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Forward looking statements
Certain statements in this document constitute “forward looking statements” within the meaning of Section 27A of the US Securities Act of 1933 and Section 21E of the US Securities Exchange Act of 1934.

Such forward looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the company to be materially different from the future results, performance or achievements expressed: more

Gold production down 5 per cent to 451,000 equivalent attributable ounces, as anticipated
Total cash cost of US$857 per ounce and NCE of US$1,239 per ounce
Loss of US$129 million incurred in the quarter due to impairments and the lower gold price
All-in sustaining costs of US$1,416 per ounce and total all-in cost of US$1,572 per ounce

Q2 2013 results in line with guidance

JOHANNESBURG. 22 August 2013, Gold Fields Limited (NYSE & JSE: GFI) today announced a net loss from continuing operations for the June 2013 quarter of US$129 million compared with earnings of US$27 million in the March 2013 quarter and US$105 million in the June 2012 quarter. In Rand terms the net loss for the June 2013 quarter of R1,169 million compared with earnings of R236 million in the March 2013 quarter and R837 million in the June 2012 quarter.

Statement by Nick Holland, Chief Executive Officer of Gold Fields:
Click to expand/collapse the table SAFETY
It is with deep regret that we report that one of our colleagues was fatally injured after a fall of ground accident at a destress section at South Deep during the quarter. This was after a period of 3,923,208 shifts and 805 days without a fatality at South Deep. Following this incident the practice of manual support-drilling in the hanging wall of destress sections has been stopped and a new standard implemented Group-wide whereby all drilling is now remotely operated. Elsewhere, Cerro Corona maintained its record of being lost time injury free since September 2011 and Damang achieved a full year without a lost time injury. Work place injuries of any nature are unacceptable and the safety of our people is not negotiable. We will not mine if we cannot mine safely.

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Click to expand/collapse the table FINANCIAL RESULTS
Gold Fields today reported a net loss from continuing operations of US$129 million (R1,169 million) or US$0.18 per share (159 SA cents per share) for the second quarter, largely resulting from non-recurring items of US$143 million (R1,318 million), of which US$127 million (R1,160 million) relates to impairment charges at Tarkwa and Damang. The impairment was driven by the recent decision to curtail all heap leach activities at Tarkwa and a revaluation of the ore stockpiles at Damang, given the lower gold prices prevailing. Another contributing factor to the quarterly loss was the lower revenue resulting from a decline in production and the lower average quarterly US dollar gold price achieved.
Attributable gold equivalent production decreased by 5 per cent from 477,000 ounces in the March quarter to 451,000 ounces in the June quarter, mainly due to the illegal strike action at Tarkwa and Damang;
The average quarterly US dollar gold price achieved decreased by 16 per cent from US$1,625 per ounce in the March quarter to US$1,372 per ounce in the June quarter;
Revenue declined by 21 per cent from US$805 million (R7,159 million) to US$637 million (R6,038 million); and
Net operating costs decreased by 1 per cent from US$401 million (R3,566 million) in the March quarter to US$397 million (R3,737 million) in the June quarter.

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Click to expand/collapse the table OPERATIONAL RESULTS AND GUIDANCE
    Q2 F2013
Original Guidance
Updated Guidance
  Production (000 ounces) 451   1,825 – 1,900   1,825 – 1,900  
  Cash costs (US$/oz) 857   860   830  
  Notional cash expenditure (NCE) (US$/oz) 1,239   1,360   1,240  

Group production for the quarter at 451,000 ounces and for the year to date at 928,000 ounces, is supportive of our production guidance for the year at 1.825 million ounces to 1.900 million ounces, which we reaffirm.

As a consequence of the restructuring, rationalisation and aggressive cost cutting implemented since the beginning of the year, further capital and operating cost savings of approximately US$200 million, are expected for the full year 2013. This includes US$50 million forecast to be saved on project capital. As a result of these savings, the cash cost and NCE guidance for the year given in February 2013 has been reduced by approximately US$30 per ounce and US$120 per ounce, to US$830 per ounce and US$1,240 per ounce, respectively.

If the South Deep project, (which is a developing mine) and capitalised project costs are excluded from these figures, then cash costs are forecast at US$790 per ounce and NCE at US$1,110 per ounce; this indicates that the Groupís core operations are sustainable at current spot prices. The actual NCE of US$1,266 per ounce for the six months to June 2013 was lower than guidance for the full year of US$1,360 per ounce. NCE for the six months to December is forecast at US$1,180 per ounce. In addition, exploration costs and Far Southeast (FSE) project costs are forecast to be US$30 million lower than previously estimated.

