denver gold forum - overendstudio.co.za · 9/11/2012 · …operating costs are increasing whilst...
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Denver Gold Forum11 September 2012Nick HollandNick HollandChief Executive Officer
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 among others those relating to the Damang Exploration Target Statement;
the Far Southeast Exploration Target Statement; commodity prices; demand for gold and other metals and minerals; interest rate expectations;
exploration and production costs; levels of expected production; Gold Fields’ growth pipeline; levels and expected benefits of current and
l d it l dit f t d th i li ti l l d th t t f t ffi i i d i t bplanned capital expenditures; future reserve, resource and other mineralisation levels; and the extent of cost efficiencies and savings to be
achieved. Such forward looking statements involve known and unknown risks, uncertainties and other important factors that could cause the
actual results, performance or achievements of the company to be materially different from the future results, performance or achievements
expressed or implied by such forward looking statements. Such risks, uncertainties and other important factors include among others: economic,
business and political conditions in South Africa, Ghana, Australia, Peru and elsewhere; the ability to achieve anticipated efficiencies and other
cost savings in connection with past and future acquisitions, exploration and development activities; decreases in the market price of gold and/or
copper; hazards associated with underground and surface gold mining; labour disruptions; availability terms and deployment of capital or credit;
changes in government regulations particularly taxation and environmental regulations; and new legislation affecting mining and mineral rights;changes in government regulations, particularly taxation and environmental regulations; and new legislation affecting mining and mineral rights;
changes in exchange rates; currency devaluations; the availability and cost of raw and finished materials; the cost of energy and water; inflation
and other macro-economic factors, industrial action, temporary stoppages of mines for safety and unplanned maintenance reasons; and the
impact of the AIDS and other occupational health risks experienced by Gold Fields’ employees.
These forward looking statements speak only as of the date of this document. Gold Fields undertakes no obligation to update publicly or release
any revisions to these forward looking statements to reflect events or circumstances after the date of this document or to reflect the occurrence
f ti i t d t
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 2
of unanticipated events.
Investors just seeking gold exposure can buy ETFs
Total global goldETF holdings (by quarter)
2,500t2,500t
1 500
2,000
1 500
2,000
1,000
1,500
1,000
1,500
500
,
500
,
002004 2005 2006 2007 2008 2009 2010 2011 2012
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 3
Note: ETFs and similar products, including closed-end gold fundsSource: World Gold Council
So gold mining stocks must provide returns that beat the ETF… but…
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 4
Note: Data indexed to 14th January 2000; index made up of 8 major gold producers’ total return indexes weighted by market capitalisation; Major Gold producers defined as: AngloGold Ashanti, Barrick, Harmony, Kinross, Goldcorp, Gold Fields, Newmont and Newcrest
Source: Bloomberg
The industry is struggling to grow production…
Investors are sceptical:• Can this be delivered?
• Is it growth or just g jreplenishment?
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 5
Note: Major Gold producers defined as: AngloGold Ashanti, Barrick, Harmony, Kinross, Goldcorp, Gold Fields, Newmont and Newcrest.Source: World Gold Council; Annual reports; Producer investor presentations
…operating costs are increasing whilst yields are declining…
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 6
Note: Cost per tonne is the weighted average of 8 major gold producers by total ore mined; average grade is the weighted average of 8 major gold producers by total ore mined; Major Gold producers defined as: AngloGold Ashanti, Barrick, Harmony, Kinross, Goldcorp, Gold Fields, Newmont and Newcrest.
