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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, including, among others, those relating to the future business prospects, revenues and income of Gold Fields, wherever they may occur in this report and the exhibits to the report, are necessarily estimates reflecting the best judgment of the senior management of Gold Fields and involve a number of risks and uncertainties that could cause actual results to differ materially from those suggested by the forward-looking statements. As a consequence, these forward-looking statements should be considered in light of various important factors, including those set forth in this report. Important factors that could cause actual results to differ materially from estimates or projections contained in the forward-looking statements include, without more

Salient features
US$1,074 per ounce All-in-sustaining costs
US$1,096 per ounce All-in-costs
559,000 ounces of attributable gold production
US$63m cash flow from operating activities cash flow after taking account of net capital expenditure, environmental payments, debt service costs and non-recurring items
12% free cash flow margin

Strong operational performance generates US$63 million cash flow

JOHANNESBURG. 20 November 2014, Gold Fields Limited (NYSE & JSE: GFI) today announced net earnings for the September 2014 quarter of US$19 million compared with US$19 million for the June 2014 quarter and US$9 million for the September 2013 quarter. Normalised earnings for the September 2014 quarter of US$23 million compared with US$25 million for the June 2014 quarter and US$12 million for the September 2013 quarter.

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


During the September 2014 quarter Gold Fields delivered results consistent with guidance previously given. This has enabled the Group to continue to generate cash and to further strengthen its balance sheet. Key features of the quarter included a strong performance from the international mines, all seven of which were cash generative, as well as the completion of the production-critical safety related ground support at South Deep.

Generating Free Cash Flow

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During the quarter Gold Fields generated US$63 million of cash flow. This brings the total cash flow from operating activities for the year to date, after taking account of net capital expenditure, environmental payments, debt service costs and non-recurring items, to US$182 million, which positions Gold Fields as one of the strongest free cash flow generators in its gold mining peer group.

Attributable gold equivalent production increased by 2% to 559,000 ounces in the September quarter. The Group achieved all-in sustaining costs (AISC) of US$1,074/oz and all-in costs (AIC) of US$1,096/oz. If the South Deep project, which is not yet at commercial levels of production, is excluded from the September quarter results, then the Group’s AIC was US$1,025/oz, which demonstrates the robustness of the portfolio and positions Gold Fields in the lowest quartile on an AIC basis.

Despite the recent volatility in the gold price, Gold Fields remains committed to the objective of generating a sustainable free cash flow margin of at least 15% at a US$1,300/oz gold price, without compromising the long-term sustainability of our ore bodies through a lack of investment in ore reserve development and stripping, or through “high grading”. This policy remains unchanged, even at current spot prices. During the September quarter, Gold Fields achieved a free cash flow margin of 12% (see table on Free cash flow margin ) against a realised gold price of US$1,265/oz for the quarter. By structuring the Group to generate a 15% free cash flow margin at a US$1,300/oz gold price, Gold Fields has in fact built-in a safety cushion to withstand lower gold prices. On this basis the Group’s expected breakeven gold price is approximately US$1,050/oz, assuming existing operations are sustained.

On 20 October 2014, Gold Fields announced that the Group remained on track to achieve its production guidance for the full year 2014 of approximately 2,200,000 ounces of gold equivalent production. Costs for the full year, however, are expected to be lower than the guidance, first published on 13 February 2014, with AISC and AIC expected to be 3% and 2% lower at approximately US$1,090/oz and US$1,130/oz respectively.

Further Reducing Net Debt

Continued strong cash generation during the quarter enabled the Group to make further progress on another key strategic objective for 2014, namely to further improve the strength of its balance sheet by reducing net debt and further improving the net debt to EBITDA ratio. During the quarter net debt was reduced by a further US$137 million to US$1,498 million, which brings total net debt reduction for the year to date to US$237 million. The reduction was assisted by the US$81 million proceeds from the sale of a 51% interest in Chucapaca, which was received this quarter.

