GOLD FIELDS - Q2 ended 30 June 2012

Attributable gold production increased by 4 per cent from 827,000 ounces in the March quarter to 862,000 ounces in the June quarter.

At the South African operations, production increased by 13 per cent from 387,000 ounces to 437,000 ounces. This increase in production was mainly due to higher underground mining volumes and improved grades at KDC and South Deep.

Attributable gold production at the West African operations decreased by 7 per cent from 207,000 ounces to 193,000 ounces, largely due to lower volumes mined and processed at both Tarkwa and Damang. Attributable equivalent gold production at Cerro Corona in Peru, increased by 11 per cent from 76,000 ounces to 84,000 ounces, largely due to record throughput in June month, improved recoveries and higher copper grades. At the Australian operations, gold production decreased by 6 per cent from 157,000 ounces to 148,000 ounces due to lower scheduled underground tonnes and grades mined and processed.

At the South Africa region, gold production at KDC increased by 12 per cent from 249,700 ounces (7,765 kilograms) in the March quarter to 279,600 ounces (8,698 kilograms) in the June quarter. Gold production at KDC for the 6 months to June 2012 was similar to the 6 months to June 2011. At Beatrix, gold production increased by 1 per cent from 79,200 ounces (2,462 kilograms) to 79,600 ounces (2,477 kilograms). At South Deep, gold production increased by 33 per cent from 58,600 ounces (1,824 kilograms) to 77,800 ounces (2,420 kilograms).

At the West Africa region, managed gold production at Tarkwa decreased by 5 per cent from 185,300 ounces to 176,300 ounces due to a decrease in CIL throughput and lower head grades delivered to the mill and heap leach facility. At Damang, gold production decreased by 14 per cent from 44,300 ounces to 38,200 ounces as a result of lower grades and less tonnes processed.

At the South America region, equivalent gold production at Cerro Corona increased by 11 per cent from 76,500 equivalent ounces in the March quarter to 84,900 equivalent ounces in the June quarter.

At the Australasia region, St Ives’ gold production decreased by 8 per cent from 120,300 ounces to 111,200 ounces. At Agnew, gold production was similar at 37,200 ounces.

The average quarterly US dollar gold price achieved for the quarter decreased by 5 per cent from US$1,679 per ounce in the March quarter to US$1,600 per ounce in the June quarter. The average rand gold price achieved decreased by 1 per cent from R419,433 per kilogram to R414,642 per kilogram, while the average Australian dollar gold price increased marginally from A$1,595 per ounce to A$1,600 per ounce. The average Rand/US dollar exchange rate weakened by 4 per cent from R7.77 in the March quarter to R8.06 in the June quarter. The average Rand/Australian dollar exchange rate strengthened from R8.19 in the March quarter to R8.16 in the June quarter. The average Australian/US dollar exchange rate weakened by 4 per cent from A$1.00 = US$1.05 in the March quarter to A$1.00 = US$1.01 in the June quarter.

As a result of the above mentioned factors, revenue increased from R11,206 million in the March quarter to R11,364 million in the June quarter, but decreased in dollar terms from US$1,442 million to US$1,408 million.

Net operating costs increased by 3 per cent from R5,774 million (US$743 million) in the March quarter to R5,973 million (US$740 million) in the June quarter. Total cash cost increased by 1 per cent from R217,434 per kilogram to R220,546 per kilogram. The increase in the total cash cost was due to the increase in operating costs. In US dollar terms total cash cost decreased by 2 per cent from US$870 per ounce to US$851 per ounce due to the weakening of the rand against the US dollar. Refer to the Total cash cost reconciliation for more detail.

At the South Africa region, net operating costs increased by 6 per cent from R3,168 million (US$408 million) to R3,346 million (US$415 million). This increase was due to the 16.7 per cent annual electricity price increase (effective 1 April) together with one month of significantly higher winter tariffs (approximately 60 per cent to 65 per cent higher than summer tariffs in the months of June, July and August) as well as an increase in stores costs in line with the increase in production volumes. Total cash cost decreased by 6 per cent from R264,069 per kilogram (US$1,057 per ounce) to R248,503 per kilogram (US$959 per ounce) due to the increase in production, partly offset by the increase in costs.

At the West Africa region, net operating costs increased by 7 per cent from US$142 million (R1,104 million) to US$152 million (R1,224 million). This increase was mainly at Tarkwa due to gold-in-process valuation movements at the North and South heap leach facilities and a much lower build-up of stockpiles. Total cash cost at the West African operations increased by 12 per cent from US$642 per ounce in the March quarter to US$722 per ounce in the June quarter due to the decrease in production and the increase in costs.

