Gold Fields

5.2.5 Government relations

As the issuer of mining licences, developers of policy and overseers of regulation, host governments are among Gold Fields’ most important stakeholders. Engagement with national governments typically takes place on a collective basis through local chambers of mines. Gold Fields also regularly engages with regional regulatory authorities and local government in its host communities. Gold Fields does not provide financial contributions to political parties and lobby groups unless explicitly approved by the Gold Fields Board of Directors.

Taxation and the maximisation of national mineral benefits
It is natural and right that governments seek to maximise the social benefits that accrue from the extraction of finite natural resources. As a matter of policy Gold Fields fully complies with the fiscal and taxation regulations and laws of the countries it operates in, understanding that these fiscal contributions are critical to fund governments, its employees and public sector infrastructure and projects.

Nonetheless, attempts to secure these benefits through higher levels of targeted taxation can in the long term have the opposite effect. Indeed, the weak commodities market – including the low price of gold – is throwing into sharp focus just how damaging short-term attempts to secure a greater proportion of companies’ earnings can be. Mining investment is falling, new growth projects are being left undeveloped and existing projects are facing closure – even without additional fiscal uncertainty. The implications for longer-term national and host community development are obvious.

Fiscal challenges in Ghana
In Ghana, Gold Fields continues to remain disproportionately exposed to the consequences of a heavier fiscal regime for the mining sector. This follows a range of fiscal measures taken in recent years to address public budgetary challenges. These include:

• Increased corporate income tax rates and royalties
• A much reduced capital allowance
• Increased customs duties on mining items
• Increased ‘stool tax’ – a local tax calculated on the size of all exploration and mining lease areas

In 2015 Gold Fields was the second largest corporate contributor to public revenues in Ghana – paying US$86 million in direct taxes, royalties and dividends. Whilst proud of making such a substantive contribution to national development, this contribution continues to be disproportionate to that of its in-country peers.

These commercial pressures – in combination with the low gold price – are having a direct impact on Gold Fields’ expansion plans. In 2014, we reduced our exploration activities in Ghana to near-mine activities only, and the fiscal framework will be a key consideration as we ponder the future of our Damang mine.

Gold Fields continues to constructively engage with the Government of Ghana regarding the potential introduction of an investment framework that would be equally applicable to all gold mining companies. The latest formal engagements with the government in terms of a new investment agreement have been ongoing since late 2014 but have yet to give us a satisfactory level of assurance. A level playing field with a supportive and globally competitive tax regime would significantly improve fiscal predictability for the Ghanaian mining sector, which is critical for long-term investment planning.

Subsequent to the sign-off of the Integrated Annual Report 2015 on 23 March 2016 an event occurred that is material to the Company. The press release on this event follow below:

Development agreement concluded in Ghana
Johannesburg, 29 March 2016:

Gold Fields Limited (Gold Fields) is pleased to announce that it has concluded a development agreement with the Government of Ghana for both the Tarkwa and Damang mines. The highlights of the agreement include:

• A reduction in the corporate tax rate from 35.0% to 32.5%, effective 17 March 2016.
• A change in the royalty rate from a flat 5% of revenue to a sliding scale royalty based on the gold price (as per table below), with effect from 1 January 2017.

Royalty rate	Gold price
3.0%	US$0 – 1,300/oz
3.5%	US$1,300 – 1,449.99/oz
4.0%	US$1,450 – 2,299.99/oz
5.0%	US$2,300/oz – unlimited

The term of the agreement, effective from 17 March 2016, will be for a period of 11 years for Tarkwa and nine years for Damang, each renewable for an additional five years.

Ghana continues to be a key region for Gold Fields and the Company commended the Government of Ghana for creating a fair and competitive environment in the country.

Royalties in Australia
During 2015, Gold Fields joined with its peers in Western Australia to campaign against a review of the royalties charged on mining, which had been proposed by the government of the state. The campaign, entitled ‘Heart of Gold’, highlighted the industry’s contribution to the economy and job creation. In March 2015, the government announced that there would be no increases to the royalties on gold mining.

