Introduction Gold Fields is a significant producer of gold and a major holder of gold reserves in South Africa, Ghana, Australia and Peru. In Peru, Gold Fields also produces copper. Gold Fields is involved in underground and surface gold and copper mining and related activities, including exploration, development, extraction, processing and smelting. In 2016, the South African, West African, Australasian and South American operations produced 13%, 32%, 43% and 12% of Gold Fields total gold-equivalent production, respectively. Gold Fields’ currently holds a 91.3% interest in the South African operation, South Deep. Gold Fields also owns the St. Ives mine, the Yilgarn South Assets and has a 90.0% interest in each of the Tarkwa gold mine and the Damang gold mine in Ghana. Gold Fields also owns a 99.53% economic interest in the Cerro Corona mine in Peru. In November 2016, Gold Fields entered into a 50:50 unincorporated joint venture with Gold Road Resources, or Gold Road, for the development and operation of the Gruyere Gold Project in Western Australia. In addition, Gold Fields has gold and other precious metal exploration activities and interests in Africa, Eurasia, Australasia and the Americas. As of December 31, 2016, Gold Fields reported attributable proven and probable gold and copper reserves of 48.0 million ounces of gold and 454 million pounds of copper, as compared to the 46.1 million ounces of gold and 532 million pounds of copper, reported as of December 31, 2015. See “—Reserves of Gold Fields as at December 31, 2016”. In fiscal 2016, Gold Fields processed 34.2 million tonnes of ore and produced 2.22 million ounces of gold equivalent ounces. On an attributable basis, Gold Fields produced 2.15 million ounces of gold equivalent ounces. Competitive Position Gold Fields is a producer of gold and major holder of gold reserves in South Africa, Australia, Ghana, and Peru. Gold is a commodity product generally sold in U.S. dollars, with London being the world’s primary gold trading market. Gold is also actively traded using futures and forward contracts. The price of gold has historically been significantly affected by macroeconomic factors, such as inflation, exchange rates and reserves policy and by global political and economic events, rather than simple supply and demand dynamics. As a general rule, Gold Fields sells the gold it produces at market prices to obtain the maximum benefit from prevailing gold prices. Historically, the key gold producers globally have been Barrick, Newmont Mining Corporation, or Newmont, AngloGold Ashanti, Goldcorp Inc., or Goldcorp, and Gold Fields before the Spin-off. In fiscal 2016, Barrick, Newmont, AngloGold Ashanti and Goldcorp were, in that order, the four largest gold producers in the world, producing 5,517, 4,898, 3,628 and 2,873 thousand ounces respectively, and together accounted for 16% of the total global production for the year, according to the information provided by the companies and industry reports. Gold Fields was the seventh largest gold producer in the world in 2016, producing 2.15 million gold equivalent ounces on an attributable basis. According to publicly available sources, at December 31, 2016 for each of Barrick, Newmont, AngloGold Ashanti and Goldcorp, Barrick had 13 operations in eleven countries, Newmont had 15 operations in five countries, AngloGold Ashanti had 17 operations in nine countries and Goldcorp had 12 operations in six countries. Gold Fields attempts to attract and retain motivated high caliber employees through a mix of guaranteed and performance-based remuneration, as well as short-term and long-term incentives, and non-financial rewards relating to work experience. However, the worldwide mining industry, including Gold Fields, continues to 28 Table of Contents experience a shortage of qualified senior management and technically skilled employees. In order to maintain competitiveness in the global labor market, regular industry market surveys are conducted to benchmark remuneration practices and to keep abreast of industry movements regarding employee benefits and non-financial employee reward and recognition programs. Developments since December 31, 2015 Since the end of fiscal 2015, the following significant events have occurred: On February 19, 2016, Gold Fields Australasia (Proprietary) Limited, or GFA, a wholly owned subsidiary of Gold Fields, announced an offer to purchase U.S.$200 million of the notes due October 7, 2020, issued October 7, 2010, or the U.S.$1 billion Notes. Gold Fields accepted for purchase an aggregate principal amount of U.S.$1 billion Notes equal to U.S.$147.6 million at the purchase price of U.S.$880 per U.S.$1,000 in principal amount of U.S.$1 billion Notes. Gold Fields intends to hold the U.S.$1 billion Notes acquired until their maturity date on October 7, 2020. See “Additional Information—Material Contracts—U.S.$1 billion Notes Issue”. On March 17, 2016, Gold Fields concluded the Development Agreement with the government of Ghana for both the Tarkwa and Damang mines. See “—Environmental and Regulatory Matters—Ghana—Mineral Rights”. On March 18, 2016, Gold Fields successfully completed a U.S.$151.5 million (R2.3 billion) non-U.S. accelerated equity raising by way of a private placement, or the Placing, to institutional investors. A total number of 38,857,913 new Gold Fields shares were placed at a price of R59.50 per share which represents a discount of 6.0% to the 30-day volume weighted average traded price, for the period ended March 17, 2016 and a 0.7% discount to the 50-day moving average. The net proceeds from the Placing were applied to the U.S.$1,510 million term loan and revolving credit facilities that were utilized to purchase the U.S.$1 billion U.S.$1 billion Notes amounting to U.S.$147.6 million, as described above. On March 29, 2016, the Full Court of the Federal Court of Australia overturned a July 2014 Federal Court decision that the re-grant of certain tenements to Gold Fields Australia’s St. Ives mine in 2004 by the State was not compliant with the correct processes in the Native Title Act. The Applicants’ application to seek leave to appeal this decision to the High Court of Australia was unsuccessful, and the matter is now finalized. See “—Legal Proceedings and Investigations—Ngadju Native Title Claim”. On May 13, 2016, the South Gauteng High Court ordered, among other things, the certification of two separate classes for silicosis and tuberculosis on behalf of current or former mineworkers (and their dependents) who have allegedly contracted silicosis and/or tuberculosis while working for one or more of the mining companies listed in the application. Subsequently the mining companies listed in the application were granted leave to appeal against all aspects of the class certification judgment. See “—Legal Proceedings and Investigations—Silicosis”. On June 7, 2016, Gold Fields successfully refinanced its U.S.$1,510 million credit facilities due in November 2017. The new facilities amount to U.S.$1,290 million and comprise three tranches: • U.S.$380 million: 3 year term loan maturing in June 2019 – margin 250 basis points (bps) over Libor; • U.S.$360 million: 3 year revolving credit facility also maturing in June 2019 (with an option to extend to up to 5 years) – margin 220bps over Libor; and • U.S.$550 million: 5 year revolving credit facility maturing in June 2021 – margin 245bps over Libor. The new facilities were concluded with a syndicate of 15 banks. On average, the interest rate on the new facilities is similar to the interest rate on the existing facilities. A total of US$645 million was drawn down from the new facilities on 13 June 2016 to repay the group’s existing US$ facilities, with US$645 million remaining unutilized. The refinancing is a key milestone in Gold Fields’ balance sheet management and increases the maturity of its total borrowings, with the first maturity now only in June 2019 (previously November 2017). 29 Table of Contents On December 13, 2016, Gold Fields acquired a 50% interest in the Gruyere Gold Project for a total purchase consideration of A$350 million (U.S.$259 million) payable in cash and a 1.5% royalty on Gold Field’s share of production after the total mine production exceeds 2 million ounces. The purchase consideration comprises A$250 million (U.S.$185 million) payable on the effective date (December 13, 2016), and A$100 million (U.S.$74 million) payable according to an agreed construction cash call schedule. In addition, transaction costs of A$19 million (U.S.$13 million) were incurred and capitalized. The 1.5% royalty will be accounted for as the production milestones are met. The 50% unincorporated interest in the project was accounted for as a joint operation. Based on an assessment of the relevant facts and circumstances, the Group concluded that the acquisition of the Gruyere Gold Project did not meet the criteria for accounting as a business combination and the transaction was accounted for as an asset acquisition. Refer note 15.2 to the consolidated financial statements. During fiscal 2016, Gold Fields established a new Technology and Innovation, or the T&I, division This division has technical oversight throughout the Group and has developed a new T&I strategy by determining the best ways to improve safety, increase production and reduce operating costs. See “—Group Performance Scorecard—Business Optimization—Technology and Innovation”. On February 16, 2017, Gold Fields announced the results of the Rebase Plan. The Rebase Plan defines the updated Mineral Reserve and LoM plan for South Deep and incorporates all recent revisions and improvements in mine design, production scheduling and geotechnical parameters. In addition, the supporting infrastructure equipment, labor, ore handling, ventilation and refrigeration, backfill, water and power provisions required to support the production plan have been incorporated. South Deep is now targeting steady-state annual production of approximately 500,000 ounces by fiscal 2022 at an AIC of U.S.$900 per ounce. In October 2016, Gold Fields announced its reinvestment plan for the Damang Gold mine in Ghana, or the Damang Reinvestment Plan, which is expected to extend the LoM by eight years from 2017 to 2024. The Damang Reinvestment Plan is expected to enhance Gold Fields presence in one of our key operating regions and result in significant social benefits for the country, including the creation and preservation of 1,850 direct and indirect employment positions. On December 4, 2016, Gold Fields continued to streamline its portfolio by selling 11 producing and non-producing royalties to Toronto-listed Maverix Metals Inc. in return for a 32% stake in the company (refer note 15.1(b) to the consolidated financial statements). Effective March 31, 2017, ABSA Bank Limited, GFIJVH, GFO and certain wholly owned subsidiaries of Gold Fields entered into a R500 million Revolving Credit Facility. The purpose of the facility is to fund capital expenditure and general corporate and working capital requirements of the Gold Fields group. The tenor of the facility is six years. The final maturity date of this facility is March 31, 2020. Effective March 31, 2017, Standard Bank, GFIJVH, GFO and certain wholly owned subsidiaries of Gold Fields entered into a R500 million Revolving Credit Facility. The purpose of the facility is to fund capital expenditure and general corporate and working capital requirements of the Gold Fields group. The tenor of the facility is six years. The final maturity date of this facility is March 31, 2020. Planned Disposals Gold Fields, in line with its strategy of efficient portfolio management, identifies and earmarks for divestment assets that are not aligned with the Group’s business objectives. The Arctic Platinum Project, or APP, in Finland remains earmarked for divestment. In addition, Gold Fields has stated that it will, in the first half of fiscal 2017, commence a sales process for Darlot. Darlot was acquired in fiscal 2013 as part of the acquisition of Barrick Gold’s Yilgarn South Assets in Western Australia. Gold Fields has invested heavily to extend the LoM beyond the initial projected six months which has resulted in Darlot producing more than 228,000 ounces of gold in the past three years. The ongoing 30 Table of Contents multi-year investment in exploration as well as the discovery of new mineral deposits at Darlot could increase the current LoM, which extends to early fiscal 2018 based on current reserves. However, without additional conversion or discovery, the production levels are expected to decline over time, which may adversely affect the current LoM of Darlot to mid-fiscal 2018 and the full reserve may not therefore be exploited. Management believes that Darlot needs a more intensive exploration focus, which Gold Fields is unable to provide given its significant exploration activities at its other Australian assets as well as the development of the Gruyere Gold Project. Organizational Structure Gold Fields is a holding company with its significant ownership interests organized as set forth below. 31 Table of Contents Group Structure(1)(2) Notes: (1) As of April 3, 2017, unless otherwise stated, all subsidiaries are, directly or indirectly, wholly-owned by Gold Fields. 