Gold Fields

Basis of preparation

The condensed consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports and the requirements of the Companies Act of South Africa. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.

The condensed consolidated financial statements do not include all the disclosures required for complete annual financial statements prepared in accordance with IFRS as issued by the International Accounting Standards Board. The condensed consolidated financial statements are prepared on a going concern basis. The Board is satisfied that the liquidity and solvency of the Company is sufficient to support the current operations for the next 12 months.

The condensed consolidated financial statements are presented in United States Dollars, which is Gold Fields Limited's presentation currency. The accounting policies applied in the preparation of these condensed consolidated financial statements are in terms of International Financial Reporting Standards and are consistent with those applied in the previous annual financial statements except for the adoption of IFRS 16 Leases (IFRS 16).

Pro forma financial information

The preliminary financial statements contain certain non-IFRS financial measures in respect of the Group's financial performance, the statement of financial position and cash flows presented in order to provide users with relevant information and measures used by the Group to assess performance. These measures constitute proforma financial information in terms of the JSE Listings Requirements and are the responsibility of the Group's Board of Directors. They are presented for illustrative purposes only and due to their nature, may not fairly present Gold Fields' financial position, changes in equity, results of operations or cash flows.

The key non-IFRS measures used and defined in the media release include:

Normalised profit which is defined as profit excluding gains and losses on foreign exchange, financial instruments and non-recurring items after taxation and non-controlling interest effect.
Net debt (pre- and post-IFRS 16) which is calculated as borrowings plus the current portion of borrowings and lease liabilities less cash and cash equivalents). IFRS 16 net debt adjustments mainly comprise the long and short term portion of lease liabilities relating to the Genser power purchase agreement, Granny Smith power plant and Gruyere power plant and gas pipeline.
Cash flow from operating activities less net capital expenditure, environmental payments, lease payments and redemption of Asanko preference shares.

Auditor's review

The condensed consolidated financial statements of Gold Fields Limited for the year ended 31 December 2019 have been reviewed by the company's auditor, PricewaterhouseCoopers Inc.

The auditor's report does not necessarily report on all of the information contained in this media release. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement they should refer to the media release for a copy of the auditors report.

The pro-forma financial information has been reported on by the Groups auditors, being PricewaterhouseCoopers Inc. Their unqualified reporting accountant's report thereon is available for inspection at the Company's registered address.

Changes in significant accounting policies

The Group applied IFRS 16 initially on 1 January 2019, using the modified retrospective approach. The Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessees incremental borrowing rate as of 1 January 2019. This resulted in an additional lease liability of US$210 million. The Group elected to recognise the right-of-use assets at an amount equal to the lease liability at 1 January 2019; and the Group applied the following practical expedients for IFRS 16:

Leases for which the underlying asset is of low value. Low value assets relate mainly to cellphones, computer equipment and photocopiers; and
Short-term leases.

For leases previously classified as finance leases the entity recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right of use asset and the lease liability at the date of initial application.

The key judgements applied by the Group in applying IFRS 16, included the following:

Assessing whether an arrangement contains a lease;
Determining the discount rate; and
Determining the non-lease components of an arrangement that will be separated.

The Group recognised right-of-use assets and lease liabilities for its operating leases for the following material contracts, which relate mainly to the Australian and Ghanaian operations:

Power Purchase Agreements (PPAs);
Rental of gas pipelines;
Ore haulage and site services;
Transportation contracts;
Mining equipment hire; and
Property rentals.

The adoption of IFRS 16 affected all segments in the Group.

United States Dollars  
US$m  
Operating lease commitments 657.4  
Reconciled as follows:    
Non-lease elements1 (356.8)  
Discounting (91.0)  
Lease liability 209.6  
1 The operating lease commitments consist mainly of power purchase agreements entered into at Tarkwa, Damang, Granny Smith and Gruyere. Included in these amounts are payments for non-lease elements of the arrangement.

Identification of material weakness – relating to year-end cut-off

During the Companys most recent fiscal year, management identified a material weakness in the internal control over financial reporting related to the recording of transactions between cost close (the date the general ledger was closed for reporting purposes) and calendar year end in the statement of cash flows. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of the Companys financial statements will not be prevented or detected on a timely basis. The Company has concluded that its internal control over financial reporting was not effective as of 31 December 2018 and, accordingly, its disclosure controls and procedures were not effective as of 31 December 2018.

