MARKET RISK Gold Fields is exposed to market risks, including foreign currency, commodity price and interest rate risk associated with underlying assets, liabilities and anticipated transactions. Following periodic evaluation of these exposures, Gold Fields may enter into derivative financial instruments to manage some of these exposures. As part of its strategy, however, Gold Fields does not generally hedge against the risk of changes in the price of gold. See “—Commodity Price Sensitivity—Commodity Price Hedging Policy”. Gold Fields has policies in areas such as counterparty exposure, hedging practices and prudential limits which have been approved by Gold Fields’ Board of Directors. Management of financial risk is centralized at Gold Fields’ treasury department, which acts as the interface between Gold Fields’ operations and counterparty banks. The treasury department manages financial risk in accordance with the policies and procedures established by the Gold Fields Board of Directors and Executive Committee. Gold Fields’ Audit Committee has approved dealing limits for money market, foreign exchange and commodity transactions, which Gold Fields’ treasury department is required to adhere to. Among other restrictions, these limits describe which instruments may be traded and demarcate open position limits for each category as well as indicating counterparty credit- related limits. The dealing exposure and limits are checked and controlled each day and reported to the Chief Financial Officer. Foreign Currency Sensitivity General In the ordinary course of business, Gold Fields enters into transactions, such as gold and concentrate sales, denominated in foreign currencies, primarily U.S. dollars. In addition, Gold Fields has investments and indebtedness in various foreign currencies, primarily U.S. and Australian dollars. Although this exposes Gold Fields to transaction and translation exposure from fluctuations in foreign currency exchange rates, Gold Fields does not generally hedge this exposure, although it may do so in specific circumstances, such as foreign currency commitments, financing projects or acquisitions. Also, Gold Fields on occasion undertakes currency hedging to take advantage of favorable short-term fluctuations in exchange rates when management believes exchange rates are at unsustainably high levels. Foreign Currency Hedging Experience Gold Fields uses various derivative instruments to protect its exposure to adverse movements in foreign currency exchange rates. On October 1, 2014, South Deep entered into a U.S.$/Rand zero-cost collar for U.S.$7.5 million per month for a period of six months starting October 2014. A floor of R11.2 and an average cap over the period of R12.0567 was achieved. At December 31, 2014, the fair value of the collar was nil. On February 25, 2016, South Deep entered into U.S.$/Rand forward exchange contracts for a total delivery of U.S.$69.8 million starting at July 2016 to December 2016. The average forward rate achieved over the six month period was R16.8273. The hedge was delivered into in July and August and the balance closed out in September 2016. The average rate achieved on delivery and close out was R13.8010, resulting in a profit of U.S.$14.4 million. Gains and losses on financial instruments are disclosed in detail under “Operating and Financial Review and Prospects—Results of Operations—Gain/(loss) on Financial Instruments”. Foreign Currency Contract Position As of December 31, 2016, there were no foreign currency contract positions. 277 Table of Contents Foreign Currency Sensitivity Analysis Gold Fields’ revenues and costs are very sensitive to the Rand/U.S. dollar and Australian dollar/U.S. dollar exchange rates because revenues are generated using a gold price denominated in U.S. dollars, while costs of the South African and Australian operations are incurred principally in Rand and Australian dollars, respectively. Depreciation of the Rand and Australian dollar against the U.S. dollar results in lower operating costs when they are translated into U.S. dollars, thereby increasing the operating margin of the South African and Australian operations. Conversely, appreciation of the Rand and Australian dollar results in higher operating costs when translated into U.S. dollars, thereby decreasing the operating margins at the South African and Australian operations. The impact on profitability of changes in the value of the Rand and Australian dollar against the U.S. dollar can be substantial. A sensitivity analysis of the mark-to-market valuation has not been performed as there were no foreign currency contracts as of December 31, 2016. Commodity Price Sensitivity General Gold and copper The market price of gold and to a lesser extent copper have a significant effect on the results of operations of Gold Fields, the ability of Gold Fields to pay dividends and undertake capital expenditures, and