Based on a 12-month rolling historical average, the Group’s net debt to EBITDA ratio improved from 1.47 in the June 2014 quarter to 1.33 in the September 2014 quarter. Our medium-term objective is to reduce our net debt to EBITDA ratio to approximately 1 times.

The net debt reduction in conjunction with the agreement reached with our group of bankers in the June quarter to amend and extend the maturity date of commitments totaling US$715 million by two years from November 2015 to November 2017 on the same terms – has enabled the Group to improve its solvency and liquidity.

Setting South Deep up for long-term success

At South Deep all mining related activities were severely curtailed for the entire September quarter as a result of the May 2014 introduction of an extensive ground support remediation programme in the current mine workings. The remediation programme took most of the legacy haulages and arterial routes on 95-level and above – from where a significant proportion of current production is sourced – out of service, with a commensurate impact on production. As a consequence South Deep’s production declined by 18% from 1,591 kilograms (51,100 ounces) in the June quarter to 1,298 kilograms (41,700 ounces) in the September quarter and destress mining declined by 50% from 6,822 square metres in the June quarter to 3,392 square metres in the September quarter.

While access to production areas was re-established at the start of the December quarter, the ground support remediation programme delayed both destress mining and the opening up of a number of long-hole stopes that were planned to be mined in the December 2014 and March 2015 quarters, as well as the advance of ancillary services, such as backfill, an integral component of the mining cycle. While this will have a commensurate knock-on effect on production, mitigation is expected through new production areas that are planned to be opened up during the March 2015 quarter. The full implications of the largely completed ground support programme on 2015 production are still being assessed. Accordingly, updated 2015 guidance for South Deep, reflecting these safety related knock-on effects, will be published with the Group guidance on Thursday, 12 February 2015.

The Australian team continues to contribute to the upskilling of our people and in helping to develop a true mechanised mining culture at South Deep. Particularly pleasing, however, is that South Deep is now starting to attract talent from the highly sought after, albeit small, South African mechanised mining skills pool. Nico Muller, formerly the Chief Operating officer of Royal Bafokeng Platinum Limited, has joined Gold Fields as Executive vice president for the South Africa Region. Nico has extensive mechanised mining experience spanning a 20-year career during which time he worked at Target and helped to build the Two Rivers mechanised underground mine, one of the most successful mechanised mines in South Africa.

The success of South Deep is largely dependent on its people and our strategy is to grow our own people through focussed internal training efforts as well as judicious recruitment of the best South African mechanised mining skills to supplement our existing talent pool.

The review of South Deep’s current destress mining methodology by the International Geotechnical Advisory Board (IGAB), announced on 21 August 2014, continued during the quarter. Two alternative methods are under review. The first method is the 4.5 X 4.5 meter Destress method (previously 4.0 X 4.0 meter) and the second is the Inclined Mining Slot method. Both of these methods, if successful, could significantly de-risk the South Deep build-up plan and future production profiles, and could have a meaningful positive impact on costs and schedule. Both methods will be piloted in discrete areas of the mine during 2015. It is too early to assess whether either of these methods could be commercially deployed. The results of the pilot studies will provide greater resolution on their commercial viability and timing of adoption.

Steady state production in Ghana

At Tarkwa in Ghana, the expansion of the Carbon in Leach (CIL) plant from an annual throughput of 12.3 to 13.3 million tonnes per annum progressed well and this programme is expected to be completed by the end of December 2014. The expansion is expected to enable Tarkwa to increase its future production to a steady state level of approximately 550,000 ounces per annum.

With production of 139,200 ounces at AIC of US$1,096/oz during the September quarter, and year to date production of 425,200 ounces at an AIC of US$1,045/oz, Tarkwa is on track to better its 2014 production guidance of 520,000 ounces at an AIC of US$1,100/oz. Following the closure of the heap leach operations at the beginning of the year, Tarkwa has achieved stability and continues to out-perform against its production and cost guidance. Although smaller following the closure of the heap leach operations, Tarkwa is now more profitable even at current lower gold prices.

