Improved performance from South Africa region

JOHANNESBURG. 23 August 2012, Gold Fields Limited (NYSE & JSE: GFI) today announced net earnings for the June quarter of R1,606 million compared with R2,082 million in the March quarter and R1,267 million in the June 2011 quarter. In US dollar terms net earnings for the June quarter were US$198 million, compared with US$268 million in the March quarter and US$186 million in the June 2011 quarter.

June 2012 quarter salient features:

• Group attributable equivalent gold production of 862,000 ounces;
• Total cash cost of US$851 per ounce and NCE of US$1,308 per ounce;
• Operating margin of 47 per cent and NCE margin of 18 per cent;
• Good progress made on South Deep project; and
• Stabilisation of production output at KDC.

Interim dividend of 160 SA cents per share is payable on 17 September 2012.

Statement by Nick Holland, Chief Executive Officer of Gold Fields:

“During the quarter, the Group’s safety drive experienced a serious setback when five of our colleagues tragically lost their lives after an underground fire broke out at the Ya Rona shaft at KDC West. The cause of the fire, which started in an old worked-out part of the shaft that had been closed for many years, remains unknown. The fire has since been extinguished with no evident damage to existing working areas. The balance of the September quarter will be focused on flushing out noxious gases and ensuring a safe and healthy environment to recommence operations in Q4 2012. On this basis, the loss of production as a consequence of the fire is expected to be approximately 1,600 kilograms (50,000 ounces). KDC also had a tramming related fatality during the quarter, bringing the total number of fatalities to six.

On a more positive note, shortly after the close of the quarter KDC East recorded three million fatality free shifts spanning a period of approximately nine months, a new record. South Deep has been fatality free for the past eighteen months while Beatrix recorded a fatality free quarter. Tarkwa and Cerro Corona continued to report zero lost time injuries. The lost day injury frequency rate for the Group improved from 5.21 to 4.51, while the days lost frequency rate regressed from 220 to 234.

Safety and health remains the most important value in our Group. We concentrate on five main areas, namely: engineering out risk; ensuring compliance with standards and procedures; improving the health and well-being of employees; continuous stakeholder engagement; and behavioural-based safety initiatives.

In the June 2012 quarter, Gold Fields reported attributable Group production of 862,000 gold equivalent ounces, which is 4 per cent higher than the 827,000 gold equivalent ounces produced in the March 2012 quarter. The increased production, compared with the previous quarter, was primarily as a result of a 13 per cent increase at the South Africa region where production increased from 387,000 ounces to 437,000 ounces; with KDC increasing by 12 per cent and South Deep by 33 per cent.

Production was similar (Q2 2011: 872,000 gold equivalent ounces) to the corresponding quarter in 2011. The benefit of the minority buy-outs in Ghana and Peru, completed during the second half of 2011, was offset by a decline in production of between 50,000 and 60,000 equivalent ounces over the past year from Damang, Agnew and Cerro Corona. We expect to reverse part of these declines over the next six to twelve months.

KDC’s production for the first half of 2012 was similar to that of the first half of 2011, which is a noteworthy reversal of the declining trend of prior years. Conversely, Beatrix produced 8 per cent (14,000 ounces) less during the first half of 2012 compared with the corresponding period in 2011, mainly as a result of volume and mining mix issues as well as safety related stoppages. Production from the South Deep project was 9 per cent (14,000 ounces) less than the same period a year ago, whilst importantly, destress mining activities, which open up the ore body for future mining, reached record levels for the quarter increasing by 52 per cent. The capital infrastructure projects at South Deep are progressing well and, in particular, the ventilation shaft deepening and plant expansion are scheduled for completion before the end of 2012, after which there should be a steady build-up towards the full production target run-rate of 700,000 ounces per annum by the end of 2015.

On 2 August 2012, Gold Fields issued a notice in terms of Section 189 (3) of the Labour Relations Act to the National Union of Mineworkers (“NUM”) and other affected employees who are not members of a recognised trade union at South Deep. In terms of the notice, a consultation process with the NUM and affected unaffiliated employees will run for a prescribed period of 60 days. In the event that South Deep experiences work stoppages or delays due to industrial action during this period, these may have a material adverse effect on the business, production levels and operating results.

