Towards an Towards an

Affordable, Stable Electricity Supply Affordable, Stable Electricity Supply

MISSION CRITICAL FOR SOUTH AFRICAMISSION CRITICAL FOR SOUTH AFRICA

Public Presentation To NERSAby

Nick HollandChief Executive Officer

Gold Fields Limited22 January 2010

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INTRODUCTION

SUSTAINABILITY IS KEY

Affordable Electricity For All, but…..

• MYPD2 is not sustainable for South Africa.

• A clear, long-term, affordable price path is essential.

• A broad-based tax is preferable to input cost increases.

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Our CredentialsGOLD FIELDS

STABLE, AFFORDABLE POWER IS KEY

• A Global Gold Producer.

• Dependent on a strong SA base.

• R16 bn invested in SA operations over past 5 years.• R24 bn invested in South Deep acquisition.

• R25 bn capital committed in SA over next 5 years.• R10 bn additional projects in SA under consideration.

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Our CredentialsGOLD FIELDS

WE ARE A COMMITTED, LONG-TERM PLAYER

• ~60,000 employees in SA.

• F2010E Group production 3.8 to 4.0 moz. (SA production ~2.2 moz.)

• F2009 Revenue R29 billion.

• 65 million ounces of reserves in SA.

• +50-year mine life in SA.

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Impact on South Africa

MYPD2 NEGATIVE FOR GROWTH!

• MYPD2 is negative for:

– New Investments;

– Operating costs;

– Employment;

– Tax collections; and

– Foreign earnings.

MYPD2

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Impact on Mining Industry

MYPD2 A NAIL IN THE COFFIN

• Mining industry hard hit by recession, yet…– Employs ~500,000 people directly.– Significant contributor to GDP, foreign earnings etc.

• Gold industry digging deeper…– Low margin operators.– Stable, affordable power essential.

• MYPD2 will increase risk of…– Sterilized reserves.– Shelving of expansion projects.– Shaft closures.– Job losses.

MYPD2

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Impact on Gold FieldsMYPD2

JOBS AT RISK IN A LABOUR INTENSIVE INDUSTRY

• Consumed 2.2% of Eskom’s F2009 sales.

• Already paying a premium.

• ~50MW saved over past 2 years (10%).• ~50MW savings planned next 2 years (10%).

• Stable electricity supply critical for safety and sustainability of operations.

• MYPD2 may force restructuring.– Jobs, production and reserves at risk.

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Impact on Gold FieldsMYPD2

POWER ALREADY +2X F2008 BASE

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Impact on Gold FieldsMYPD2

PRE MYPD2 MARGINS ALREADY TIGHT

NCE = All in cost of production including capital

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Impact on Gold FieldsMYPD2

MYPD2 COULD TIP US OVER THE EDGE

Power as a Percentage of Working Costs and Projected Impact of MYPD2

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EfficiencyCONCLUSIONS

MANAGING DEMAND IS CRITICAL

• No supply flexibility in short to medium term.

• Demand management the only lever to pull in the short term.

• Universal DSM and PCP now the TOP priority.

• Must be applied ACROSS the Board.

• To be implemented by independent party, NOT Eskom.

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Price Path CertaintyCONCLUSIONS

PRICE PATH CERTAINTY IS CRITICAL

• MYPD2 aims to recover long-term costs through short- term solution – not sustainable.

• Current consumers should not subsidise future consumers.

• Long-term solution and price path certainty required for planning and investment decisions.

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Government’s RoleCONCLUSIONS

IF ESKOM FAILS, SA FAILS!

• Sustainability of ESKOM is mission critical for SA.

• Government MUST provide adequate capital injection and debt guarantees.

• Broad-based tax preferable to cost increases. – Will avoid domino effect on economy and fiscus.– Will impact only those who can afford it.– Mixture of consumption and direct taxes to spread the

burden.

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Government’s RoleCONCLUSIONS

BROAD-BASED TAX IS PREFERABLE

Price increases will: → increase headline costs;

→ damage income producing assets;

→ impair economic viability;

→ reduce employment;

→ reduce the tax base; and

→ lead to lower growth rates.

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Other ConsiderationsCONCLUSIONS

REQUIRES A HOLISTIC SOLUTION

• Transparent, credible pricing and cost data essential.– Capital and operating cost review at ESKOM.

• Municipal tariffs should be addressed.

• IPP’s have a role in future, but are not the solution.– Require a clear price path and strong counterparty guarantee.– Require tariff increases to generate an acceptable return.

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CONCLUSIONS

TOGETHER WE CAN FIND A BETTER WAY

• Above inflation increases are unavoidable, BUT ….

• Must not damage the productive engine of SA.

• MYPD2 is fatally flawed.

• Clear, long-term, affordable price path is essential.

• Broad-based tax better than cost increases.