Source: Gold Fields company data; annual reports
…and total expenditure has grown in line with the gold price…
CAGR(06 – 11)
21%21%
16%
G f G G G * C /Note: Major Gold producers defined as: AngloGold Ashanti, Barrick, Harmony, Kinross, Goldcorp, Gold Fields, Newmont and Newcrest; *Estimated NCE/oz based on total cash costs plus capex for existing operations, weight averaged by production (excludes new mine development capex)
Source: Bloomberg;,Annual reports
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 7
…yet we shoot ourselves in the foot by telling only half the story…
CAGR..whereas in practice, free cash flow is much lower
(06 – 11)
21%
once we include capital to sustain and grow our
businesses
21%Governments think we generate this
much cash…
16%
G f G G G *Note: Major Gold producers defined as: AngloGold Ashanti, Barrick, Harmony, Kinross, Goldcorp, Gold Fields, Newmont and Newcrest; *EstimatedNCE/oz based on total cash costs plus capex for existing operations, weight averaged by production (excludes new mine development capex)
Source: Bloomberg;,Annual reports
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 8
Counter to analyst expectations fundamentals have supported a strongly rising gold price…
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 9
Note: Consensus forecast is median forecast of all contributing analysts to Bloomberg; Forecast as of 10th May in each year, except 2006 which is from 30th June; Futures price curve based on contracts prices on 312t Aug 2012 for settlement at year-end in 2012, 2013, 2014 and 2015
Source: Bloomberg
There are strong indications that the gold industry recognises that investment cannot be sustained whilst returns remain low
“Barrick Gold slows down expansion”Financial Times, 26th July 2012
“N t t t $1b f
“The era of gold mega-projects may be
“Newmont to cut over $1bn from planned Peru project spend”Mineweb, 24th May 2012
“Kinross Gold hunts for ways
g g p j yfading. The industry is moving into an era of cash flow generation, yields and capital discipline”Sean Boyd CEO Agnico-Eagle
“Barrick replace CEO in board shake-up”
yto cut expenses”Financial Post, 8th August 2012
Sean Boyd, CEO, Agnico-Eagle
Barrick replace CEO in board shake-upFinancial Times, 6th June 2012
“…ounces at any cost…”Johann Steyn
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 10
Strategic response
It is not about ounces at any cost….• Review operating and growth portfolio to optimise cash generation and
investment payback
It is not about ounces at any cost….1
• Understand and manage all-in costs (Notional cash Expenditure)
P di id d f 25% t 35% f li d i
2
3• Pay dividends of 25% to 35% of normalised earnings
• Deliver South Deep
3
4
• Prioritise low risk high return brownfields growth opportunities5
• Pursue greenfields projects only if they offer truly attractive returns
• Leverage the balance sheet to grow value on a per share basis
6
7• Leverage the balance sheet to grow value on a per share basis7
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 11
Optimise cash generation
Q2 2012 NCE i 18% 2012 H1 21%
1,800
US$/oz
Q2 2012 NCE margin 18%; 2012 H1 21%
1,400
1,600
NCEMargin
1,000
1,200
600
800
-
200
400
Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Dec-09 Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 Jun-11 Sep-11 Dec-11 Mar-12 Jun-12
Gold price Total cash costs NCE
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 12
Targeting a 25% NCE Margin
Leverage the Balance Sheet
Strong balance sheet
1,500 11,900 Net Debt
• Q2 2012 - Cash generated from operations R4 195m (US$514 million)
Strong balance sheet
1,400
1,450
10,500
11,200
US$
mill
ion
R m
illio
n
operations R4,195m (US$514 million)
• Net debt R11,457 million (US$1,366 million)
1,300
1,350
9,100
9,800
1Q2011 1Q2012 2Q2012ZAR million USD million
million)
• Net Debt/EBITDA ratio of 0.53
8 000
10,000 Debt Maturity
ZAR million USD million
• Conservative debt maturity schedule
• Committed unutilised facilities of
4,000
6,000
8,000 R7.7bn (US$918m)
R m
illio
n
-
2,000
2012 2013 2014 2015 2016 2017 2018 2019 2020
Pursue Value on a Per Share Basis
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 13
Prioritise Dividends
Leading dividend payer in the peer group
Dividends as a % of EPS
Leading dividend payer in the peer group
Dividend Yield
50%
60%
2 0%
2.5%
3.0%
30%
40%
1.0%
1.5%
2.0%
10%
20%
0.0%
0.5%
0%
0%2007 2008 2009 2010 2011 Interim: 2012
Gold Fields Industry Average
Source: Bloomberg, Company results Source: Bloomberg, company information
Dividend Payment of 25% to 35% of Normalised Earning
New Dividend Policy Aligned To Investor Expectations
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 14
Dividend yield calculated based on dividend declared for 2011 divided by average share price for 2011
South Africa Region
Stable performance in line with expectations
• KDC producing within 1.0 to 1.1 Moz p.a. range (Dec 2011 Analyst Day guidance)
Stable performance, in line with expectations
• Beatrix producing with 325 to 350 Koz p.a. range (Dec 2011 Analyst Day guidance)
• Q2 2012 NCE margin 17%
450
500
South Africa RegionProduction (koz)
250
300
350
400
450
50
100
150
200
-3Q2011 4Q2011 1Q2012 2Q2012
KDC Beatrix South Deep
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 15
Q2 2012 Free Cash Flow of US$161m
South Africa Region
South Deep Project
Production build-up to run-rate of 700koz by end of 2015
South Deep Project
Destress mining improved as planned
88% self-funding* in Q2 2012
Section 189 process initiated on 2 August 2012
Key Infrastructure Projects On Budget And On Time
2010 2011 2012E 2013E 2014E 2015E Status
94 Level Refrigeration Plant Commissioned
Tailings Storage Facility CommissionedTailings Storage Facility Commissioned
Twin Vent Shaft On-track
Plant Expansion On-track
Backfill Infrastructure On trackBackfill Infrastructure On-track
New Mine Development On-track
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 16
* Calculated as cash flow from operations divided by Capital Expenditure
Key Infrastructure Projects On Track For Completion Q4 2012
South Africa Region
West Rand Surface Resources Project
• Positive scoping study – Gold Fields and Gold One
West Rand Surface Resources Project
• Synergies in treating combined tailings of both parties utilising the following:
• An integrated reclamation network
• A high grade uranium leach facility
• A single low grade gold and uranium extraction facility g g g y
• Depositing tailings on two residue disposal facilities
• Extract U O Au and Sulphur• Extract U3O8, Au and Sulphur
• Include historical surface dumps as well as current arisings of both parties
• 4Moz of gold and 65 million pounds of U3O8 to be recovered over a 20-year life
• Pre-feasibility study under consideration
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 17
A Significant Opportunity
West Africa Region
14Moz of Reserves and 25Moz of Resources• Minority buy-outs increases interest from 71% to 90%
• Tarkwa production in 700 to 750 Koz range – world-class operation with upside
14Moz of Reserves and 25Moz of Resources
p g p p
• Damang a mine in transition – focus on restoring production to ~180 Koz p.a.
