Gold Fields

5.2.1 Strategic focus areas - Energy and carbon

The management of energy use and the related costs is a business imperative for us, even more challenging in the context of declining ore grades, dynamic mining conditions and increasing energy tariffs in our regions. As such, energy management (comprising both electricity and fuel) remains a top priority – in terms of controlling both costs and carbon emissions as well as ensuring security of supply.

Group energy spending as a percentage of operating costs increased to 22% in 2015 (2014: 21%), however this reflected mostly the Group’s reduction in operating costs. Actual energy spend declined to US$312 million (2014: US$361 million).

While Gold Fields mined more tonnes in 2015 compared to 2014, mining intensity remained flat at 0.07 GJ/ tonnes-mined, while our energy intensity per ounce produced increased by 9% to 5.02 GJ/oz from 4.56 GJ/oz in 2014. This was largely due to declining ore grades and the increased use of diesel power generators to ensure security of supply at our Ghanaian operations.

Through energy efficiency and business optimisation initiatives, Group cumulative energy savings reached 777,914GJ between 2012 and 2015. This was a 7% improvement on what we had budgeted for over that period, resulting in US$30 million in cumulative cost savings and avoidance of 109,000 CO₂- equivalent tonnes in carbon emissions.

Integrated Energy and Carbon Management Strategy. This strategy seeks to ensure energy security; decrease carbon emissions; explore immediate and long-term energy efficiency opportunities, and investigate and implement viable sources of renewable energy.

During 2015, all regions were tasked with developing and implementing five-year energy security plans, with the South Deep and Ghanaian mines being identified as facing the greatest energy-security risks. But these operations also present the most significant opportunities for renewable energy integration.

Gold Fields remains committed to renewable energy solutions at its operations as well as new mine developments. During the year, we initiated a renewable energy project at South Deep (p95) and installed solar power at our head office in Johannesburg to meet half our electricity demand. For all new projects, we have set a target of an average of 20% renewable energy generation for all new mine developments – our Salares Norte project in Chile is actively seeking renewable energy sources as part of its ongoing activities.

Energy and carbon performance, with a strong focus on costs savings, and energy security – including the evaluation of renewable energy – were contained in the balanced scorecards of senior and line management in 2015.

Some of the salient features of the Group’s energy and carbon performance during the year were:

• Diesel consumption rose from 169,000 kℓ in 2014 to 193,000 kℓ amid among others, increased reliance on diesel generators at our Ghanaian mines and declining ore grades at a number of our operations
• Our diesel spend declined in line with the lower oil prices, while the stronger US Dollar against the Australian Dollar and the South African Rand resulted in lower power and fuel costs, which are denominated in US Dollars
• Total electricity consumption for the Group was steady at 1,322,353 MWh compared with 1,338,075 MWh in 2014, reflecting significant energy savings at our Australian mines and a shift towards diesel- generated power at our Ghanaian mines
• Total energy consumption increased by 7% from 10,465,746 GJ¹ in 2014 to 11,240,369 GJ¹ in 2015 due to higher diesel usage
• Total carbon emissions increased by 3.4% (59,120 CO₂-equivalent tonnes) to 1,753,163 CO₂- equivalent tonnes from 1,694,043 in 2014 CO₂-equivalent tonnes

With energy accounting for 22% of operating costs, Group-wide, energy efficiencies and energy savings are critical components of our cost savings initiatives. Energy savings from initiatives are recognised for 36 months, after which they become part of the baseline. Rolling energy savings performance targets are set at the beginning of each year, considering operational business plans. For 2016 we are targeting savings of 6% on our initial energy consumption estimate of 10,992 TJ.

Some of the most successful energy savings initiatives during 2015 included

• Campaign milling2 initiative at St Ives and Granny Smith
• Throughput improvement on the comminution circuit at Damang, which led to improved energy crushing efficiencies
• Installation of polymer liner material in the milling circuit at Cerro Corona
• An energy efficiency fans retrofit programme at South Deep

1	The sum of direct and indirect energy consumption reflects a conversion factor used by Granny Smith and Darlot power stations. If the conversion factor is not applied, total energy consumption was 11,797,812 GJ in 2015 (2014: 10,997,560 GJ).
2	Campaign milling refers to the situation where the milling process is only in operation when sufficient ore has been provided for the mill to run for a prolonged period. Typically, a mine runs a mill for two weeks then shuts it down for the next two weeks until sufficient ore has been stockpiled.

