Gold Fields Limited Q2 FY2021 earnings call

Management Statement and Operational Highlights

• Safety and Sustainability: One fatality, 30% improvement in total safety recordable rates. COVID-19 had an impact, with 19 COVID-related fatalities. Vaccination programs ongoing. ESG achievements recognized, including 3rd place in Dow Jones Sustainability Index.
• Operations: Solid first half performance with production up 2% despite fewer production days. Free cash flow margin of 21%. Salares Norte project on track for first production in Q1 2023 with 42% progress by end of June.
• Financials: Normalized earnings up 33% to $431 million. Interim dividend of ZAR2.10 per share. Net debt-to-EBITDA improved to 0.49 times.

Segment Performance

• Australia: Production decreased by 3% year-on-year, but had strong free cash flow margins. All-in cost was $1,189 per ounce. Reserves and resources are strong with consistent exploration investment.
• West Africa: Production increased by 5% year-on-year, generating the best free cash flow margins in the group (32%) with all-in cost of $1,114.
• Americas (Cerro Corona, Peru): Production decreased by 9% year-on-year due to slope instability from heavy rainfall, but still had a 20% margin and all-in cost of $1,162.
• South Africa (South Deep): Production increased by 27% year-on-year despite COVID challenges, with free cash flow margins of 19% and all-in cost of $1,444. Productivity trends are improving.
• Overall Group: Attributable gold production increased by 2% year-on-year to 1.104 million ounces. Free cash flow was $180 million after spending on Salares Norte.

Guidance

• Production: Attributable gold production to Gold Fields expected to be between 2.3 million and 2.35 million ounces for the year.
• Costs: All-in cost guidance remains between $1,310 and $1,350, with all-in sustaining cost between $1,020 and $1,060 excluding Salares.
• Salares Norte: On track for first production in Q1 2023, with 42% progress by end of June, and expected to contribute to production growth to over 2.7 million ounces by 2024.

Risks

• COVID-19 Impact: Continued impact on operations and workforce, with ongoing health and safety challenges.
• Inflationary Pressures: Labor and commodity price inflation in various regions, affecting costs.
• Regulatory and Political Risks: Uncertainty in tax legislation and royalties in Chile, Peru, and other regions.
• Project Risks: Potential cost overruns and delays in projects like Salares Norte due to factors like steel prices and weather events.

Question and Answer

Q: Discuss inflationary pressures, labor competition, South Deep backfill, and political stability in Chile/Peru A: Paul Schmidt discussed mixed inflationary pressures across regions, with South Africa facing ~10% inflation, Australia ~6%, and Peru benign. Labor competition in Australia due to other commodities. Chris Griffith addressed South Deep backfill as a temporary issue due to mine design changes, and political stability in Chile/Peru as monitored with stability agreements in place.

Q: Risks in second half, AISC guidance offset, South Deep underground yield A: Chris Griffith and Paul Schmidt discussed better second half production expected across regions. Consolidated AISC guidance offset by better performance in some assets. South Deep underground yield lower due to mine design changes, not a long-term grade impact.

Q: Inflation in energy, steel, explosives, freight; taxation in other regions; criteria for asset growth; South Africa growth A: Paul Schmidt noted inflation in energy, steel, etc., in South Africa and Australia. Chris Griffith discussed no significant tax changes in other regions. Criteria for asset growth include 10-year life potential, cost improvement, and portfolio sustainability. No immediate growth planned in South Africa beyond existing asset improvement.

Q: South Deep value unlock, Salares Norte costs, hedging, debt levels, Asanko performance A: Chris Griffith discussed unlocking South Deep value through continued improvement. Paul Schmidt addressed Salares Norte cost impact from steel prices but on track. Hedging policy based on project needs. Comfortable with current debt levels. Asanko performance is work in progress with room for improvement.

Q: Industry consolidation, hedging plans, gross debt comfort, Asanko reinvestment A: Chris Griffith noted potential industry consolidation but uncertain triggers. Paul Schmidt discussed hedging policy aligning with project needs. Comfortable with current gross debt. Asanko may require reinvestment as work in progress.