was mainly due to higher grades mined from the Teberebie pillar and surrounding high grade areas. Throughput and efficiencies in the processing plant also improved significantly.

Net operating costs improved by 12% from US$372 million in 2014 to US$327 million in 2015 due to ongoing business improvement initiatives across all facets of the operation as well as the lower oil price. As a consequence of the increase in gold production and improved cost management, offset by higher capital expenditure associated with fleet replacement and increased stripping, AIC improved by 9% from US$1,068/oz in 2014 to US$970/oz in 2015.

Tarkwa's processing plant achieved record throughput in 2015 of 13.5 million tonnes compared to 13.4 million tonnes in 2014.

Tarkwa generated net free cash of US$76 million during 2015.

A brief review of the mine's brownfields exploration activity during 2015 is on page 80.

2016 Guidance:

• Gold production: 560,000 ounces
• AISC/AIC: US$940/oz

Damang had a challenging year with managed gold production of 167,800 ounces, 7% below guidance for the year and 6% below 2014 production of 177,800 ounces. The lower production was mainly as a result of lower grades caused by inadequate exposed and available high grade ore in the pits, in particular at the Juno South East and Saddle Bridge areas.

Net operating costs increased by only 3% from US$180 million in 2014 to US$186 million in 2015 mainly due to increased tonnes processed as well as higher fuel costs, amid the increased use of diesel generators to compensate for power disruptions as well as additional load shedding requirements by the state electricity utility ECG. Total AIC of US$1,326/oz in 2015 was 9% higher than guidance and 13% above the US$1,175/oz recorded in 2014. The mine’s net cash outflow totalled US$32 million in 2015.

To address the loss making position of Damang, a comprehensive review of the mine commenced during the second half of 2015, with a view to evaluating all options for the future of the mine. Options being considered include a push back to expose higher grade ore under the original Damang pit or placing the mine in care and maintenance.

A brief review of the mine's brownfields exploration activity during 2015 is on page 80.

2016 Guidance:

• Gold production: 150,000 ounces
• AISC/AIC: US$1,160/oz

This represents a ‘holding plan’ pending the outcome of the review of different options for the mine.

Aerial view of the Damang mine