The control deficiencies were caused by an inadequate evaluation of the risk that transactions, including cash payments and receipts, could occur between the cost close date and 31 December which could have a material impact, both individually and in aggregate, on financial statement captions and disclosures. Consequently, Management failed to design and implement appropriate controls to address this risk. Managements controls only focussed on transactions that occurred outside the normal course of business, and did not consider potentially material transactions that occurred in the normal course of business between the cost close and 31 December of the relevant years. The cost close dates were 21 December 2018 and 22 December 2017, respectively.

Remediation efforts

The deficiencies in Managements internal control over financial reporting, which gave rise to the material weakness described above, have been remediated as of 31 December 2019. Management designed, implemented and tested specific controls to identify and account for material transactions in the normal course of business between cost close and calendar year end.

2018 Assessment of internal control

The Companys report on internal control over financial reporting and consequently KPMG Inc.s attestation report on Managements assessment of the Companys internal control over financial reporting as of 31 December 2018 can no longer be relied upon. The Company plans to file its Form 20-F for the fiscal year ended 31 December 2019 at which time the Company will include its assessment on internal control over financial reporting as of 31 December 2019.

Correction of immaterial error – relating to year-end cut-off

These deficiencies in internal control over financial reporting resulted in adjustments to a number of financial statement captions within the statements of financial position and cash flows. In order to assess the impact of the adjustments, the Company applied SEC Staff Accounting Bulletin ("SAB") No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements. SAB No. 108 states that registrants must quantify the impact of correcting all misstatements on all periods presented, including both the carryover (iron curtain method) and reversing (rollover method) effects of prior-year misstatements on the current-year financial statements, and by evaluating the misstatements measured under each method in light of quantitative and qualitative factors.

Under SAB No 108, prior year misstatements which, if corrected in the current year would be material to the current year, must be corrected by adjusting prior year financial statements, even though such correction previously was and continues to be immaterial to the prior year financial statements. Correcting prior year financial statements for such immaterial errors does not require previously issued or filed financial statements to be amended.

In accordance with SAB No 99 Materiality, the Company assessed the materiality of the adjustments and concluded that they were not material to any of the previously issued or filed financial statements taken as a whole.

The conclusions above in terms of SAB No 99 and No 108 are consistent with the requirements of IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors, as well as principles of IFRS. As a result, the immaterial errors were corrected by revising each of the affected financial statement line items for prior periods (all unaffected financial statement line items, in the table below, have been grouped together as "other").

No adjustments were made to the consolidated income statement, statement of changes in equity and statement of comprehensive income. The following tables summarise the impact on the Companys consolidated financial statements.

i. Consolidated statement of financial position

  31 December 2018
US$m
As
previously
reported
Adjustments As
restated
 
Cash and cash equivalents 399.7 (180.0) 219.7  
Other current assets 521.4 (14.6) 506.8  
Other 5,183.2 5,183.2  
Total assets 6,104.3 (194.6) 5,909.7  
Borrowings 1,925.3 (111.0) 1,814.3  
Current portion of borrowings 86.3 6.2 92.5  
Other current liabilities 520.7 (89.8) 430.9  
Other 865.1 865.1  
Total liabilities 3,397.4 (194.6) 3,202.8  
Total equity 2,706.9 2,706.9  
Net debt 1,611.9 75.2 1,687.1  
Adjusted EBITDA 1,111.6 1,111.6  
Net debt to adjusted EBITDA 1.45   1.52  
  31 December 2017
US$m
As
previously
reported
Adjustments As
restated
 
Cash and cash equivalents 479.0 (85.2) 393.8  
Other current assets 595.4 (30.1) 565.3  
Other 5,545.7 5,545.7  
Total assets 6,620.1 (115.3) 6,504.8  
Borrowings 1,587.9 1,587.9  
Current portion of borrowings 193.6 0.9 194.5  
Other current liabilities 660.4 (116.2) 544.2  
Other 775.2 775.2  
Total liabilities 3,217.1 (115.3) 3,101.8  
Total equity 3,403.0 3,403.0  
Net debt 1,302.5 86.1 1,388.6  
Adjusted EBITDA 1,263.7 1,263.7  
Net debt to adjusted EBITDA 1.03   1.10  