At Cerro Corona in South America, net operating costs decreased by 20 per cent from US$44 million (R341 million) to US$35 million (R282 million). This decrease was mainly due to a decrease in statutory workers participation as a result of lower taxable income and an increase in concentrate stock on hand. Total cash cost decreased by 10 per cent from US$534 per ounce in the March quarter to US$482 per ounce in the June quarter due to the increase in gold equivalent ounces sold and the decrease in net operating costs.

At the Australasia region, net operating costs decreased by 4 per cent from A$142 million (R1,160 million) to A$137 million (R1,122 million). This was in line with the lower production. Total cash cost for the region increased from A$877 per ounce (US$925 per ounce) to A$910 per ounce (US$922 per ounce) due to the decrease in production, partly offset by the lower costs.

The net effect of the increase in revenue and the increase in net operating costs was a 1 per cent decrease in operating profit from R5,433 million (US$699 million) in the March quarter to R5,391 million (US$667 million) in the June quarter.

The Group operating margin decreased from 48 per cent in the March quarter to 47 per cent in the June quarter. The operating margin at the South African operations increased from 37 per cent to 42 per cent. At the West African operations the operating margin decreased from 63 per cent to 56 per cent. At Cerro Corona in South America, the operating margin was similar at 69 per cent and at the Australian operations the operating margin decreased from 44 per cent to 42 per cent.

Amortisation increased by 4 per cent from R1,522 million (US$196 million) in the March quarter to R1,577 million (US$195 million) in the June quarter. This increase was in line with the higher production at KDC and South Deep.

Net interest paid increased from R45 million (US$6 million) in the March quarter to R65 million (US$8 million) in the June quarter. In the June quarter interest paid of R154 million (US$19 million) was partly offset by interest received of R60 million (US$7 million) and interest capitalised of R29 million (US$4 million). This compared with the March quarter interest paid of R150 million (US$19 million), which was partly offset by interest received of R77 million (US$10 million) and interest capitalised of R28 million (US$3 million).

The share of results of associates after taxation resulted in a loss of R98 million (US$12 million) in the June quarter. This compared with a profit of R18 million (US$2 million) in the March quarter in Rand Refinery. The R98 million (US$12 million) in the June quarter comprised a profit of R17 million (US$2 million) on the Group’s interest in Rand Refinery and a loss of R115 million (US$14 million) which relates to the ongoing study and evaluation costs at FSE following the acquisition of the 40 per cent interest there-in on 22 March 2012.

The gain on foreign exchange of R8 million (US$1 million) in the June quarter compared with a loss of R66 million (US$9 million) in the March quarter. These gains and losses related to the conversion of offshore cash holdings into their functional currencies as well as exchange gains and losses on inter-company loans.

The loss on financial instruments increased from R1 million (US$nil) in the March quarter to R8 million (US$1 million) in the June quarter and related to mark to market adjustments on warrants and options.

Share-based payments increased from R144 million (US$19 million) in the March quarter to R194 million (US$24 million) in the June quarter. This increase was due to the net effect of new allocation charges for share-based compensation granted.

Other costs increased from R1 million (US$nil) in the March quarter to R40 million (US$5 million) in the June quarter, mainly due to facility fees on the new US$500 million loan concluded during the quarter.

Exploration expenditure decreased from R292 million (US$38 million) in the March quarter to R190 million (US$23 million) in the June quarter due to the reallocation of growth and project team costs of R101 million (US$13 million) to feasibility and evaluation costs - see below. Refer to the Growth section for more detail on exploration activities.

Feasibility and evaluation costs increased from R76 million (US$10 million) in the March quarter to R120 million (US$15 million) in the June quarter. This increase was mainly due to the reallocation of the growth and project team costs of R101 million (US$13 million) from exploration made up of R57 million (US$7 million) incurred in the June quarter and R44 million (US$6 million) incurred in the March quarter. This increase was partly offset by the reallocation of expenditure at the Far Southeast (FSE) project in the Philippines, which is now reported under share of results of associates, compared with R76 million (US$10 million) in the March quarter. Refer to the Growth section for more detail.

Non-recurring costs increased from R79 million (US$10 million) in the March quarter to R135 million (US$17 million) in the June quarter. Non-recurring costs in the June quarter included the impairment of 7.8 million shares in Northam Platinum Limited amounting to R73 million (US$9 million) and various junior exploration companies amounting to R1 million (US$ nil) together with restructuring costs of R62 million (US$8 million), made up of voluntary separation packages and business process re-engineering costs at all the operations. Non-recurring costs in the March quarter included the impairment of various junior exploration companies which amounted to R17 million (US$2 million) and restructuring costs of R63 million (US$8 million).

