Q1 2013 results in line with guidance

The March 2013 quarter was the first quarter that the operations of Gold Fields and Sibanye Gold were effectively managed as separate entities by their respective management teams, although the separation was finalised only on 11 February 2013.

The results for KDC and Beatrix, which technically formed part of the Gold Fields Group until the unbundling of Sibanye Gold, are shown under the heading “discontinued operations” in the accounts. However, these results have no impact on the overall Group results as the contribution from Sibanye for the quarter was included in the distribution of the Sibanye shares.

The Group’s operational performance during the March 2013 quarter was in line with guidance provided for the full year. The quarter also saw significant further progress made on the restructuring and refocusing of the Group for cash generation, in line with the outcomes of the Portfolio Review completed in late 2012 and announced on 14 February 2013. The envisaged on-mine interventions, most notably the closing down of marginal production at Tarkwa, St Ives and Agnew, were implemented during the quarter. As a consequence of the review, exploration and project activities are being curtailed so as to deploy our available financial capacity and technical skills on the most promising activities.

The most notable achievement for the quarter is that we had no fatalities at any of the operations. In addition, we also had no lost time injuries at Damang, Cerro Corona and Agnew. Safety of our people continues to be the most important value in the company in that “if we cannot mine safely, we will not mine” and we continue to embed this philosophy into our culture, training and way of working without fear of retribution.

Attributable gold production declined by 11 per cent from 534,000 ounces in the December quarter to 477,000 ounces in the March quarter.

In the South Africa region, the South Deep project produced 63,000 ounces (1,959 kilograms) of gold, which was similar to the December quarter, despite the Christmas break, the impact of which is experienced in the March quarter. Although South Deep has implemented a new operational model in November 2012, the pre-existing Christmas break arrangements were honoured. A shorter Christmas break will apply this year. The March 2013 quarter was the first full quarter that South Deep operated under the new operating model. While the full benefits of this new way of working still need to be realised, the trends are positive with record tonnes mined (above 200,000 tonnes) for this mechanised mine during March. Further positive trends are expected through the remainder of the year.

In West Africa, Tarkwa’s production declined from 187,800 ounces in the December quarter to 170,100 ounces in the March quarter, as anticipated. This was largely due to the cessation of ore stacking at the high cost South heap leach facility announced in February this year, as well as a decline in grade. At Damang production was largely unchanged at 44,000 ounces.

In the Australasia region, St Ives produced 102,000 ounces compared with 111,600 ounces in the December 2012 quarter, which was in line with the guidance for the full year. The decline was mainly due to the closure of the heap leach operations announced in February 2013. Agnew produced 43,700 ounces compared with 54,900 ounces in the December quarter, which is in line with lower production levels planned after the withdrawal from the higher cost and lower grade Rajah and Main lodes, also announced in February 2013.

In South America, Cerro Corona produced 76,900 gold equivalent ounces compared with 97,900 gold equivalent ounces in the December quarter. This decline was largely the result of expected lower copper and gold grades and lower recoveries, in line with those published in the Reserve declaration for 2012.

Lower Group production, partially offset by an 8 per cent decline in net operating costs from R3,888 million (US$451 million) in the December quarter to R3,566 million (US$401 million) in the March 2013 quarter, resulted in a 5 per cent increase in total cash costs from R222,433 per kilogram (US$798 per ounce) to R234,036 per kilogram (US$819 per ounce).

Notional cash expenditure (NCE), which includes the capitalised costs for projects in the growth portfolio - and is the true measure of the cost of producing an ounce of gold - decreased by 2 per cent from R377,663 per kilogram (US$1,355 per ounce) in the December quarter to R369,050 per kilogram (US$1,291 per ounce) in the March quarter. This decline was due to lower operating costs, referred to above, as well as reduced capital expenditure during the quarter, partially offset by lower production. As a consequence the NCE margin for the Group increased from 20 per cent to 21 per cent for the quarter. Both total cash costs and NCE for the March 2013 quarter are below the guidance provided for the full year.

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The Group’s growth activities were significantly refocused during the first quarter, in line with the Group’s cash generation objectives and the outcome of the Portfolio Review announced on 14 February 2013.

Greenfields exploration expenditure has been cut from approximately US$130 million spent in 2012 to US$80 million planned for 2013, while exploration activities are being focused on smaller, higher grade, and less capital intensive targets, mainly in the regions where we already have a presence.

Near-mine exploration expenditure has been reduced from US$65 million spent in 2012 to approximately US$28 million planned for 2013, again with the focus being on the most prospective short to medium term targets. Capital expenditure, feasibility and evaluation costs for the international growth projects are under review and are expected to be significantly lower than that spent in 2012, with our available funding refocused on the best of these and other potential projects.

Due to the sub-optimal outcome of the Chucapaca feasibility study completed during 2012, this project in Peru is undergoing a new scoping study. The study will, inter alia, evaluate various new mining configurations, including the possibility of less capital intensive, lower volume but higher grade underground mining, as well as additional exploration on adjacent targets. It is too early to comment on the likelihood of success.

At the Far Southeast project in the Philippines, the focus remains on limited surface geotechnical drilling as well as activities aimed at securing Free Prior Informed Consent (FPIC), which is a prerequisite for obtaining a Financial Technical Assistance Agreement (FTAA). This process is expected to slow down somewhat due to the pending elections in the Philippines, scheduled for the last quarter of the year.

At the Arctic Platinum project in Finland, the addition of the Suhanko North deposit brings the overall resource for the project to 209 million tonnes for 0.8 million ounces of gold, 2.4 million ounces of platinum, 9.8 million ounces of palladium, 1,034 million pounds of copper and 438 million pounds of nickel. The pre-feasibility study for the project is close to completion and a decision on the way forward is expected later this year.

The Yanfolila project in Mali advanced to a resource development stage during the quarter, following a doubling of the resource to 1.4 million ounces. As this project has fairly low technical risk, we are conducting an in-fill drilling programme, along with a technical, environmental and social impact study, to determine if this project could be fasttracked to a development decision by the end of this year. Political developments in the country are being closely monitored.

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