The Groupís All-in sustaining costs (AISC) increased from US$1,303 per ounce (R372,509 per kilogram) in the March quarter to US$1,416 per ounce (R428,392 per kilogram) in the June quarter. All-in costs (AIC) increased from US$1,476 per ounce (R421,735 per kilogram) to US$1,572 per ounce (R475,577 per kilogram). These costs were determined in accordance with the new World Gold Council standard issued on 27 June 2013. Lower production and inventory impairments were the main reasons for the increase in costs, as previously mentioned (refer to page 7 for detail).

Excluding the impact of the once-off impairments, the Groupís AISC and AIC for the June quarter declined by two percent from US$1,416 per ounce (R428,392 per kilogram) to US$1,280 per ounce (R387,271 per kilogram) and by three per cent from US$1,572 per ounce (R475,577 per kilogram) to US$1,436 per ounce (R434,456 per kilogram) respectively.

At US$1,280 per ounce (R387,271 per kilogram) for the June quarter the normalised AISC was two per cent lower than the US$1,308 per ounce (R344,315 per kilogram) achieved for the full year 2012. This reflects the initial results of the Groupís cost reduction programme and curtailment of marginal production.

Due to the significant decline in the gold price, the Group has made a loss for the quarter. Management and the Board are also concerned about gold price volatility in the short-term. As a result, the Gold Fields Board has deemed it prudent not to declare an interim dividend.

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Commencing with the 2012 Group-wide portfolio review aimed at achieving sustainable free cash flow generation, and the subsequent restructuring and rationalisation which commenced in late 2012, we have taken and are continuing to take a series of steps to reduce costs without negatively impacting underground development and surface stripping at the operations. This proactive stance on costs allowed us to respond effectively to the volatility in prices during the June quarter, which added impetus and greater urgency to the restructuring and rationalisation process.

While much work is still required to reposition the cost base of the company, considerable progress has been made with the following interventions:

The reduction of marginal mining in the Group commenced with the closure of the marginal heap leach operation at St Ives in Australia; the withdrawal from mining the low grade Main and Rajah ore bodies at Agnew, also in Australia; and the closure of the South Heap leach operations at Tarkwa in Ghana. All of these measures have had a positive impact on the costs of these operations. Further reductions in marginal mining are planned at the various operations as discussed below;
Restructuring and rightsizing of all operational and regional structures as well as the corporate office and the growth and international projects unit (GIP). This was accompanied by the introduction of a fit-for-purpose, low-cost, operating model and structure with full operational responsibility and accountability in capable and appropriately resourced regions. The number of employees, including contractors, world-wide has reduced by five per cent from 19,400 after the unbundling of Sibanye to 18,400 currently. Full time employees in the Group now number 9,900. The smaller corporate office, which has reduced its staff numbers from 110 to 56 people, is now narrowly focused on the Group functions of strategy, capital, growth, stakeholders, policies and standards, as well as compliance and reporting;
Corporate costs are now estimated at US$10 per ounce;
Rationalisation and prioritisation of all capital expenditure and, where appropriate, the deferral of expenditure in a manner that will not compromise the future integrity of the operations and ore bodies. Capital expenditure for the year is forecast at US$790 million compared with the previous guidance of US$970 million;
The Groupís greenfields exploration budget has been reduced from US$130 million in 2012 to US$80 million for 2013 and our scarce resources refocused on smaller, higher grade, less capital intensive projects, with only the most promising targets being advanced;
Near mine exploration expenditure has been cut from US$65 million in 2012 to approximately US$28 million in 2013;
The Tarkwa Expansion Phase 6 (TEP6) and both the Cerro Corona Oxides and Sulphides projects have been cancelled due to inadequate returns at current prices and due to capital rationing;
The burn-rate on all of the advanced stage international growth projects has been reduced significantly from US$128 million to US$84 million in 2013 as we prioritised spend. As a consequence of the rationalisation of our portfolio, certain projects have been earmarked for disposal. These include the Arctic Platinum Project (APP) in Finland, the Woodjam project in Canada and the Talas Copper/Gold project in Kyrgyzstan. The longer-term viability of our remaining projects is being reassessed in light of current low prices; and
Part of the rationalisation of our operations is based upon the assumption of a US$1,300 per ounce gold price for our 2013 Resource and Reserve declaration instead of the US$1,500 per ounce used in 2012. This change will also flow through into the 2014 operational plans and further reduce marginal mining and focus on improving margins.