Government royalties increased from R318 million (US$41 million) in the March quarter to R333 million (US$41 million) in the June quarter. The higher royalty in the June quarter was mainly at the South African operations due to the higher revenue on which royalties are calculated.

Taxation increased from R792 million (US$102 million) in the March quarter to R960 million (US$119 million) in the June quarter. Normal taxation decreased from R885 million (US$114 million) to R845 million (US$105 million). The deferred taxation charge of R115 million (US$15 million) in the June quarter compared with a credit of R93 million (US$12 million) in the March quarter. The movement in deferred tax was mainly due to the once off net credit of R255 million (US$33 million) in the March quarter as a result of tax rate changes at the South African and Ghanaian operations, with legislated decreases in South Africa and increases in Ghana.

Net earnings attributable to owners of the parent amounted to R1,606 million (US$198 million) or 220 SA cents per share (US$0.27 per share) in the June quarter compared with R2,082 million (US$268 million) or 288 SA cents per share (US$0.37 per share) in the March quarter.

Headline earnings i.e. earnings excluding the after tax effect of asset sales, impairments and the sale of investments, amounted to R1,680 million (US$207 million) or 230 SA cents per share (US$0.29 per share) in the June quarter compared with R2,098 million (US$270 million) or 290 SA cents per share (US$0.37 per share) in the March quarter.

Normalised earnings - net earnings excluding non-recurring items as well as gains and losses on foreign exchange, financial instruments and share of results of associates after royalties and taxation, amounted to R1,819 million (US$224 million) or 250 SA cents per share (US$0.30 per share) in the June quarter compared with R2,171 million (US$279 million) or 300 SA cents per share (US$0.39 per share) in the March quarter.

Cash inflow from operating activities increased from R2,742 million (US$360 million) in the March quarter to R4,195 million (US$514 million) in the June quarter. The higher cash inflow in the June quarter was mainly due to lower royalties and taxation paid and a release of working capital.

Dividends of R2 million (US$nil) were paid to non-controlling interest holders at La Cima (Cerro Corona) in the June quarter compared with dividends paid of R1,702 million (US$225 million) in the March quarter, which included R1,677 million (US$222 million) paid to owners of the parent and R24 million (US$3 million) paid to non-controlling interest holders at Tarkwa.

Cash outflow from investing activities decreased from R3,489 million (US$452 million) in the March quarter to R3,362 million (US$418 million) in the June quarter. The decrease is explained below.

Capital expenditure increased from R2,650 million (US$341 million) in the March quarter to R3,330 million (US$414 million) in the June quarter, mainly due to the increased spend on capital after the slow start-up at the beginning of the financial year.

At the South Africa region, capital expenditure increased from R1,317 million in the March quarter to R1,463 million in the June quarter mainly due to an increase in infrastructure expenditure at KDC and Beatrix. This was partially offset by a R12 million decrease in capital expenditure at South Deep, from R655 million to R643 million. The majority of the expenditure at South Deep was on development and equipping of the mine to achieve its build-up plan. Expenditure on ore reserve development (ORD), which is included in capital expenditure, increased from R426 million to R484 million at KDC and from R99 million to R115 million at Beatrix.

At the West Africa region, capital expenditure increased from US$75 million in the March quarter to US$89 million in the June quarter mainly due to the acquisition of additional mining fleet at Tarkwa and Damang.

In South America, at Cerro Corona, capital expenditure increased from US$17 million in the March quarter to US$21 million in the June quarter. The majority of this expenditure was incurred on the tailings management facility.

At the Australasia region, capital expenditure increased from A$60 million in the March quarter to A$95 million in the June quarter. At St Ives, capital expenditure increased from A$49 million to A$74 million, due to increased expenditure on mine development at Cave Rocks (a life extension project on an existing underground mine) and a new tailings facility. The expenditure at Cave Rocks should extend its life by at least another two years at robust returns. At Agnew, capital expenditure increased from A$11 million to A$21 million due to additional underground development, extensional exploration at Waroonga underground complex and acquisition of additional mining equipment.

Other investing activities in the March quarter included the third payment amounting to R834 million (US$110 million) for the FSE project in terms of the option agreement which resulted in the acquisition of a 40 per cent interest in FSE for Gold Fields.

Purchase of investments increased from R1 million (US$nil) in the March quarter to R6 million (US$1 million) in the June quarter and related to the conversion of warrants to shares in Atacama Pacific Gold Corporation. Proceeds on the disposal of investments were similar to the March quarter at R4 million (US$1 million) and related to the repayment of the loan advanced to GBF Underground Mining Company at St Ives.