32 Table of Contents (2) See “Additional Information—Material Contracts—Additional Black Economic Empowerment Transactions”. (3) Not all other subsidiaries and investments are wholly-owned. Gold Fields is a limited public company incorporated in South Africa, with a registered office located at 150 Helen Road, Sandown, Sandton, 2196, South Africa, telephone number +27-11-562-9700. Strategy Overview After almost four years of belt-tightening and consolidation, fiscal 2016 was the year in which Gold Fields started strengthening and expanding its portfolio of mines and projects to ensure longer-term sustainable cash generation. Gold Fields began fiscal 2016 in much better financial and operational shape than when our transformation journey started in fiscal 2012. While we benefited from a stronger than planned for gold price our 2016 successes are attributable to remaining focused on achieving our key strategic priorities, which were: • South Deep—finalize and successfully implement the Rebase Plan for long-term success; • Cash-flow generation—improve cash flow and margin; • Dividends—pay between 25% and 35% of normalized earnings; • Balance sheet—reduce net debt to adjusted EBITDA, ratio to 1.0 times or below by the end of fiscal 2016; and • Growth and expansion—through brownfields exploration, project development and opportunistic, value-accretive acquisitions. The Company has made progress on each of these priorities during fiscal 2016. In February 2017, we announced the long-term production and cost guidelines for the South Deep mine in South Africa after two years of extensive rebasing work by the management team appointed in fiscal 2015. We are now targeting steady-state production of approximately 500,000 ounces by fiscal 2022 at an AIC of U.S.$900 per ounce. Of significance, South Deep was cash-positive in fiscal 2016 for the first time, helped by the higher Rand gold price. During fiscal 2016, we generated U.S.$294 million in net cash flow (non-IFRS measure-see “Information on the Company—Glossary of mining terms—net cash flow” for a reconciliation to “net cash flow from operations” in accordance with IFRS) compared with U.S.$123 million in fiscal 2015. While our Australian mines and South Deep were undoubtedly aided by the weaker Australian Dollar and South African Rand, improved cash generation is also attributable to tight cost management by our operational teams, as well as the improved operating performance at South Deep, which recorded a U.S.$92 million swing in cash-flow from an outflow of U.S.$80 million in fiscal 2015 to an inflow of U.S.$12 million in fiscal 2016. The 17% cash-flow margin at the average gold price received of U.S.$1,241 per ounce in fiscal 2016 is well ahead of target (15% at a gold price of U.S.$1,300 per ounce). The total dividend for the year of R1.10 per share equates to 32% of normalized earnings, at the upper end of our dividend policy and 340% ahead of the total dividend declared in fiscal 2015. Through a combination of improved cash-flows, debt restructuring and equity raising, we managed to achieve a net debt to adjusted EBITDA ratio of 0.95 times at the end of fiscal 2016 (even after the upfront A$250 million payment for the Gruyere Gold Project), compared with 1.38 times at the end of fiscal 2015. We are confident of maintaining a responsible net debt position during fiscal 2017, despite funding new, lower-cost projects. 33 Table of Contents A significant investment in the future of Gold Fields positions us to generate future profits at the current gold price and offer leverage to a rising gold price. In support of this strategy, we launched some key projects during fiscal 2016, in addition to the South Deep rebase announcement: • In October, we announced a US$341 million investment at our Damang mine to extend the life of the mine by 1.6 million ounces and eight years. Production will be at a low AIC of around US$950/oz and be cash- generative in about three years’ time. • In November, we acquired a 50% joint venture interest in and management control of the Gruyere Gold Project in Western Australia owned by Australian exploration company Gold Road Resources for a consideration of A$350 million. Once in production, which is forecast for late fiscal 2018 or early fiscal 2019 and will require a total of A$507 million in capital for the construction, the Gruyere Gold Project will produce about 270,000 ounces a year (100% basis) over a 13-year reserve life at an AIC of less than U.S.$805 per ounce; • Also in Western Australia, we spent A$102 million (U.S.$76 million) on near-mine (brownfields) exploration at our four mines, adding 450,000 ounces in mineral reserves (after depletion) during the year. This was driven by successful exploration programs at St. Ives and Granny Smith. For fiscal 2017, we have planned a further A$89 million (U.S.$65 million) in brownfields exploration spend at the operating mines as well as A$4 million (U.S.$3 million) at the Gruyere Gold Project; and • Finally, we streamlined our portfolio by selling 11 producing and non-producing royalties to Toronto-listed Maverix Metals Inc., or Maverix, in return for a 32% stake in Maverix, which has already provided a noticeable increase in value. All of our key decisions regarding the Company’s future growth relied on collaboration with our stakeholders to achieve meaningful cash-flow for the benefit of all stakeholders: • Gold Fields showed a vastly improved safety performance in fiscal 2016. Our TRIFR improved by 33% to 2.27 recordable injuries per million hours worked. Regrettably, we still had one fatality in fiscal 2016, compared to three fatal mine accidents in fiscal 2015. We have found that there is a strong correlation between a safe mine and a strong operating performance, and remain committed to realizing our Zero Harm policy; • The long-term Rebase Plan for South Deep is critically dependent on the co-operation of our employees, and the three-year agreement we entered into with their representative trade unions in fiscal 2015 was a vital underpin to the plan. We have also engaged the local community through a variety of projects focused on improving their social and economic wellbeing with a specific emphasis on host community procurement and employment. This, we believe, will ensure that these communities will grant us our social license to operate, which is critical given South Deep’s significant mine life; • The investment in Damang was facilitated in part by the signing of a Development Agreement with the Ghanaian government in March 2016. This agreement provides tax and other concessions in return for future investment at our operations. Furthermore, the investment guarantees the creation and protection of about 1,850 direct jobs as well as sizeable community programs over the mine’s new eight-year life; and • A significant investment in low-carbon and renewable energy projects at many of our mines is intended to ensure that we reduce the future cost of electricity and facilitate long-term security of supply, thereby mitigating two critical risks facing the Company. A majority of our Australian and Ghanaian operations are now powered by gas, after new gas-fired power plants were commissioned to supply our Granny Smith, Tarkwa (currently 50% supply) and Damang mines. In addition, we have appointed a renewable energy firm to develop a 40MW solar plant at South Deep over the next two years, which apart from lower costs and security of supply, has the added benefit of reducing carbon emissions at the mine. 34 Table of Contents Supporting our integrated management approach is robust and effective corporate governance throughout the Group. During fiscal 2016, the Company revised its Code of Conduct, which forms the ethical basis of the business and informs how we conduct ourselves and interact with all stakeholders. We have also committed to implementing the recommendations of the King IV Report on Corporate Governance. Our focus on viable cash-generation was supported by the recovery in the gold price during fiscal 2016. After falling by 45% between September 2011 and December 2015, when it hit a low of U.S.$1,060 per ounce, the gold price recovered in fiscal 2016, ending the fiscal year at U.S.$1,130 per ounce. Since then it stabilized at around the U.S.$1,200 per ounce level towards the end of February 2017. To some extent, we were also supported by weaker currencies in commodity-exporting nations, though this effect was less pronounced than in fiscal 2015. The ability to generate cash is critical in distributing the benefits from mining to our stakeholders. In fiscal 2016, Gold Fields’ value distribution, as measured by the WGC definitions, totaled U.S.$2.505 billion, slightly more than the U.S.$2.425 billion we distributed in fiscal 2015. This amount was dispensed as follows during fiscal 2016: • U.S.$122 million (fiscal 2015: U.S.$117 million) to shareholders and debt providers, who are seeking a return on their invested capital through dividend and interest payments; • U.S.$482 million (fiscal 2015: U.S.$435 million) to our employees, whose work is rewarded through salaries and other benefits; • U.S.$1,648 billion (fiscal 2015: U.S.$1.663 billion) to contractors and suppliers, from whom we procure goods and services; • U.S.$235 million (fiscal 2015: U.S.$196 million) to governments and regulators, who grant us our mining licenses and who benefit from our tax and royalty payments; and • U.S.$16 million (fiscal 2015: U.S.$14 million) in social investment programs among our host communities, whose support is critical for our social license to operate and who benefit significantly through host community jobs and procurement. Group Performance Scorecard Each year, Gold Fields adopts a Group performance scorecard that incorporates the strategic priorities and seeks to instill the right culture and behaviors among our workforce, driven by the strategic imperative of cash generation. By integrating all of the key value drivers into the business, the scorecard also aims to enhance the Group’s sustainability. The scorecard consists of four key performance areas and elements against which we measure our performance. These are financial performance; our social license to operate; people; and business optimization. Financial Performance The first key performance area of the Group scorecard is financial performance, as measured by cash flow generation and debt reduction as well as improving investor confidence. Our strategy is driven by the objective of generating a 15% FCF Margin at a gold price of U.S.$1,300 per ounce, as we believe that this is a reasonable long-term price for bullion. The premise is that when the gold price trades above U.S.$1,300 per ounce, the FCF Margin will grow commensurately. Conversely, when prices trade below U.S.$1,300 per ounce, as we have seen since 2012, the inclusion of the 15% FCF Margin at that level provides Gold Fields with a safety cushion down to our cash breakeven level of approximately U.S.$1,050 per ounce. The Group’s FCF Margin for 2016 was 17%, despite the fact that at U.S.$1,241 per ounce, the actual annualized gold price received was again below the planning price of U.S.$1,300 per ounce. It illustrates that our strategy of boosting margin growth is paying off. 35 Table of Contents Net Cash Flow and Focus on Cost Net cash flow is one of the key measurements of Gold Fields’ turnaround strategy since fiscal 2012. Despite the 25% decline in the average price of gold between fiscal 2012 and fiscal 2016, Gold Fields’ ability to generate cash has improved substantially. During fiscal 2016, this was aided by the higher average gold price received, as well as a weakening of the Rand and the Australian dollar against the U.S. dollar. The improved Rand gold price also helped South Deep breakeven for the first time. Our cash flow progression over the past five years has seen us turn around a net cash outflow of U.S.$280 million in fiscal 2012 to a net cash inflow of U.S.$294 million in fiscal 2016. Central to our ability to generate free cash flow is a commitment to cost management, which we have implemented rigorously over the past few years, though we have been careful not to cut sustaining capital expenditure critical to maintaining the long-term integrity of our ore bodies. During fiscal 2016, costs were marginally lower than in fiscal 2015 as a result of exchange rate benefits, lower oil prices and cost controls by our operations. Both AIC at U.S.$1,006 per ounce and AISC at U.S.$980 per ounce were below their respective 2016 guidance ranges of U.S.$1,035 per ounce to U.S.$1,045 per ounce and U.S.$1,000 per ounce to U.S.$1,010 per ounce, respectively. Cumulative reduction for AIC between fiscal 2012 and fiscal 2016 has been 35%. Debt Reduction One of Gold Fields’ key strategic objectives has been to reduce the amount of debt on our balance sheet. In this regard, management set itself a target of reducing the net debt to adjusted EBITDA ratio to below 1.0x by the end of fiscal 2016. Over the year, the Group entered into a number of transactions which impacted the debt balance, including a bond buy-back of U.S.$148 million funded from an equity raising of U.S.$152 million to decrease the level of net debt. The first upfront payment for the Gruyere transaction (A$250 million) in December 2016 had the effect of increasing the Group’s net debt. Despite this, the bond buy-back and equity raising, as well as the U.S.$294 million in net cash flow generated during the year, helped decrease our net debt by U.S.$214 million, from U.S.$1,380 million at the end of December 2015 to U.S.$1,166 million at the end of December 2016. This resulted in a net debt to adjusted EBITDA ratio of 0.95x, below our stated target of 1.0x. Improving Investor Confidence Our portfolio has undergone a fundamental change since fiscal 2013. We spun off the Sibanye Gold assets to shareholders, eliminated marginal mining, stopped all projects in our growth pipeline that did not provide an adequate return and, in October 2013, acquired the Yilgarn South Assets in Western Australia from Barrick. In fiscal 2016, we expanded our portfolio to take advantage of the improved gold price and our significant cash-flow generation. The only operating asset in the Group that still has to be brought fully to account is our South Deep mine. Here we achieved cash breakeven for the first time in fiscal 2016. The mine reported net cash inflow of U.S.$12 million compared to an outflow of U.S.