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Currently viewing: For the year ended 31 December 2018 compared with year ended 31 December 2017 / Next: South Africa region |
For the year ended 31 December 2018 compared with year ended 31 December 2017Revenue Attributable equivalent gold production decreased by 6 per cent from 2.160 million ounces in 2017 to 2.036 million ounces in 2018, almost exclusively due to the decline in production at South Deep. Gold production at South Deep in South Africa, decreased by 44 per cent from 8,748 kilograms (281,300 ounces) to 4,885 kilograms (157,100 ounces). Attributable gold production at the West African operations increased by 6 per cent from 639,000 ounces in 2017 to 679,700 ounces in 2018 due to higher production at Damang as well as the inclusion of 44,500 ounces from Asanko for the five months ending December 2018. This was partially offset by lower production at Tarkwa. Attributable equivalent gold production at Cerro Corona in Peru increased by 2 per cent from 305,200 ounces in 2017 to 312,500 ounces in 2018. Gold production at the Australian operations decreased by 5 per cent from 934,600 ounces in 2017 to 886,400 ounces in 2018 due to marginally lower production at Agnew and Granny Smith, partially offset by higher production at St Ives but mainly due to the exclusion of Darlot in 2018. The 934,600 ounces in 2017, included 39,200 ounces for nine months only at the discontinued operation, Darlot. At the South Africa region, production at South Deep decreased by 44 per cent from 8,748 kilograms (281,300 ounces) in 2017 to 4,885 kilograms (157,100 ounces) in 2018 due to decreased volumes and grades. This was mainly due to the industrial action, the restructuring process as well as the fatal accident, further exacerbated by poor ground conditions in the high grade areas of the mine. At the West Africa region, managed gold production at Tarkwa decreased by 7 per cent from 566,400 ounces in 2017 to 524,900 ounces in 2018 mainly due to lower volumes mined in line with the 2018 planned strategy to reduce mining and optimise margins and cash flow. At Damang, managed gold production increased by 26 per cent from 143,600 ounces in 2017 to 180,800 ounces in 2018 mainly due to higher head grade and yield. Production at Asanko amounted to 44,500 ounces for the 5 months ended December 2018. At the South America region, total managed gold equivalent production at Cerro Corona increased by 2 per cent from 306,700 ounces in 2017 to 314,100 ounces in 2018 mainly due to the higher copper price relative to the gold price (price factor) and higher copper production as a result of higher copper head grade. At the Australia region, St Ives' gold production increased by 1 per cent from 363,900 ounces in 2017 to 366,900 ounces in 2018. At Agnew, gold production decreased by 1 per cent from 241,200 ounces in 2017 to 239,100 ounces in 2018 mainly due to decreased ore processed. At Granny Smith, gold production decreased by 3 per cent from 290,300 ounces in 2017 to 280,400 ounces in 2018 due to lower grades mined. In 2017, gold production at Darlot amounted to 39,200 ounces for the nine months to September 2017. The average US dollar gold price achieved by the Group decreased marginally from US$1,255 per equivalent ounce in 2017 to US$1,251 per equivalent ounce in 2018. The average rand gold price decreased by 1 per cent from R538,344 per kilogram to R531,253 per kilogram. The average Australian dollar gold price increased by 3 per cent from A$1,640 per ounce to A$1,694 per ounce. The average US dollar gold price for the Ghanaian operations (including Asanko) increased by 1 per cent from US$1,255 per ounce in 2017 to US$1,265 per ounce in 2018. The average equivalent US dollar gold price, net of treatment and refining charges, for Cerro Corona decreased by 6 per cent from US$1,252 per equivalent ounce in 2017 to US$1,174 per equivalent ounce in 2018. The average US dollar/Rand exchange rate strengthened by 1 per cent from R13.33 in 2017 to R13.20 in 2018. The average Australian/US dollar exchange rate weakened by 3 per cent from A$1.00 = US$0.77 in 2017 to A$1.00 = US$0.75 in 2018. Revenue decreased by 7 per cent from US$2,762 million in 2017 to US$2,578 million in 2018 due to the lower ounces sold. Cost of sales before amortisation and depreciation Cost of sales before amortisation and depreciation increased by 1 per cent from US$1,357 million in 2017 to US$1,375 million in 2018. At the South Africa region, at South Deep, cost of sales before amortisation and depreciation decreased by 12 per cent from R4,062 million (US$305 million) in 2017 to R3,586 million (US$272 million) in 2018 mainly due to lower production as a result of industrial action, lower expenditure on consumables, contractors, labour and utility costs, partially offset by a R127 million (US$10 million) gold inventory charge to cost in 2018 compared with a credit to cost of R21 million (US$2 million) in 2017. At the West Africa region, cost of sales before amortisation and depreciation increased by 10 per cent from US$428 million in 2017 to US$471 million in 2018. At Tarkwa, cost of sales before amortisation and depreciation, increased by 1 per cent from US$306 million to US$309 million due to a gold-in-process charge to cost, partially offset by lower mining costs in line with lower operational tonnes mined. The US$10 million gold-in-process charge to costs in 2018 compared with a