Value creation in gold mining
NICK HOLLAND
September 2014
Value creation in gold mining Presentation to KPMG Mining Executive - - PowerPoint PPT Presentation
Value creation in gold mining Presentation to KPMG Mining Executive Forum NICK HOLLAND September 2014 Forward looking statements Certain statements in this document constitute forward looking statements within the meaning of Section 27A
September 2014
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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 planned 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 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
Nick Holland - Presentation to KPMG September 2014
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Nick Holland - Presentation to KPMG September 2014
Mine 2014 • Realigning expectations 35 PwC • June 2014 2012 2013 2014f 2015f 2016f 2017f 2018f 1 2 3 4 5 6 7 8 9 10
Emerging markets & developing economies China Advanced economies
% y-o-y
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Nick Holland - Presentation to KPMG September 2014
Source: World Gold Council - Gold Demand Trends Full Year 2013, February 2014
1,066 975 175 140 92 77 72 68 57 38 25 21 18 16 190 121 77 73 65 23 20 2 200 400 600 800 1,000 1,200
(tonnes)
Total East: 2,840 tonnes
Total West: 573 tonnes
630 tonnes in 2008 450 tonnes in 2008
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Nick Holland - Presentation to KPMG September 2014
Source: Broker Research, AME, FactSet as at 6 January 2014 (a) Points on the curve represent the average price for the year. Nominal forward curve adjusted by US inflation of 2.0% per annum
200 400 600 800 1,000 1,200 1,400 1,600 1,800 2,000 Jan 02 Jan 03 Jan 04 Dec 04 Dec 05 Dec 06 Dec 07 Dec 08 Dec 09 Dec 10 Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 Dec 16 Dec 17 Dec 18
Gold AME Price Broker Average Forward Curve (US$/oz, real terms)
(a)
Broker Max & Min Annual, Real 2013 Terms(a) Max: $1,500/oz Median: $1,268/oz Min: $815/oz
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Nick Holland - Presentation to KPMG September 2014
Source: Credit Suisse (6 Jan 2014), Morgan Stanley (3 Feb 2014), Société Générale (29 Nov 2013), AME, Bloomberg, WGC
2416 2589 2709 2812 2861 2968 2855 2780 2655 1315 1549 1655 1610 1615 1371 1000 900 875 880 300 150 15 35 3,731 4,138 4,364 4,422 4,476 5219 4,155 3,845 3,565 1000 2000 3000 4000 5000 6000 2008 2009 2010 2011 2012 2013 2014e 2015e 2016e
Mine Supply Scrap ETFs Hedging
Supply of gold from mines, scrap, ETFs and hedging (tons)
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Nick Holland - Presentation to KPMG September 2014
Source: GFL/MinEx Consulting
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Nick Holland - Presentation to KPMG September 2014
Source: ICMM
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Nick Holland - Presentation to KPMG September 2014
Mining.com – January 2013
International Business News - September 2013
Mining.com – February 2014
EWN – June 2014
Ghana Web – September 2013
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Nick Holland - Presentation to KPMG September 2014
2009 2012 Start Payments in country (producing operations)
23,320 39,243
Payments in country (non-producing operations)
1,756 5,425
Payments out of country
4,975 10,926
2009 2012 Start Payments in country (producing operations)
23,320 39,243
Payments in country (non-producing operations)
1,756 5,425
Payments out of country
4,975 10,926
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Nick Holland - Presentation to KPMG September 2014
Source: Facts about mining ins South Africa (South Africa Chamber of Mines, November 2012), The Socio-Economic Impact of Newmont Ghana Gold Limited (Newmont Ghana Gold Limited, June 2011), The economic contribution of large scale gold mining in Peru (World Gold Council, May 2012). South Africa: IDC and Quantec study
~2.5x for South Africa ~3.2x for Ghana ~1.7x in Peru
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Nick Holland - Presentation to KPMG September 2014
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
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Nick Holland - Presentation to KPMG September 2014
A 15% Free Cash Flow Margin at US$1,300/oz Gold
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Nick Holland - Presentation to KPMG September 2014
@ US$1,300/oz gold price Operate
Acquire? Operate? Restructure? Divest?
Acquire Divest
M&A Franchise assets Non-franchise assets
Restructure
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Nick Holland - Presentation to KPMG September 2014
Australia 43% Ghana 28% Peru 13%
16% 28% 43% 13%
2014 Production Guidance* South Africa Ghana Australia Peru
* Attributable production
. 500 1000 1500 2000 2500 3000 3500 2012 2013 2014*
Attributable Production South Africa Ghana Australia Peru
* 2014 Guidance
SA 16%
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Nick Holland - Presentation to KPMG September 2014
100,000 200,000 300,000 400,000 500,000 600,000 700,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2012 2012 2012 2012 2013 2013 2013 2013 2014 2014 500 700 900 1,100 1,300 1,500 1,700 1,900 Gold Produced Gold Price AIC
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Source: Bloomberg
47%
0% 20% 40% 60% GFI & Sibanye Combined Randgold Goldcorp Agnico Eagle Newmont Anglogold Barrick Yamana Newcrest Harmony Kinross
28 November 2012 to 3 September 2014
1,000 1,100 1,200 1,300 1,400 1,500 1,600 1,700 1,800
28 November 2012 to 3 September 2014 28 Nov 2012 US$1,719.69/oz 3 Sep 2014 US$1,269.40/oz
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Free Cash Flow Total Shareholder Returns
15% Free Cash Flow Margin US WACC 6% Real compounded (Threshold)
50% Weighting 50% Weighting
= BONUS
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Nick Holland - Presentation to KPMG September 2014
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