$80 million in fiscal 2015 and in February 2017 announced the mine’s long-term production and cost metrics (the Rebase Plan). Gold Fields also remains one of the higher dividend payers among its peers. The total dividend declared for the year of R1.10 per share (fiscal 2015: R0.25 per share) is equivalent to 32% of normalized earnings, close to the top end of our dividend policy of paying out 25% to 35% of normalized earnings as dividends. We believe that Gold Fields has established a solid base which will maintain the confidence of our current shareholders and attract long-term investors seeking value and leverage to the gold price. 36 Table of Contents Business Optimization Underpinning the financial performance of the business is Gold Fields’ commitment to running its operations safely, efficiently and cost-effectively without undermining the longevity of our mines. We measure the success of business optimization by looking at our progress on Safety and Health; the performance and growth of our portfolio of mines and projects; setting up the South Deep project for long-term success; running our mines energy efficiently; and using technology and innovation to optimize their future performance. Gold Fields’ operating and financial performance during fiscal 2016 showed that our efforts in this regard are paying off. Highlights were: • Production of 2.15 million gold-equivalent attributable ounces, broadly in line with our updated guidance for the full year of 2.10 to 2.15 million ounces; • Strong cost management across the Group resulted in a good cost performance with AISC of U.S.$980 per ounce and AIC of U.S.$1,006 per ounce in fiscal 2016, below guidance for the year; and • Net cash flow increased strongly to U.S.$294 million in fiscal 2016 compared with U.S.$123 million in fiscal 2015. Safety and Health Safety is management’s first priority in running our operations, and it is critical that we continuously emphasize that our first value is “if we cannot mine safely we will not mine.” Nevertheless, we had one fatality during fiscal 2016 (compared with four fatalities in fiscal 2015, three resulting from operational accidents and one from crime). On September 10, 2016, Mr. Vakele Thafeni, a learner miner, was killed after a 1.5 magnitude seismic event caused an underground rock burst at South Deep. Post year-end, on January 1, 2017, Thankslord Bekwayo, a dump truck operator, and on February 16, 2017, Nceba Mehlwana, a loco driver, were killed in underground accidents. While any fatality is an undoubted setback on our journey to Zero Harm, we are encouraged by the progress made in terms of our overall safety performance during 2016. Our TRIFR showed a further 33% improvement to 2.27 per million hours worked from 3.40 in fiscal 2015. The work on safety is integral to our operational discipline and has been accepted as the foundation for improved performance. As such, there is no conflict between pursuing safety and productivity at the same time. Behavior-based safety programs are in place across the Company and our work at embedding these into our day-to-day performance, along with visible management leadership on the ground, continues. At South Deep, the CEO’s “Zero Harm” task team has been strengthened with the addition of a Board director to the team. The Group has also intensified operation-specific health and wellness programs, focusing on improving the physical and mental health of our employees. Quality Portfolio of Assets During fiscal 2016, Gold Fields made a conscientious effort to invest in enhancing the quality of its existing portfolio while at the same time identifying value-accretive acquisitions. This active portfolio management approach requires an ongoing strategic review of all existing assets as well as potential acquisition targets against our strategic imperatives. Similarly, growth at Gold Fields is not just a matter of increasing the Group’s mineral resources and mineral reserves or boosting the production profile; it is about growing cash flow per ounce and per share in the medium and long term. In this context, Gold Fields continued to focus on improving the cash-generation performance of its existing operations and identifying value-adding projects. The pillars that support this strategy are: • Protection of the commercial sustainability of our mines by avoiding high-grading and investing in ore development on an ongoing basis; 37 Table of Contents • The cessation of all early greenfields exploration activity and a focus on brownfields (near-mine) exploration for LoM, particularly at our Australian operations; • Production and strategic planning based on the delivery of a 15% FCF margin at a gold price of U.S.$1,300 per ounce; and • The identification of cash-generative acquisition opportunities that are aligned with Gold Fields’ core competencies. To ensure that our business has a strong future, we have made ongoing investment in brownfields exploration as well as the development of ore bodies strategic priorities. These are among the last activities we would cut, even in a sustained low gold price environment the costs associated with maintaining the integrity of our ore bodies is built into our mines’ cash-flow models. Key decisions since January 2016 that improved the quality of our portfolio of assets included: • The Damang Reinvestment Plan which will extend the mine’s LoM by eight years to 2024 at costs that will lower the Company’s average cost of production; • The acquisition of 50% of the Gruyere Gold Project in Western Australia from Gold Road; • The progression of the Salares Norte project in Chile to a pre-feasibility study; • The sale of our royalty portfolio to Maverix in return for a 32% holding in the company; and • The decision to commence with the sale of the Darlot mine in Western Australia. Gold Fields believes that near-mine exploration offers the best route to low-cost ounce replacement that can generate cash in the short- and medium-term. In fiscal 2016, Gold Fields raised its total near-mine exploration expenditure by 5% to U.S.$80 million, on top of the U.S.$162 million spent in the preceding three years, in pursuit of this strategy. Much of this activity was focused on the Australia region, where the four mines in our portfolio spent A$102 million (U.S.$76 million) in fiscal 2016, in line with the A$91 million (U.S.$72 million) spent in fiscal 2015. This is part of a multi-year strategy to both replace and increase quality reserves and resources at our operations in Australia. In addition to exploration drilling to extend current ore bodies, activity focused on developing early-stage generative targets on the prospective leases. Some successes from fiscal 2016 included: • St. Ives’ Invincible mine was extended to Invincible Underground and Invincible South; • Work at Agnew/Lawlers showed good potential at the Waroonga North ore body, adjacent to the Waroonga underground operation; and • Exploration at Granny Smith indicated further mineralization at depth of the existing Wallaby underground mine. To build on the work undertaken to date, we have budgeted A$89 million (U.S.$65 million) for fiscal 2017. This includes exploration at the Gruyere Gold Project, which is a departure from the brownfields approach, but which we believe will enhance our portfolio in Western Australia and expand our exposure to this new and emerging goldfield. Furthermore, we have proven our ability to absorb new operations into the Gold Fields Australia portfolio by leveraging off existing resources. Gold Fields took over management of the Gruyere Gold Project on February 1, 2017, and first production is expected by late fiscal 2018 or early fiscal 2019. Pursuing cash-generative acquisition opportunities is an integral part of our strategy although by necessity, opportunistic in nature. However, given our existing commitments, further merger and acquisitions, or M&A, during fiscal 2017 or fiscal 2018 appears unlikely except in countries in which we already have a presence and where it has synergistic benefits. It would be modelled on our successful U.S.$262 million acquisition of the Yilgarn South Assets from Barrick Gold in October 2013. An acquisition like this will be difficult to replicate in terms of the price we paid, but the structural benefits and subsequent management efforts have given us a model to replicate. 38 Table of Contents Finally, we are examining whether a return to judicious greenfields exploration would be a viable proposition in view of the sharp price escalation of mines already in operation. This strategic consideration is at an early stage and includes an evaluation of whether Gold Fields should pursue greenfields exploration on its own or in co-operation with junior miners. During fiscal 2016, Gold Fields increased attributable gold mineral reserves (net of depletion) by 4% to 48.1Moz. Attributable copper mineral reserves totaled 454 million pounds (fiscal 2015: 532 million pounds). Encouragingly, in Australia, we added 450,000oz in mineral reserves (after depletion) during fiscal 2016. South Deep In fiscal 2015, the new management team at South Deep took a decision to take a step back and “get the basics right” to ensure a stronger foundation for sustainable growth in the future. During fiscal 2016, this rigorous approach showed signs of success, with the following encouraging indicators of improvement: • The mine’s safety performance was the best it has been since Gold Fields bought the project in fiscal 2006, though we regrettably had one fatal mining accident (fiscal 2015: two fatalities); • Production of 290,400 oz in fiscal 2016 was 47% higher than the 198,000oz produced in fiscal 2015; • Costs were reduced with AIC of U.S.$1,234 per ounce showing a significant 21% improvement on the U.S.$1,559 per ounce reported in fiscal 2015; • Most significantly, South Deep was cash positive for the first time, aided by a currency hedge and the stronger Rand gold price of R584,894/kg (fiscal 2015: R478,263/kg) received during the year. The mine generated U.S.$12 million in net cash flow during fiscal 2016 compared with an outflow of U.S.$80 million in fiscal 2015; and • Full implementation of the high profile destress mining method. Key to improvements at South Deep were strategic interventions on a number of fronts: • People: The recruitment of identified critical skills was completed during fiscal 2016 and most of the core mining and engineering positions have now been filled, a process supported by intensified training programs for our existing staff. In addition, the signing of a three-year wage deal with trade unions in March 2015, which will govern wages and other working conditions until March 2018, is expected to give South Deep a degree of labor stability as the mine builds up; • Fleet: As part of the fleet renewal strategy, 58 category 1 units have been commissioned over the past two years. The total category 1 fleet currently stands at 111 units. The renewed fleet is expected to have a positive impact on fleet availability and utilization. The maintenance capacity at South Deep improved during the year through the implementation of supplier maintenance contracts in corridor 2 (approximately 35% of total mining), as well as the commissioning of the 93 level workshop; and • Mining method: During fiscal 2015, South Deep management, in collaboration with a team of leading international and local geotechnical experts, reviewed the destress mining method. Following the recommendations, we implemented a strategic change in the design of destress methodology, and converted from low profile to high profile destress mining during fiscal 2016. By year-end, most of the mine was employing this approach, which contributed significantly to simplifying and de-risking the mining process. Building on this work, in February 2017, the Board approved the long-awaited Rebase Plan for South Deep, which sketches the long-term production and cost profile of the mine. The key features of this plan are: • Increasing the tonnes milled to 2,861 kt by fiscal 2022; 39 Table of Contents • Ramping up production to 500,000 oz by fiscal 2022; • Reducing AIC to U.S.$900 per ounce by fiscal 2022; and • Growth of capital expenditure of R2.3 billion (U.S.$151 million) over the next six years. Managing Energy Costs and Climate Change Risks Energy remains a major performance driver, accounting for 19% of Group operating costs in fiscal 2016, having gradually risen from 18% in fiscal 2013, amid increasing energy demand and supply constraints in all of our operating regions. As part of the Integrated Energy and Carbon Management strategy implemented in 2014, each of our regions has set energy reduction targets, which have already delivered around U.S.