credit to costs of US$42 million in 2017. In 2017, higher volumes were mined and stockpiled. At Damang, cost of sales before amortisation and depreciation, increased by 2 per cent from US$122 million in 2017 to US$124 million in 2018 mainly due to higher operating tonnes mined, partially offset by a gold-in-process credit to costs of US$19 million in 2018 compared with a charge to costs of US$1 million in 2017. Cost of sales before amortisation and depreciation at Asanko amounted to US$37 million in 2018. At the South America region, at Cerro Corona, cost of sales before amortisation and depreciation increased marginally from US$154 million in 2017 to US$155 million in 2018 mainly due to higher tonnes mined in 2018. At the Australia region, cost of sales before amortisation and depreciation increased by 13 per cent from A$613 million (US$469 million) in 2017 to A$690 million (US$516 million) in 2018. At St Ives, cost of sales before amortisation and depreciation, increased by 20 per cent from A$207 million (US$159 million) in 2017 to A$249 million (US$186 million) in 2018 mainly due to increased underground mining cost as a result of increased ore tonnes mined, less cheaper open pit tonnes mined, increased processing maintenance cost and a lower gold inventory credit to costs. At Agnew, cost of sales before amortisation and depreciation, increased by 10 per cent from A$197 million (US$150 million) in 2017 to A$216 million (US$162 million) in 2018 mainly due to increased mining cost and a gold-in-process charge to cost of A$2 million (US$2 million) in 2018 compared with a credit to costs of A$6 million (US$5 million) in 2017. At Granny Smith, cost of sales before amortisation and depreciation, increased by 7 per cent from A$210 million (US$160 million) in 2017 to A$225 million (US$168 million) in 2018 mainly due to increased mining cost as a result of mining deeper zones. Amortisation and depreciation Amortisation and depreciation for the Group decreased by 11 per cent from US$748 million in 2017 to US$668 million in 2018. This decrease was mainly due to the increase in reserves at Cerro Corona in line with the life extension and at South Deep due to lower production. Other Net interest expense for the Group increased by 6 per cent from US$63 million in 2017 to US$67 million in 2018. Interest expense of US$92 million was partially offset by interest income of US$8 million and interest capitalised of US$17 million. In 2017 interest expense of US$92 million was partially offset by interest income of US$6 million and interest capitalised of US$23 million. The share of equity accounted losses increased from US$1 million in 2017 to US$13 million in 2018 mainly due to the US$12 million write-off of deferred costs and other non-recoverable amounts at Far Southeast project (FSE) as well as a loss of US$1 million related to the Group's share of equity accounted loss on Asanko. The gain on foreign exchange of US$6 million in 2018 compared with a loss of US$4 million in 2017. These gains and losses on foreign exchange related to the conversion of offshore cash holdings into their functional currencies. The gain on financial instruments decreased by 38 per cent from US$34 million 2017 to US$21 million 2018. In 2018, the US$21 million comprised US$17 million on hedges and US$4 million on the mark to market on warrants. The US$17 million included US$54 million realised gains, partially offset by US$37 million unrealised losses. The gold hedge gains are analysed as follows: at the Australian operations (a loss of US$5 million/A$5 million), the Ghanaian operations (a gain of US$22 million) and South Deep (a loss of US$3 million/R43 million). It also included realised and unrealised gains and losses on the oil hedges taken out at the Ghanaian and Australian operations (a gain of US$2 million and US$1 million/A$2 million, respectively), as well as the copper hedge taken out at Cerro Corona (gain of US$9 million). In addition, a currency hedge taken out at the Australian operations resulted in a loss of US$9 million (A$12 million). Share-based payments for the Group increased by 41 per cent from US$27 million in 2017 to US$38 million in 2018 and related to the current valuation of the share scheme and changes in its composition. Long-term employee benefits decreased by 80 per cent from US$5 million to US$1 million due to the current valuation of the plan. Other costs for the Group increased by 25 per cent from US$44 million to US$55 million. Exploration and project costs Exploration and project costs decreased by 5 per cent from US$110 million in 2017 to US$104 million in 2018 mainly due a decrease in the write-off of brownfields exploration costs at the Australian operations from A$64 million (US$48 million) in 2017 to A$51 million (US$38 million) in 2018, partially offset by an increase in expenditure at Salares Norte from US$53 million in 2017 to US$61 million in 2018. The write-off of brownfields exploration is a non-cash item. The balance of US$5 million mainly related to various exploration office costs. Non-recurring items Non-recurring expenses of US$633 million in 2018 compared with US$224 million in 2017. The non-recurring expenses for 2018 included:
There were no further impairments at 31 December 2018 using the following assumptions:
The non-recurring expenses in 2017 included mainly:
The above assumptions do not affect the steady state production target of circa 500,000 ounces by 2022.