Fiscal uncertainty in South Africa
Gold Fields’ operation in South Africa is guided primarily by the Mineral and Petroleum Resources Development Act (MPRDA) of 2002. In 2013 critical amendments to the MPRDA were tabled by the government in the MPRDA Amendment Bill, but the bill was sent back to Parliament for consideration. A change of minister and director general in the Department of Mineral Resources (DMR) in 2015 and differing policy priorities by various government departments, have also created significant uncertainty for current and potential investors.

One of the key requirements of the MPRDA is to facilitate meaningful and substantial participation of Historically Disadvantaged South Africans (HDSAs) in the mining industry. To provide guidance on this open-ended requirement, the Mining Charter, as revised in 2010, was published providing for a range of empowerment actions and a corollary time frame. All mining rights holders (including South Deep as the mining rights holder) are required to submit an annual compliance assessment to the DMR on progress made against meeting the annual targets in the Charter. Gold Fields continues to comply with this process.

Government had indicated that the Mining Charter would be reviewed during 2015 but a number of important aspects of the Charter remain to be finalised, key of which is the Black Economic Empowerment (BEE) ownership of mining companies and the evaluation of previous BEE transactions carried out by the industry. The Chamber of Mines, representing the vast majority of mining companies in South Africa, has applied to the High Court of South Africa for a declaratory order. The matter was set down for March 15 and 16. For an update see the AFR on page 41.

Consideration of the implementation of the Department of Trade and Industry’s amended Codes of Good Practice (CoGP) on the mining industry is also important, specifically alignment between the Mining Charter and the CoGP. In October 2014, the Broad-Based Black Economic Empowerment Act of 2003, as amended (B-BBEE Act), which gives effect to the CoGP, was amended introducing a ‘trumping’ clause to bring about alignment to the B-BBEE Act for all disparate legislation regulating the measurement of BEE. On 30 October 2015, the DMR announced that the mining industry will be exempt for 12 months from the provisions in the B-BBEE Act, while alignment between the Mining Charter and CoGP is being sought.

The Chamber is also engaging with government directly on the long term sustainability of the industry and a number of other issues confronting the sector. A tripartite forum, called Project Phakisa – comprising industry, government and organised labour – was established during 2015 followed by extensive engagement programmes to map out future growth and empowerment of the South African mining industry.

Gold Fields is fully in support of these efforts and has actively participated in Project Phakisa. However, amid the continued regulatory uncertainty it is difficult to envisage strong investor support for the industry, which is essential if the investment is to be forthcoming to fund an expansion of the sector.

Citrus farming on rehabilitated mine land at Damang

Mining Charter Scorecard
All mining rights holders (including South Deep as the mining rights holder) are required to submit an annual compliance assessment to the South African Department of Mineral Resources (DMR) on progress made against meeting the annual targets in the Charter.

Gold Fields had submitted its 2012 and 2013 annual assessment report in accordance with these requirements. In early 2015, the DMR requested all mining rights holders (including Gold Fields’ South Deep Mine) to re-submit the 2012 and 2013 compliance assessments and submit its 2014 compliance assessment onto an on-line template (designed by the DMR). On 15 March 2016 the DMR extended the statutory deadline for the 2015 submission from 31 March 2016 to 30 April 2016.

Gold Fields submitted the information online as requested.

Amid the absence of new criteria, Gold Fields has updated its Mining Charter performance and compliance in line with this scorecard. The 2015 scorecard follows on this page.

Gold Fields’ BEE ownership transactions are detailed on our website at www.goldfields.co.za/ reports/annual_report_2013/ integrated/sec-ethics.php.

View enlarged Mining Charter Scorecard

1	Includes members of the SA Regional Executive Committee and the South Deep mine Executive Committee
2	Core skills include A, B and C graded employees in the miner and artisan categories as well as officials with core skills for mining and/or working in a core mining area(s)