Slide 1: Africa Down Under 2019
Africa Down Under 2019 NICK HOLLAND: GOLD FIELDS CEO The Gold Industry 2019 – Through The Looking Glass
Slide 2: Forward looking statement
Forward looking statement 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 a
Slide 3: The cost reporting conundrum
The cost reporting conundrum
Slide 4: Introduction
Introduction ● Cost reporting appears to be misleading and inconsistent in the context of a gold industry that is undercapitalised ● Gold miners have not been spending enough capital to sustain production, never mind grow it ̵ Any growth capital people speak about is in fact largely sustaining capit
Slide 5: Cost control has been good (on the face of it)
Cost control has been good (on the face of it) In 2013, the World Gold Council (WGC) published its guidance note on Non GAAP metrics – All In Sustaining Cost (AISC) and All In Cost (AIC) in which non-sustaining costs were defined as: ̵ Costs incurred at new operations and costs related to ‘major pro
Slide 6: But has this been at the expense of longevity?
But has this been at the expense of longevity? US$/oz Industry opex and capex per ounce produced US$/oz 400 800 ● Of concern is the notable decrease in 350 360 700 313 sustaining capital (SIB capex) from 300 287 600 240 US$313/oz in 2012 to US$166/oz in 2016. It 250 203 500 200 173 166 179 168 400 h
Slide 7: Production growth has continued to slow
Production growth has continued to slow ● Growth in global mine supply has slowed significantly ̵ Mine supply increased only 1.8% in 2018 compared to 6.2% in 2013 ● 30% of global reserves are currently associated with assets where a construction decision is yet to be made ● The industry can potentia
Slide 8: Mine production outlook
Mine production outlook Africa Down Under 2019 | Nick Holland: CEO Gold Fields | September 2019 8
Slide 9: Mine supply: structural shifts
Mine supply: structural shifts Average reserve life of the industry has decreased from >25 years to <15 years since 2012 Africa Down Under 2019 | Nick Holland: CEO Gold Fields | September 2019 9
Slide 10: Higher throughput rates, lower grades
Higher throughput rates, lower grades Africa Down Under 2019 | Nick Holland: CEO Gold Fields | September 2019 10
Slide 11: Is the industry telling the whole story?
Is the industry telling the whole story? ● Of the 25 companies included in our study, only 6 reported an AIC number in 2018 ● In addition, the AISC reported by the industry excludes some capital and exploration costs that should be included as per the 2013 WGC guidelines ̵ The amount of capital and
Slide 12: Is capital being misclassified?
Is capital being misclassified? ● Despite the notable slow down in production growth over the past five years, expenditure classified by the industry as ‘growth’ or ‘non-sustaining’ has increased significantly ̵ growth capital and non-sustaining exploration have grown at 4-year CAGRs of 6.4% and 10.
Slide 13: But what is the "bottom line" (free cash) telling us?
But what is the “bottom line” (free cash) telling us? ● There is a stark difference between the reported AISC margin and the Free Cash Flow (FCF) margin ̵ In 2018, the reported AISC margin was US$410/oz vs. the FCF of only US$86/oz ● To echo this, GMR calculated a FCF cost equivalent (*see footnote
Slide 14: Taking it one step further…
Taking it one step further… ● Taking interest and tax into account adds c.US$100/oz to the FCF cost equivalent ̵ In 2018, the FCF cost equivalent (after interest and tax) was US$345/oz higher than the reported AISC ● So, the ‘true’ margin is significantly lower than reported AISC margin US$/oz Repor
Slide 15: Is cost reporting going to become more opaque?
Is cost reporting going to become more opaque? ● In November 2018, the World Gold Council updated its guidance note and amended the definition of Non-sustaining costs to: ̵ Costs incurred at ‘new operations’ and costs related to ‘major projects at existing operations’ where these projects will mater
Slide 16: What should the producers do
What should the producers do ● Actual costs are higher than the industry is reporting ̵ The industry needs to maintain discipline with what it classifies as growth ̵ Replacement will become more expensive ● Gold producers need to be as transparent as possible with their cost reporting ̵ The people b
Slide 17: What has Gold Fields' strategy been: Focusing on Australia
What has Gold Fields’ strategy been: Focusing on Australia
Slide 18: Gold Fields in Australia
Gold Fields in Australia ● Gold Fields has been in Australia for 17 years ● We are now the third largest gold producer in Australia and the proud operator of Western Australia’s newest gold mine ● The Australian assets generate 43% of Group production and almost half of Group net cash flow ● With Gr
Slide 19: What has Gold Fields strategy been?