This was partially offset by:
The reversal of the impairment is due to a higher net present value as a result of the completion of a pre-feasibility study in 2017 extending the life of mine from 2023 to 2030 by optimising the tailings density and increasing tailings capacity by using in-pit tailings after mining activities end.
Royalties Government royalties for the Group increased marginally from US$62 million in 2017 to US$63 million in 2018. Taxation The taxation credit for the Group of US$66 million in 2018 compared with a charge of US$173 million in 2017. Normal taxation decreased from US$205 million to US$146 million. The deferred tax credit of US$212 million in 2018 compared with US$32 million in 2017. The significant deferred tax credit arose due to the taxation credit of R1.652 billion (US$123 million) on the impairment of South Deep. In addition, as a result of the settlement of the South Deep tax dispute, Gold Fields has recognised an additional R2.708 billion (US$205 million) of capital allowances with a tax effect of R812 million (US$62 million). Discontinued operation – Darlot The net loss in 2017 from the discontinued operation, Darlot, net of tax of US$13 million was a result of revenue of A$64 million (US$49 million), cost of sales before amortisation and depreciation of A$62 million (US$47 million) with the balance relating to other costs. The revenue of A$64 million (US$49 million) related to 39,200 ounces sold at a gold price of A$1,637 per ounce (US$1,252 per ounce). Loss/profit Net loss attributable to owners of the parent of US$348 million or US$0.42 per share in 2018 compared with a loss US$19 million or US$0.02 per share in 2017. Headline earnings attributable to owners of the parent of US$61 million or US$0.07 per share in 2018 compared with headline earnings of US$210 million or US$0.26 per share in 2017. Normalised profit of US$27 million or US$0.03 per share in 2018 compared with US$154 million or US$0.19 per share in 2017. Normalised profit Normalised profit reconciliation for the Group is calculated as follows:
Normalised profit is considered an important measure by Gold Fields of the profit realised by the Group in the ordinary course of operations. In addition, it forms the basis of the dividend pay-out policy. Non-IFRS measures such as normalised results are considered as pro forma financial information as per the JSE Listing Requirements. The pro forma financial information is the responsibility of the Group's Board of Directors and is presented for illustration purposes only and because of its nature, normalised profit should not be considered as a representation of earnings.
