Gold Fields

2.1 Vision of the Chairperson

The past year has been another challenging period for the global gold industry. After peaking around US$1,300/oz in January 2015, the US Dollar gold price steadily decreased through 2015, to end off the year around the US$1,050/oz level. Fortunately, our actions in recent years placed us in a stronger position to withstand this further fall in the gold price. In addition, our globally diversified portfolio has allowed us to benefit from commodity currency depreciation against the US Dollar.

During 2015, we further reduced our All-in Cost (AIC) to US$1,026/oz, placing Gold Fields in the bottom half of the industry cost curve. In 2012 AIC averaged US$1,537/oz, which means we have cut costs by one-third in three years – a remarkable achievement. This allowed the Group to generate US$123 million of net cash flow from operations, which has enabled us to deliver on our commitments of paying dividends and improving the balance sheet.

In 2015, we continued to optimise our strong international portfolio and focused on fixing the base at South Deep. We are pleased to have seen some early signs of improvement at South Deep during the second half of the year. Underpinning this was the strength of the international operations, which produced 1.96 million attributable ounces at an average AIC of below US$950/oz. In Australia, our biggest region, we expect the current level of exploration expenditure to continue in order to sustain and potentially grow production. Our strategy towards growth, which is a preference for acquisitions of producing assets over greenfields exploration, remains intact and we continue to evaluate value-accretive opportunities.

While we believe in the long-term value of gold, we must continue our efforts on modernising all aspects of our business in order to survive volatile and ever-changing market conditions. We commend our CEO, Nick Holland, on his recent presentation on The Gold Mine of the Future, and strongly believe that this changing mind-set bodes well for the long-term future of Gold Fields.

Being a global company, we deal with a range of stakeholders across the multiple jurisdictions in which we operate and through these engagements we generally find solutions that are best for our business and our stakeholders.

When it comes to the safety and wellbeing of Gold Fields’ employees and contractors there is never a time to be complacent or rest on our laurels despite the undoubted progress that has been made. Tragically four fatalities occurred during the year – at our South Deep mine in South Africa and the Tarkwa mine in Ghana. Three of these were workplace accidents, the fourth was a member of our protection services who was shot and killed during a robbery at South Deep. My heartfelt condolences go out, once again, to the relatives, friends and colleagues of Kennedy Katongo, Albert Chiungo, Sbongiseni Ngqoleka and Clement Aidoo.

In honour of their memory, and those who died at our mines before them, this Board will continue to press management on the achievement of Zero Harm at all our operations. Similarly, reducing the exposure of our employees to occupational and non-occupational diseases such as Silicosis, Tuberculosis, HIV/Aids, Noise Induced Hearing Loss and Malaria must remain a priority.

With regards to the high-profile Silicosis court case, in which Gold Fields is a co-respondent, it is worth noting that further significant progress has been made in underground dust management and related work at South Deep over the past few years. The past year has been spent with our peer companies in an intensive engagement process with all stakeholders to find a comprehensive solution to the occupational lung disease challenge that is both fair to past, present and future employees, and sustainable to the companies and the industry.

Stakeholder engagement, beyond the regular interaction with our shareholders and investors, is becoming an increasingly critical issue and the Board devotes a large amount of time to ensure that Gold Fields’ management deals appropriately with the challenges, issues and concerns of the key stakeholders in our host governments, amongst our workforce and in our host communities. During 2015, Gold Fields’ total value distribution to our stakeholders – as measured by World Gold Council (WGC) standards – was almost US$2.43 billion in the form of payments to governments, capital providers, communities, business suppliers and employees.

Communities adjacent to the mines we operate grant us our social licence to operate and increasingly have to be consulted on mining operations on their doorsteps. Unfortunately, the mining industry has not always been successful in addressing the rightful aspirations of these communities to see greater social and economic benefits from the mines.

This can no longer be the modus operandi of the industry. We need to intensify engagement with host communities, understand their aspirations and implement strategies and projects to successfully and collaboratively meet them without undermining the economic viability of our mines. Gold Fields has listened and is painfully aware of the wide trust gap that still exists between these communities and us. In response, we are implementing a range of initiatives, in addition to work already ongoing, ranging from strengthening the capacity of our community relations teams to upskilling small businesses in our host communities for them to be able to supply goods and services to our mines.

In addition, we have supported the ability of the South Deep Trusts as well as Foundations in Peru, Ghana and Australia to distribute funds more effectively to host community projects. Gold Fields is making significant strides in putting community contribution on a more sustainable footing – but undoubtedly there is always more that needs to be done.

Globally, our operations are confronted by a range of external regulatory, political, labour and price dynamics that will impact on their future business performances. None more so than those initiated by governments, which through their policies, regulations and taxes, have the ability to create the environment necessary for businesses to prosper.

The industry around the world is also facing high electricity tariffs, which are exacerbated by regular power outages, as well as water shortages. This is most acute at our Ghanaian and South African mines and we have implemented measures to improve energy efficiencies and supply at these operations, as well as securing ongoing water supplies.

As a committed corporate citizen, Gold Fields is more than willing to play its role in addressing these challenges and find solutions that benefit all stakeholders. We can only do so if our stakeholders engage with us in open dialogue and genuine partnerships and if additional regulatory, fiscal and cost imposts, which will be difficult to absorb by the embattled mining industry, are avoided. In fact, in some cases fiscal relief is required to sustain our industry for the benefit of all stakeholders.

As directors of this Company one of our key responsibilities is to ensure that the corporate governance systems at Gold Fields are in line with the ever-changing and more stringent rules and regulations that are being rolled out by regulators across the globe. The Gold Fields Board is committed to high levels of corporate governance and statutory compliance and will review policies and procedures when required.

In conclusion, I would like to welcome Steven Reid to the Board. He joined in February 2016 and brings with him 35 years of experience in the mining industry. I would also like to express my gratitude to my fellow directors and executive management, led by our CEO, Nick Holland. Most importantly, I want to thank every employee at Gold Fields for their hard work and dedication to the Company. They are integral to its success and it is thanks to their efforts that Gold Fields is now in a position to withstand the low gold price environment and flourish when the gold price does start to recover.

Cheryl Carolus
Chairperson