What has Gold Fields strategy been? We have spent the money and disclosed it in costs ● We have continued to spend the exploration dollars necessary to sustain our business in Australia ̵ We increased the level of spend significantly in 2015 and have maintained it at A$90m – A$100m pa since then ̵ A
Slide 20: The Invincible orebody at St Ives shows why it is necessary to spend on exploration
The Invincible orebody at St Ives shows why it is necessary to spend on exploration Invincible December 2011 N Lake Surface S 500m Africa Down Under 2019 | Nick Holland: CEO Gold Fields | September 2019 20
Slide 21: Invincible at St Ives
Invincible at St Ives Invincible December 2012 N Lake Surface S 500m 2012 2013 2014 2015 2016 2017 2018 Cumulative Production (koz) - - - 140 394 626 858 Combined Resource (koz) 246 1,329 1,417 1,375 1,438 1,672 1,607 Combined Reserve (koz) - 492 796 705 826 731 793 Reserve plus Production (koz) - 4
Slide 22: Invincible at St Ives
Invincible at St Ives Invincible December 2013 N Lake Surface S Resource Reserve 500m 2012 2013 2014 2015 2016 2017 2018 Cumulative Production (koz) - - - 140 394 626 858 Combined Resource (koz) 246 1,329 1,417 1,375 1,438 1,672 1,607 Combined Reserve (koz) - 492 796 705 826 731 793 Reserve plus Pro
Slide 23: Invincible at St Ives
Invincible at St Ives Invincible December 2014 N Lake Surface S Resource Reserve 500m 2012 2013 2014 2015 2016 2017 2018 Cumulative Production (koz) - - - 140 394 626 858 Combined Resource (koz) 246 1,329 1,417 1,375 1,438 1,672 1,607 Combined Reserve (koz) - 492 796 705 826 731 793 Reserve plus Pro
Slide 24: Invincible at St Ives
Invincible at St Ives Invincible December 2015 N Lake Surface S Resource Reserve 500m 2012 2013 2014 2015 2016 2017 2018 Cumulative Production (koz) - - - 140 394 626 858 Combined Resource (koz) 246 1,329 1,417 1,375 1,438 1,672 1,607 Combined Reserve (koz) - 492 796 705 826 731 793 Reserve plus Pro
Slide 25: Invincible at St Ives
Invincible at St Ives Invincible December 2016 N Lake Surface S Resource Reserve 500m 2012 2013 2014 2015 2016 2017 2018 Cumulative Production (koz) - - - 140 394 626 858 Combined Resource (koz) 246 1,329 1,417 1,375 1,438 1,672 1,607 Combined Reserve (koz) - 492 796 705 826 731 793 Reserve plus Pro
Slide 26: Invincible at St Ives
Invincible at St Ives Invincible December 2017 N Lake Surface S Resource Reserve 500m 2012 2013 2014 2015 2016 2017 2018 Cumulative Production (koz) - - - 140 394 626 858 Combined Resource (koz) 246 1,329 1,417 1,375 1,438 1,672 1,607 Combined Reserve (koz) - 492 796 705 826 731 793 Reserve plus Pro
Slide 27: Invincible at St Ives
Invincible at St Ives Invincible December 2018 N Lake Surface S Resource Reserve 500m 2012 2013 2014 2015 2016 2017 2018 Cumulative Production (koz) - - - 140 394 626 858 Combined Resource (koz) 246 1,329 1,417 1,375 1,438 1,672 1,607 Combined Reserve (koz) - 492 796 705 826 731 793 Reserve plus Pro
Slide 28: Granny Smith mine Wallaby deposit – December 2015
Granny Smith mine Wallaby deposit – December 2015 4,600 koz Resource • 534 koz Measured Zone 250-60 • 2,310 koz Indicated Zone 70 • 1,756 koz Inferred Zone 80 1,305 koz Reserve Zone 90 • 168 koz Proven • 1,137 koz Probable Zone 100 1.9 km Mined Production (2015) TVD • 308 koz Zone 110-120 Maiden Zon
Slide 29: Granny Smith mine Wallaby deposit – December 2016
Granny Smith mine Wallaby deposit – December 2016 5,958 koz Resource • 657 koz Measured Zone 250-60 • 3,183 koz Indicated Zone 70 • 2,118 koz Inferred Zone 80 1,674 koz Reserve Zone 90 • 239 koz Proven • 1,435 koz Probable Zone 100 1.9 km Mined Production (2016) TVD • 323 koz Zone 110-120 2015-2016
Slide 30: Granny Smith mine Wallaby deposit – December 2017
Granny Smith mine Wallaby deposit – December 2017 6,493 koz Resource • 788 koz Measured Zone 250-60 • 3,781 koz Indicated Zone 70 • 1,924 koz Inferred Zone 80 2,191 koz Reserve Zone 90 • 239 koz Proven • 1,951 koz Probable Zone 100 1.9 km Mined Production (2017) TVD • 301 koz Zone 110-120 2016-2017
Slide 31: Granny Smith mine Wallaby deposit – December 2018
Granny Smith mine Wallaby deposit – December 2018 7,294 koz Resource • 745 koz Measured Zone 250-60 • 4,844 koz Indicated Zone 70 • 1,705 koz Inferred Zone 80 2,239 koz Reserve Zone 90 • 175 koz Proven • 2,064 koz Probable Zone 100 1.9 km Mined Production (2018) TVD • 296 koz Zone 110-120 2017-2018
Slide 32: Agnew: Waroonga - 2015
Agnew: Waroonga - 2015 Africa Down Under 2019 | Nick Holland: CEO Gold Fields | September 2019 32
Slide 33: Agnew: Waroonga - 2016
Agnew: Waroonga - 2016 Africa Down Under 2019 | Nick Holland: CEO Gold Fields | September 2019 33
Slide 34: Agnew: Waroonga - 2017
Agnew: Waroonga - 2017 Africa Down Under 2019 | Nick Holland: CEO Gold Fields | September 2019 34
Slide 35: Agnew: Waroonga - 2018
Agnew: Waroonga - 2018 Africa Down Under 2019 | Nick Holland: CEO Gold Fields | September 2019 35
Slide 36: Agnew: Waroonga - 2019
Agnew: Waroonga - 2019 Africa Down Under 2019 | Nick Holland: CEO Gold Fields | September 2019 36
Slide 37: Thank you
Thank you QUESTIONS AND ANSWERS