Gold Fields

Year ended 31 December 2019 compared with year ended 31 December 2018

Results for the Group

Safety

Gold Fields recorded one fatality in 2019, which we reported on in our H1 results. Serious injuries declined by 29% from 17 in 2018 to 12 in 2019. The total recordable injury frequency rate (TRIFR) for the Group, however, regressed by 19% to 2.19 during 2019.

Our Safety Leadership Group, chaired by Stuart Mathews, Executive Vice President Australia, has developed the following strategic objectives:

Develop a culture of safety leadership within the organisation and firmly embed safety management as a line management responsibility;
Provide appropriate mechanisms to engage employees on safety and equip them with the necessary skills to achieve safe outcomes consistently; and
Ensure the deployment of fit-for-purpose management systems that are aligned to a Critical Control Management approach and are certified to the ISO 45001 standard.

During 2019, a dedicated safety leadership training package was developed and rolled out to the Board of Directors and management. All remaining employees will be trained during 2020 and the training made standard for all new employees. We are also extending our Australian behaviour-based programme, Vital Behaviours, to entrench safe behaviours and choices across the entire business.

    Year  
Safety
 
2019 2019  
Fatalities   1 1  
Serious Injuries1   12 17  
TRIFR2   2.19 1.83  
1
A Serious Injury is an injury that incurs 14 or more days lost and results in: a fracture of any bone (excluding hairline fractures and fractures of fingers, toes or nose); or internal haemorrhage; or head trauma (including concussion, loss of consciousness) requiring hospitalisation; or loss of all or part of a limb (excluding bone dressing to facilitate medical treatment of injured fingers and toes); or permanent loss of function and/or permanent disability such as hearing loss or damage to lung function; or permanent disfigurement where the injury has resulted in the appearance of a person being deeply and persistently harmed medically and that is likely to lead to psychosocial problems. This number includes injuries reported under the SA Mine Health and Safety Act.
2
Total Recordable Injury Frequency rate (TRIFR). (TRIFR) = (Fatalities + Lost Time Injuries + Restricted Work Injuries + Medically Treated Injuries) x 1,000,000/number of hours worked.

Environmental

For the first time ever, Gold Fields recorded no Level 3 – 5 environmental incidents for 2019, while the number of Level 2 incidents, which have a limited environmental impact, declined by 46%.

Fresh water withdrawal declined by 2% from 2018 to 2019, mainly due to a decrease in water withdrawal at Tarkwa as a result of increased recycling/reuse. Group water recycled/reused improved accordingly.

Group energy use rose 7% in 2019 compared with 2018 as diesel consumption increased when Gruyere ramped up mining in H2 2019. Group total energy spend remained stable, benefiting from relatively lower realised diesel unit prices. This was despite higher diesel consumption driven by tonnes mined and higher electricity spend in line with higher tonnes processed and higher gold production. Net realised gains from the oil price hedges totalled US$8m in 2019 compared to US$14m in 2018.

CO2 scope 1 and 2 emissions were 6% higher in 2019 compared with 2018, driven by higher diesel consumption, with CO2 intensity marginally lower.

At the Granny Smith and Agnew mines in Australia, microgrid power systems, which include a combination of gas, solar, wind and battery storage, reached practical completion. The Agnew gas, solar and battery system was commissioned and construction of five wind turbines will be completed in 2020.

    Year  
Environmental
 
2019   2018  
Environmental Incidents − Level 3   0   2  
Water Recycled/Reused (% of total)   68   66  
Fresh Water Withdrawal (GL)1   14.15   14.50  
Energy Consumption (TJ)   12,444   12,178  
Energy Cost   299   302  
Energy Intensity (GJ/ounce)   5.47   5.46  
CO2 Emissions (Mt)2   1.45   1.37  
CO2 Emissions per tonne mined   8   7  
1
Relates to operations only.
2
CO2 emissions comprise Scope 1 and 2 emissions3.
3
Scope 1 emissions arise directly from sources managed by the Company.
Scope 2 are indirect emissions generated in the production of electricity used by the Company.

Social

Gold Fields continues to focus on maximising in-country and host community economic impact. The Group's value distribution to national economies decreased by 4% to US$2.58bn in 2019 compared with 2018. Gold Fields' procurement from in-country suppliers, excluding corporate procurement spend, was 96% of total procurement.