$41 million in savings (against plans) between fiscal 2014 and fiscal 2016. For fiscal 2016, this equates to energy savings of around 3% against our business plans, with an additional benefit of 4% savings in our CO2e. Most critically though is that the average energy spend per ounce of gold produced has declined by 18% to US$130/oz between 2014 and 2016, with energy efficiency initiatives contributing the equivalent of US$5/oz to these savings. At the same time, the regions have been tasked with securing access to future energy sources. In Ghana, where the government required our mines to reduce their electricity consumption by 25% to 30% over the past few years, both Tarkwa and Damang have signed power purchase agreements with an independent power producer, which successfully commissioned new gas-powered plants at both of these mines during fiscal 2016. The plants at Tarkwa (3 x 11MW units) and Damang (5 x 5.5MW units) are expected to result in reliable supply and significant electricity cost savings for both operations. As at the end of fiscal 2016, 100% of Damang’s and 50% of Tarkwa’s power requirements were supplied by the new gas-powered plants. It is expected that these plants will supply 100% of Tarkwa’s power requirements from the beginning of fiscal 2018. With the successful commissioning of a new gas power plant at Granny Smith, each of our four mines in Western Australia is now supplied by gas and new long-term supply agreements have been entered into with various utilities. While lower global diesel prices have somewhat mitigated the current cost benefits of a switch to gas, we believe that the long-term price differential will favor gas over diesel. Gas is also a cleaner fuel with resultant environmental benefits. Our Cerro Corona mine in Peru also has a long-term power agreement in place with a private gas company. The improved power supply environment in South Africa ensured that our South Deep mine was not subject to load-curtailment programs during fiscal 2016. In keeping with our commitment to renewable energy, we solicited proposals for an on-site 40MW photovoltaic solar plant at the mine. In October 2016, we appointed an independent renewable power company to build, own and operate the solar plant for the next 20 years. The plant will provide around 19% of the mine’s annual power requirements at costs that are at least on par with Eskom tariffs. Gold Fields remains committed to our goal of 20% renewable energy generation over the LoM at all new projects and is investigating this requirement for our Salares Norte project in Chile. Greater use of renewables has the added benefit of reducing our carbon footprint, which is one of Gold Fields’ key environmental priorities. During fiscal 2016, our total CO2 emissions increased to 1.96 million tonnes (fiscal 2015: 1.75 million tonnes), but we expect longer-term benefits to our emissions arising from the energy efficiency projects we have put in place at our mines. During fiscal 2016, we implemented a Group climate change policy that addresses the risks faced by our operations as a result of the change in climate arising from global warming. Technology and Innovation An important addition to our fiscal 2016 scorecard was the inclusion of the T&I division. A new division was established under EVP: Technical, Richard J. Butcher, who joined us from the Minerals and Mining Group, 40 Table of Contents or MMG, in February 2016. Richard J. Butcher and his team developed a new Gold Fields’ T&I strategy which was completed and presented to the Board in November 2016. The key features of this strategy are: • A five-year implementation plan commencing with a foundational phase over the first two years, optimizing our operations by year three and implementing new technologies and innovation over the full five-year period; • Tasking our regions to develop and implement three-year technology plans starting in fiscal 2017, with the corporate office consolidating and driving the process; • Developing a platform to share lessons learned and roll out successful projects across the Group; and • The ultimate goal of the strategy is to work towards the “Gold Fields Mine of the Future”, which will be premised on automation, an integrated digital data platform, remote machine operation, virtual reality and reduced mining waste. During the foundational phase, Gold Fields has already identified opportunities to enhance efficiencies within Gold Fields’ current regional portfolios: • The key focus for the Australia region is reducing exploration time through real time data management and the use of leading practice technologies; • In Ghana, the focus will be on data analysis to achieve end-to-end business optimization. A key part of this program is to complete fleet automation studies and trials; • The South Deep mine will upgrade its underground wireless connectivity and radio-communications systems to use technologies such as online maintenance and dispatch systems and remote operating equipment more effectively; • The Cerro Corona mine will be using upgraded operating software and a new dispatch system that will focus on porphyry ore blending to reduce variation of stock feed, thereby optimizing plant recoveries; and • Investigating the potential for an automated and remote-controlled underground trial mine at one of our Australian operations. Recent advances in digitization, automation and mechanization make it critical that we develop strategies to implement new technologies and partner with IT companies and original equipment manufacturers, or OEMs, that are leaders in the field. License to Operate The success of our business is critically dependent on relationships with a number of key external stakeholders that determine both our regulatory and social licenses to operate: governments at national, regional and local level and, above all, the communities that host our mines. Over the years we have devoted considerable resources and energy to securing and maintaining our relationship with these key stakeholders. A number of elements are critical in achieving sound and supportive community relations: Extensive engagement work, investment in these communities, as well as the responsible management of environmental resources, particularly water. These resources, if not managed sustainably, can have an adverse impact on the nearby environment and create tensions with host communities, thus threatening our licenses to operate. At the same time, we need to ensure that we plan for the closure of our operations throughout the LoM, ensuring that when we eventually exit, we have optimized operating costs, our environmental footprint is mitigated and the economy of the host community continues to thrive. Improved Community Relations and Shared Value The communities in which we operate are directly and often exclusively dependent on the sustainability and growth of our mines and they seek a greater share of the benefits of mining than they have received to date. One 41 Table of Contents of the biggest challenges facing mining companies is building relationships and trust with these host communities, without which there is potential for operational disruption, project delays and cancellations—the loss of the “social license to operate” referred to previously. Host community procurement and employment are critical pillars of our community investment strategies at all our operations in developing countries. At present, host community employment accounts for 23% of our workforce at Cerro Corona in Peru, 13% at South Deep in South Africa (in line with Mining Charter definitions) and 72% at our two Ghanaian operations. The percentages of host community procurement spend was 8%, 14% and 7%, respectively. Gold Fields is proactively looking at ways to increase local employment and procurement opportunities over the next few years, including engaging with our large multi-national suppliers to support investment in these communities. At South Deep, we have set ourselves the target of procuring 25%, equivalent to an estimated R500 million a year, of goods and services from the mine’s Westonaria host community, creating around 500 new jobs in the process. We are making good progress in this regard; in fiscal 2016, host community procurement spend rose by 85% to R356 million, the number of host community suppliers to South Deep increased to 83 (fiscal 2015: 76). Gold Fields has also invested in communities through a range of educational, skills development, health and infrastructure projects and, more recently, through Shared Value-based projects. However, it is evident that mining companies need to expand and deepen their investment in and engagement with host communities. Our contribution to host communities is on a more sustainable footing as we increasingly use a Shared Value approach to structure our investments in community projects, thereby taking into account social and economic benefits rather than just spend. To date, our regions have implemented six Shared Value projects ranging from the promotion of mathematics and science education among South Deep’s host communities to multi-lateral water management projects at Cerro Corona and increased sourcing from community suppliers at all our mines. The most high-profile project is the U.S.$17 million, three-year upgrade of the dirt road between the Tarkwa and Damang mines in Ghana. We are working with government in building the road which, when completed, will significantly improve access for our operations’ host communities. In addition, the bulk of the labor required for completing the project is being sourced from these communities. Environmental Management Responsible environmental management remains a vital component of Gold Fields’ regulatory and social license to operate at all our operations and projects. In fiscal 2016, we reported three incidents of limited non-conformance or non-compliance that resulted in ongoing but limited environmental impact, or Level 3 environmental incidents (fiscal 2015: five). All three incidents took place at our Ghanaian operations in the first quarter of fiscal 2016. The two incidents at our Tarkwa operation involved accidental damage to fuel units and hoses that spilt large volumes of fuel into the environment. The incident in Damang involved the overflow of about 20,000 liters of tailings slurry and supernatant water into a nearby event pond as a result of blockages in the tailings delivery pipeline and heavy rainfall. In all cases, corrective actions were implemented to prevent future recurrence. Water is a particular focus of our environmental strategy, as it is becoming an increasingly scarce and expensive resource globally. Managing the risks around current and anticipated water security, which includes the quantity and quality of supply as well as associated costs, is essential to ensure sustainable production for existing operations and the future viability of projects. Water withdrawal across the Group decreased to 30,321Mℓ (2015: 35,247Mℓ), while water withdrawal per ounce was lower at 13.67kℓ in fiscal 2016 compared with 15.77kℓ in fiscal 2015. The Group’s water management guideline requires operations to identify opportunities to enhance water reuse, recycling and conservation practices. In fiscal 2016, a total of 16 initiatives were implemented in line with these guidelines, including the use of in-pit tailings disposals at our St. Ives and Tarkwa mines. Many of these initiatives 42 Table of Contents deliver multiple benefits, including cost savings, reduced impact in water scarce areas, improved regulatory compliance, identification and mitigation of water-related risks and reduction of mine closure liabilities, thereby enhancing Gold Fields’ social license to operate. These efforts will continue into the future. Following the Mount Polley (Canada, August 2014) and Samarco (Brazil, November 2015) tailings dam disasters, the 23 mining companies that are members on the International Council of Mining and Metals, or the ICMM, agreed to convene to review the standards for tailing storage facilities. The resultant working group, which is chaired by Gold Fields, announced in December 2016 a new agreement that will encourage members to further improve the management of mine tailings throughout their global operations. In fiscal 2017, external consultants will conduct Gold Fields’ three-yearly review of all the 26 tailings facilities at our mines and projects and will assess our tailings management against the new position statement. The total gross mine closure liability for Gold Fields increased from U.S.$353 million in fiscal 2015 to U.S.$381 million in fiscal 2016. We plan on further enhancing our integrated approach to mine closure management with a focus on post-closure water management. The program is currently being finalized and implementation is scheduled for fiscal 2017. People The profile of our workforce was profoundly impacted during the initial years of our transformation journey from fiscal 2012 to fiscal 2014, with large-scale reductions in the number of employees and contractors. Since then, our human resource base has stabilized with 8,964 employees and 9,127 contractors at the end of fiscal 2016. With the shift towards mechanization and automation, we have found that in addition to the continued development and training of our workforce, it is important to recruit the appropriate skills for our mines. At South Deep, we completed the recruitment of necessary mining skills during fiscal 2016 and continue to train our workforce in underground mechanical mining skills. During fiscal 2016, we spent over U.S.$17 million globally on training and development, in addition to recruiting the best mining skills to supplement our existing talent pool. Since the restructuring process, our smaller, yet more skilled workforce has ensured that Gold Fields works more efficiently to improve productivity. The key to this is that employees are incentivized to deliver against clearly defined performance targets that directly support the achievement of business objectives. Our remuneration strategy is evolving to attract and retain these skills, and our people development approach is being adjusted to ensure that we build a robust internal skills pipeline that can supply the skills that the Company needs, now and in the future. Our people strategy is based on achieving the following key objectives, to: • Create and sustain a high-performance culture; • Become an “Employer of Choice” for the best talent in the industry; • Ensure we have the right people in the right jobs at the right time; • Ensure a sufficient supply of the right leaders; and • Build great people managers. Achievement of this strategy is reflected in our Group scorecard objectives for fiscal 2016: • Performance management; • Improved people management skills; • Create a conducive work environment; • Improved talent management; and • Communication and engagement. 