Regional and Group energy and carbon performance

	2015			2014		20131
Diesel consumption (kℓ)
Americas	13,4553			9,939		13,127
Australia	76,867			75,034		32,709
South Africa	2,457			2,419		4,279
West Africa	99,739			81,423		102,829
Group	192,517			168,815		152,943
Electricity purchased (MWh)
Americas	145,361			143,441		148,217
Australia	277,521			296,989		234,613
South Africa	484,256			476,767		549,788
West Africa	415,215			420,878		449,487
Group	1,322,353			1,338,075		1,382,106
Total energy consumption (GJ)2
Americas	1,012,363			876,812		1,009,890
Australia	3,250,575			3,285,225		2,056,610
South Africa	1,835,467			1,807,258		2,137,095
West Africa	5,141,964			4,496,451		5,365,150
Group	11,240,369			10,465,746		10,568,746
Energy intensity (GJ/oz produced)
Americas	3.42			2.69		3.19
Australia	3.28			3.18		3.40
South Africa	9.27			9.01		7.07
West Africa	6.82			6.11		6.83
Group	5.02			4.56		5.26
Total energy costs (US$m)
Americas	21.08			22.61		26.91
Australia	96.43			130.43		54.25
South Africa	31.00			33.11		40.56
West Africa	163.16			175.14		184.22
Group	311.67			361.29		305.94
Energy costs as % of Opex (%)
Americas	15			14		17
Australia	18			18		10
South Africa	13			13		13
West Africa	31			32		29
Group	22			21		18
CO2 emissions (tonnes) (Scope 1 – 3)4
Americas	124,030			100,645		110,598
Australia	536,782			537,662		331,803
South Africa	531,078			539,057		611,248
West Africa	561,273			516,679		677,706
Group	1,753,163			1,694,043		1,731,355
Carbon emission intensity (tonnes CO2 -e/oz)
Americas	0.27			0.19		0.22
Australia	0.39			0.37		0.37
South Africa	2.73			2.48		1.85
West Africa	0.49			0.43		0.49
Group	0.59			0.55		0.62

1	Australia numbers exclude the Yilgarn South assets
2	The sum of direct and indirect energy consumption reflects a conversion factor used by Granny Smith and Darlot power stations. If the conversion factor is not applied, total energy consumption was 11,797,812 GJ in 2015 (2014: 10,997,560 GJ).
3	Higher diesel consumption at Cerro Corona is due to increased haulage distances because of the deepening of the pit
4	Incudes head offices

Group direct and indirect energy consumption (TJ) (Terajoules)		Group energy intensity GJ (Gigajoules)

Regional energy performance and security
In 2015, we developed regional five-year energy security plans. Our regional operations face varying degrees of energy supply interruptions and tariff volatility. These factors as well as low-carbon energy availabilities were assessed in the development of the energy security plans.

Americas region
Energy security is not an issue at our Cerro Corona mine, which has an electricity supply agreement with independent power provider (IPP) Kallpa until 2027. Since Kallpa uses gas as its power-source it also contributes to low carbon intensity.

Cerro Corona has therefore focused on energy management and from 2016 onwards operational energy performance targets will be correlated with key operational issues such as ore hardness and hauling distances. Energy efficiency initiatives saved the mine US$3.2 million in 2015.

Australia region
Gold Fields’ Australian operations have limited, but stable, power supply options due to the remote nature of their operations. Both Agnew and St Ives have power purchasing agreements (PPA) with BHP Nickel West, which will guarantee energy supplies until 2019 and 2023 respectively. The PPAs are based on gas-generated electricity, which will help reduce the carbon intensity of these mines. This is also the case for Darlot.

At Granny Smith all the necessary approvals for the construction of the gas fired power station, along a new gas pipeline being constructed for the nearby Tropicana mine, have been secured. Construction of the gas pipeline has commenced and commissioning of the power station is on track for April 2016. Gold Fields has entered into a 10-year PPA. The cost of the power station is estimated at A$4.5 million (US$3.3 million). Once completed we expect savings of around A$1 million (US$730,000) a year at current oil prices.

In terms of energy efficiency, the Australian operations performed well with total energy consumption down from 3.29 million GJ in 2014 to 3.24 million GJ, against a target of 3.20 million GJ, led by lower electricity usage. The energy initiatives continued to be focused on the reduction of electricity consumption through campaign milling at Granny Smith and St Ives, as well as the shutdown of the Lawlers processing plant. This led to absolute energy savings of 9.6% against a regional target of 10% for 2015. This saved a cumulative US$17.1 million in costs.