Gold Fields aims to sustain the value delivered to host communities through employment, procurement and social investments. Group host community procurement spend increased significantly year on year, both in absolute terms and as a percentage of total procurement. Group host community employment numbers increased slightly but fell marginally as a percentage of the total workforce.

Gold Fields' investment in socio-economic development (SED) projects in our host communities declined by 17% during 2019 following the completion of the three-year, US$27m, upgrade to the Tarkwa-Damang road in H1 2019. This is Gold Fields' largest-ever SED project.

The Board approved a Group Diversity & Inclusion strategy and a Group Sexual Harassment policy in 2019. The percentage of women in Gold Fields' workforce increased slightly to 20% in 2019. Just over half of our female employees work in core mining activities. Training spend decreased 5% in 2019 relative to 2018, in line with the lower employee numbers.

    Year  
Social
 
2019   2018  
Value distribution to national economies (US$bn)   2.58   2.71  
Procurement from in-country suppliers (US$bn)   1.80   1.54  
Host community procurement (US$m)   635   441  
Host community procurement (% of total)1   34   27  
Host community workforce   9,284   9,188  
Host community workforce (% of total)1   55   56  
Socio-Economic Development spending (US$m)   21   26  
Women in Workforce (%)   20   19  
Employee & contractor numbers   17,655   17,611  
Training spend (US$m)   13   14  
1
Includes Gruyere, excludes projects.

Revenue

Attributable equivalent gold production increased by 8% from 2.036Moz in 2018 to 2.195Moz in 2019 due to an increase in production at South Deep, a full year of production at Asanko and Gruyere coming into production.

Gold production at South Deep in South Africa, increased by 41% from 4,885kg (157,100oz) to 6,907kg (222,100oz).

Attributable gold production at the West African operations increased by 13% from 679,700oz in 2018 to 767,700oz in 2019 due to higher production at Damang as well as the inclusion of Asanko for the full year. Asanko's sales are excluded from the Group's revenue as the interest in the joint venture is equity accounted. This was partially offset by lower production at Tarkwa. Attributable equivalent gold production at Cerro Corona in Peru decreased by 7% from 312,500oz in 2018 to 291,300oz in 2019. Gold production at the Australian operations increased by 3% from 886,400oz in 2018 to 914,300oz in 2019 due to Gruyere going into production in 2019.

At the South Africa region, production at South Deep increased by 41% from 4,885kg (157,100oz) in 2018 to 6,907kg (222,100oz) in 2019. The 2018 production was impacted by the industrial action and restructuring process.

At the West Africa region, managed gold production at Tarkwa decreased by 1% from 524,900oz in 2018 to 519,100oz in 2019 mainly due to lower yield. At Damang, managed gold production increased by 15% from 180,800oz in 2018 to 208,400oz in 2019 mainly due to higher head grade and tonnes treated. At Asanko, Gold Fields' share of production increased from 44,500oz for the five months ended December 2018 to 113,000oz in 2019.

At the South America region, total managed gold equivalent production at Cerro Corona decreased by 7% from 314,100oz in 2018 to 292,700oz in 2019 mainly due to the lower copper/gold price ratio as well as lower copper production due to lower copper head grade, partially offset by higher gold production.

At the Australia region, St Ives' gold production increased by 1% from 366,900oz in 2018 to 370,600oz in 2019. At Agnew, gold production decreased by 8% from 239,100oz in 2018 to 219,400oz in 2019 mainly due to lower grade mined. At Granny Smith, gold production decreased by 2% from 280,400oz in 2018 to 274,800oz in 2019 due to lower tonnes mined and processed. In 2019, Gold Fields share of Gruyere production was 49,500oz.

The average US Dollar gold price achieved by the Group increased by 11% from US$1,252/eq oz in 2018 to US$1,388/eq oz in 2019. The average rand gold price increased by 24% from R531,253/kg to R659,111/kg. The average Australian Dollar gold price increased by 18% from A$1,694/oz to A$2,007/oz. The average US Dollar gold price for the Ghanaian operations (including Asanko) increased by 9% from US$1,265/oz in 2018 to US$1,384/oz in 2019. The average equivalent US Dollar gold price, net of treatment and refining charges, for Cerro Corona increased by 14% from US$1,174/eq oz in 2018 to US$1,344/eq oz in 2019. The average US Dollar/Rand exchange rate weakened by 10% from R13.20 in 2018 to R14.46 in 2019. The average Australian/US Dollar exchange rate weakened by 7% from A$1.00 = US$0.75 in 2018 to A$1.00 = US$0.70 in 2019.