43 Table of Contents Of these five scorecard objectives, we have identified “communication and engagement” as an especially important component of people management. Our engagement with trade unions is critical in this respect, particularly in Ghana and South Africa, where a large portion of our workforce is represented by various unions. In March 2015, we signed a three-year comprehensive wage deal that recognizes the mechanized mining requirements of South Deep as we take it to full production. Negotiations on a new agreement, which is due in fiscal 2018, will commence in fiscal 2017. In Ghana, negotiations with the unions have been concluded with a 10% basic salary increase for fiscal 2016 (to be backdated to January 1, 2016) and a 6% increase for fiscal 2017 being the main outcome of the negotiations. We continue to invest in building cordial relationships with unions in both Ghana and South Africa, but the journey from confrontation to collaboration is an ongoing one. At South Deep, in particular, the priorities of the business in terms of delivering the mine’s Rebase Plan are sometimes in conflict with the views and aspirations of the main trade union. This potential conflict now requires urgent resolution. In Ghana, the aspirations of the unions for continued above inflation wage increases is undermining our business and a new wage model is in the process of being evolved through dialogue with the union. Without consensus, a restructuring of our business is likely. Our goal remains to develop our relationships with trade unions further so that they do not compromise the delivery of our business objectives. Group Strategy Fiscal 2017 will be a year of re-investment for Gold Fields, the benefits of which are expected to be realized in the years to follow. In addition to its cash-generative mines within the portfolio, Gold Fields now has development and growth projects in each of the four regions in which it operates. In South Africa, we have South Deep which is still a mine in build-up. In Ghana, the re-capitalization of Damang is essentially the equivalent of developing a new mine, while our investment in the Gruyere joint venture will lead to the construction of a new mine in Western Australia. Finally, in the Americas region, we are set to conclude a pre-feasibility study on the Salares Norte project in northern Chile by the second half of fiscal 2017. These projects are important in terms of their contribution to the strategic objectives of Gold Fields, namely to maintain and grow cash flow on a sustainable basis. They are all forecast to operate at AIC which are lower than the current AIC of the Group once steady-state levels of production are realized and as such, the Group’s overall cost of production will reduce over time and the quality of the portfolio will improve. At South Deep, we have announced the Rebase Plan, which is anticipated to position the mine at a steady-state production of 500,000 ounces per year by fiscal 2022, at AIC (in 2017 terms) of below U.S.$900 per ounce. Similarly, the Damang project has projected AIC, including upfront capital development, of U.S.$950 per ounce, and the Gruyere Gold Project AIC of U.S.$805 per ounce. Although the Salares Norte pre-feasibility study is still being concluded, we anticipate that AIC is likely to be lower than these levels due to the high grades and the likelihood that this will be an open-pit operation. Furthermore, we continue to invest in brownfields exploration in Australia with the objective of not only replacing what we mine each year, but also with the aim of increasing our resources and reserves at a higher quality than what has been mined previously. We will continue to look for life extension opportunities at Cerro Corona through economic additions to both the tailings and waste facilities, as well as through brownfields exploration on Cerro Corona porphyry style systems in the vicinity of the mine. Tarkwa has a strong resource position, but we are stepping up our efforts to convert some of these to reserves and to look for opportunities for other styles of mineralization across the lease. The Kobada Hill prospect has emerged as an interesting hydrothermal style target with encouraging geology and controlled mineralization with good continuity. In due course underground mining could also potentially offer opportunities at Tarkwa. 44 Table of Contents These investments, we believe, will achieve a measure of success over the next three years, thereby maintaining and sustaining strong cash flows from the operations. Amid the strong investment drive at Gold Fields, some shareholders have been asking whether we have changed our strategic focus from cash generation to a drive for long-term production. This is not the case as the main objective underpinning Gold Fields’ strategy remains the generation of sustainable and increasing cash-flow. The focus on cash flow is two-fold in that it entails growing our cash margin and absolute cash flow and then distributing this in the form of dividends and repaying debt. To continue expanding margins and distributing cash, the long-term sustainability of the business must be kept intact. This requires investing to extend the life of our assets, ensuring we maintain our regulatory and social licenses to operate, strong corporate governance and retaining our people, who are key to the success of our business. It also entails maintaining a healthy balance sheet and not taking on too much debt, which might lead the Company into financial difficulties should the macro-economic environment turn against it. The challenge facing Gold Fields’ management will be to balance distributing the cash we generate with reinvestment into our assets to ensure that our portfolio of mines generates cash sustainably into the foreseeable future. The key financial objectives of Gold Fields’ strategy include: • Meeting our production and cost guidance; • Generating a 15% FCF margin at a U.S.$1,300 per ounce planning gold price; • Paying 25% – 35% of normalized earnings as dividends; • Maintaining a net debt to adjusted EBITDA ratio to 1.0x or below if possible in the long term; • Extending the life of our Australian portfolio through brownfields exploration; • Pursuing value-accretive M&A; and • Successfully implementing the South Deep Rebase Plan. Fiscal 2017 is a year where the Company is expected to spend more than it will bring in, but with the view to achieving and increasing sustainable cash flow generation over the medium to long-term. The alternative is to harvest the assets over five or six years, which we don’t believe that this is in the best long-term interests of either shareholders or other stakeholders in the Company. As we embark on the Company’s reinvestment drive, we will pursue only those investments and capital expenditures that have a clear path to pay-backs and returns. Furthermore, we need to optimally manage our ore bodies in terms of grade management and ongoing sustainable capital expenditure by planning for outcomes that optimize the life of the ore body (and thus optionality) and cash flow. Stakeholder Engagement for Fiscal 2017 Gold Fields’ prosperity in the short- and longer-term is critically dependent on societal acceptance. This can only be achieved through transparent and mutually beneficial relationships with governments at all levels (national, regional and local), organized labor and host communities. Our corporate and regional management teams have been tasked with intensifying stakeholder engagements in fiscal 2017 to ensure that we operate in a business environment that allows us to work profitably to the benefit of all stakeholders. The Development Agreement that we entered into with the Ghanaian government in fiscal 2016 is testament to the benefits of open and honest dialogue with stakeholders. The new royalty regime ensures that both parties share the pain in a low gold-price environment but benefit when the price rises above targeted levels. It is a model we believe can be replicated in all our jurisdictions. 45 Table of Contents In South Africa, Gold Fields has dedicated substantial human and capital resources towards meeting the targets of the 2010 Mining Charter, including the BBBEE target of 26% ownership, which we exceed. We will continue to support the transformation of the sector to make it truly representative of the South African population. True transformation will take time and cannot happen without the financial backing of investors, many of whom have fled the sector over the past few years amid poor returns on their capital. As the South African government drafts critical policies based on these engagements we urge it to avoid additional fiscal or regulatory burdens that will inevitably further stifle the growth of the sector. Directly, and through the Chamber, we have and will be engaging the South African government on three key issues that were supposed to be addressed in fiscal 2016, but have still not been finalized: The review of the Mining Charter; the once-empowered, always-empowered principle in BBBEE ownership of mining companies; and the finalization of amendments to the MPRDA. In addition, we remain committed to extensive engagement with communities around our South Deep mine, both through direct interaction but also in alliance with other gold miners operating in the area, particularly Sibanye Gold. In Peru, the mining industry is working closely with the new business-friendly government to find joint solutions to the social and environmental issues that appear to be the root causes of the distrust towards the sector by local communities. Engagement with these communities and their representative organizations is already engrained in the DNA of our Cerro Corona mine, but will only yield sustainable success if it is supported by government at national, regional and local levels. Reserves of Gold Fields as at December 31, 2016 Methodology While there are some differences between the definition of the South African Code for Reporting of Exploration Results, Mineral Resources and Mineral Reserves, or SAMREC Code, and that of the SEC’s Industry Guide 7, only the reserves at each of Gold Fields’ operations, growth and advanced exploration projects as at December 31, 2016 which qualify as reserves for purposes of the SEC’s Industry Guide 7 are presented in the table below. See “—Glossary of Mining Terms”. In accordance with the requirements imposed by the JSE, Gold Fields reports its reserves using the terms and definitions of the SAMREC Code (2016 edition). Mineral or ore reserves, as defined under the SAMREC Code, are divided into categories of proved and probable reserves and are expressed in terms of tonnes to be processed at mill feed head grades, allowing for estimated mining dilution, ore loss, mining recovery and other factors. All of Gold Fields’ operations report reserves using cut-off grades or net smelter return cut-offs, or NSR, in the case of multi-metal deposits. Cut-off grade is the grade that distinguishes the economic material within an ore body that is to be extracted and treated from the remaining material. Cut-off grade is typically calculated using an appropriate metal price and the development, stoping, processing, general and administration and sustaining capital costs to derive a total cost per tonne. NSR is the net revenue (total revenue less production costs) that the owner of a mining property receives from the sale of the mine’s metal products less transportation and refining costs. Modifying factors applied in estimating reserves are primarily based on historical empirical information, but commonly incorporate adjustments for planned operational improvements. Tonnage and grade may include some mineralization below the selected cut-off grade to ensure that the reserve comprises blocks of adequate size and continuity to facilitate practical mining. Reserves also take into account operating cost levels as well as necessary capital and sustaining capital provisions required at each operation, and are supported by “life of mine” plans. South Africa South Deep’s Rebase Plan, which forms the basis for the South Deep’s mineral reserves, will continue to be refined and enhanced as other rebasing project outcomes are delivered and as the mine evolves to steady state production. This plan incorporates all recent improvements in mine design, geotechnical parameters as well as infrastructure required to support the production plan. 46 Table of Contents At South Deep (except as noted above), the estimation of reserves is based on surface drilling, underground diamond drilling, surface three-dimensional reflection seismics, ore body facies modeling, structural modeling, underground mapping, detailed ore zone wireframes and geostatistical estimation. The reefs, which are sedimentary in nature and reflect extensive intra-basinal fluvial deposits, are initially explored by drilling from the surface on an approximately 500 meter to 2,000 meter grid. Once underground access is available, diamond drilling is undertaken on an approximate 30 meter to 90 meter grid, to provide the necessary ore body definition to support mine design and production scheduling. The following sets out the drill spacing ranges used to classify the different categories of reserves at South Deep. Reserve Classification Sample Spacing Range Min/Max Maximum Distance Data is Projected (meters) Proved 0 to 60 220 Probable 60 to 650 650 For proved reserves, the planned grade control diamond drilling must be designed at an approximate 50 meter by 50 meter grid spacing, depending on the accessibility for the diamond drill rigs. The destress mining extracts 2.5 to 5.5 meter high cuts that are generally mined horizontally at 17 meter vertical intervals, and it reduces the in situ rock stress from approximately 80 MPa to 30 to 40 MPa to facilitate bulk mechanized mining. Estimation is constrained within both geologically homogenous structural and defined facies zones, and is generally derived from either