Damang further consolidated its return to profitability with another strong performance. Gold production increased by 6% to 42,800 ounces, while the AIC declined by 3% from US$1,282/oz to US$1,245/oz during the September quarter. With year to date production of 130,000 ounces at an AIC of US$1,210/oz, Damang is on track to exceed its 2014 guidance of 165,000 ounces of production at an AIC of US$1,240/oz.

The main focus at Damang remains the identification of additional ore sources along the 27 kilometres of strike between Damang and Tarkwa, where historical open pits were last drilled and mined when the gold price was between US$300/oz and US$400/oz. This strategy could contribute to an appreciable addition to Mineral Reserves and Mineral Resources over the next three years and has the potential to extend the life of this mine substantially.

Another outstanding quarter for South America

Cerro Corona, our copper/gold operation in Peru, had another outstanding quarter with gold equivalent production up by 10% to 84,700 ounces at an AIC of US$718/eq oz. This strong cost performance compared with AIC of US$789/eq oz in the June quarter. With year to date production of 242,000 ounces at an AIC of US$712/eq oz, Cerro Corona is on track to exceed its production guidance for the full year of 290,000 ounces at an AIC of US$865/eq oz.

Australia continues to outperform

The Group’s Australian operations, in aggregate, exceeded guidance both in terms costs and ounces produced. The four mines in the portfolio reported gold production of 268,800 ounces at an AIC of US$990/oz. This brings total production for the year to date to 770,900 ounces at an AIC of US$1,043/oz against guidance for the full year of 975,000 ounces at an AIC of US$1,130/oz. Over the past 12 months, since acquiring the Yilgarn South assets from Barrick in October 2014, Gold Fields’ Australian operations have produced more than 1 million ounces of gold.

During the September quarter, Agnew/Lawlers increased its production by 9% to 72,200 ounces at an AIC of US$953/oz, while St Ives raised its production by 6% to 88,700 ounces at an AIC of US$1,149/oz. The star performer in the region, however, was again Granny Smith, which improved its production by 1% to 85,600 ounces at an AIC of US$792/oz. Year-to-date and with one quarter still to go, the mine has already produced 236,700 ounces at an AIC of US$789/oz, against full year guidance of 240,000 ounces at an AIC of US$1,060/oz.

Darlot contributed 22,300 ounces at AIC of US$1,224/oz, which is in line with the strategy for this mine to operate above cash break-even point, while investing all of the cash it generates in exploration to find additional ore sources that would secure its future. Year-to-date, the mine produced 68,100 ounces at an AIC of US$1,175/oz against full-year guidance of 80,000 ounces at AIC of US$1,315/oz. Approximately US$7 million has been invested in near-mine exploration year-to-date and sufficient ore reserves have been delineated to secure similar production in 2015. Good progress has also been made towards the discovery of a potential “game changer” aimed at securing the future of this mine as a long-term Gold Fields franchise asset.

The key strategic objective of the Australia region continues to be significant investment in near mine exploration with the US$65 million near-mine exploration programme at all of the mines, aimed principally at improving the Mineral Resource and Reserve positions of these mines over the next 2 to 3 years. At St Ives early capital development has commenced on the newly discovered high-grade Invincible deposit with a view to first open pit production during the June 2015 quarter. At Agnew/Lawlers access development has commenced into the new high grade underground FBH deposit, where first production is also expected during the June 2015 quarter. FBH is expected to initially supplement and eventually replace production from the Kim Lode, which is the base load of production from the mine. At Granny Smith exploration results during the quarter provided further support for the replication of numerous deeper lodes in the Wallaby underground deposit, similar in structure and geometry to the Z70 to Z100 lodes from where current production is sourced. These results are early indications of the potential for significant Mineral Resource and Reserve replenishment potential at the Wallaby deposit.

