1.4 Our value creation model
How Gold Fields creates and distributes value
Gold Fields is able to create and distribute value to its stakeholders by achieving its overarching strategic objective, which is to deliver a sustainable free cash flow margin of 15% at a long-term planning gold price of US$1,300/ oz. This means we will not only invest to achieve this year’s targets but also those in the years to follow.
A wide range of internal and external factors – or inputs - have either had a direct impact on or influenced the development of this strategy. Many of these inputs pose a risk to the Group, and can be directly linked to the top 10 risks on our business risk register (p46), while others are an opportunity.
At a macro level, we continually consider the global geopolitical climate and macroeconomic trends as well as the socio-economic and political environment in the specific jurisdictions where we operate. In recent years, gold price volatility and a decline in prices have had a direct impact on how we steer the business strategically, and currently pose a key business risk. Furthermore, the level of exchange rates in regions in which we operate have a material influence on our business.
Certain factors that are more directly linked to our business include the contributions and expectations of our shareholders, host communities and employees and contractors. The public and fiscal policies of host governments, and their stance on the mining industry, is a further important factor.
Our business uses a number of capitals and resources including natural, manufactured, human, social and financial capital.
All of these inputs come together to inform our strategy, which in turn is executed by:
- Improving the quality of our portfolio: Having a quality portfolio of assets allows us to generate the cash needed to meet our objectives. A combination of business optimisation and active risk management allows us to grow and improve the portfolio of assets.
- Focusing on delivery: In addition to having a quality portfolio of assets we also require an absolute focus on delivery. This is enabled by driving a high-performance culture, ensuring we have superior processes in place and employing and retaining the right people in the right jobs.
The successful execution of our strategy results in revenue creation, and from this we are able to deliver value to a number of stakeholders and invest in host communities and countries. We pay interest to financial institutions, salaries to employees, payments to suppliers and taxes and royalties to governments.
Once these payments are made, the net cash remaining is used to reduce our debt, pay dividends to shareholders and invest in growth – three of our most critical strategic objectives.
This entire value generation and distribution process is underpinned by certain non-negotiable fundamentals. These include adherence to our safety ethos of ‘If we cannot mine safely, we will not mine’; securing and maintaining our social licence to operate; meeting our environmental responsibilities; and, ensuring we have the necessary licences in place to meet all regulatory compliances. The Gold Fields values, which inform the way in which we work, also underpin all aspects of our business.