South Africa region
Given the rolling load shedding that South Africa experienced in 2015 and the uncertainties with regard to the electricity prices, South Deep’s energy plans aim to build resilience in its power supplies and manage the price risks. Eskom continues to face power supply constraints, due to:

• Historical under-investment in generating capacity
• A maintenance backlog on the ageing generation fleet of power stations
• Delays in the construction of the Medupi and Kusile coal-fired power stations

In this context, Eskom carried out load-shedding across the national grid whenever its available generation capacity could not meet national demand. South Deep has entered into a load-curtailment programme with Eskom. This requires South Deep to reduce demand by up to 25% – depending on the severity of the shortage – for a specified period when the national grid is unable to maintain its load. As South Deep is not yet operating at full capacity, the mine has managed to carry out its principal mining activities without interruption, limiting the impact on production and development during 2015. The mine also uses standby diesel generators for critical periods to ensure the safety of our employees, should load-shedding become unavoidable.

In March 2016, the National Energy Regulator of South Africa (Nersa) granted Eskom a tariff increase of 9.4% for 2016 on top of above-inflation hikes over the previous years.

As part of its five-year Energy Security Plan, South Deep is mitigating the impact of such price rises through further energy efficiency improvements and seeking alternative energy sources. These form part of its five-year energy security plan, whose implementation commenced early last year, with 25% of the plan completed by the end of the year.

An essential component of the plan is the use of solar power at the mine. After extensive techno-economic studies undertaken by the Richard Branson-sponsored Carbon War Room – Rocky Mountain Institute (CWR-RMI¹), South Deep last year issued an initial Expression of Interest for a 40MW photovoltaic (PV) on-site solar electricity generation plant. Since then 10 firm proposals were made by IPPs and we expect to make a final decision by mid-2016.

Key requirements of the proposals were:

• Bidders had to include social initiatives in their proposals that will benefit our host communities
• The pricing proposal had to trend in line with projected inflation rates and ideally meet Eskom grid price parity (at estimated 2018 tariff levels)
• Black economic empowerment ownership

South Deep will provide the land for the solar plant and consider entering into a 25-year PPA in accordance with the selection criteria.

At South Deep, energy consumption per tonne processed has improved by 10% between 2014 and 2015, though overall energy consumption was up by 2% to 1.84 million GJ. Electricity accounts for 13% of operating expenses at South Deep, which is below the Group average of 22%. We do not envisage a significant increase in this share as the mine has a large fixed component of energy consumption. Energy efficiency initiatives achieved cost savings at US$2.1 million in 2015.

West Africa region
Tarkwa and Damang continue to source their power from the Volta River Authority (VRA) and the Electricity Company of Ghana (ECG). Power supply in Ghana remains severely constrained due to several factors:

• Hydro-power schemes contribute some 47% of Ghana’s power, but with dam levels still dropping rapidly, security of electricity supply remains under threat
• Delays in the completion of Ghana’s planned gas processing plants
• Reduced gas imports due to growing domestic demand in Nigeria
• Maintenance challenges at thermal power plants

As a consequence:

• Daily load-shedding of between 25% – 30% of the mines’ electricity consumption was introduced during Q4 2014 and persisted throughout 2015
• The ECG increased tariffs during the year, while VRA tariffs were reduced as a result of lower prices
• Power shortages are anticipated to continue in the medium term as electricity demand in Ghana is expected to surpass generation capacity by 2020

To address the current load-shedding requirements, Tarkwa and Damang initiated a number of actions during 2015 as part of their five-year energy security plan:

• Making more extensive use of diesel generators at Damang, amid relatively lower diesel prices
• Reaching a power management agreement with the Power Ministry for our Ghanaian mines to, when requested, reduce load at Damang, which, as opposed to Tarkwa, is not running at full capacity.