At 496,000 ounces, production for the September quarter was 10 per cent higher than the 451,000 ounces reported in the June quarter. This brings production for the year to date to 1,424,000 ounces, which is supportive of our existing guidance for the full year of between 1,825,000 and 1,900,000 ounces, excluding the Yilgarn South assets.

Group all-in sustaining cost (AISC) for the September quarter was US$1,089 per ounce, 23 per cent lower than the US$1,416 per ounce reported for the June quarter;
Group all-in cost (AIC) for the September quarter was US$1,176 per ounce, 25 per cent lower than the US$1,572 per ounce reported for the June quarter;
Total cash cost for the September quarter was US$772 per ounce, 10 per cent lower than the US$857 per ounce reported for the June quarter; and
Group NCE of US$1,064 per ounce for the September quarter was 14 per cent lower than the US$1,239 per ounce reported for the June quarter.

Despite the fact that South Deep is a developing project and is still operating significantly below full production, it is accounted for as a fully operational mine. If South Deep is excluded then the Group NCE is US$962 per ounce and AIC is US$1,088 per ounce for the September quarter. This gives a good indication of the robustness of the rest of the portfolio.

The newly acquired Yilgarn South assets are expected to produce between 90,000 and 100,000 ounces for the December quarter. As a consequence Group production guidance for the full year is revised up to between 1,915,000 and 2,000,000 ounces, while cost guidance remains unchanged with total cash costs of approximately US$830 per ounce and Notional Cash Expenditure (NCE) of approximately US$1,240 per ounce.

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During the September quarter Gold Fields made progress with its strategy to make a sustainable structural shift in the Group’s cost base with four of our six existing mines reporting much improved all-in costs: Cerro Corona achieved an AIC of negative US$21 per ounce; Agnew US$842 per ounce; St Ives US$1,116 per ounce and Tarkwa US$1,124 per ounce. The only exceptions were Damang in Ghana which reported AIC of US$1,727 per ounce and South Deep in South Africa, which is a build-up mine and reported AIC of US$1,599 per ounce.

The strategy to make a sustainable structural shift in the Group’s cost base includes the following interventions:

Reduction of marginal mining by closing down unprofitable production. As previously reported, marginal mining projects had already been stopped at St Ives (heap leach operations), Agnew (low grade Main and Rajah lodes) and Tarkwa (South heap leach operations). The benefits of these interventions are largely reflected in the September quarter results. At Tarkwa the North heap leach operation has also been earmarked to be stopped by the end of 2013, given that the Heap leach operation is loss-making at current gold price levels;
Restructuring and right-sizing of the Corporate office, as well as restructuring of all regional and operational structures to be fit-for-purpose with operational responsibility and accountability devolved to capable and appropriately resourced regions, which resulted in a 5 per cent reduction in head count across the portfolio;
Rationalisation and prioritisation of all capital expenditure and, where appropriate, the deferral of non-essential capital expenditure without compromising the future integrity of ore bodies and operations. Capital expenditure for 2013 has been reduced by approximately US$180 million from US$970 million to US$790 million;
Cancellation of brownfields growth projects that did not provide an adequate return. These include the Tarkwa Expansion Phase 6 project (TEP 6) and both of the Cerro Corona Oxides and Sulphides projects;
General cost savings and improved efficiencies brought about by site specific Business process re-engineering interventions and through the interrogation and, where appropriate, revision of operating budgets, procurement and supply contracts, and general expenditure at mine, regional and corporate level;
Damang and Darlot are implementing a range of operational improvements to reduce their cash burn, while the longer term future of both of these mines is being assessed;
South Deep’s cost base is being right-sized to match its slower than anticipated production build-up, without impeding the momentum of the build-up, that is mechanised mining (trackless and engineering) at South Deep has not been affected; and
The break-up of the Growth and International projects division (GIP) and the significant reduction of all associated expenditure, which is discussed below.
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Following the announcement on 22 August 2013 of the review of the Group’s GIP division, which included all international growth as well as greenfields exploration projects, it was decided during the September 2013 quarter to break-up the GIP Division and significantly downscale all associated growth activities, and to relocate the remaining activities to the existing relevant regional structures.