ii. Consolidated statement of cash flows

  31 December 2018
US$m
As
previously
reported
Adjustments As
restated
 
Change in working capital (16.3) (15.6) (31.9)  
Royalties and taxation paid (282.7) 26.5 (256.2)  
Other 912.1 912.1  
Cash flows from operating activities 613.1 10.9 624.0  
Dividends paid (55.3) (55.3)  
Cash flows from investing activities (886.8) (886.8)  
Loans repaid (431.9) (104.0) (535.9)  
Loans raised 691.7 (1.7) 690.0  
Other (2.5) (2.5)  
Cash flows from financing activities 257.3 (105.7) 151.6  
Net cash utilised (71.7) (94.8) (166.5)  
Effect of exchange rate fluctuation on cash held (7.6) (7.6)  
Cash and cash equivalents at beginning of the year 479.0 (85.2) 393.8  
Cash and cash equivalents at end of the year 399.7 (180.0) 219.7  
  31 December 2017
US$m
As
previously
reported
Adjustments As
restated
 
Change in working capital (69.4) (20.5) (89.9)  
Royalties and taxation paid (305.5) (9.9) (315.4)  
Other 1,206.5 1,206.5  
Cash flows from operating activities 831.6 (30.4) 801.2  
Dividends paid (69.2) (69.2)  
Cash flows from investing activities (908.6) (908.6)  
Loans repaid (695.5) (7.0) (702.5)  
Loans raised 779.7 7.9 787.6  
Cash flows from financing activities 84.2 0.9 85.1  
Net cash utilised (62.0) (29.5) (91.5)  
Effect of exchange rate fluctuation on cash held 14.3 14.3  
Cash and cash equivalents at beginning of the year 526.7 (55.7) 471.0  
Cash and cash equivalents at end of the year 479.0 (85.2) 393.8  

iii. Consolidated income statement, consolidated statement of comprehensive income and consolidated statement of changes in equity

There is no impact on the consolidated income statement, consolidated statement of comprehensive income and consolidated statement of changes in equity for the years ended 31 December 2017 and 2018.

New bonds issued – US$1 billion raised

On 9 May 2019 Gold Fields successfully concluded the raising of two new bonds – a US$500m five-year bond with a coupon of 5.125% and a US$500m ten-year bond with a coupon of 6.125% – raising a total of US$1bn at an average coupon of 5.625%. The final combined book for the bond issues was in excess of US$3bn, an oversubscription by three times.

The proceeds of the raising were used to repay amounts outstanding under the US$1,290m credit facilities agreement and repurchase of a portion of the 2020 bond.

In conjunction with the issuance, and as part of the use of proceeds, Gold Fields announced a tender offer for up to US$250m of the outstanding 4.875% 2020 bonds at a price of 102%.

On 27 May 2019 Gold Fields announced the successful buyback of US$250m of the outstanding 2020 notes at 102% of par as compared with a premium of 101.73% of par at the close of business on 24 May 2019.

The remainder of the 2020 notes (US$600m), due in October 2020, is expected to be repaid from a combination of available cash and bank debt facilities.

US$1,200 million revolving credit facility

On 25 July 2019, Gold Fields Orogen Holding (BVI) Limited and Gold Fields Ghana Holdings (BVI) Limited entered into a US$1,200m revolving credit facilities agreement, with a syndicate of international banks and financial institutions. The new facilities which became effective on the same day comprise two tranches:

US$600m 3+1+1 (two 1-year extension options subject to bank consent) year revolving credit facility (RCF) – at a margin of 1.45% over Libor; and
US$600m 5+1+1 (two 1-year extension options subject to bank consent) year revolving credit facility (RCF) – at a margin of 1.70% over Libor.

Gold Fields was upgraded to Baa3 by Moody's on 26 June 2018 and the new transaction allowed the Company to align the documentation to Investment Grade terms and conditions. Gold Fields has also adopted IFRS 16 and improved its financial covenants to accommodate the treatment of operating leases as follows:

Net Debt to EBITDA covenant has moved from =2.5 times to =3.5 times; and
Consolidated EBITDA to Consolidated Net Finance Charges covenant has been reduced from =5 times to =4 times.

The purpose of the new facilities is:

to refinance the US$1,290m credit facilities agreement dated 6 June 2016;
to repay the Gold Fields bonds maturing in 2020; and
to fund general corporate and working capital requirements of the Gold Fields group.

The successful completion of the new bonds, as well as the buyback and refinancing of the syndicated bank debt, helps Gold Fields achieve one of its key financial objectives for 2019 of extending the maturity of its debt profile.

Sale of non-core investments to pay down debt

In line with its key strategic objective of paying down its debt, Gold Fields sold its shareholdings in three of its non-core investments, Maverix Metals, Gold Road and Red 5, for combined proceeds of US$179m. All positions were sold at a significant premium to the look-through acquisition costs.