Revenue increased by 15% from US$2,578m in 2018 to US$2,967m in 2019 due to the higher gold price and higher gold sold.

Cost of sales before amortisation and depreciation

Cost of sales before amortisation and depreciation increased by 4% from US$1,375m in 2018 to US$1,424m in 2019.

At the South Africa region, at South Deep, cost of sales before amortisation and depreciation decreased by 2% from R3,586m (US$272m) in 2018 to R3,503m (US$242m) in 2019 mainly due to a gold inventory credit to cost of R54m (US$4m) in 2019 compared with a charge to cost of R127m (US$10m) in 2018.

At the West Africa region (excluding Asanko), cost of sales before amortisation and depreciation increased by 6% from US$433m in 2018 to US$457m in 2019. At Tarkwa, cost of sales before amortisation and depreciation, increased by 2% from US$309m to US$315m due to higher mining costs in line with higher operational tonnes mined. The US$14m gold-in-process credit to cost in 2019 compared with a charge to cost of US$10m in 2018. At Damang, cost of sales before amortisation and depreciation, increased by 15% from US$124m in 2018 to US$142m in 2019 mainly due to higher operating tonnes mined, along with a gold-in-process credit to cost of US$9m in 2019 compared with US$19m in 2018.

Cost of sales before amortisation and depreciation at Asanko (not included in Group's cost of sales before amortisation and depreciation) amounted to US$90m in 2019.

At the South America region, at Cerro Corona, cost of sales before amortisation and depreciation increased by 5% from US$155m in 2018 to US$162m in 2019. The higher cost was due to higher process plant maintenance cost due to aging and ore hardness, higher workers participation due to higher profit and higher labour expenses resulting from the close out of the union labour agreement.

At the Australia region, cost of sales before amortisation and depreciation increased by 17% from A$690m (US$516m) in 2018 to A$808m (US$562m) in 2019. At St Ives, cost of sales before amortisation and depreciation, increased by 32% from A$249m (US$186m) in 2018 to A$329m (US$229m) in 2019. The higher cost of sales before amortisation and depreciation was due to increased mining cost as a result of increased ore tonnes mined at Invincible underground mine and Neptune open pit (A$57m/US$40m), increased processing maintenance cost (A$3m/US$2m) and a lower gold inventory credit to cost of A$4m (US$3m) in 2019 compared with A$20m (US$15m) in 2018.

At Agnew, cost of sales before amortisation and depreciation, increased by 8% from A$216m (US$162m) in 2018 to A$233m (US$162m) in 2019 mainly due to increased mining cost at Waroonga (A$8m/US$6m) as a result of increased tonnes mined, partially offset by a gold-in-process credit to cost of A$4m (US$3m) in 2019 compared with charge to cost of A$2m (US$2m) in 2018. At Granny Smith, cost of sales before amortisation and depreciation, increased marginally from A$225m (US$168m) in 2018 to A$226m (US$157m) in 2019.

At Gruyere, cost of sales before amortisation and depreciation, was A$20m (US$14m) for the three months (Oct-Dec 2019) in which Gruyere was in commercial levels of production. The cost of sales before amortisation and depreciation of A$20m (US$14m) comprised cost of sales before gold inventory change and amortisation and depreciation of A$28m (US$19m) and a gold-in-process credit to cost of A$8m (US$5m).

Amortisation and depreciation

Amortisation and depreciation for the Group decreased by 9% from US$668m in 2018 to US$610m in 2019. This decrease was mainly due to lower amortisation of US$36m in local currencies (mainly at South Deep due to lower capital expenditure in 2019 and at St Ives due to lower ounces mined) and the exchange rate effect of US$22m on translation into US Dollar at a 10% weaker Rand and a 7% weaker A$ Dollar.

Other

Net interest expense for the Group increased by 22% from US$67m in 2018 to US$82m in 2019. Interest expense of US$113m and lease interest of US$19m were partially offset by interest income of US$7m, interest capitalised of US$41m and lease interest capitalised of US$2m. In 2018, interest expense of US$92m was partially offset by interest income of US$8m and interest capitalised of US$17m.