Greenfields exploration is being reduced from 16 projects around the world to a smaller nucleus of the most promising projects. All other greenfields exploration projects will either be relinquished or disposed of;
In the Australasia region, the key focus will be on brownfields exploration in the Yilgarn South region where Gold Fields has an extensive and highly prospective tenement position associated with its newly acquired and existing assets;
The Arctic Platinum project in Finland, the Woodjam project in British Columbia, the Talas project in Kyrgyzstan and the Yanfolila project in Mali have all been earmarked for disposal. Pending the sale of these projects, the burn-rate on these projects has been reduced. Where disposal proves impractical in the current market environment, some of the projects may be retained for optionality, but with a significantly reduced holding cost. No final decisions have been made on the sale of any of these projects;
Activities at the Far Southeast project in the Philippines have been limited to those associated with securing the FTAA and expenditure has been significantly reduced; and
At the Chucapaca project in Peru, expenditure has been limited to the completion of a scoping study focussed on exploring the viability of a smaller, higher grade underground option for this project. This work will continue into 2014.

As a consequence of these interventions the combined expenditure on all GIP related activities is expected to reduce from approximately US$220 million in 2012 to an estimated US$165 million in 2013 including once off costs of US$10 million relating to restructuring and retrenchment costs. Further cost reductions should be realised in 2014.

Break-up of the GIP division is well underway and is expected to be completed by year-end. While some of the anticipated savings are reflected in the results for the September 2013 quarter, the bulk of the savings will be realised over the remainder of 2013 and into the first half of 2014.

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Of the Group’s eight mines (including the recently acquired Yilgarn South assets) five are performing well and consistent with production and cost expectations (Tarkwa, St Ives, Agnew/Lawlers, Granny Smith and Cerro Corona), while three are in need of and receiving focussed attention (South Deep, Damang and Darlot) with a view to improving operational performances and reducing cost.

At Tarkwa in Ghana the South heap leach operation has now been decommissioned. The focus for the remainder of 2013 is on the closure of the North heap leach operation which has a cost structure higher than the prevailing gold price, and to transition the mine from a combined heap leach and CIL operation, to a CIL operation only. This will see the mining rate reduce in 2014 from approximately 130 million tonnes per annum to approximately 90 million tonnes per annum. Following the closure of the North heap leach operation Tarkwa’s production is expected to decline to between 525,000 ounces and 550,000 ounces in 2014, and to approximately 500,000 ounces per annum thereafter.

At Damang, also in Ghana, the focus remains on improving operational performance through improved quality mining and more consistent plant availability. The work to determine if it is economically viable to extract all or part of the four million ounce reserve continues, with a decision on the future of the mine expected in the first half of 2014. If a viable sustainable operational plan cannot be developed for this mine, care and maintenance will be considered.

At South Deep in South Africa trends remain positive and supportive of the mine’s continued production build-up. In the September 2013 quarter production increased by a further 5 per cent to 81,900 ounces (2,547 kilograms) and AIC decreased by 16 per cent to US$1,599 per ounce (R513,149 per kilogram), despite three days of wage related industrial action during the quarter. The critical destress mining increased by a further 6 per cent to 14,986 meters in the September quarter and is now at a run rate of double of what it was 2 years ago. Particularly noteworthy is that the excessive accumulations of blasted stock underground, due to logistical bottlenecks, have at the time of writing been cleared. A new “clean mine policy” has been implemented whereby smaller but more frequent blasts now take place in open stopes and mining areas are cleared of blasted stock before the next blast can take place. This has had a positive impact on the underground yield which improved from 4.8 grams per tonne in the June quarter to 5.0 grams per tonne in the September quarter. The process of right-sizing the cost-base of the mine in line with its production profile is underway, with a particular focus on reducing senior management structures, replacing contractors with own employees where practical and optimising all support service costs. This process is expected to be completed by the end of 2013. The process of interrogating and recalibrating the production build-up plan of South Deep is progressing as scheduled and the new build-up plan is targeted for disclosure with the announcement of the December 2013 results in February 2014.

