Corporate

South Deep operating model

On 2 October 2012, a formal agreement was reached with the National Union of Mine Workers (NUM) to implement a new operating model at South Deep. As a result, the Section 189 notice issued to NUM on 2 August 2012 was withdrawn. This model was previously agreed to by UASA. This new model will secure current jobs and is aimed at improving productivity, allowing the mine to create an additional 400 full time positions.

A key element of the agreement will introduce full calendar operations (FULCO) and increase production time per day by five hours. In addition, South Deep will have seven more production days per year. Employees will on average work 50 days less per year. A new bonus system will be introduced providing significant incentives for improved performance.

Competitive grading and compensation systems will also be implemented under the new operating model. This agreement has resolved all outstanding and unresolved issues with the NUM dating back to the strike in 2010, and is reflective of our desire to establish South Deep as a world class mine for the next 50 years and more, to the benefit of all its stakeholders.

Silicosis

On 21 August 2012, a court application was served on Gold Fields and various of its subsidiary companies on behalf of three individual applicants purporting to represent a class of mine workers who were previously employed by or who are employees of Gold Fields and who allegedly contracted occupational lung diseases (the class).

This is an application in terms of which the court is asked to certify a class action to be instituted by the applicants on behalf of the class. According to the applicants, this is the first and preliminary step in a process, where if the court were to certify the class action, the applicants will, in a second stage, bring an action wherein they will attempt to hold Gold Fields liable for the occupational disease and the resultant consequences. The applicants contemplate in the second stage dealing with what they describe as common legal and factual issues regarding the claim arising for the entire class. If the applicants are successful in the second leg, they envisage that individual members of the class could later submit individual claims for damages against Gold Fields. The application does not identify the number of claims that will be instituted against Gold Fields or the quantum of damages the applicants may seek.

Gold Fields has filed a notice of its intention to oppose the application. Gold Fields and its lawyers are engaging with the applicants’ lawyers to try and establish a court sanctioned process to agree timelines on procedural issues indicated and specifically the date by which Gold Fields must file its papers opposing the application.

2012 Strategic portfolio review

Gold Fields has concluded its 2012 strategic portfolio review of all operating assets as well as brownfields and greenfields projects. The purpose of the review was to maximise cash generation and shareholder returns through a more rigorous analysis of operating costs, capital expenditures and production levels.

The outcomes of the review will have a significant impact on Gold Fields’ strategy going forward and include the implementation of the following broad principles:

  • A more rigorous focus on value creation and cash returns and not an undue focus on production levels;
  • Ensuring that dividends have the first call on cash flows at between 25 per cent and 35 per cent of normalised earnings;
  • A critical review of declining and/or low margin assets;
  • Deploy scarce capital only on projects, brownfields or greenfields, that provide the best risk-weighted returns;
  • No M&A heroics while seeking opportunistic opportunities to acquire producing assets where the path to value is clear; and
  • Maintaining the focus on gold and international diversification.

These changes are in the process of being implemented and specific outcomes will be communicated to the market as notable changes are made.