Cash flow Cash inflow from operating activities of US$613 million in 2018 compared with US$832 million in 2017, a 26 per cent decrease due to lower gold sold and higher restructuring costs. Dividends paid/advanced of US$55 million in 2018 compared with US$69 million in 2017. Dividends paid to owners of the parent decreased from US$63 million in 2017 to US$46 million in 2018. Dividends paid to non-controlling interest holders of US$10 million in 2018 compared with US$6 million in 2017. Cash outflow from investing activities decreased from US$909 million in 2017 to US$896 million in 2018 due to a decrease in sustaining capital expenditure mainly at South Deep, Tarkwa and St Ives, partially offset by an increase in growth capital expenditure at Gruyere, Damang and South Deep. Capital expenditure decreased from US$834 million in 2017 to US$814 million in 2018 due to lower sustaining capital expenditure as planned. Growth expenditure of US$125 million was incurred on the Damang reinvestment project and A$180 million (US$134 million) was incurred on Gruyere. In accordance with the Joint Venture agreement entered into at the time of acquisition, Gold Fields will fund up to 10 per cent of the cost overrun, excluding scope changes and force majeure costs. The Gruyere overruns of 10 per cent will be funded in 2019. This compared with growth expenditure of US$115 million on the Damang reinvestment project and A$106 million (US$81 million) on Gruyere. Proceeds on disposal of assets of US$79 million in 2018 compared with US$23 million in 2017 and related to disposal of assets as part of the conversion to contractor mining at Tarkwa in 2018 and Damang in 2017. Purchase of investments of US$19 million in 2018 compared with US$80 million in 2017. In 2018, it related mainly to the purchase of shares in Asanko. Purchase of Asanko of US$165 million related to the Joint Venture transaction with Asanko Gold (Asanko) which was completed on 31 July 2018. Gold Fields acquired a 50 per cent stake in Asanko's 90 per cent interest in the Asanko Gold mine in Ghana. Proceeds on disposal of assets held for sale of US$40 million in 2018 related to the sale of APP. Cash outflow from operating activities less net capital expenditure, environmental payments and finance lease payments of US$132 million in 2018 compared with an outflow of US$2 million in 2017. The US$132 million outflow in 2018 comprised: US$191 million net cash generated by the seven mining operations (after royalties, taxes, capital expenditure and environmental payments), less US$77 million of net interest paid, US$77 million for exploration mainly at Salares Norte (this excludes any mine based brownfields exploration which is included in the US$191 million above), US$163 million (AS$218 million) at Gruyere [capital expenditure of US$134 million (A$180 million) and an investment into working capital of US$29 million (A$38 million), mainly due to timing of cash calls from the EPC contractor], as well as US$6 million on non-mine based costs. Included in the US$191 million above is US$125 million capital expenditure on the Damang reinvestment project and US$18 million on South Deep growth capital expenditure. If these two amounts are excluded, then the mining operations generated US$334 million in net cash. Adding back the negative US$141 million for South Deep, the core international operations generated US$475 million. The US$2 million outflow in 2017 comprised: US$309 million net cash generated by the seven mining operations (after royalties, taxes, capital expenditure and environmental payments), less US$72 million of net interest paid, US$58 million for exploration mainly at Salares Norte (this excludes any mine based brownfields exploration which is included in the US$309 million above), US$141 million (A$184 million) at Gruyere [capital expenditure of US$81 million (A$106 million) and an investment into working capital of US$60 million (A$78 million), mainly due to cash calls on the balance of the deferred payment balance and stamp duty], as well as US$40 million on non-mine based costs. Included in the US$309 million above is US$115 million capital expenditure on the Damang reinvestment project and US$17 million on South Deep growth capital expenditure. If these two amounts are excluded, then the mining operations generated US$441 million. In the South Africa region at South Deep, capital expenditure decreased from R1,099 million (US$82 million) in 2017 to R770 million (US$58 million) in 2018 mainly due to lower expenditure on fleet and surface infrastructure. At the West Africa region, (excluding Asanko), capital expenditure decreased from US$313 million to US$295 million. At Tarkwa, capital expenditure decreased from US$181 million to US$156 million due to lower capital waste stripping and lower fleet expenditure as a consequence of the revised optimised life of mine plan and the conversion from owner mining to contractor mining. Capital expenditure at Damang increased from US$132 million to US$139 million mainly due to higher expenditure on the Damang reinvestment project (US$125 million). Capital expenditure at Asanko amounted to US$13 million for the 5 months ended December 2018. The Asanko capital expenditure is not included in the Group capital expenditure. In the South America region at Cerro Corona, capital expenditure decreased from US$34 million to US$33 million mainly due to lower expenditure on the construction of the tailings dam and waste storage facilities. At the Australia region, capital expenditure decreased from A$414 million (US$317 million) in 2017 to A$373 million (US$279 million) in 2018. At