3.2.4 Improving investor and analyst confidence
We seek to position Gold Fields as a focused, lean and globally diversified gold mining company that generates significant free cash flow, and provides investors with superior leverage to the price of gold.
Gold Fields today is a significantly smaller, more focused and global company than it was before 2013. With the unbundling of our conventional South African mines into Sibanye Gold in 2013 we have created a company that is today exclusively focused on mechanised mining. Shareholders have also benefited from the creation of Sibanye Gold, whose share price has outperformed that of most other gold counters on the Johannesburg Stock Exchange.
Gold Fields’ re-organisation was further enhanced by the successful restructuring and rightsizing of our corporate, regional and operational structures over the past three years, together with the reduction of our workforce around the world.
Over the past three years, Gold Fields has successfully transformed itself into a company that consistently generates FCF despite the steady declines in the price of gold during this time. In 2012 and 2013, Gold Fields had net cash outflows of US$280 million and US$235 million respectively. In 2014, despite a 10% decline in the average gold price from US$1,386/oz in 2013 to US$1,249/oz, cash flow from operating activities – after taking account of net capital expenditure and environmental payments – improved from an outflow of US$235 million to an inflow of US$235 million, a positive swing of US$470 million. In 2015, we managed to generate US$123 million in net cash flow from operating activities, despite a further 9% decline in the gold price from US$1,249/oz in 2014 to US$1,140/oz in 2015.
The one outstanding issue that remains to be fully addressed, is to deliver the South Deep mine in South Africa and release the intrinsic value of the asset, which has the world’s second largest gold ore body. The achievement of cash breakeven for South Deep, which is targeted for the end of 2016, is expected to not only further enhance the Group’s capacity to improve FCF generation but, in particular, to further improve market confidence in Gold Fields. A detailed update on the financial, operational and development performance of South Deep during 2015 is provided on page 73.