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Click to expand/collapse the table OPERATIONAL HEALTH CHECK AND ROAD MAP

In the West Africa region the Tarkwa and Damang mines were affected by industrial action early in the June quarter, which resulted in a combined loss of approximately 21,700 ounces. Following significant interventions the situation at both mines has returned to normal.


Tarkwa’s gold production for the quarter was 139,200 ounces compared with 170,100 in the previous quarter. The lower production was due to the illegal strike action and a temporary reduction in grade.

Tarkwa continues to be a world-class ore-body. Lower gold prices have necessitated a rationalisation of the operation by further reducing marginal production.  Accordingly it has been decided to close the North heap leach operations by the end of 2013. Heap leach recoveries have been steadily declining over the years and are now at around 55 per cent compared with recoveries in the CIL plant of 96 per cent. In our view the opportunity loss arising from the difference in recoveries cannot be ignored, particularly at lower gold prices. It was also decided not to advance the TEP6 project which had been under consideration for the past year as a possible solution for the treatment of the increasingly harder ore encountered as the open pits become deeper and recoveries from the heap leach operations decline. The decision not to proceed with the project was motivated by inadequate returns and capital rationing.

As a consequence, Tarkwa’s annual production profile is expected to be between 525,000 ounces and 550,000 ounces initially. Early indications are that the cost profile should improve as a result of higher recoveries but more work is being done to quantify the impact. Further rationalisation opportunities at the mine are under review.


Damang’s managed gold production for the June quarter was 31,800 ounces compared with 43,300 ounces in the March quarter. As with Tarkwa, this was as a result of the industrial action, as well as the premature closure of the original Damang Pit due to safety concerns.

The existing Damang mine has effectively come to the end of its life following the withdrawal from the original Damang pit during the quarter. The mine is incurring losses and is cash negative due to inadequate volumes of high grade ore to feed the CIL plant, compounded by reduced availability of the plant due to its age. The plant is 17 years old, which is beyond its original anticipated life. Nonetheless, Damang has a large reserve base of four million ounces and a resource of eight million ounces. A dedicated project team has been assembled to determine if there are economic means to extract all or part of the remaining four million ounces. A decision on the future of Damang is expected by February 2014, which might include placing the mine on care and maintenance. In the interim, aggressive steps are being implemented to improve volumes, grade and plant availability in the short term, as a means of containing cash outflows.


St Ives

St Ives produced 97,700 ounces of gold in the June quarter compared with 102,000 ounces in the March quarter. This reduction was mainly due to a planned maintenance closure of the Lefroy mill.

Significant operational restructuring has already taken place at St Ives and the operation is viable as is evidenced by the strong operating results. While St Ives is now securely positioned in the lowest cost quartile in Australia, further cost reductions and revenue enhancing measures are under review.


At Agnew, gold production increased to 53,000 ounces from 43,700 ounces in the March quarter mainly due to higher grade and improved throughput as a result of increased tonnes treated from the Songvang open pit stockpiles.

The succesfull implementation of the fit-for-purpose, low-cost, operating model and structure focussed on sustainable cash generation, has set Agnew up to be a good asset in our portfolio for some years to come. Agnew is now one of the lowest cost producers in the Group and near the bottom of the lowest cost quartile in Australia. Our challenge is to maintain this excellent performance.


Cerro Corona

In the South America region Cerro Corona produced 70,000 gold equivalent ounces compared with 76,900 gold equivalent ounces in the March quarter. This decrease was mainly due to an expected decrease in gold and copper grades, in line with those published in the 2012 Reserve declaration, partially offset by an increase in gold and copper recoveries.

Cerro Corona is the lowest cost producer in the Group and one of the lowest cost producers in the industry.  We believe that we can maintain this cost position for many years into the future.

Due to inadequate returns and capital rationing, it was decided not to advance the Sulphide Expansion project and the Oxides project at Cerro Corona. Instead of constructing a separate treatment facility for the existing oxide stockpiles, technologies are being tested that may make it possible to treat the Oxide material through the existing Sulphide circuits, if recovery rates are acceptable.