St Ives, capital expenditure decreased from A$204 million (US$156 million) in 2017 to A$170 million (US$127 million) in 2018 due to lower expenditure at the open pits following completion of activities at Invincible open pit stage 5. At Agnew, capital expenditure increased from A$96 million (US$74 million) in 2017 to A$98 million (US$73 million) in 2018. At Granny Smith, capital expenditure decreased from A$114 million (US$87 million) in 2017 to A$105 million (US$79 million) in 2018 due to completion of the VR8 ventilation shaft in 2017. Capital expenditure at the discontinued operation, Darlot, amounted to A$9 million (US$7 million) in 2017. Net cash inflow from financing activities of US$257 million in 2018 compared with US$84 million in 2017. The inflow in 2018 related to a drawdown of US$692 million, partially offset by the repayment of US$432 million on offshore and local loans and US$3 million from finance lease payments. The inflow in 2017 related to a drawdown of US$780 million, partially offset by the repayment of US$696 million on offshore and local loans. The net cash outflow for the Group of US$72 million in 2018 compared with US$62 million in 2017. The cash balance of US$400 million in 2018 compared with US$479 million in 2017. All-in sustaining and total all-in cost The Group all-in sustaining costs increased by 3 per cent from US$955 per ounce in 2017 to US$981 per ounce in 2018 mainly due to lower gold sold, partially offset by lower cost of sales before amortisation and depreciation and lower sustaining capital expenditure. Total all-in cost increased by 8 per cent from 11 US$1,088 per ounce in 2017 to US$1,173 per ounce in 2018 for the same reasons as for all-in sustaining costs and due to higher non-sustaining capital expenditure and higher exploration, feasibility and evaluation costs. In the South Africa region, at South Deep, all-in sustaining costs increased by 41 per cent from R574,406 per kilogram (US$1,340 per ounce) to R807,688 per kilogram (US$1,903 per ounce) mainly due to lower gold sold, partially offset by lower cost of sales before amortisation and depreciation and lower sustaining capital expenditure. The total all-in cost increased by 42 per cent from R600,109 per kilogram (US$1,400 per ounce) to R854,049 per kilogram (US$2,012 per ounce) due to the same reasons as for all-in sustaining costs as well as higher non-sustaining capital expenditure. At the West Africa region, all-in sustaining costs decreased by 3 per cent from US$958 per ounce in 2017 to US$926 per ounce in 2018 mainly due to higher gold sold and lower sustaining capital expenditure, partially offset by higher cost of sales before amortisation and depreciation. Results for Asanko were included for 5 months in 2018. Total all-in cost decreased by 2 per cent from US$1,119 per ounce in 2017 to US$1,098 per ounce in 2018 due to the same reasons as for all-in sustaining costs and higher non-sustaining capital expenditure of US$125 million on the Damang reinvestment project and US$5 million at Asanko. At the South America region, all-in sustaining costs and total all-in cost increased by 39 per cent from US$203 per ounce to US$282 per ounce mainly due to lower gold sold, lower by-product credits, and higher cost of sales before amortisation and depreciation, partially offset by lower capital expenditure. All-in sustaining costs and total all-in cost per equivalent ounce increased by 4 per cent from US$673 per equivalent ounce to US$699 per equivalent ounce mainly due to the same reasons as above as well as lower equivalent ounces sold. At the Australia region, all-in sustaining costs and total all-in cost increased by 4 per cent from A$1,210 per ounce (US$926 per ounce) in 2017 to A$1,262 per ounce (US$943 per ounce) in 2018 mainly due to higher cost of sales before amortisation and depreciation and lower gold sold, partially offset by lower capital expenditure. Statement of financial position Net debt (borrowings plus the current portion of borrowings less cash and cash equivalents) increased from US$1,303 million for the year ended December 2017 to US$1,612 million for the year ended December 2018. Net debt/adjusted EBITDA The net debt/adjusted EBITDA ratio of 1.45 at 31 December 2018 compared with 1.03 at the end of the financial year ended 31 December 2017. Adjusted EBITDA Adjusted EBITDA for calculating net debt/EBITDA is based on the previous 12 months earnings, which is determined as follows in US$ million: Reconciliation between revenue less cost of sales before amortisation and depreciation and adjusted EBITDA for the year ended:
Non-IFRS measures such as adjusted EBITDA are considered as pro forma financial information as per the JSE Listing Requirements. The pro forma financial information is the responsibility of the Group's Board of Directors and is presented for illustration purposes only and because of its nature, adjusted EBITDA should not be considered a representation of earnings. Adjusted EBITDA is required to be determined in terms of the loan and revolving credit facilities agreements to evaluate compliance with covenants.
Free Cash flow margin The free cash flow (FCF) margin is revenue less cash outflow divided by revenue expressed as a percentage. The FCF for the Group for the year ended 2018 is calculated as follows:
The FCF margin of 16 per cent in 2018 at a gold price of US$1,252 per ounce compared with 16 per cent in 2017 at a gold price of US$1,259 per ounce. The FCF margin for 2018 meets the Group's target of a 15 per cent FCF margin at a gold price of US$1,300 per ounce. |
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