The share of equity accounted gain of US$3m in 2019 compared with a loss of US$13m in 2018. The gain of US$3m in 2019 comprised the Group's share of Asanko's earnings of US$4m, partially offset by losses at Far Southeast project (FSE) of US$1m. The loss of US$13m in 2018 comprised mainly of the US$12m write-off of deferred costs and other non-recoverable amounts at Far Southeast project (FSE) as well as a loss of US$1m related to the Group's share of Asanko's losses.

The loss on foreign exchange of US$5m in 2019 compared with a gain on foreign exchange of US$6m in 2018. These gains and losses on foreign exchange related to the conversion of offshore cash holdings into their functional currencies.

The loss on financial instruments of US$238m in 2019 compared with a gain of US$21m 2018. In 2019, the US$238m comprised US$245m losses on hedges and US$7m gain on the mark-to-market on Maverix warrants. The US$245m included US$132m realised losses and US$113m unrealised losses. The realised losses of US$132m comprised losses realised on the South Deep gold hedge of R220m (US$15m), the Australian gold hedge of A$163m (US$113m) and Australian currency hedge of A$22m (US$14m), partially offset by gains made on the Ghana oil hedge of US$5m, Ghana gold hedge of US$2m and Australian oil hedge of A$4m (US$3m).

Gold hedged comprised of a combination of outright forward sales and zero cost collars and were transacted in line with our pre-existing hedging policy as set out in our Integrated Annual Report. The policy is designed to allow for hedging to protect cash flows at times of significant expenditure, for specific debt servicing requirements, and to safeguard the viability of higher cost operations. The hedges have enabled the Company to fund its capital projects to date largely from internal cash flows and to underwrite a meaningful reduction in debt in 2020.

The unrealised losses of US$113m comprised losses on the South Deep gold hedge of R153m (US$11m), the Ghana gold hedge US$39m, the Australian gold hedge of A$94m (US$66m), the Ghana oil hedge of US$3m and Australian oil hedge of A$1m (US$1m), partially offset by a gain on Australian currency hedge of A$12m (US$7m).

Share-based payments for the Group decreased by 45% from US$38m in 2018 to US$21m in 2019 and related to the current valuation of the share scheme and changes in its composition. Long-term employee benefits increased by 800% from US$1m to US$9m due to the current valuation of the plan and change in composition.

Other costs for the Group decreased by 9% from US$55m in 2018 to US$50m in 2019.

Exploration and project costs

Exploration and project costs decreased by 19% from US$104m in 2018 to US$84m in 2019 mainly due a decrease in the write-off of brownfields exploration costs at the Australian operations from A$51m (US$38m) in 2018 to A$43m (US$30m) in 2019, as well as lower spend at Salares Norte from US$61m in 2018 to US$49m in 2019. The write-off of brownfields exploration is a non-cash item. The balance of US$5m mainly related to various exploration office costs.

Non-recurring items

Non-recurring expenses of US$24m in 2019 compared with US$633m in 2018.

The non-recurring expenses for 2019 included:

a positive silicosis provision adjustment (US$2m/R23m
net impairment of FSE of US$10m. The impairment of FSE was based on the fair value less cost of disposal of the investment which was indirectly derived from the market value of Lepanto Consolidated Mining Company;
profit on sale of Maverix holding of US$15m;
loss on repurchase of 2020 bond of US$5m;
contract termination costs of US$13m at Damang; and
a cost arising on the rehabilitation year-end adjustments of US$13m.

The non-recurring expenses for 2018 included:

impairment of R6.471bn (US$482m) in respect of the South Deep cash-generating unit. The after tax impairment was R4.819bn (US$359m). The impairment was recognised in June 2018 and given that impairment indicators still existed at 31 December 2018, a further impairment assessment was performed.

There were no further impairments at 31 December 2018 using the following assumptions:

  o Gold price of R525,000/kg for 2019 and R550,000/kg thereafter;
  o Reserve ounces used in discounted cash flow of 32.4Moz;
  o Resource price of US$17/oz at a Rand/US Dollar exchange rate of R14.63;
  o Resource ounces of 24.5Moz;
  o Life of mine 75 years; and
  o Nominal discount rate of 13.5%.
restructuring costs at Tarkwa (US$89m) with the transition to contractor mining;
restructuring costs at Damang (US$14m);
restructuring costs at South Deep (US$11m/R148m);
losses on the sale of mining fleet and heavy machinery equipment and inventory at Tarkwa as part of the transition to contractor mining, amounted to US$38m and US$9m, respectively;
silicosis provision adjustment (US$5m/R60m);
loss on sale of APP (US$15m);
impairment of FSE of US$37m. The impairment of FSE was based on the fair value less cost of disposal of the investment which was directly derived from the market value of Lepanto Consolidated Mining Company; and
Gain on the acquisition of Asanko Gold mine of US$52m.