ordinary or simple kriged small-scale grids. For probable reserves, the estimates access a significant number of samples on spacing greater than the spacing for development and stoping bordering these areas. In addition, borehole spacings ranging from tens to hundreds of meters are used in conjunction with 3D seismic survey results that confirm certain structural reef elevations and key stratigraphic surfaces. Reserves classified as probable are generally adjacent to those classified as proved. Estimation is constrained within homogenous structural and facies zones, and is derived using a localized direct conditioning technique (used to derive recoverable block estimates) based on simple kriging. The primary assumptions of continuity of the geologically homogenous zones are driven by the geological model, which is updated when new information arises. Any changes to the model are subject to peer and internal technical corporate review and external independent consultant review when deemed necessary. Historically, mining at South African deep-level gold mines has shown significant geological continuity, so that new mines were started based on limited surface borehole information. Customarily, geological models are primarily based on the definition of different sedimentary facies within each conglomerate horizon. These facies are extrapolated along palaeocurrent and grade trends into new, undeveloped areas taking into account inherent proximal to distal depositional relationships and any surface borehole data in those areas. Normally these facies are continuous, supported by extensive historical sample databases, and can be incorporated in the macro kriging of large blocks. Ghana For the Tarkwa open pit operation, estimation of probable reserves is based on a combination of an initial 100- or 200-meter grid of diamond drilling and proved reserves are typically based on drilling a 12.5 meter to 25 meter grid of reverse circulation drill holes. For the Damang open pit operation, estimation of probable reserves is based on a 40 meter to 80 meter grid of combined reverse circulation and diamond drilling and proved reserves on a five meter by eight meter grid up to a 20 meter grid, depending on an orebody type. Advance grade control drilling is employed in certain areas to provide detailed estimation to greater depths than normal grade control drilling where information is required to confirm structural and grade trends. 47 Table of Contents Diamond drilling provides continuous (solid) core from diamond drill bits, using water and chemicals for lubrication. Consequently, diamond drilling provides greater resolution of geological parameters such as lithologies, alterations, mineralization, rock hardness and structures. In surface drilling programs, reverse circulation drilling provides chip samples from percussion hammers powered by compressed air. The chips are transferred to surface up a central tube with the rods to eliminate contamination from the outer hole. Sampling is generally conducted at intervals relevant to the block model and mining dimensions. Reverse circulation drilling is generally quicker and less expensive than diamond drilling. However, there is a depth limitation to reverse circulation drilling and consequently all deep holes are conducted by diamond drilling. Generally exploration programs will consist of a mix of reverse circulation and diamond drilling in order to provide the necessary geological resolution, as well as bulk analytical data for evaluation, geotechnical and geometallurgical purposes. Infill drilling programs are usually conducted using both diamond drilling and reverse circulation, depending on the resolution required. Grade control drilling programs use reverse circulation. Australia At the Australian operations, the estimation of reserves for both underground and open pit operations is based on exploration and sampling information gathered through appropriate techniques, primarily from diamond drilling, reverse circulation drilling, air-core and sonic drilling techniques. The locations of sample points are spaced close enough to deduce or confirm geological and grade continuity. Generally, drilling is undertaken on grids, which range between 20 meters by 25 meters for proved reserves and up to 40 meters by 60 meters typically for probable reserves, although this may vary depending on the continuity of the ore body. Due to the variety and diversity of mineralization at the Australian operations, sample spacing may also vary depending on each particular ore type. Peru For the Cerro Corona operation, estimation is based on diamond drill and reverse circulation holes. The spacing of holes at Cerro Corona is generally on a grid ranging from 40 meters to 60 meters for probable reserves with some areas approximating a 25 meter grid where geology becomes more complex. The blast hole rock chips are used as grade control samples and are drilled on an average 5.5 meter by 4.8 meter grid. 48 Table of Contents Reserve Statement As at December 31, 2016, Gold Fields had aggregate attributable proved and probable reserves of approximately 48.1 million ounces of gold and 454 million pounds of copper, as set forth in the following tables: Gold ore reserve statement as at December 31, 2016(1) Proved reserves Probable reserves Total reserves Attributable gold production in fiscal 2016(2) Tonnes Head Grade Gold Tonnes Head Grade Gold Tonnes Head Grade Gold (million) (g/t) (M oz) (million) (g/t) (M oz) (million) (g/t) (M oz) (M oz) Underground (“UG”) South Africa South Deep(3)(4) 13.78 5.6 2.479 184.85 5.3 31.593 198.63 5.3 34.072 0.29 Australia St. Ives 0.29 4.4 0.041 3.28 5.1 0.533 3.57 5.0 0.574 0.10 Granny Smith 1.38 5.4 0.239 8.46 5.3 1.435 9.84 5.3 1.674 0.28 Darlot — — — 0.45 3.8 0.056 0.45 3.8 0.056 0.07 Agnew/Lawlers(5) 0.14 5.4 0.024 2.74 5.5 0.482 2.88 5.5 0.506 0.23 Total Underground 15.59 5.6 2.783 199.78 5.3 34.098 215.38 5.3 36.882 0.97 Surface (Production Stockpile) Ghana Tarkwa(5) 7.60 0.8 0.186 53.98 0.4 0.694 61.57 0.4 0.880 — Damang(5) 2.73 0.7 0.066 2.73 0.7 0.066 2.73 0.7 0.066 — Australia St. Ives(5) 3.32 1.0 0.107 — — — 3.32 1.0 0.107 — Granny Smith 0.09 6.3 0.019 — — — 0.09 6.3 0.019 — Darlot — — — — — — — — — — Agnew/Lawlers 0.09 3.0 0.009 — — — 0.09 3.0 0.009 — Peru Cerro Corona 3.81 0.8 0.100 — — — 3.81 0.8 0.100 — Surface (Open Pit) Ghana Tarkwa(4) 48.19 1.3 1.980 66.74 1.2 2.613 114.92 1.2 4.593 0.51 Damang(4) 5.08 1.5 0.238 20.76 1.8 1.203 25.85 1.7 1.441 0.13 Australia St. Ives(4) 2.51 1.9 0.152 12.12 2.3 0.908 14.63 2.3 1.060 0.27 Gruyere Gold Project 7.44 1.1 0.260 38.35 1.2 1.500 45.79 1.2 1.760 — Peru Cerro Corona 33.32 1.0 1.028 8.77 0.6 0.168 42.09 0.9 1.196 0.15 Total Surface 114.17 1.1 4.145 200.71 1.1 7.085 314.88 1.1 11.230 1.06 Grand Total 129.76 1.7 6.928 400.50 3.2 41.184 530.26 2.8 48.112 2.03 Totals by Mine South Deep 13.78 5.6 2.479 184.85 5.3 31.593 198.63 5.3 34.072 0.29 Tarkwa 55.78 1.2 2.166 120.71 0.9 3.307 176.50 1.0 5.473 0.51 Damang 5.08 1.5 0.238 23.49 1.7 1.268 28.58 1.6 1.506 0.13 St. Ives 6.11 1.5 0.300 15.40 2.9 1.441 21.51 2.5 1.740 0.36 Granny Smith 1.48 5.4 0.258 8.46 5.3 1.435 9.93 5.3 1.693 0.28 Darlot — — — 0.45 3.8 0.056 0.45 3.8 0.056 0.07 Agnew/Lawlers 0.23 4.4 0.033 2.74 5.5 0.482 2.97 5.4 0.515 0.23 Gruyere Gold Project 7.43 1.1 0.260 38.35 1.2 1.500 45.79 1.2 1.760 — Cerro Corona 37.13 0.9 1.129 8.77 0.6 0.168 45.90 0.9 1.296 0.15 Grand Total 129.76 1.7 6.928 400.50 3.2 41.184 530.26 2.8 48.112 2.03 Notes: (1) (a) Quoted as mill delivered metric tonnes and Run of Mine, or RoM, grades, inclusive of all mining dilutions and gold losses except mill recovery. Metallurgical recovery factors have not been applied to the reserve figures. The approximate metallurgical recovery factors are as follows: (i) South Deep 96.5%; (ii) Tarkwa 97%; (iii) Damang 90%; (iv) St. Ives 78% to 94%; (v) Agnew 94.9%; (vi) Granny Smith 92.6%; (vii) Darlot 92.5%; and (viii) Cerro Corona 69% for gold and 87% for copper. The metallurgical recovery is the ratio, expressed as a percentage, of the mass of the specific mineral product actually recovered from ore treated at the plant to its total specific mineral content before treatment. The South African operation has a consistent metallurgical recovery, while the recoveries on the International operations vary according to the mix of the source material and method of treatment. 49 Table of Contents (b) The metal prices used for the 2017 LoM plans were as follows: For the Ghana operations, ore reserve figures are based on an optimized pit at a gold price of U.S.$1,200 per ounce. For the Australian operations, ore reserve figures are based on a gold price of A$1,600 per ounce (at an exchange rate of A$1.33 per U.S.$1.00). Open pit ore reserves at the Australian operations are similarly based on optimized pits and the underground operations on appropriate mine design and extraction schedules. At South Deep, a gold price of R550,000 per kilogram (at an exchange rate of R14.26 per U.S.$1.00) was applied in valuing the ore reserve. The gold price used for reserves approximates the three year trailing average (U.S.$1,225oz), calculated on a monthly basis, of the London afternoon fixing price of gold. For the Cerro Corona gold reserves, the optimized pit is based on a gold price of U.S.$1,200 per ounce and a copper price of U.S.$2.8 per pound. The reserves used a copper price of U.S.$2.3 per pound for fiscal 2017, U.S.$2.5 per pound for fiscal 2018/2019 and U.S.$2.8 per pound from fiscal 2020 onwards. Due to the nature of the deposit and the importance of net smelter returns, the gold and copper price need to be considered together. (c) Dilution relates to planned and unplanned waste and/or low-grade material being mined and delivered to the mill. Ranges are given for those operations that have multiple ore body styles and mining methodologies. The mine dilution factors are as follows: (i) South Deep 7.9%; (ii) Tarkwa 30cm hanging wall and 20 cm footwall; (iii) Damang 20% to 25%; (iv) St. Ives 2% to 49% (open pits) and 15% to 25% (underground); (v) Agnew/Lawlers 10%; (vi) Granny Smith 15%; (vii) Darlot 15% to 20%; and (viii) Cerro Corona 0%. (d) The mining recovery factor relates to the proportion or percentage of ore mined from the defined ore body at the gold price used for the declaration of reserves. This percentage will vary from mining area to mining area and reflects planned and scheduled reserves against total potentially available reserves (at the gold price used for the declaration of reserves), with all modifying factors, mining constraints and pillar discounts applied. The mining recovery factors are as follows: (i) Tarkwa 100%; (ii) Damang 95%; (iii) St. Ives 95% to 98% (open pits) and 90% to 95% (underground); (iv) Agnew/Lawlers 80% to 95%; (v) Granny Smith 91%; (vi) Darlot 90% to 95%; (vii) South Deep 96%; (viii) Cerro Corona 98%. (e) The cut-off grade may vary per shaft, open pit or underground mine, depending on the respective costs, depletion schedule, ore type and dilution. The following are the average or range of values applied in the planning process: (i) South Deep 3.8 to 4.2 g/t; (ii) Tarkwa 0.47 g/t for mill feed; (iii) Damang 0.71 g/t to 0.81 g/t for fresh ore and 0.56 g/t to 0.62 g/t for oxide ore; (iv) St. Ives 0.5 g/t for mill feed—open pit, and 2.6 g/t to 3.0 g/t for mill feed—underground; (v) Agnew/Lawlers 2.8 to 4.3 g/t for mill feed—underground; (vi) Granny Smith 2.4 to 3.1 g/t; (vii) Darlot 3.7 g/t for mill feed-underground; and (viii) Cerro Corona U.S.$16.6 to 22.0/t net smelter return (combined copper and gold). (f) Totals may not sum due to rounding. Where this occurs it is not deemed significant. (g) An ounces-based Mine Call Factor based primarily on historic performance but also on realistic planned improvements where appropriate is applied to the reserves. The following Mine Call Factors have been applied: Damang 95%, Tarkwa 97%, with Agnew/Lawlers, Granny Smith, Darlot, St. Ives, South Deep and Cerro Corona at 100%. (2) Actual gold/copper produced after metallurgical recovery. (3) Based on life of mine ownership share due to step-up of minority interest over time. (4) In line with other international operations, all South Deep reserves are classed as above infrastructure, as the reserves will be accessed by means of ongoing declines from current infrastructure. (5) Includes some gold produced from stockpile material, which cannot be separately measured. The following table sets forth the proved and probable copper reserves of the Cerro Corona mine as at December 31, 2016 that are attributable to Gold Fields. Copper ore reserve statement as at December 31, 2016(1)(2) Proved reserves Probable reserves Total reserves Attributable copper production in fiscal 2016(2) Tonnes Grade Cu Cu Tonnes Grade Cu Cu Tonnes Grade Cu Cu (million) (g/t) (M lb) (million) (g/t) (M lb) (million) (g/t) (M lb) (M lb) Surface (Open Pit & Stockpiles) Peru Cerro Corona 37.1 0.5 374 8.8 0.4 80 45.9 0.45 454 66 Notes: (1) Metallurgical recovery factors have not been applied to the reserve figures. The approximate metallurgical factor for copper at Cerro Corona is 61% to 88%. (2) For the copper reserves, the optimized pit is based on a gold price of $1,200 per ounce and a copper price of $2.8 per pound, which, due to the nature of the deposit, need to be considered together. 