Gold Fields completed the sale of its 19.9% shareholding in Toronto-listed gold and royalty streaming company Maverix. The sale of the shares – processed through a series of private market transactions – raised C$91.4m (US$67m).

Gold Fields retains 4.125 million Maverix warrants, equivalent to a 3.68% interest in the company on a partially diluted basis. Gold Fields sold the bulk of its royalty portfolio to Maverix in December 2016 in return for the 19.9% shareholding.

In April 2019, Gold Fields sold its 247 million shares in ASX-listed mining company Red 5 – equivalent to 19.9% of its total shareholding – at A$0.12 per share for a total consideration of A$29.6m (US$21m). Gold Fields had acquired the stake at A$0.05 per share in October 2017 when it sold its Darlot gold mine in Western Australia to Red 5.

In addition, Gold Fields sold its 87 million shares in ASX-listed mining company Gold Road for a total consideration of A$126.3m (US$85.1m).

Silicosis and tuberculosis class and individual actions

As previously reported, the Gold Working Group (comprising African Rainbow Minerals, Anglo American South Africa, AngloGold Ashanti, Gold Fields, Harmony and Sibanye-Stillwater) (the "GWG Parties") concluded a settlement agreement (the "Settlement Agreement") with the attorneys representing claimants in the silicosis and tuberculosis class action litigation on 3 May 2018. The Settlement Agreement provides meaningful compensation to eligible workers (or their dependants) suffering from silicosis and/or tuberculosis and who worked in the GWG Parties' mines between March 1965 and December 2019.

A full bench of the High Court, Gauteng Local Division, approved the Settlement Agreement on 26 July 2019 ("Approval Order"). The Settlement Agreement and Approval Order contained two suspensive conditions, which have subsequently been fulfilled and, in accordance with the provisions of the Settlement Agreement and the Approval Order, the Settlement Agreement has become effective on 10 December 2019.

The settlement trust, known as the Tshiamiso Trust, was registered on 28 November 2019. Tshiamiso is a Setswana word meaning "to make good" or "to correct". Now that the Settlement Agreement is effective, the Tshiamiso Trust will commence its work to oversee the processing of claims and payment of benefits to eligible workers, including the undertaking of benefit medical examinations.

The GWG Parties have paid the legal costs of the claimants' attorneys, together with other initial amounts, in accordance with the provisions of the Settlement Agreement and the Approval Order. On 31 January 2020, the GWG Parties commenced the payment of their quarterly administration and benefit contributions to the Tshiamiso Trust to enable the trustees to settle benefits of eligible workers.

Further details on the establishment of the Trust and how potential beneficiaries can establish whether they might be eligible for compensation under the Trust and, if they are potentially eligible, how to go about establishing a claim, will be made in due course.

Details of the silicosis settlement can be found on the website www.silicosissettlement.co.za and the Facebook page https://www.facebook.com/silicosissettlement/

Provision raised

Gold Fields has provided for the estimated cost of the above settlement based on actuarial assessments and the provisions of the Settlement Agreement. At 31 December 2019, the provision for Gold Fields' share of the settlement of the class action claims and related costs amounts to US$21m (R297m). The nominal value of this provision is US$29m (R408m).

The ultimate outcome of this matter however remains uncertain, with the number of eligible workers successfully submitting claims and receiving compensation being uncertain. The provision is consequently subject to adjustment in the future.

Segment reporting

The net profit/(loss) per the income statement reconciles to the net profit/(loss) in the segmental operating and financial results as follows:

2019
US$m  
Net profit 174.7  
– Operating segments 380.7  
– Corporate and projects (206.0)  
2018
US$m  
Net profit (344.8)  
– Operating segments 38.7  
– Corporate and projects (383.5)  

Additional notes include

Debt maturity ladder;
Reconciliation of headline earnings with net profit/(loss);
Fair value hierachy; and
Hedging/derivatives.

Subsequent event – Salares Norte

As reported at the end of 2019, the Environmental Impact Assessment for the project was approved on 18 December 2019, earlier than estimated in the project schedule. As a result, the updated feasibility study was presented to the Board in February 2020 and the final notice to proceed (FNTP) was provided by the Board.

The updated capital expenditure estimate is US$860m (in 2020 terms). The capital expenditure is scheduled over a 33-month period commencing in April 2020.

Nick Holland

Chief Executive Officer

12 February 2020

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