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Gold Fields — Society of Mining Professors' 2014 Silver Anniversary
35 slides from Gold Fields's conference presentation, Jun 28, 2014
Slide 1: The state of the gold mining sector
The state of the gold mining sector Society of Mining Professors’ 2014 Silver Anniversary NICK HOLLAND 28 June 2014
Slide 2: Forward looking statements
Forward looking statements Certain statements in this document constitute “forward looking statements” within the meaning of Section 27A of the US Securities Act of 1933 and Section 21E of the US Securities Exchange Act of 1934. In particular, the forward looking statements in this document include
Slide 3: Long-term trends affecting the mining industry
Long-term trends affecting the mining industry
Slide 4: Economic demand from emerging market remains strong
Economic demand from emerging market remains strong IMF expects continued strong economic growth from emerging markets ● Emerging markets continue to be the world’s growth engine ● China is leading the way with an envious growth rate of 6.8% by 2018 ● Growth rates in developed markets are also expec
Slide 5: Leading to strong consumer demand for metals from the East
Leading to strong consumer demand for metals from the East 2013 Gold consumer demand by country 450 tonnes 630 tonnes in 2008 in 2008 EAST WEST (tonnes) Total East: 2,840 Total West: 573 tonnes tonnes 1 200 1 000 1 066 975 (83%) (17%) 800 600 400 175 190 200 140 121 92 77 72 68 77 73 57 38 65 25 21
Slide 6: But, commodity prices have been weak, volatile
But, commodity prices have been weak, volatile Commodity prices continued to fall last year ● 2013 was another challenging year, with double digit decreases not uncommon ● Gold lead the way with a 28% price drop, its biggest decline in 30 years ● Nickel and gold have recovered some ground in 2014, b
Slide 7: Gold price has been hard hit with little respite in sight
Gold price has been hard hit with little respite in sight Historical & forecast gold prices GOLD PRICING DEVELOPMENT Annual, Real 2013 Terms(a) 2 000 1 800 1 600 Max: $1,500/oz 1 400 (US$/oz, real terms) Median: $1,268/oz 1 200 1 000 Min: $815/oz 800 600 Broker Max & Min 400 200 0 Jan 02 Jan 03 Jan
Slide 8: Gold is becoming scarce (1)
Gold is becoming scarce (1) World gold supply trends – steadily retreating Supply of gold from mines, scrap, ETFs and hedging (tons) 6000 5000 4 850 4 422 4 476 4 155 4 364 4 138 840 3 845 4000 15 3 565 3 731 300 35 1610 1615 150 1655 1120 1549 1000 900 3000 1315 875 2000 2812 2861 2890 2855 2780 25
Slide 9: Gold is becoming scarce (2)
Gold is becoming scarce (2) Number and average grades of gold discoveries have dropped dramatically Source: GFL/MinEx Consulting The state of the gold mining sector - Society of Mining Professors | Nick Holland | 28 June 2014 9
Slide 10: Increasing Resource Nationalism
Increasing Resource Nationalism Governments and communities are increasingly antagonistic towards mining “Resource nationalism “Miners encounter the a key threat to mining” hard rock of resource BlackRock, Oct 2011 nationalism” The Telegraph (UK), Nov 2011 “Resource nationalism plagues the oil marke
Slide 11: Communities are finding their voice
Communities are finding their voice Number of conflicts between mines and communities Source: ICMM The state of the gold mining sector - Society of Mining Professors | Nick Holland | 28 June 2014 11
Slide 12: Industry costs are piling up while yields are down
Industry costs are piling up while yields are down Key KPIs in terms of costs and new discoveries have turned against gold miners 2012/13 costs have 2012/13 costs come down, but at have what consequence: come • Reduced mine down development • High grading • Project deferrals • Mine closures Note: Co
Slide 13: Industry is halting new investments…
Industry is halting new investments… Low margins and declining equity prices are putting mining investments under threat A harsh environment with new projects increasingly being delayed and cancelled Sources: Factiva, Literature search The state of the gold mining sector - Society of Mining Professo
Slide 14: … and cutting back on existing operations
… and cutting back on existing operations Existing mining operations are being curtailed and may shut down prematurely Existing mines under pressure from price decreases and cost increases; greater taxes will aggravate the problem 150 jobs go as Tanami closes mine The West Australia\n – April 24, 20
Slide 15: The mining industry in 2013
The mining industry in 2013 Sourced from PwC Top 40 Mining Companies survey
Slide 16: Mining revenues continued to fall
Mining revenues continued to fall As commodity prices fell revenues for mining firms decreased ● The Top 40 realised a decline of 2% in mining revenues to US$512-bn in 2013 ● Copper and iron ore revenue increased in 2013, supported by demand from China ● Emerging market factors, such as China’s urba
Slide 17: Operating costs remain stubbornly high
Operating costs remain stubbornly high Top 40 are struggling to bring rising operating costs under control ● With costs up, aggregate net profits for the year dropped to US$20bn, the lowest level for the Top 40 in a decade ● Cost saving initiatives are taking time to bear fruit, but early 2014 repor
Slide 18: Industry had record impairments … again
Industry had record impairments … again The mining industry had to make record impairment charges ● 2013 was another year of write downs for the Top 40 with US$57-bn of impairment charges recorded, on top of around US$40-bn in 2012 ● One quarter of the Top 40 recorded over US$1-bn of impairments eac
Slide 19: Share prices of mining stocks have dived
Share prices of mining stocks have dived Both SA and international mining indices have underperformed the general markets ● The performance of the Top 40 mining stocks was down 23% in 2013 to US$985bn ● The HSBC and JSE mining indices declined by 23% and 21% respectively in 2013, while the Dow Jones
Slide 20: How should the industry respond to long-term and short-term trends?