In the West Africa region, Tarkwa’s production was 5 per cent lower that the March quarter as a result of lower throughput. Subsequent to quarter end, the heap leach facilities, which contribute approximately 20 per cent of Tarkwa’s production, were closed following a directive from the Environmental Protection Agency, instructing the mine to stop the discharge of water from the leach pads, pending the installation of water treatment plants. Although we believe that Tarkwa was in full compliance with all environmental laws and regulations in Ghana, we have, in pursuit of environmental best practice and world class environmental stewardship, and to comply with the directive, committed to installing new water treatment plants before the end of the year. Tarkwa reopened both the North and South heap leach facilities on 9 August 2012 following the approval of the Environmental Protection Agency. The loss of production from this closure, which will be reflected in Q3 2012, is expected to be in the order of 15,000 ounces.

Damang has experienced a significant decline in production over the past year due to the transition from the old mature Damang Pit into the new developing Huni and Juno pits which contain the majority of the current reserve of 3.4 Moz. It is expected that Damang will return to a production level of approximately 45,000 ounces per quarter over a period of six to twelve months. We continue to evaluate the potential for expansion of Damang, although the priority now is on improving the short-term performance of the mine. We remain concerned about the lack of a level playing field in Ghana amongst mining companies on fiscal matters and other practices, and are engaging with the Government on this and on the prospect of securing a stability agreement for the Damang super-pit project, provision for which exists in the legislation.

In the Australasia region, production from St Ives remained steady while Agnew continued to encounter poor ground conditions which slowed the mining rate. A better understanding of localised ground conditions at depth has assisted in formulating action plans to recover production to approximately 45,000 ounces per quarter by the end of 2012. This mine remains prospective at depth and we continue to evaluate its potential.

In the South America region, Cerro Corona produced 16 per cent less than the same period in 2011, on a gold equivalent basis, mainly as a result of anticipated lower grades and movements in the commodity price ratio, which reduced equivalent production by about 15,000 ounces per quarter. The overall mining physicals for this mine continue to be robust.

Total cash cost increased from R217,434 per kilogram in the March quarter to R220,546 per kilogram in the June quarter due to the increase in operating costs and total cash cost in dollar terms decreased from US$870 per ounce to US$851 per ounce due to the weakening of the rand against the US dollar. NCE increased from R319,835 per kilogram (US$1,280 per ounce) to R339,046 per kilogram (US$1,308 per ounce) over the same period. The increase in NCE is mainly due to the higher capital expenditure. 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 gold price received.

Net earnings 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. Free cash flow increased from R93 million (US$19 million) in the March quarter to R865 million (US$100 million) in the June quarter as a consequence of lower royalties and taxes paid and a release of working capital.

During the quarter, Gold Fields restated its dividend policy. Previously dividend payments were based on 50 per cent of earnings net of growth capital, which represented a dividend pay-out of approximately one-third of net earnings over the past six years. The new dividend policy has been simplified and provides for a dividend pay-out of between 25 and 35 per cent of normalised net earnings, irrespective of capital expenditure. Although this restatement would not have changed the quantum of the historical dividend pay-outs, it provides shareholders with a dividend in the presence of growth projects and crystallizes our position as the leading dividend payer in the industry. The restated policy reinforces Gold Fields’ strategy to focus on all-in costs and to use free cash flow to: (1) pay dividends; and (2) to use the remaining free cash flow to sustain production at existing operations and to fund the growth portfolio. An interim dividend of 160 SA cents per share has been declared, based on the restated policy.

The June quarter saw steady progress on all of our growth projects. At the Chucapaca project in Peru work continued towards completion of the feasibility study and submittal of the Environmental Impact Assessment to the Authorities by the end of 2012. At the Far Southeast project in the Philippines, an in-fill drilling programme is underway, with nine drill rigs currently commissioned as part of a 100,000 metre drill programme. In parallel, work around securing the Foreign Technical Assistance Agreement (FTAA), which allows foreigners to own up to 100 per cent of local companies, continues. At the Arctic Platinum project (APP) in Finland, work continued on the pre-feasibility study and the definition of a maiden resource for the Suhanko North project, after drilling was completed in the March quarter.

The gold production outlook for the year will be impacted by the fire at the Ya-Rona shaft at KDC, safety stoppages at Beatrix and the temporary suspension of the heap leach facilities at Tarkwa as well as industrial relations risks at South Deep following the issue of the Section 189 (3) notice. As a result, attributable gold production is unlikely to exceed 3.4 million gold equivalent ounces.”