Gold Fields Limited · JSE:GFI
Gold Fields — Gordon Institute of Business Science, Johannesburg (October 2015)
42 slides from Gold Fields's conference presentation, Oct 28, 2015
Slide 1: The Gold Mining Company of the Future
The Gold Mining Company of the Future Nick Holland, CEO Gold Fields Gordon Institute of Business Science, Johannesburg| 28 October 2015
Slide 2: Contents
Contents Where are The global Gold Industry has failed to we today? realize full value over the last decade due to 6 headwinds 1
Slide 3: Gold industry has failed to realize full value due to 6 headwinds
WHERE ARE WE TODAY? The global Gold Industry has failed to realize full value over the last decade due to 6 headwinds Geological inflation1 is driving double-digit cost inflation Today it takes an average of 18 years from discovery to first production versus 10 years a decade ago The average grade o
Slide 4: Prices up 3x since 2000, but costs have squeezed margins
WHERE ARE WE TODAY? Even though prices are up 3x since 2000, costs have risen squeezing margins Average annual gold price and cost, US$ per ounce Gold Price AISC1 2,000 1,800 1,600 -36% 1,400 1,200 1,000 800 +339% 600 400 200 Margin, % 27 21 21 7 12 12 12 2 6 2 0 -3 -6 -3 -3 2000 01 02 03 04 05 06 0
Slide 5: Shareholder value destroyed by 50-80% since 2007
WHERE ARE WE TODAY? As a result, shareholder value has been destroyed by between 50-80% since 2007 Enterprise value and invested capital Size = Enterprise value representation US$ bn 2007 2014 4.0 3.5 3.0 2.5 Enterprise Value to 2.0 Invested Capital Ratio 1.5 Multiple 1.0 0.5 0 0 5 10 15 20 25 30 35
Slide 6: What about gold as a commodity?
Contents What about gold as a We are still relevant and commodity? important to the global economy, particularly in We are still relevant and important to the global economy, developing particularly in developing countries countries 5
Slide 7: Gold mining is critical to people and local communities
WHAT ABOUT GOLD AS A COMMODITY? Gold mining is critical to the people it employs as well as the local community… especially in developing economies… Key elements in developing countries Investment in people … Impact beyond the mine … invested in people employed3 4.2M US$284M socio-economic (1M direc
Slide 8: Gold's contribution to the global economy and safe haven role
WHAT ABOUT GOLD AS A COMMODITY? …to the global economy Contribution to global economy… … and a safe haven around geo-political crises Gold price, US$/oz US$171.6Bn3 total GDP Peak post contribution, 2,400 financial crisis (direct contribution = 49 percent) 1,670 2,000 Soviet/Afghanistan war; Iranian
Slide 9: Still an industry worth investing in
WHAT ABOUT GOLD AS A COMMODITY? … and is still an industry worth investing in Long-term Long-term Trend price impact Trend price impact Development of new Far East Increase in Chinese and investment platforms to Jewelry Investment Indian middle classes stimulate local demand for Demand gold Portfoli
Slide 10: What does the future look like?
Contents What does In the future, our industry the future look like? will look vastly different from today 9
Slide 11: A new recipe is needed for gold to be viable
WHAT DOES THE FUTURE LOOK LIKE? A new recipe is needed for Gold for Gold to be viable Requires new recipe for success ▪ Optimise major operational risks (e.g., labour, grade, ore complexity) ▪ Access new reserves or create value from previously unmined reserves ▪ Drive disciplined capital spending –
Slide 12: The gold industry of the future has four focus areas
WHAT DOES THE FUTURE LOOK LIKE? The gold industry of the future has four focus areas Operating practices & technology Talent and leadership Partnerships ▪ New exploration trends ▪ More technical skills – ▪ Governments – contributing strong analytics and decisions equity ▪ Mechanised, automated and b
Slide 13: The big operational issues confronting gold mining
OPERATING PRACTICES & TECHNOLOGY The “big operational issues” confronting gold mining… Embracing digital mining and full integration of big data, advanced analytics and new software technologies Mining on demand and ability to run agile production schedules Converting outstanding conventional mining
Slide 14: Challenges and technologies: Exploration
OPERATING PRACTICES & TECHNOLOGY For some of our challenges… Exploration What challenges need to What technologies could be addressed address this Size and qualities of Airborne Gravimetry - discoveries are declining Electromagnetic surveys that provide greater coverage and ▪ Reducing the cost of de
Slide 15: Challenges and technologies: Mining and Extraction
OPERATING PRACTICES & TECHNOLOGY For some of our challenges… Mining and Extraction What challenges need to What technologies be addressed could address this Increased mining depth Advanced analytics and modelling Narrower ore bodies Geographic Information Systems Improved safety Real-time tracking o