• Q2 2012 Regional NCE margin of 28%
West Africa Region
• Significant opportunities for value creation
200
250
gProduction (koz)
50
100
150
-3Q2011 4Q2011 1Q2012 2Q2012
Tarkwa Damang
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 18
Tarkwa - A World-class Mine With Upside Potential
West Africa Region
Tarkwa Expansion Phase 6 (TEP 6)
• 8Mtpa CIL plant to replace North Heap Leach
• Adds ~100koz p.a. on improved recoveries – to provide ~800koz p.a. production profile
Tarkwa Expansion Phase 6 (TEP 6)
p p p p p p
• Additional 1Moz over life of mine based on lower cut-off grade and improved recoveries
• Double digit IRR, accretive on cash flow and NPV basis
• Capital ~US$450m
• Pre-feasibility study completed end of year
80
100
CIL/TEP 6 Gold Recovery (%)
-
20
40
60
2009 2010 2011 2012E
Actual Heap Leach Recoveries Indicative TEP 6\CIL Recoveries
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 19
An ~800koz p.a. Profile
West Africa Region
Damang - a mine in transitionDamang - a mine in transition
• High level of stripping to secure future mining – impacts NCE
• Lower production from high grade Damang pit due to safety concerns• Lower production from high-grade Damang pit due to safety concerns
• Super-pit project work on slow burn, focus on restoring profitability and cash flow
Juno – 490koz
Huni – 1,733koz
Damang – 293koz
Insert plan view of pits including reserve per pitPeet/Kevin
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 20
Targeting Steady State 45koz Per Quarter
Australasia Region
St Ives at steady state Agnew needs work
• St Ives steady state production 450koz p.a.
A t t 180 K
St Ives at steady state, Agnew needs work
• Agnew to recover to ~180 Koz p.a.
• Q2 2012 NCE margin 3%
Ch k it l lif t i d i i i• Chunky capital on life extensions and owner mining conversion
• Transition to owner mining at St Ives completed by Q1 2013Australasia Region
140
160
180
200
gProduction (koz)
40
60
80
100
120
0
20
3Q2011 4Q2011 1Q2012 2Q2012St. Ives Agnew
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 21
Significant Exploration Potential at St Ives and Agnew
Australasia Region
St Ives – Cave Rocks ExtensionSt Ives – Cave Rocks Extension
Coloured blocks indicateColoured blocks indicate three-year mining plan
D thDepth500m
9m @5.2g/t3m @37.4g/t
5m @52.8g/t
5m @2.4g/t
South@ g
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 22
Potential for Two Years Plus Life Extension
Australasia Region
St Ives – InvincibleSt Ives – Invincible
Cave Rocks
NeptuneInvincible
Neptune
Leviathan
Existing ug mines
Existing op mines
Argo
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 23
Exciting New Discovery in Major High Grade Corridor
Australasia Region
Agnew – Waroonga ComplexAgnew – Waroonga Complex
Mining Pre-2008
Kim Lode
Main Lode
g
Mining Post 2008
Current Reserves
500m
Fitzroy Target
Bengal Target
5
Hastings Target
Link Target
Fitzroy –Bengal-
Hastings High Grade Shoots
Link target
Reserve Level 2011(1500m bs)
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 24
Significant Upside
South America Region
Cerro Corona - Now a 6Moz 16-year fully developed asset
• Production ~340 Koz eq p.a.