South Deep

In the South Africa region the South Deep project increased its production by 23 per cent from 63,000 ounces (1,959 kilograms) in the March quarter to 77,800 ounces (2,420 kilograms) in the June quarter. Noteworthy was a 23 per cent increase in total tonnes milled to a record 640,000 tonnes, a 51 per cent quarter-on-quarter improvement in development, as well as a 39 per cent improvement in destress mining, all of which are important for the project’s production build-up. This performance is evidence of the successful implementation of the new operating model which launched in November 2012.

Despite these notable improvements, the slower production build-up, along with the slower than anticipated build-up in destress mining, is unlikely to place the mine in a position to achieve its previous target of 700,000 ounces of annual production during 2016. In addition, the underground yield and mine call factor have been negatively impacted by logistical constraints which have resulted in a delay in moving the long-hole stoping tonnages from the working place to the shaft. Long-hole stoping currently comprises 30 per cent of mining volumes. The mine has thus recently adopted a new blasting protocol in the long-hole stopes as the previous protocol has generated excessive tonnes per blast which could not effectively be removed. The new protocol allows for more frequent blasting and cleaning of lesser tonnes per blast to alleviate the current cleaning and movement constraints. A comprehensive review is underway to determine the most realistic future production profile for this mine. Once this is completed a reassessment of the capital and cost base will follow. Our view is that a rationalisation of the cost base at South Deep is required, given that the production build-up is likely to take longer and due to the lower gold price. We aim to provide further information on this review process by the end of the year.

If the current low gold price environment persists for a protracted period of time, it is unlikely that the South Deep project in its current configuration will achieve break-even by the end of this year as previously estimated.

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With the announcement of the Group’s March quarter 2013 results on 10 May 2013, we reported that the Group’s growth activities were being significantly refocused, in line with the Group’s free cash flow objectives and the outcome of the Portfolio Review announced on 14 February 2013. This process continued unabated during the second quarter, with a significant focus on the lowering of the burn-rate on all of the advanced stage international growth projects.

A prioritisation process has commenced on the project portfolio with a view to ranking our projects and determining which should continue to be advanced and which should be exited. This will allow the Group to concentrate on those assets which best fit the company’s objectives, have the best economic returns and are in jurisdictions considered attractive.

Accordingly, Gold Fields has appointed CIBC to explore strategic alternatives, including the possibility of a disposal, for the Arctic Platinum project in Finland, while Jefferies International has been appointed to do the same for the Talas Copper Gold project in Kyrgyzstan. The Woodjam project in British Columbia, Canada, has also been earmarked for possible disposal.

At the Yanfolila project in Mali the de-risking programme continues according to plan. Government approval for the exploitation permit is expected during the September 2013 quarter and a decision on the future of the project is expected by early 2014.

At the Chucapaca project in Peru conceptual studies for different mining scenarios, including a smaller underground operation, as well as metallurgical test work and capital estimates to support these scenarios, are ongoing.  This work is expected to be completed by the end of the year after which a decision will be made on the project’s future.  

At the FSE project in the Philippines the project reached a significant milestone when the indigenous elders of the community voted in favour of the Free Prior Informed Consent (FPIC) for the project by an 84 per cent margin. The FPIC process is expected to be finalised by the end of September 2013 with the signing of a memorandum of agreement with the communities. Thereafter the focus will shift to securing the Financial Technical Assistance Agreement (FTAA), which will enable Gold Fields to exercise its option to acquire an additional 20 per cent of the project, raising its stake to 60 per cent. Work is underway to determine the viability of a smaller, less capital intensive starter operation with a shorter timeline to production. This could entail a long-hole open stoping operation focusing initially on the higher grade portion of the ore body. This study is expected to take at least until June 2014.

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Click to expand/collapse the table CONCLUSION
While we remain positive on the medium term outlook for the gold price, we are concentrating our attention and efforts on current prices. We remain focused on cash generation rather than ounces for the sake of ounces, as is evidenced by our ongoing reduction of marginal mining and aggressive cost reductions. The objective is to retain the integrity of our operations and to position the Group for profitability at current spot gold prices.

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Stock data   NYSE – (GFI)  
Number of shares in issue   Range – Quarter US$4.70 – US$7.70
– at end June 2013 736,562,241   Average Volume – Quarter 5,579,904 shares/day
– average for the quarter 735,823,756   NYSE – (GFI)  
Free Float 100 per cent   Range – Quarter ZAR53.33 – ZAR71.93
ADR Ratio 1:1   Average Volume – Quarter 4,511,307 shares/day
Bloomberg/Reuters GFISJ/GFLJ.J