Slide 16: Challenges and technologies: Processing
OPERATING PRACTICES & TECHNOLOGY For some of our challenges… Processing What challenges need to What technologies be addressed could address this Refractory ore bodies In-pit crushing and conveyance Lower grades, which reduce Predictive equipment recoveries maintenance monitoring Increasing environm
Slide 17: Challenges and technologies: Energy and Water
OPERATING PRACTICES & TECHNOLOGY For some of our challenges… Energy What challenges need to What technologies be addressed could address this Rising energy costs Increased energy efficiency Energy supply constraints Use of renewable energy forms and disruptions Underground water treatment Carbon emi
Slide 18: Mining companies advancing on the digital journey
OPERATING PRACTICES & TECHNOLOGY – MECHANISATION & AUTOMATION Mining companies are making strides forward on the digital journey – remote control centres and remote equipment increasingly common Rio Tinto BHP remote remote center at Perth center in Perth “Oct 18 – Controlled from “Remote centre brin
Slide 19: Partnering with OEMs will become increasingly critical
TECHNOLOGY PARTNERS Partnering with OEMs will become increasingly critical in future to harness best-of-class technologies OEMs ▪ Computer algorithm automatically detects patterns in exploration data Exploration indicative of mineralisation ▪ All major OEMS offer products with various level of autom
Slide 20: Partnering with technology companies to drive operational change
TECHNOLOGY PARTNERS Partnering with technology companies to drive operational change will become increasingly critical and common Gold Fields has established partnerships with… …to implement technological advances... Rugged 3D vision and sensors mapping software …with multiple applications Mapping O
Slide 21: St Ives aerial and underground drones
GOLD FIELDS TECHNOLOGY PARTNERS St Ives has both aerial and underground drones working today to produce visual data for machine learning and mining software Through the use of drones and UG Gold Fields now can... censors… Capture visual images and convert them into data files for use in mine softwar
Slide 22: Cyest partnership to optimise South Deep
GOLD FIELDS TECHNOLOGY PARTNERS With Cyest we are looking at innovative ways to economically optimise South Deep through advanced analytics & simulation Overview International advisory and technology company founded and based in SA Combines data analytics, technology solutions and industry under
Slide 23: South Deep's mechanisation journey: 2010-2017
OPERATING PRACTICES & TECHNOLOGY – MECHANISATION & AUTOMATION South Deep’s mechanisation journey: 2010 - 2017 Challenges What we are doing The outcome ▪ Economically exploiting ▪ Rebasing the mine so it can Aiming for fully the world’s 2nd largest be mined cost-effectively & mechanised mine with: go
Slide 24: Destress mining at South Deep
OPERATING PRACTICES & TECHNOLOGY – MECHANISATION & AUTOMATION Destress mining at South Deep ▪ Optimal extraction of orebody through bulk mining methods in de- Grow Gold stressed zone Fields ▪ Replicates ~1,200m stress conditions at ~2,600m below surface ▪ Allows mechanised bulk mining at depth ▪ Red
Slide 25: Key takeaways on operating practices and technology
OPERATING PRACTICES & TECHNOLOGY Key takeaways on operating practices and technology In the short term extraction and exploration will see the biggest advances through automation and digitisation Technology will give us the edge to fundamentally change our cost structures and make our mines safer Pa
Slide 26: The gold industry of the future has four focus areas
WHAT DOES THE FUTURE LOOK LIKE? The gold industry of the future has four focus areas Operating practices & technology Talent focus and leadership Partnerships ▪ New exploration trends ▪ More technical skills – ▪ Governments – contributing strong analytics and decisions equity ▪ Mechanised, automated
Slide 27: The workforce will be highly skilled, specialised and trained
TALENT FOCUS The workforce will be highly skilled, specialised and trained Today Tomorrow ▪ Manual, non-specialised ▪ Automated machinery frontline work requiring specialists ▪ Decision making ▪ Mine-wide, real-time information limited and information available for Miners not real-time decision maki
Slide 28: Role of the CEO and organisation design will be different
TALENT FOCUS Role of the CEO and organisation design will be different Shareholders Government Communities • Manage expectations on returns • Facilitate private public • Shared value • Operational accountability partnerships • Socio-economic upliftment • Operational transparency • Support infrastruc
