HEDGING/DERIVATIVES

The Group’s policy is to remain unhedged to the gold price. However, hedges are sometimes undertaken as follows:

•	to protect cash flows at times of significant expenditure;
•	for specific debt servicing requirements; and
•	to safeguard the viability of higher cost operations.

Gold Fields may from time to time establish currency financial instruments to protect underlying cash flows.

Derivative instruments*

Ghana – Oil hedge

In May 2017 and June 2017 fixed price ICE Gasoil cash settled swap transactions were entered into for a total of 125.8 million litres of diesel for the period June 2017 to December 2019 based on 50 per cent of usage over the specified period. The average swap price is US$457 per metric tonne (equivalent to US$61.4 per barrel). At the time of the transactions, the average Brent swap equivalent over the tenor was US$49.8 per barrel.

In June 2019 fixed price ICE Gasoil cash settled swap transactions were entered into for a total of 123.2 million litres of diesel for the period January 2020 to December 2022 based on 50 per cent of usage over the specified period. The average swap price is US$575 per metric tonne (equivalent to US$75.8 per barrel). At the time of the transactions, the average Brent swap equivalent over the tenor was US$59.2 per barrel.

At the reporting date, the mark to market value on the hedge was positive US$3 million with a realised gain of US$3 million for the six months ended 30 June 2019.

Ghana – Gold hedge

In June 2019, a total of 275,000 ounces of the expected production for 2020 for the Ghanaian region was hedged for the period January 2020 to December 2020 using cash settled zero-cost collars (175,000 ounces) and average rate forwards (100,000 ounces). The average strike prices are US$1,364 per ounce on the floor and US$1,449 per ounce on the cap. The average strike price on the forwards is US$1,382 per ounce.

At the reporting date, the mark to market value on the hedge was negative US$8 million.

Subsequent to 30 June 2019, 100,000 ounces of the expected production for the Ghanaian region was hedged for the period January 2020 to December 2020 using cash settled zero cost collars. The average strike prices are US$1,400 per ounce on the floor and US$1,557 per ounce on the cap.

Australia – Oil hedge

In May 2017 and June 2017 fixed price Singapore 10ppm Gasoil cash settled swap transactions were entered into, for a total of 77.5 million litres of diesel for the period June 2017 to December 2019 based on 50 per cent of usage over the specified period. The average swap price is US$61.2 per barrel. At the time of the transactions, the average Brent swap equivalent over the tenor was US$49.9 per barrel.

In June 2019 fixed price Singapore 10ppm Gasoil cash settled swap transactions were entered into for a total of 75.0 million litres of diesel for the period January 2020 to December 2022 based on 50 per cent of usage over the specified period. The average swap price is US$74.0 per barrel. At the time of the transactions, the average Brent swap equivalent over the tenor was US$57.4 per barrel.

At the reporting date, the mark to market value on the hedge was positive A$4 million (US$3 million) with a realised gain of A$2 million (US$2 million) for the six months ended 30 June 2019.

Australia – Gold hedge

In December 2018, a total of 456,000 ounces of the expected production for the Australian region was hedged for the period January 2019 to December 2019 using cash settled zero cost collars (173,000 ounces) and average rate forwards (283,000 ounces). The average strike prices are A$1,751 per ounce on the floor and A$1,800 per ounce on the cap. The average strike on the forwards is A$1,751 per ounce.

In January 2019, a total of 456,000 ounces of the expected production for the Australian region was hedged for the period January 2019 to December 2019 using cash settled zero cost collars. The average strike prices are A$1,800 per ounce on the floor and A$1,869 per ounce on the cap.

In June 2019, a total of 480,000 ounces of the expected production for 2020 for the Australian region was hedged for the period January 2020 to December 2020 using cash settled zero cost collars (270,000 ounces) and average rate forwards (210,000 ounces). The average strike prices are A$1,933 per ounce on the floor and A$2,014 on the cap. The average strike price on the forwards is A$1,957 per ounce.

At the reporting date, the mark to market value on the hedges was negative A$141 million (US$98 million) with a realised loss of A$14 million (US$10 million) for the six months ended 30 June 2019.

Australia – Foreign exchange hedge

In May 2018, AUD/USD average rate forwards were entered into for a total notional US$96 million for the period January 2019 to December 2019 at an average strike price of 0.7517.

In June 2018, further hedges were taken out for a total notional US$60 million for the same period as above (January 2019 to December 2019) at an average strike of 0.7330.

In September 2018, further hedges were taken out for a total notional US$100 million for the same period as above (January 2019 to December 2019) at an average strike of 0.7182.

In October 2018, further hedges were taken out for the period January 2019 to December 2019 for a notional US$60 million at an average strike of 0.7075.

In December 2018, further hedges were taken out for the period January 2019 to December 2019 for a notional US$50 million at an average strike of 0.715.

At the reporting date, the mark to market value on the hedge was negative A$13 million (US$9 million) with a realised loss of A$7 million (US$5 million) for the six months ended 30 June 2019.

South Africa – Gold hedge

Between October 2018 and January 2019 cash settled average rate forwards were entered into for a total of 112,613 ounces for the period June 2019 to December 2019 at an average strike rate of R617,000 per kilogram.

In June 2019, a total of 200,000 ounces of the expected production for 2020 for South Deep was hedged for the period January 2020 to December 2020 using cash settled zero cost collars (100,000 ounces) and average rate forwards (100,000 ounces). The average strike price is R660,000 per kilogram on the floor and R727,000 per kilogram on the cap. The average strike price is R681,400 per kilogram on the forwards.

At the reporting date, the mark to market value on the hedge was negative R161 million (US$11 million) with a R5 million (US$nil million) realised gain for the six months ended 30 June 2019.

*	Do not qualify for hedge accounting and are accounted for as derivative financial instruments in the income statement.
^#	Asian swop is an option where the payoff is determined by the average monthly gold price over the option period.
All these derivative financial instruments are measured at fair value using available market contract values for each trading date’s settlement volume (Level 2).