An important mitigating strategy is a PPA with independent US-based power producer, Genser Energy. Implementation of this plan commenced in 2015 and permits have been received from the Environmental Protection Agency (EPA) for the construction of two Genser-owned gas turbine power plants near the mines. The key features of the Genser agreement are:

• It is a 20-year PPA for an initial 40MW with 20MW of power being provided from duel-fuel turbines (primarily gas, with an option for coal condensate) at both Tarkwa and Damang. Both Tarkwa’s and Damang’s 20MW installation are expected to be on-line by the second half of 2016. An additional 20MW is planned for installation at Tarkwa by January 2018
• The plants will have sufficient on-site gas storage capacity to mitigate any gas supply disruptions. The Genser plants will significantly improve the power supply situation at Tarkwa, which has a total load of 36MW, and Damang, which has a total load of 17MW

By January 2018, Genser should be in a position to provide 100% of the power supply needs at these operations. Surplus power produced by Genser could be wheeled to other consumers should Gold Fields elect to do so. The plants were scheduled to be commissioned in February 2015, but were delayed primarily due to financing delays experienced by Genser.

During 2015, energy spend at our Ghanaian mines remained high at around 35% of operating expenditure – the highest in the Gold Fields Group. This was despite the relatively lower cost of diesel as this was offset by higher statutory fuel levies and a downward revision in electricity tariffs. Total energy consumption at both mines rose from 4.49 million GJ in 2014 to 5.14 million GJ in 2015 as diesel consumption surged from 81,423 kℓ to 99,739 kℓ.

Energy efficiency initiatives yielded cumulative savings of 186,514 GJ and emission reductions of 12,354 tonnes of CO₂, representing cost savings of around US$7.3 million.

1

The CWR was founded in 2009 as a global non-profit organisation by Sir Richard Branson and a group of like-minded entrepreneurs to accelerate the adoption of business solutions that reduce carbon emissions and to advance the low carbon economy. The RMI is an independent non-profit organisation founded in 1982, with the mission of transforming global energy use to create a clean, prosperous, and secure low-carbon future by accelerating the adoption of market-based solutions that cost-effectively shift from fossil fuels to efficiency and renewable energies. CWR merged with the RMI in 2014

Energy performance and carbon emission targets

During 2014, each region was required to establish energy and carbon baselines and then set targets for reducing energy consumption and carbon emissions until 2016. From 2016 onwards operational energy performance budgets and targets will also be consolidated at Group level (measured in absolute GJ, GJ/tonne mined, GJ/oz, energy costs (US$) and absolute carbon emission tonnes CO₂-equivalent).

Americas region

In 2015, Cerro Corona did not have energy performance targets, as it finalised the process of linking projections of energy usage to physical operating conditions. Cerro Corona achived a reduction in electricity intensity of 3.43% (TJ MT processed), representing a 1.97% reduction in absolute electric energy usage (by 145,361 MWh, equivalent to 10.53 TJ) . Total energy spend reducued by USS4.42 million attributable to lower diesel prices. The increase in diesel usage contributed to CO₂ emissions increasing by 0.053% to 77,579 tonnes CO₂-equivalent. All performance figures are against a baseline year of 2013.

Australia region

The energy consumption of our Australian mines decreased by 1.52% to 3.24 TJ (2014: 3.29 TJ), against a target of 3.20 TJ. While their CO₂ emissions remianed relatively flat at 380,611 tonnes CO₂-equivalent for 2015 (2014: 381², 455 tonnes CO₂-equivalent) the region achieved absolute energy savings of 9.6% against a target of 10%.

South Africa region

South Deep is at present exempt from setting performance targets due to being on ramp-up phase.

West Africa region

The energy consumption at the Ghanian mines increased by 12.5% to 5.14 TJ (2014: 4.49 TJ), CO₂ emissions increased by 12.96% to 364,376 tonnes CO₂-equivalent (2014: 317,,142 tonnes CO₂-equivalent) while absolute energy savings of 6.26% were recorded against a target of 1.7%.

Carbon emissions
Carbon emissions and climate change represent a material issue for Gold Fields. This is due to:

• The long-term risks posed by climate change both to the Group’s own operations and to wider society
• Growing efforts to regulate carbon emissions in a range of jurisdictions
• The taxes increasingly attached by governments to non-renewable energy consumption

Gold Fields’ total Scope 1 – 3 CO₂ emissions during 2015 amounted to 1,753,163 tonnes (2014: 1,694,043 tonnes), leading to a commensurate increase in our emission intensity from 0.55 CO₂-equivalent tonnes/oz in 2014 to 0.59 CO₂-equivalent tonnes/oz in 2015.