Slide 29: Key takeaways on talent focus and leadership
TALENT FOCUS Key takeaways on talent focus and leadership… CEO of the future will need to be a portfolio manager, consultant, strategist and coach rather than a full-time manager The skills we need will be vastly different and will require partnership with governments, universities and training coll
Slide 30: The gold industry of the future has four focus areas
WHAT DOES THE FUTURE LOOK LIKE? The gold industry of the future has four focus areas Operating practices & technology Talent focus and leadership Partnerships ▪ New exploration trends ▪ More technical skills – ▪ Governments – contributing strong analytics and decisions equity ▪ Mechanised, automated
Slide 31: New partnership models in developing countries
PARTNERSHIPS New partnership models in developing countries will focus on joint ownership, risk management and shared benefits ▪ Contributing equity position ▪ Policy certainty and competitive rates ▪ Partners in infrastructure development Governments ▪ Shift from re-active concessions to pro-active
Slide 32: Partnerships that will shape the future mine
PARTNERSHIPS – PARTNERSHIPS Partnerships that will shape the future mine Mechanisms used What we offer What the partners provide ▪ Payment of taxes and royalties ▪ Competitive investment environment ▪ Contributing equity position ▪ Regulatory consistency and stability Government ▪ Infrastructure PPP
Slide 33: Clashes with local communities have risen 22% p.a.
PARTNERSHIPS – SOCIAL DEVELOPMENT Clashes with local communities have risen – 22% p.a. since 2002 Reported incidents of mining company – community conflicts have increased steadily Number of incidents of cases occurred Year 2002 10 70% in high risk regions1 03 13 04 10 Alternative models of communit
Slide 34: Community engagement at South Deep
PARTNERSHIPS AND SCRUTINY – SOCIAL DEVELOPMENT Community engagement methods in South Africa have led us to think differently about such topics What we did at our South Deep mine … but there were important Multiple programmes were implemented … lessons learnt Set aside significant funds for Ownership
Slide 35: Template for community engagement at Cerro Corona, Peru
PARTNERSHIPS AND SCRUTINY – SOCIAL DEVELOPMENT A template for engagement and investment in the communities around Cerro Corona, Peru What we did in Peru is serving as a template for our other mines Socio – economic impact Why this worked well… Understood the community’s local contractors used in the
Slide 36: Key takeaways on partnerships
PARTNERSHIPS Key takeaways on partnerships… Gold companies will enter into many partnerships: ▪ With OEMs and Universities for joint research and skills development ▪ Other Mining companies to diversify risk and leverage competitive advantages ▪ Equitable resource rent and government development par
Slide 37: The gold industry of the future has four focus areas
WHAT DOES THE FUTURE LOOK LIKE? The gold industry of the future has four focus areas Operating practices & technology Talent focus and leadership Partnerships ▪ New exploration trends ▪ More technical skills – ▪ Governments – contributing strong analytics and decisions equity ▪ Mechanised, automated
Slide 38: Responsible and transparent operations
RESPONSIBILITY AND TRANSPARENCY We will need to focus on responsible and transparent operations ▪ Investors will require real-time operational, financial and Operational sustainability data transparency ▪ Transparent cost and earnings reporting ▪ Evolving and more stringent corporate governance Corp
Slide 39: Following global standards of reporting
RESPONSIBILITY AND TRANSPARENCY Mining companies will need to follow global standards of reporting since investors are demand more transparency and clearer mandates Future non-negotiables – Adherence to leading reporting frameworks. These include: Is a global standard to Focuses on communicating pro
Slide 40: Where is Gold Fields on this journey?
Conclusion Where is Gold Fields on this journey? 39
Slide 41: The gold industry needs to proactively shape its own future
Conclusion The gold industry needs to proactively shape its own future Continue on the mechanisation, automation and digitisation journey Work with OEMs and tech companies to gain access to world- class technology Partner with other mining firms to share risks and achieve economies of scale Work wit
Slide 42: Acknowledgements
Acknowledgements Professor Fred Cawood, University of the Witwatersrand, School of Mining Terry Heymann, Consultant and Aidan Davy, former MD, Gold Deputy President, Development at the International World Gold Council Council of Mining & Metals 41
Gold Fields — Gordon Institute of Business Science, Johannesburg (October 2015) on 6ix