How should the industry respond to long-term and short-term trends?
Slide 21: The industry needs to make money again
1 – The industry needs to make money again Equity and debt investors need to return to provide funding to grow the industry ● Capital providers will not return to the sector unless their investments yields a strong return ● The focus needs to be on cash returns – not production growth ● Cost control
Slide 22: The industry needs to innovate
2 – The industry needs to innovate Technology and R&D critical to the future of mining ● Innovation can help the industry enhance profitability, address labour shortages, costs and develop technologies required in more difficult conditions (deep level, remote locations, etc). ● Areas of innovation f
Slide 23: The industry needs to mechanise
3 – The industry needs to mechanise Mechanisation will ensure a safer, more modern and more profitable mine ● Mechanisation is critical for the future of the mining industry as it enables the mine to be run more efficiently, safer and attract the right skills ● Critical areas of mechanisation at our
Slide 24: The industry needs to upskill to survive
4 – The industry needs to upskill to survive From Jurassic to Joystick mining ● Mechanisation is critical for the future of the mining industry as it enables the mine to be run more efficiently, safer and attract the right skills ● Critical areas of mechanisation at our South Deep mine: - Move the m
Slide 25: Sound ESG policies to be maintained and implemented
5 – Sound ESG policies to be maintained and implemented Creating Shared Value with our communities and other stakeholders Moving from philanthropy to systematic creation of shared value, recognising the impact of the GDP multiplier effects The state of the gold mining sector - Society of Mining Prof
Slide 26: Better communication of the mining sector's benefits (1)
6 – Better communication of the mining sector’s benefits (1) Illustrate the gold industry’s direct economic impact World Gold Council – The direct economic impact of gold in 2012 ● >$210bn Gold’s total direct economic value-add contribution (GVA) to annual global GDP across 15 largest gold producing
Slide 27: Better communication of the mining sector's benefits (2)
6 – Better communication of the mining sector’s benefits (2) Illustrate the gold industry’s total value creation and impact World Gold Council - Total global expenditure by leading gold companies to employees, governments, capital providers, suppliers and communities: 2009: $30.5bn 2012: $55.6bn 200
Slide 28: Better communication of the mining sector's benefits (3)
6 – Better communication of the mining sector’s benefits (3) The mining economy has large multiplier effects • GDP growth is essential for governments targeting effective transformation • Growing the mining economy, Mining has especially for resource-rich boosted RSA developing countries, has signif
Slide 29: Better communication of the mining sector's benefits (4)
6 – Better communication of the mining sector’s benefits (4) Job and livelihood multiplier effect is significant • Mining punches above its weight with its GDP multiplier effect • One direct mining job supports one indirect job and one impacted job • …in SA, one job supports on ~27x for S. average a
Slide 30: Establish partnerships with stakeholders
7 - Establish partnerships with stakeholders Job and livelihood multiplier effect is significant Challenge Mitigation Partnership Working and collaborative partnerships between miners, governments, labour and communities Balance Balance long-term growth strategies with short-term fiscal imperatives
Slide 31: How Gold Fields has responded
How Gold Fields has responded
Slide 32: The transformation of Gold Fields
The transformation of Gold Fields The journey started with the speech to the Melbourne Mining Club Portfolio Review Aug - Dec 2012 Sibanye Gold Dec - Jan 2012 New Cash Strategy 2013 Business Plan A New Paradigm 15 April 2013 Gold Price < US$1,300/oz A Fundamental Shift In Strategy “It’s all about ca
Slide 33: The transformation of Gold Fields: costs under control
The transformation of Gold Fields A structural shift in the production and cost base Gold Fields’ costs under control ● 7 out of 8 mines at or below gold price 700 000 1 800 (US$1,283/oz) 600 000 1 600 ● 8th Mine (South Deep Project) cash break- 1 400 even end 2014 early 2015 – (Q1 2014: 500 000 1 2
Slide 34: The transformation of Gold Fields: international diversification
The transformation of Gold Fields International diversification 2014 Production Guidance* ● In 2013 Gold Fields transformed its production base 13% 16% ̵ Unbundling of Sibanye Gold in South Africa ̵ Acquisition of Yilgarn South assets in Australia 43% 28% ̵ Marginal production stopped in Australia &
Slide 35: Conclusion: The gold mining industry at a crossroads
Conclusion: The gold mining industry at a crossroads The industry needs to work with stakeholders to grow the mining economy • Long term collaborative partnerships (Miners, Governments, Labour, Mining Communities, Dev. Agencies)… Economy/ • … leading to more investment GDP • The result: increased im
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