Royalties

Government royalties for the Group increased by 17% from US$63m in 2018 to US$74m in 2019 in line with the increase in revenue.

Taxation

Government royalties for the Group increased by 17% from US$63m in 2018 to US$74m in 2019 in line with the increase in revenue.

The taxation charge for the Group of US$176m in 2019 compared with a credit of US$66m in 2018. Normal taxation increased from US$146m to US$191m. The deferred tax credit of US$15m in 2019 compared with US$212m in 2018.

The significant deferred tax credit in 2018 arose due to the taxation credit of R1.652bn (US$123m) on the impairment of South Deep. In addition, as a result of the settlement of the South Deep tax dispute, Gold Fields recognised an additional R2.708bn (US$205m) of capital allowances with a tax effect of R812m (US$62m) in 2018

Profit/loss

Net profit attributable to owners of the parent of US$162m or US$0.20 per share in 2019 compared with a loss US$348m or US$0.42 per share in 2018.

Headline earnings attributable to owners of the parent of US$163m or US$0.20 per share in 2019 compared with headline earnings of US$61m or US$0.07 per share in 2018.

Normalised profit of US$343m or US$0.42 per share in 2019 compared with US$27m or US$0.03 per share in 2018.

Normalised profit

Normalised profit reconciliation for the Group is calculated as follows:

  Year
United States Dollars
 
2019   2018  
Profit/(loss) for the period attributable to owners of the parent 161.6   (348.2)  
Non-recurring items 23.8   633.1  
Tax effect of non-recurring items (7.8)   (171.1)  
Non-controlling interest effect of nonrecurring items (0.9)   (10.1)  
Loss/(gain) on foreign exchange 5.2   (6.4)  
Tax effect of loss/(gain) on foreign exchange (0.3)   0.6  
Loss/(gain) on financial instruments 238.0   (21.0)  
Tax effect of loss/(gain) on financial instruments (74)   5.7  
Non-controlling interest effect of loss/ (gain) on financial instruments (2.4)   1.6  
South Deep tax settlement   (61.5)  
Other tax adjustments   4.2  
Normalised profit attributable to owners of the parent 343.4   26.9  

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. Normalised profit is defined as profit excluding gains and losses on foreign exchange, financial instruments and nonrecurring items after taxation and non-controlling interest effect.

Cash flow

Cash inflow from operating activities increased by 43% from US$624m in 2018 to US$893m in 2019 due to higher gold sold and higher realised price.

Dividends paid of US$48m in 2019 compared with US$55m in 2018. Dividends paid to owners of the parent remained flat at US$46m. Dividends paid to non-controlling interest holders of US$2m in 2019 compared with US$10m in 2018.

Cash outflow from investing activities decreased from US$887m in 2018 to US$447m in 2019. Capital expenditure decreased from US$814m in 2018 to US$613m in 2019 due to lower sustaining and growth capital expenditure as planned. Growth expenditure of US$70m was incurred on the Damang reinvestment project and A$96m (US$67m) at Gruyere. This compared with growth expenditure of US$125m on the Damang reinvestment project and A$180m (US$134m) on Gruyere in 2018.

In the South Africa region at South Deep, capital expenditure decreased from R770m (US$58m) in 2018 to R479m (US$33m) in 2019 mainly due to the temporary suspension of growth capital.

At the West Africa region, (excluding Asanko), capital expenditure decreased from US$295m to US$202m. At Tarkwa, capital expenditure decreased from US$156m to US$125m due to lower capital waste stripping expenditure in line with the 2019 plan. Capital expenditure at Damang decreased from US$139m to US$76m mainly due to lower capital waste tonnes mined as the Damang reinvestment project is nearing completion.