Emission intensity varies widely from 0.27 CO₂-equivalent tonnes/oz in Peru, which relies on gas for the bulk of its energy requirements, to 2.73 CO₂-equivalent tonnes/oz in South Africa, which relies almost exclusively on coal-powered electricity for its energy supplies.

During 2015, Gold Fields’ total CO₂ emissions were 3.4% higher than in 2014, largely due to the greater use of diesel at our Ghanaian operations. For 2016 we are looking at intensifying our efforts for improved energy and carbon management through a number of new initiatives, ranging from deepening our understanding of energy drivers at our mines to increased staff awareness and training.

We will continue to investigate opportunities for low carbon energy supplies at a number of our operations, including South Deep (p95), Tarkwa and Damang (p95) as well as Granny Smith. At the latter, construction of a gas plant has begun, which has been registered with the Australian Emissions Reduction Fund (ERF) to achieve savings of around 13,000 CO₂- equivalent tonnes a year once it is fully operational, which is expected in mid-2016. The ERF credits can be sold with the price depending on ruling auction prices – currently estimated at around A$12/tonne. Given that the total abatement will be 91,000 tonnes, this could generate revenue of around A$1 million (US$730,000) over seven years

The South Deep energy efficient fans retrofit programme was registered with the UN Clean Development Mechanism (CDM) in 2013. The programme will enter its first validation stage in 2016.

During 2016, we will also be undertaking risk-based climate change assessments at our operations to identify the ones that are most vulnerable to the impact of climate change and develop short-term and long-term adaptation measures.

Group CO2 emissions – Scope 1, 2, 3 (TJ) (Terajoules)		Emission intensity (Scope 1 and 2 only) GJ (Gigajoules)

Carbon and climate change reporting
Gold Fields responds on an annual basis to the international Carbon Disclosure Project’s (CDP) climate change and water questionnaires. This information – along with that of other organisations – is aggregated to produce the Carbon Disclosure Leadership Index (CDLI) and Carbon Performance Leadership Index (CPLI).

In 2015, Gold Fields achieved a disclosure score of 100% in the CDLI and a performance rating of A- in the CPLI. Both are an improvement on 2014, when the Gold Fields disclosure score was 96% and the CPLI rating a B. The CDP in 2015 also recognised consistent performers between 2008 – 2015. Gold Fields was recognised as one of four companies for being in the CPLI for three or more years and one of seven companies for being in the CDLI for six or more years.

Global and national climate change initiatives
In the build up to the 2015 Conference of the Parties (COP 21) negotiations in Paris, the ICMM – of which Gold Fields is a member – released a statement in support of the negotiations and clarified the position of the industry with regard to climate change. At the COP 21 negotiations, countries reached a globally binding agreement that would seek to limit global temperature increases over the next few decades.

Key implications for Gold Fields include:

• Across all Gold Fields operating regions, governments have proposed stringent greenhouse gas emission targets (pre-2020 and in some instances post-2020), with increasing renewable energy and energy efficiency drives
• The implementation of carbon taxes is likely to be accelerated to enable countries to achieve their emission reduction targets. Gold Fields is facing carbon taxes in South Africa, though their implementation is only likely from 2017 onwards
• Chile, Peru and Ghana have proposed additional climate adaptation measures, such as reforestation, potentially presenting an opportunity for old mining land re-use
• All our operations will have to comply with greenhouse gas reporting requirements, such as the Australian National Greenhouse and Energy Reporting (NGER) – already implemented – and the South African National Atmosphere Emissions Inventory Systems (NAEIS), which is not yet legislated.
• Countries have to review and update their Nationally Determined Commitments every five years from 2020 to report on country progress towards meeting the emission reduction commitments. Companies are expected to align their reporting systems to be able to supply government with the relevant data
• Carbon pricing and a trading scheme were included in the agreement, though details were not provided

Following the COP 21 Paris Agreement, Gold Fields signed the Paris Pledge for Action to demonstrate our broad support for the worldwide efforts to reduce global carbon emissions. We believe, however, that any regulatory interventions have to be economically sustainable for the industry and any revenues generated used to benefit the environment in general.

We have noted that the South African draft Carbon Tax Bill, which was released in November 2015, is currently targeting only greenhouse gas emissions according to the Intergovernmental Panel on Climate Change methodology. This would not affect South Deep which does not yet produce its own power from fossil fuel-based sources, except through a potential pass through from Eskom, the state’s power utility that provides the bulk of the mine’s power.