• Outstanding cost performance - highest margin operation in the Group - ~50%+
Cerro Corona Now a 6Moz, 16 year, fully developed asset
Outstanding cost performance highest margin operation in the Group 50%
• Q2 2012 NCE margin 48%
• Maintain high profitability and cash flowCerro Corona
Au eq Production (koz)
• Maintain high profitability and cash flow
60
70
80
90
100
20
30
40
50
60
-
10
20
3Q2011 4Q2011 1Q2012 2Q2012
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 25
Production figures stated on a equivalent ounce basis
Advancing Organic Growth Opportunities
South America Region
Cerro Corona - Now a 6Moz 16-year fully developed assetCerro Corona Now a 6Moz, 16 year, fully developed asset
Progress future production growth projects • Sulphide plant extension (Feasibility 2013)
H l h ti f id (F ibilit (2013)
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 26
Advancing Organic Growth Opportunities• Heap leach option for oxides (Feasibility (2013)
Growth Portfolio
Chucapaca Project
• Feasibility study Q4 2012
Chucapaca Project
• Submit EIA Q4 2012
• Start value engineering andStart value engineering and
optimisation Q4 2012
• Re-establish exploration in 2013
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 27
Growth PortfolioFar Southeast Project - First Gold Fields declared resource a Sou eas ojec s Go d e ds dec a ed esou ce
Completion of Maiden Inferred Mineral Resource
19.8Moz Au & 4.5Mt Cu*19.8Moz Au & 4.5Mt Cu
Equivalent - 43.1Moz AuEq**
Deposit remains open
Resource drilling progressing well focused on:
U di fid Upgrading resource confidence
Testing new high-value positions
FPIC and FTAA processes continues FPIC and FTAA processes continues
Community engagement and support remains the highest priority
* Attributable metal is 11.9Moz Au and 2.7Mt Cu to Lepanto and
PFS timing depends on progress towards community acceptance and FTAA
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 28
7.9Moz Au and 1.8Mt Cu to Gold Fields.** Equivalent calculation based on $1,650/oz Au & $8,600t Cu
Growth PortfolioFar Southeast Project - First Gold Fields declared resourcea Sou eas ojec s Go d e ds dec a ed esou ce
Mineral Resource Tonnes Grade Gold Metal Gold Grade
CopperMetal
CopperClassification (Mt) Gold(Au g/t) (Au Moz) Copper
(Cu %)Copper(Cu Mt)
Measured - - - - -IndicatedIndicated - - - - -Inferred 891.7 0.7 19.8 0.5 4.5Total 891.7 0.7 19.8 0.5 4.5
Notes:Notes:1. These Mineral Resources are not Mineral Reserves as an assessment to a minimum of a prefeasibility study is required.2. The Mineral Resource is reported in accordance with the SAMREC Code.3. The Mineral Resource is reported within an optimised underground bulk mining shell that is derived using scoping study mining,
processing and cost parameters, and commodity prices of USD 1,650/oz Au and USD 8,600/t Cu. All Inferred Resource material within the shell is reported.the shell is reported.
4. The Mineral Resource is reported without dilution and ore loss parameters.5. Rounding-off of figures may result in minor computational discrepancies, where this happens, it is not deemed significant.6. Lepanto Consolidated Mining Company holds a 60% interest, while Gold Fields holds a 40% interest in the Far Southeast Project.
Attributable metal is 11.9Moz Au and 2.7Mt Cu to Lepanto and 7.9Moz Au and 1.8Mt Cu to Gold Fields.
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 29
Growth Portfolio
Arctic Platinum ProjectArctic Platinum Project• Suhanko North drilling complete
(targeting a 2 to 4Moz 2PGE + Au Resource in
addition to existing Greater Suhanko Resource of
~7Moz 2PGE + Au)
• Initial Platsol amenability tests on Suhanko NorthInitial Platsol amenability tests on Suhanko North
complete
• Platsol risk review completed
• Second integrated pilot plant planned for Q1 2013
• EIA baseline study in progress – Greater Suhanko
Project footprintProject footprint
• Product marketing and strategic positioning of the
project in progress
• Pre-feasibility study due by Q2 2013
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 30
Growth Portfolio
Damang Super-pit Project
• Resource 10.1Moz (+116% y-o-y)
Damang Super pit Project
• Reserve 3.4Moz (+63% y-o-y)( y y)
• Focus on returning the operation to a• Focus on returning the operation to a
stable base
• Super-pit project work on slow-burn
while prioritising operationalwhile prioritising operational
performance
Gold Fields Limited | Denver Gold Forum | 11 September 2012Page 31