50 Table of Contents Gold and copper price sensitivity The amount of gold mineralization that Gold Fields can economically extract, and therefore can classify as reserves, is sensitive to fluctuations in the price of gold. The following table indicates Gold Fields’ attributable reserves at different gold prices that are 10% above and below the base case presented in the ‘gold reserve statement’ table above. The reserve sensitivities are, however, not based on detailed depletion schedules and should be considered on a relative and indicative basis only. -10%(1) Base(1) +10%(1) (Moz) South Deep(2) 33.2 34.1 35.0 Tarkwa 4.2 5.5 6.0 Damang 1.2 1.5 1.8 St. Ives(3) 1.4 1.7 2.0 Agnew/Lawlers(3) 0.5 0.5 0.6 Granny Smith(3) 1.6 1.7 1.7 Cerro Corona(4) 1.3 1.3 1.3 Notes: (1) Darlot is excluded from the sensitivities as a result of the current short life of mine, which is less than one year, and limited mining flexibility. (2) The equivalent gold prices used for the sensitivities in South Africa are R500,000/kg, R550,000/kg and R600,000/kg. (3) The equivalent gold prices used for the sensitivities in Australia are A$1,440/oz, A$1,600/oz and A$1,760/oz. (4) Under the current tailings dam design at Cerro Corona, reserves would not respond to an upward movement of the gold price because of current capacity constraints at the tailings storage facility for the Cerro Corona mine. A decrease of 10% in gold price is insufficient to affect the level of gold reserves. The London afternoon fixing price for gold on April 3, 2017 was U.S.$1,247 per ounce. Gold Fields’ attributable gold reserves increased from 46.1 million ounces at December 31, 2015 to 48.1 million ounces at December 31, 2016, primarily due to the acquisition of Gruyere, growth in Australia (Granny Smith and St. Ives) and the re-investment plan at Damang. The London Metal Exchange, or LME, cash settlement price for copper on April 3, 2017 was U.S.$5,783 per tonne. Gold Fields’ methodology for determining its reserves is subject to change and is based upon estimates and assumptions made by management regarding a number of factors as noted above under “—Methodology”. Accordingly, the sensitivity analysis of Gold Fields’ reserves provided above should not be relied upon as indicative of what the estimate of Gold Fields’ reserves would actually be or have been at the gold or copper prices indicated, or at any other gold or copper price, nor should it be relied upon as a basis for estimating Gold Fields’ ore reserves based on the current gold or copper price or what Gold Fields’ reserves will be at any time in the future. See “Risk Factors—Gold Fields’ reserves are estimates based on a number of assumptions, which, if changed, may require Gold Fields to lower its estimated reserves”. Description of Mining Business The discussion below provides a general overview of the mining business as it applies to Gold Fields. Exploration Exploration activities are focused on replacing production depletion and on growth in ore reserves to maintain operational flexibility and sustainability. The Group focuses on the extension of existing ore bodies and 51 Table of Contents the discovery and delineation of new ore bodies both at existing sites and at undeveloped sites. Once a potential ore body has been discovered, exploration is extended and intensified in conjunction with comprehensive infill drilling, in order to enable clearer definition of the ore body and its technical and economic characteristics so as to profile the potential portions to be mined. Geological, geochemical, geophysical, geostatistical, geotechnical and geo-metallurgical techniques are constantly refined to improve effectiveness and the economic viability of prospecting and mining activities. Mining Gold Fields currently mines only gold, with copper and silver as by-products. The mining process can be divided into two principal activities: (i) developing access to the ore body; and (ii) extracting the ore body once accessed. These two processes apply to both surface and underground mines. Underground Mining Developing access to the ore body For Gold Fields’ South African underground mine, primary access to the ore body is provided through vertical shaft systems, while access is through single or multiple decline haulages extended from surface portals at the Australian operations. Horizontal and decline development at various intervals of the shaft or main decline, known as levels, extend laterally and provide access to the ore horizon. Ore drives open up the ore body for mining. Extracting the ore body Once an ore body has been accessed and opened up for mining, production activities consisting of drilling, blasting, supporting and cleaning activities are carried out on a daily basis. All mines are fully mechanized. At South Deep, the broken ore is loaded from the stope face into trucks using mechanical loaders and hauled along decline corridors to ore pass systems which connect the corridors to the cross cuts below. The ore is then transported by rail or conveyor and tipped into the shaft transfer system, after which it is hoisted to the surface. Mining methods employed include de-stress mining (to provide the appropriate geotechnical conditions for subsequent stoping), long hole open stoping (for reef targets greater than 15 meters in height) and drifting and benching (for reef targets less than 15 meters in height). The mining voids generated once the ore is removed are filled with treated tailings product termed backfill which provide ground support for the mined out areas. At the Australian underground operations, the broken ore is loaded straight from the stope face into trucks, using mechanical loaders, and hauled to the surface by underground dump trucks via the decline. Application of backfill to the mined out areas is based on local conditions and is not always required in shallow underground mining areas. Open Pit-Mining Opening up the ore body In open-pit mining, access to the ore is achieved by stripping the overburden in benches of fixed height to expose the ore below. This is most typically achieved by drilling and blasting an area, loading the broken rock with excavators into dump trucks and hauling the rock and/or soil to dumps. The overburden material is placed on designated waste rock dumps. Extracting the ore body Extraction of the ore body in open pit mining involves the same activity as in stripping the overburden. Lines on the pit floor are established demarcating ore from waste material and the rock is then drilled and 52 Table of Contents blasted. Post blasting, the ore is loaded into dump trucks and hauled to the crusher at the metallurgical plant or stockpile, while the waste is hauled to waste rock dumps. Rock Dump and Production Stockpile Mining Gold Fields mines surface rock dumps and production stockpiles using mechanized earth-moving equipment. Mine Planning and Management Operational and planning management on the mines receives support from regional technical support functions as well as corporate management. The current philosophy is one of top-down/bottom-up management, with the operational and commercial objectives at each mine defined by the personnel at the mine based on parameters, objectives and guidelines provided by Gold Fields’ corporate office. This is based on the premise that the people on the ground have the best understanding of the local business and what is realistically achievable. Each operation identifies a preferred strategic option which, once approved by Gold Fields’ Executive Committee, or the Executive Committee, is used to inform how the detailed one year operational plan is configured, which is rolled out into a life of mine plan, prior to the commencement of each fiscal year. The plans are based on financial parameters determined by the Gold Fields Executive Committee, or the Executive Committee. See “Directors, Senior Management and Employees—Executive Committee”. The operational plan is presented to the Executive Committee, which takes it to the Board for approval before the commencement of each fiscal year. The planning process is anchored by a Group planning calendar, and is sequential and based upon geological models, evaluation models, resource models, metal prices, mine design, depletion schedules and, ultimately, financial analysis. Capital planning is formalized pursuant to Gold Fields’ capital spending planning process. Projects are categorized and reviewed in terms of total expenditure, return on investment, net present value and impact on AIC per ounce and all projects involving amounts exceeding R360 million (South Africa), A$40 million (Australia) and U.S.$40 million (Ghana/Peru) are submitted to the Board for approval. Material changes to the plans have to be referred back to the Executive Committee and the Board. Capital Expenditure Gold Fields spent U.S.$649.9 million, U.S.$634.1 million and U.S.$608.9 million in capital expenditure during fiscal 2016, 2015 and 2014, respectively. The major expenditure items in fiscal 2016 were U.S.$77.9 million on the development and equipping of the South Deep mine, U.S.$39.6 million on development and infrastructure of the Waroonga and New Holland underground complexes at Agnew/Lawlers, U.S.$25.8 million on capital waste stripping at Damang, U.S.$16.4 million on the tailings storage facility at Cerro Corona, U.S.$32.3 million on development of the Wallaby underground mine at Granny Smith, U.S.$126.2 million on capital waste stripping at Tarkwa and U.S.$88.7 million on underground and open pit development at St. Ives. The major expenditure items in fiscal 2015 were U.S.$66.9 million on the development and equipping of the South Deep mine, U.S.$46.1 million on development and infrastructure of the Waroonga and New Holland underground complexes at Agnew/Lawlers, U.S.$45.4 million on new mining equipment at Tarkwa, U.S.$29.3 million on the tailings storage facility at Cerro Corona, U.S.$28.7 million on development of the Wallaby underground mine at Granny Smith and U.S.$18.5 million on HME componentization at Tarkwa. The major expenditure items in fiscal 2014 were U.S.$106.1 million on capital waste mining at Tarkwa, U.S.$91.9 million on the development and equipping of the South Deep mine, U.S.$55.6 million on the development and infrastructure of the Waroonga and New Holland underground complexes at Agnew/Lawlers, U.S.$29.4 million on the development of underground mines at St. Ives, U.S.$27.7 million on the tailings storage facility at Cerro Corona and U.S.$19.3 million on the tailings storage facility at Tarkwa. For more information regarding Gold Fields’ capital expenditure, see “—Gold Fields’ Mining Operations—South Africa Operations—South Deep Mine—Capital Expenditure”, “—Gold Fields’ Mining Operations—West Africa Operations— 53 Table of Contents Tarkwa Mine—Capital Expenditure”, “—Gold Fields’ Mining Operations—West Africa Operations—Damang Mine—Capital Expenditure”, “—Gold Fields’ Mining Operations—Australasia Operations—St. Ives—Capital Expenditure”, “—Gold Fields’ Mining Operations—Australasia Operations—Agnew/Lawlers—Capital Expenditure”, “—Gold Fields’ Mining Operations—Australasia Operations—Darlot—Capital Expenditure”, “—Gold Fields’ Mining Operations—Australasia Operations—Granny Smith—Capital Expenditure”, “—Gold Fields’ Mining Operations—Americas Operations—Cerro Corona—Capital Expenditure”, “Operating and Financial Review and Prospects—Capital Expenditures” and “Operating and Financial Review and Prospects—Liquidity and Capital Resources”. Processing Gold Fields has eight active gold processing facilities (one in South Africa, two in Ghana, four in Australia and one in Peru). A typical processing plant includes two stages: comminution (crushing and grinding the ore) and then gold recovery (typically flotation, leaching, carbon adsorption, carbon stripping/EW and/or smelting). Comminution Comminution is the process of crushing and breaking up the ore to expose and liberate the gold and make it available for treatment. Conventionally, this process occurs in multi-stage crushing and milling circuits, which include the use of jaw and gyratory or cone crushers followed by rod, semi-autogenous grinding, or SAG, and/or ball mills. For the milling step most of Gold Fields’ processing plants utilize both SAG and ball mills where the ore itself and steel balls are used as the primary grinding media. Through the comminution process, ore is ground to a pre-determined size before proceeding to the gold recovery stage. Gold Recovery In most of the Gold Fields’ processing plants, gold is extracted into solution by leaching with cyanide in agitated slurry tanks. The gold is then adsorbed onto activated carbon from the solution using either the carbon in leach, or CIL, process or the carbon in pulp, or CIP, process. The activated carbon is removed from the tanks, eluted in pressurized columns and the gold then recovered by electrowinning. Most of the Gold Fields’ plants also utilize gravity recovery circuits that use a centrifugal concentrator to recover coarse free gold based on density differences. This gravity gold recovery step is usually undertaken within the grinding stage of the processing plant before the ore progresses to CIL or CIP. As the final recovery step, the gold recovered by the electrowinning cells is smelted in a furnace to produce gold doré bars. These gold bars are transported to a refinery that is responsible for further refining. At Cerro Corona, gold/copper concentrate is recovered using a standard flotation process. The concentrate is shipped to a third-party smelter for further processing. The Cerro Corona processing plant therefore does not have a CIL or CIP circuit. Refining and Marketing South Africa On October 16, 2013, Gold Fields Operations Limited, or GFO, and GFI Joint Venture Holdings Proprietary Limited, or GFIJVH, acting jointly in their capacities as participants in an unincorporated joint venture which owns and operates the South Deep mine, known as the South Deep Joint Venture, entered into a new refining agreement with Rand Refinery Proprietary Limited, or Rand Refinery. Rand Refinery is a non-listed private company in which Gold Fields holds a 2.8% interest, with the remaining interests held by other South African gold producers. 