Environmental and post-retirement health care payments increased from R10 million (US$1 million) in the March quarter to R32 million (US$4 million) in the June quarter. This increase was mainly due to a contribution to the environmental rehabilitation fund for a rehabilitation guarantee at the South African operations.

Net cash inflow from financing activities decreased from R1,744 million (US$230 million) in the March quarter to R371 million (US$46 million) in the June quarter. The net inflow from loans received and loans repaid decreased from R1,697 million (US$224 million) in the March quarter to R327 million (US$41 million) in the June quarter. Loans received from non-controlling interest holders decreased from R46 million (US$6 million) in the March quarter to R34 million (US$4 million) in the June quarter. These loans relate to funds received from Buenaventura for their participation in the Chucapaca project.

The net cash inflow of R1,201 million (US$142 million) in the June quarter compared with a net cash outflow of R704 million (US$86 million) in the March quarter. After accounting for a positive translation adjustment of R315 million (negative US$27 million) on offshore cash balances, the cash inflow for the June quarter was R1,517 million (US$115 million). The cash balance increased from R5,152 million (US$680 million) at the end of March to R6,669 million (US$795 million) at the end of June.

Notional cash expenditure is defined as operating costs (including general and administration expenses) plus capital expenditure, which includes near-mine exploration and growth capital. NCE is reported on a per kilogram and per ounce basis – refer to the NCE table of this report.

Revenue less NCE reflects the free cash flow available to pay taxation, interest, greenfields exploration, feasibility and evaluation costs and dividends.

The NCE margin is defined as the difference between revenue per ounce and NCE per ounce expressed as a percentage.

The Group NCE, which includes capitalised project costs increased from R319,835 per kilogram (US$1,280 per ounce) in the March quarter to R339,046 per kilogram (US$1,308 per ounce) in the June quarter. This increase was as a result of the higher operating costs and higher capital expenditure partly offset by the higher production. The NCE margin for the Group decreased from 24 per cent in the March quarter to 18 per cent in the June quarter as a result of the higher NCE and the lower price achieved.

NCE per ounce from existing operations increased from R316,582 per kilogram (US$1,267 per ounce) in the March quarter to R333,854 per kilogram (US$1,288 per ounce) in the June quarter due to the higher operating costs and higher capital expenditure, partly offset by the higher production. The NCE margin from existing operations decreased from 25 per cent in the March quarter to 19 per cent in the June quarter due to the higher NCE and lower price achieved.

Capital projects NCE per ounce increased from R3,253 per kilogram (US$13 per ounce) in the March quarter to R5,192 per kilogram (US$20 per ounce) in the June quarter due to increased expenditure at Chucapaca and the Damang Super-pit. Actual expenditure for the June quarter at Chucapaca, the Damang Super-pit and APP amounted to R67 million (US$8 million), R35 million (US$4 million) and R22 million (US$3 million) respectively. The NCE margin for the Group including project expenditure decreased from 24 per cent to 18 per cent as a result of the above factors.

At the South Africa region, NCE per kilogram decreased from R372,218 per kilogram (US$1,490 per ounce) to R353,733 per kilogram (US$1,365 per ounce) due to the increase in production, partly offset by higher operating costs and higher capital expenditure. The NCE margin increased from 11 per cent in the March quarter to 16 per cent in the June quarter due to the higher rand gold price and the lower NCE. NCE excluding the funding of South Deep was similar to the March quarter at R319,257 per kilogram and decreased from US$1,277 per ounce to US$1,232 per ounce due to the weaker rand. The NCE margin excluding South Deep was similar to the March quarter at 24 per cent.

At the West Africa region, NCE per ounce increased from US$1,027 per ounce in the March quarter to US$1,169 per ounce in the June quarter due to the higher capital expenditure and lower production. The NCE margin decreased from 39 per cent in the March quarter to 28 per cent in the June quarter as a result of the higher NCE.

At the South America region, NCE per ounce decreased from US$745 per ounce in the March quarter to US$708 per ounce in the June quarter due to the increase in gold equivalent production partly offset by the increase in capital expenditure. The NCE margin at Cerro Corona decreased from 56 per cent in the March quarter to 48 per cent in the June quarter due to the lower price achieved.

At the Australasia region, NCE per ounce increased from A$1,256 per ounce (US$1,324 per ounce) in the March quarter to A$1,548 per ounce (US$1,567 per ounce) in the June quarter due to an increase in capital expenditure and the lower production at St Ives. The NCE margin decreased from 21 per cent in the March quarter to 3 per cent in the June quarter due to the higher NCE.

Net debt (long-term loans plus the current portion of long-term loans less cash and deposits) increased from R11,008 million (US$1,452 million) at the end of March to R11,457 million (US$1,366 million) at the end of June.

Financial Review