The Group's share of capital expenditure at Asanko amounted to US$27m in 2019 and US$13m for the five 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 increased from US$33m to US$56m due to higher expenditure on the new waste storage facility construction (Arpon) and infrastructure reallocation (access roads, blasting supplies warehouse and general warehouse) expenses for the life extension plan.

At the Australia region, capital expenditure increased from A$373m (US$319m) in 2018 to A$458m (US$319m) in 2019 mainly due to the inclusion of Gruyere under the Australia region from 2019. In 2018, Gruyere was disclosed under projects with A$180m (US$135m) included for the year. At St Ives, capital expenditure decreased from A$170m (US$127m) in 2018 to A$141m (US$98m) in 2019 mainly due to reduced pre-stripping of the open pits (A$19m/US$13m) combined with lower mining infrastructure spend in 2019 (A$9m/US$6m). At Agnew, capital expenditure increased from A$98m (US$73m) in 2018 to A$109m (US$76m) in 2019. At Granny Smith, capital expenditure decreased from A$105m (US$79m) in 2018 to A$104m (US$72m) in 2019. At Gruyere capital expenditure decreased from A$180m (US$134m) in 2018 to A$104m (US$72m) in 2019 due to the completion of the project.

Proceeds on disposal of assets of US$4m in 2019 compared with US$79m in 2018. The proceeds in 2018 related to disposal of assets as part of the conversion to contractor mining at Tarkwa in 2018. Purchase of investments of US$7m in 2019 (relates to Chakana copper) compared with US$19m in 2018.

Purchase of Asanko of US$20m related to the additional purchase of preference shares in accordance with the Joint Venture transaction with Asanko Gold Inc. which was completed on 31 July 2018.

Proceeds on the sale of Maverix amounted to US$67m and related to the sale of the Group's 19.9% holding in Toronto – listed gold and royalty streaming company Maverix.

Proceeds on disposal of investments of US$113m related to the disposal of the Group's holdings in Red 5, Gold Road and Bezant Resources.

Cash inflow from operating activities less net capital expenditure, environmental payments, lease payments and redemption of Asanko preference shares amounted to US$249m in 2019 and compared to an outflow of US$122m in 2018, being a net increase of US$371m.

The US$249m inflow in 2019 comprised: US$414m net cash generated by the eight mining operations (after royalties, taxes, capital expenditure and environmental payments), less US$86m of net interest paid, US$55m for exploration mainly at Salares Norte (this excludes any mine based brownfields exploration which is included in the US$414m above), as well as US$24m on non-mine based costs. Included in the US$414m above is US$71m capital expenditure on the Damang reinvestment project and A$96m (US$67m) on growth capital expenditure at Gruyere. If these two amounts are excluded, then the mining operations generated US$552m in net cash.

The US$122m outflow in 2018 comprised: US$202m net cash generated by the seven mining operations (after royalties, taxes, capital expenditure and environmental payments), less US$77m of net interest paid, US$77m for exploration mainly at Salares Norte (this excludes any mine based brownfields exploration which is included in the US$202m above), US$163m (AS$218m) at Gruyere [capital expenditure of US$134m (A$180m) and an investment into working capital of US$29m (A$38m), mainly due to timing of cash calls from the EPC contractor], as well as US$7m on non-mine based costs. Included in the US$202m above is US$125m capital expenditure on the Damang reinvestment project and US$18m on South Deep growth capital expenditure. If these two amounts are excluded, then the mining operations generated US$345m in net cash. Adding back the negative US$146m for South Deep, the core international operations generated US$491m.

Net cash outflow from financing activities of US$105m in 2019 compared with an inflow of US$152m in 2018. The outflow in 2019 related to the repayment of US$1,604m on offshore and local loans and US$38m from lease payments, partially offset by a drawdown of US$1,538m. The inflow in 2018 related to a drawdown of US$690m, partially offset by the repayment of US$536m on offshore and local loans and US$3m from lease payments.

The net cash inflow for the Group of US$294m in 2019 compared with an outflow of US$167m in 2018. The cash balance of US$515m in 2019 compared with US$220m in 2018.

All-in sustaining and total all-in cost

The Group all-in sustaining costs decreased by 1% from US$981/oz in 2018 to US$970/oz in 2019 mainly due to higher gold sold and lower sustaining capital expenditure, partially offset by higher cost of sales before amortisation and depreciation.