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The acquisition of the Yilgarn South assets from Barrick, which is in line with our strategy to improve the Group’s cash generating ability, was concluded on 1 October, after the close of the September quarter, and the integration of the Granny Smith, Lawlers and Darlot mines into the Gold Fields portfolio has commenced. A thorough operational review has been concluded on each of the mines and the most appropriate strategy determined to realise the benefits of the acquisition through the application of Gold Fields’ proven low cost model in Australia, which has been successful in repositioning Gold Fields competitively on the cost curve in Australia. The transition to Gold Fields’ management was seamless at all three mines and our attention will now turn to optimising the value of these operations.

In order to maximise the operating synergies between Lawlers and the adjacent Agnew, the two mines were immediately integrated and the Lawlers processing plant is expected to be closed by the end of November. All newly mined ore from Lawlers is now being treated at the Agnew plant. The consolidation of other services, infrastructure and human resources are progressing well. At the Darlot mine the focus is on improving the operational performance and gaining a greater understanding of the reserve potential of the property.

For the December 2013 quarter, Gold Fields will report on all three of the mines, with Agnew/Lawlers being reported as a single entity. It is expected that the three mines will collectively add between 90,000 and 100,000 ounces to Gold Fields’ production in the December quarter at an NCE of approximately US$1,165 per ounce (A$1,215 per ounce).

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Gold Fields’ approach to environmental management is in accordance with international standards and practices. ISO 14001 accreditation is a Group standard and we were the first mining signatory to the International Cyanide Management Code that obtained certification for all of its eligible operations. Our most material environmental performance indicators, i.e. carbon emissions, energy usage, water withdrawal, re-use/recycling and environmental incidents, are reported annually and externally assured. The alignment of our policies, guidelines and practices to the International Council of Mining and Metals’ (ICMM) 10 Sustainability Principles, which include environmental management, is also assured annually. Gold Fields reports environmental incidents using a grading scale of 1 to 5. Levels 1 and 2 involve minor incidents or non-conformances with negligible or limited impact. A level 3 incident is a limited non-conformance or noncompliance with limited environmental impact, but is often a repeat of the same incident. Level 4 and 5 incidents include major non-conformances or non-compliances that could result in long-term environmental impact with company or operation threatening implications and potential major damage to the company’s reputation.

No level 4 or 5 environmental incidents have been recorded at any of Gold Fields’ operations in the past five years. Six level 3 environmental incidents were recorded during 2012 compared with two during the first half of 2013. No level 3 environmental incidents were recorded during the September 2013 quarter.

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As announced on September 10, 2013, the Company has been informed that it is the subject of a regulatory investigation in the United States by the US Securities and Exchange Commission relating to the Black Economic Empowerment transaction associated with the granting of the mining license for its South Deep operation. Given the early stage of this investigation, it is not possible to estimate reliably what effect, the outcome this investigation, any regulatory findings and any related developments may have on the Company.

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Stock data
Number of shares in issue   Range – Quarter US$3.62 – US$4.84
– at end September 2014 769,894,523   Average Volume – Quarter 5,025,206 shares/day
– average for the quarter 769,377,569   JSE Limited – (GFI)  
Free Float 100 per cent  
ADR Ratio 1:1   Range – Quarter ZAR38.40 – ZAR51.44
Bloomberg/Reuters GFISJ/GFLJ.J   Average Volume – Quarter 2,300,147 shares/day