the market price of Gold Fields’ ordinary shares. Gold and copper prices have historically fluctuated widely and are affected by numerous industry factors over which Gold Fields does not have any control. See “Risk Factors—Changes in the market price for gold, and to a lesser extent copper, which in the past have fluctuated widely, affect the profitability of Gold Fields’ operations and the cash flows generated by those operations” and “Operating and Financial Review and Prospects—Revenues”. The aggregate effect of these factors on the gold and copper prices, all of which are beyond the control of Gold Fields, is impossible for Gold Fields to predict. Oil The market price of oil has a significant effect on the results of the offshore operations of Gold Fields. The offshore operations consume large quantities of diesel in the running of their mining fleets. Oil prices have historically fluctuated widely and are affected by numerous factors over which Gold Fields does not have any control. Commodity Price Hedging Policy Gold and copper Generally, Gold Fields does not enter into forward sales, derivatives or other hedging arrangements to establish a price in advance for future gold and copper production. On an exceptional basis, Gold Fields may consider gold and copper hedging arrangements in one or more of the following circumstances: • to protect cash flows at times of significant capital expenditure; • for specific debt-servicing requirements; and • to safeguard the viability of higher cost operations. See “Information on the Company—Strategy”. To the extent that it enters into commodity hedging arrangements, Gold Fields seeks to use different counterparty banks consisting of local and international banks to spread risk. None of the counterparties is affiliated with, or a related party of, Gold Fields. 278 Table of Contents Oil Generally Gold Fields does not enter into derivatives or other hedging arrangements to establish a price in advance for future oil consumption. However, where oil prices are expected to increase in the short- to medium- term, Gold Fields may consider hedging the oil price in order to protect itself against the adverse cost effects of a material increase in the oil price. Commodity Price Hedging Experience Gold No gold derivative instruments were entered into during fiscal 2016 and no gold derivative instruments have been entered into since fiscal 2007. Copper No contracts were entered into during fiscal 2014, 2015 and 2016. Oil From time to time, various subsidiaries of Gold Fields enter into call options to fix the price of specified quantities of diesel fuel. During fiscal 2014, the following option was entered into: • On November 26, 2014, Gold Fields Australia (Pty) Limited entered into Singapore Gasoil 10ppm cash settled swap transaction contracts. A contract for 63,000 barrels for the period January—March 2015 was committed at a fixed price of U.S.$94.00 per barrel, and a further 283,500 barrels was committed at a price of U.S.$96.00 per barrel for the period April—December 2015. Brent Crude at the time of the transaction was U.S.$78.50 per barrel. No further contracts were entered into during fiscal 2015 and 2016. Commodity Price Contract Position At December 31, 2016, there were no outstanding commodity contracts. Interest Rate Sensitivity General As of December 31, 2016, Gold Fields’ indebtedness amounted to U.S.$1,692.9 million. Gold Fields generally does not undertake any specific action to cover its exposure to interest rate risk, although it may do so in specific circumstances. For a discussion of Gold Fields’ credit facilities and other borrowings outstanding as of December 31, 2016, including the interest rates applicable to them, see “Operating and Financial Review and Prospects—Credit Facilities”. Interest Rate Sensitivity Analysis U.S.$846.5 million of Gold Fields interest bearing debt outstanding as of December 31, 2016 was exposed to interest rate fluctuations. This debt is normally rolled for periods between one and three months and is therefore exposed to the rate changes in this period. 279 Table of Contents U.S.$785.5 million of the total debt was exposed to changes in LIBOR while U.S.$61.0 million was exposed to the South African Prime Rate. The following table indicates the change to finance expense on average borrowings for fiscal 2016 of U.S.$798.7 million and U.S.$42.3 million, had LIBOR and the South African Prime Rate, respectively, differed as indicated. Change in finance expense for a nominal change in interest rate, change as of December 31, 2016 (U.S.$ million, except for percentages) Sensitivity to interest rates (1.5 )% (1.0 )% (0.5 )% 0.5 % 1.0 % 1.5 % Sensitivity to LIBOR interest rate (12.0 ) (8.0 ) (4.0 ) 4.0 8.0 12.0 Sensitivity to South African Prime interest rate (0.6 ) (0.4 ) (0.2 ) 0.2 0.4 0.6 Change in finance expense (12.6 ) 8.4 (4.2 ) 4.2 8.4 12.6 280 Table of Contents