On 14 November 2018, the World Gold Council published an update to its guidance note on the interpretation of all-in sustaining and all-in costs. The note provided additional clarity on what constitutes growth capital expenditure. Gold Fields has considered the new guidance note to ensure the interpretation of the guidelines is consistent with the additional guidance now available and has adopted it prospectively from 1 January 2019. Based on the revised World Gold Council interpretation guidance, all-in sustaining costs for the Group are US$897/oz in 2019. One of the benefits of adopting the new standard is closer alignment of our cost reporting with existing practices in our sector.

Total all-in cost decreased by 9% from US$1,173/oz in 2018 to US$1,064/oz in 2019 for the same reasons as for all-in sustaining costs, as well as lower non-sustaining capital and lower exploration, feasibility and evaluation co

For a reconciliation of cost of sales before gold inventory charge and amortisation and depreciation to AISC and AIC refer pages 44 – 46.

Net debt

Net debt (excluding the effect of IFRS 16) is US$1,331m in 2019 compared with US$1,687m in 2018.

Net debt (borrowings plus the current portion of borrowings and lease liabilities less cash and cash equivalents) decreased from US$1,687m for the year ended 2018 to US$1,664m for the year ended 2019. Comparative figures for 2018 did not include lease liabilities.

The difference between the two methods of calculating net debt is the long and short term portion of lease liabilities identified as part of IFRS 16, comprising mainly the Genser power purchase agreement, Granny Smith power plant and Gruyere power plant and gas pipeline.

Net debt (borrowings plus the current portion of borrowings and lease liabilities less cash and cash equivalents) is defined by the Group as total borrowings and lease liabilities less cash and cash equivalents.

Adjusted EBITDA

Adjusted EBITDA for calculating net debt/EBITDA is based on the previous 12 months earnings, which is determined as follows in US$m:

  Year
United States Dollars
 
2019   2018  
Revenue 2,967   2,578  
Cost of sales before amortisation and depreciation (1,424)   (1,375)  
Exploration and project costs (84)   (104)  
Other costs* (169)   13  
  1,290   1,112  

* Other costs relate mostly to the hedge losses for the year.

Adjusted EBITDA excluding the effect of IFRS 16 is US$1,233m for the year ended 31 December 2019.

The difference between the two methods of calculating adjusted EBITDA is a net reduction in operating costs relating to contracts identified as leases under IFRS 16.

Adjusted EBITDA is defined by the Group as profit or loss for the year adjusted for interest, taxation, amortisation and depreciation and certain other costs.

Net debt/EBITDA

The net debt/EBITDA ratio (excluding the effect of IFRS 16) of 1.08 in 2019 compared with 1.57 in 2018.

The net debt/EBITDA ratio of 1.29 in 2019 compared with 1.57 in 2018. The ratio above includes the effect of adoption of IFRS 16 which marginally increased cost of sales before amortisation and depreciation and substantially increased the net debt due to the inclusion of lease liabilities.

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 2019 is calculated as follows:

  Year
United States Dollars
 
2019  
  US$m   US$/oz  
Revenue1 2,798.9   1,3993  
Less Cash outflow (2,208.4)   (1,104)  
AIC (2,112.9)   (1,056)  
Adjusted for Share-based payments (non-cash) 20.5   10  
Long-term employee benefits (non-cash) 9.1   5  
Exploration, feasibility and evaluation costs outside of existing operations 50   25  
Non-sustaining capital expenditure (Damang reinvestment and Gruyere) 137.4   69  
Revenue hedge (140.6)   (70)  
Redemption of Asanko preference shares 10.0   5  
Tax paid (excluding royalties which is included in AIC above) (181.9)   (91)  
Free cash flow2 590.5   295  
FCF margin 21%      
Gold sold only – 000’oz 2,000.6      
1
Revenue from income statement at US$2,967.1m less revenue from by-products in AIC at US$168.2m equals US$2,798.9m.
2
Free cash flow does not agree with cash flows from operating activities less capital expenditure in the statement of cash flows on page 38 mainly due to working capital adjustments and non-recurring items included in the statement of cash flows.
3
Calculated by dividing revenue by gold sold only.

The free cash flow margin is used as a key metric in the determination of the long-term incentive plan.

The FCF margin of 21% in 2019 at a gold price of US$1,399/oz compared with 16% in 2018 at a gold price of US$1,266/oz. The hedges had an effect of US$70/oz, giving an effective price for the year of US$1,329/oz.