54 Table of Contents This new refining agreement superseded and replaced any and all previous refining agreements between the South Deep Joint Venture and Rand Refinery. Pursuant to this refining agreement, Rand Refinery undertook, among other things, to (i) refine all unrefined gold produced by South Deep, (ii) on each delivery date of unrefined gold to Rand Refinery, notify Gold Fields’ treasury department in writing of the estimated gold and/or silver content of the unrefined gold so delivered, expressed in troy ounces and (iii) retain the refined gold and the refined silver for the South Deep Joint Venture pending written instructions from Gold Fields’ treasury department that the refined gold and/or refined silver have been sold and may be delivered to the buyer in accordance with the buyer’s instructions. Rand Refinery assumes responsibility for the unrefined gold upon arrival of the unrefined gold at the Rand Refinery premises in Johannesburg, South Africa. Rand Refinery invoices the South Deep Joint Venture with the refining charges, who then arranges for direct settlement to Rand Refinery. The refining agreement will continue indefinitely until either party terminates it upon at least 12 months’ written notice. Gold Fields’ treasury department sells all the refined gold produced by South Deep to authorized counterparties at a price benchmarked against the London afternoon fixing price. Silver is accumulated and sold on a quarterly basis by Gold Fields treasury to either Rand Refinery, or to an authorized counterpart at a price benchmarked against the London Bullion Market Association, or LBMA, silver price. Ghana Up until January 12, 2015, all gold produced by Gold Fields at the Tarkwa and Damang mines in Ghana was refined by Rand Refinery. With effect from January 12, 2015, gold produced at the Tarkwa and Damang mines is refined by MKS (Switzerland) S.A., or MKS, pursuant to refining agreements entered into by Gold Fields Ghana (in respect of the Tarkwa mine) and Abosso (in respect of the Damang mine) with MKS. Under these agreements, MKS collects the gold from either the Tarkwa or Damang mine and transports it either to its Switzerland refinery or to its Indian refinery, or the Designated Refinery, where the gold is then refined. The MKS refinery in India will be the default Designated Refinery unless either party provides the other party with notice to the effect that a shipment of gold must be transported to MKS’s refinery in Switzerland, provided that MKS shall only be entitled to provide Gold Fields Ghana (Tarkwa operation) and Abosso (Damang operation) with such notice if (i) the arrival date of the gold at the refinery will fall on a day other than a business day in India or during a period of weak physical demand for gold in India; or (ii) the Indian import regulations for the gold have materially and adversely changed. Once the gold has been refined, the Tarkwa and Damang operations shall be entitled to (i) sell the refined gold through Gold Fields’ treasury department, acting as agent for and on their behalf; or (ii) require MKS to purchase the refined gold; or (iii) request a prepayment in respect of the refined gold. All sales are benchmarked against the afternoon London Bullion Market Association Gold Price, or the London gold fix, or the London Gold Fix pricing mechanism has been replaced by a new electronic LBMA price-discovery process from March 20, 2015. The price continues to be set twice daily, at 10:30 and 15:00 London time. The new LBMA Gold Price is operated and administered by an independent third-party provider, ICE Benchmark Administration, or the IBA, who were chosen following consultation with market participants. IBA provides the price platform, methodology as well as the overall administration and governance for the LBMA Gold Price. The IBA’s platform provides an electronic, auction-based, tradeable, auditable and fully IOSCO-compliant solution for the London bullion market. MKS assumes responsibility for the gold upon collection at either the Tarkwa or Damang mine. Silver is accumulated and sold on a quarterly basis to MKS, at the LBMA silver price on the date of sale. The MKS refining agreements expire on January 12, 2018, provided that after January 2017, either party may terminate an agreement by giving the other party no less than three months’ prior written notice of such termination. 55 Table of Contents Australia In Australia, all gold produced by St. Ives, Agnew/Lawlers, Darlot and Granny Smith, each an Australian operating company, is refined by the Western Australian Mint. The Western Australian Mint applies competitive charges for the collection, transport and refining services. The Western Australian Mint takes responsibility for the unrefined gold at collection from each of the operations where they engage a sub-contractor, Brinks Australia. Brinks delivers the unrefined gold to the Western Australian Mint in Perth, Australia, where it is refined and the refined ounces of gold and silver are credited to the relevant metal accounts held by each Australian Operating Company with the Western Australian Mint. The arrangement with the Western Australian Mint continues indefinitely until terminated by either party upon 90 days’ written notice. Gold Fields’ treasury department in the corporate office in Johannesburg, South Africa sells all the refined gold produced by the Australian Operating Companies. On collection of the unrefined gold from an Australian Operating Company’s mine site, the relevant Australian Operating Company will notify Gold Fields’ treasury department of the estimated refined gold content, expressed in troy ounces, available for sale. After such confirmation, Gold Fields’ treasury department will sell the refined gold to authorized counterparties at a price benchmarked against the London afternoon fixing price. All silver is sold to the Western Australian Mint at the LBMA silver price on the last business day of each month. Peru Gold Fields La Cima S.A., or La Cima, has three contracts for the sale of approximately 90% of concentrate from the Cerro Corona mine, one with a Japanese refiner, one with a German refiner and one with a global commodities trading entity. Under these contracts, La Cima is to sell approximately 30% of the concentrate to each company and to use reasonable efforts to spread the deliveries evenly throughout the year. Risk passes when the concentrate is loaded in the port of Salaverry, Peru for international (cost, insurance and freight) sales or at a Salaverry warehouse for local sales. Pricing for copper under each of the contracts is based on the daily LME settlement price for copper. Pricing for gold under each of the contracts is based on the daily average of the LBMA morning and afternoon fixing price. All production in excess of the amounts sold under long-term contracts is sold on the spot market. Gold Fields’ Mining Operations Gold Fields has eight producing mines located in South Africa, Ghana, Australia and Peru. Gold Fields acquired the Yilgarn South Assets from Barrick on October 1, 2013. Of the three operating mines acquired from Barrick, two (Granny Smith and Darlot) remain discrete operating entities, while the third (Lawlers) has now been incorporated with Agnew to form an integrated Agnew/Lawlers mine. See “—Australasia Operations”. Gold Fields conducts underground and surface mining operations at St. Ives, underground-only operations at Agnew/Lawlers, Granny Smith, Darlot and South Deep and surface-only open pit mining at Damang, Tarkwa and Cerro Corona. Some processing of surface rock dump material occurs at Damang, while some tailings material is processed at South Deep. Material processed from production stockpiles occurs at Tarkwa, Damang and St. Ives. 56 Table of Contents Total Operations The following table details operating and production results (including gold equivalents) for each of fiscal 2016, 2015 and 2014. Fiscal 2016 Fiscal 2015 Fiscal 2014 Production Tonnes (‘000) 34,222 33,014 33,513 Recovered grade (g/t) 2.0 2.1 2.1 Gold produced (‘000 eq oz)(1) 2,219 2,236 2,294 Results of operations Revenues U.S.$ millions 2,749.5 2,545.4 2,868.8 Operating costs (including gold inventory change but excluding amortization and depreciation) U.S.$ millions(2) 1,387.5 1,456.2 1,677.7 All-in sustaining cost net of by-product revenue per ounce of gold sold (U.S.$)(2) 980 1,007 1,053 All-in cost net of by-product revenue per ounce of gold sold (U.S.$)(2) 1,006 1,026 1,087 All-in sustaining cost gross of by-product revenue per equivalent ounce of gold sold (U.S.$)(2) 987 1,000 1,053 All-in cost gross of by-product revenue per equivalent ounce of gold sold (U.S.$)(2) 1,012 1,018 1,086 Notes: (1) In fiscal 2014, 2.222 million ounces were attributable to Gold Fields, in fiscal 2015, 2.16 million ounces were attributable to Gold Fields, and in fiscal 2016, 2.15 million ounces were attributable to Gold Fields, with the remainder attributable to noncontrolling shareholders in the Ghana and Peru operations during each of those periods. (2) For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net of by-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. Underground Operations The following table details the operating and production results for Gold Fields’ underground operations for fiscal 2016, 2015 and 2014. Fiscal 2016 Fiscal 2015 Fiscal 2014 Production Tonnes (‘000) 5,418 5,622 6,575 Recovered grade (g/t) 5.5 5.5 5.3 Gold produced (‘000 oz)(1) 963 989 1,119 Note: (1) In fiscal 2014, 1.119 million ounces were attributable to Gold Fields, in fiscal 2015, 0.989 million ounces were attributable to Gold Fields and in fiscal 2016, 0.963 million ounces were attributable to Gold Fields. Tonnes milled from the underground operations decreased from 5.6 million tonnes in fiscal 2015 to 5.4 million tonnes in fiscal 2016. The amount of gold produced from underground operations decreased from 0.989 million ounces in fiscal 2015 to 0.963 million ounces in fiscal 2016. The decreases in tonnes milled and in gold produced were primarily a result of the closure of the Cave Rocks mine in fiscal 2015 and the Athena mine in fiscal 2016, both at St. Ives in Australia. This was partially offset by increased tonnes milled and gold produced at the South Deep mine in South Africa. 57 Table of Contents Surface Operations The following table details the operating and production results (including gold equivalents) for Gold Fields’ surface operations for fiscal 2016, 2015 and 2014. Fiscal 2016 Fiscal 2015 Fiscal 2014 Production Tonnes (‘000) 28,804 27,392 26,938 Recovered grade (g/t) 1.4 1.4 1.3 Gold produced (‘000 oz)(1) 1,256 1,246 1,175 Note: (1) In fiscal 2014, 1.100 million ounces were attributable to Gold Fields and in fiscal 2015, 1.169 million ounces were attributable to Gold Fields and in fiscal 2016, 1.183 million ounces were attributable to Gold Fields, with the remainder attributable to noncontrolling shareholders in the Ghana and Peru operations during each period. Tonnes milled and treated from the surface operations increased from 27.4 million tonnes in fiscal 2015 to 28.8 million tonnes in fiscal 2016, mainly due to the ramp-up of the Invincible pit at St. Ives, combined with mining at the A5 and Neptune pits as part of a strategic shift to a primarily open pit operation at St. Ives. South African Operations Gold Fields’ South African region consists of the South Deep mine. South Deep remains a strategic imperative for Gold Fields, and is projected to deliver long-term, cash-generative production to the Group once it hits full production. The successful delivery of South Deep, which accounts for 72% of the Group’s Mineral Reserves, is critical for Gold Fields’ long-term, sustainable growth. South Deep Mine Introduction South Deep is situated 45 kilometers south-west of Johannesburg, in the Gauteng Province of South Africa. South Deep is a capital project and remains a developing mine where the majority of the permanent infrastructure to support expanded production has now been installed. South Deep uses trackless mechanized mining methods comprising an array of techniques and mobile machines to achieve the most efficient extraction system for any given area in the ore body. South Deep is engaged in underground mining and its primary infrastructure comprises one metallurgical plant and two operating shaft systems, the older South Shaft complex and the newer Twin Shaft complex. The South Shaft complex includes a main shaft and three sub-vertical (SV) shafts, two of which are operational. The Twin Shaft complex consists of a single-barrel main shaft for hoisting personnel, rock materials and an adjacent bratticed ventilation shaft, used for both extracting used air and hoisting rock. The South Shaft complex operates to a depth of 2,650 meters below surface and the Twin Shaft complex operates to a depth of 2,995 meters below surface. South Deep’s workings are at depth and therefore require significant cooling infrastructure. The South Deep operation has access to the national electricity grid, water, and road infrastructure and is located near regional urban centers where it can obtain needed supplies and services. History The current South Deep operations derive from the Barrick—Western Areas Joint Venture, which Gold Fields acquired in a series of transactions in the second half of fiscal 2007. The Barrick—Western Areas Joint Venture was named the South Deep Joint Venture. 58 Table of Contents Geology South Deep is a deep-level underground gold mine located along the northern and western margins of the Witwatersrand Basin, which have been the primary contributors to South Africa’s production of a significant portion of the world’s recorded gold output since 1886. The Witwatersrand Basin comprises a 6,000 meter vertical thickness of sedimentary rocks, extending laterally for some 350 kilometers northeast to southwest by some 1,200 kilometers northwest to southeast, generally dipping at shallow angles toward the center of the basin. The basin outcrops at its northern extent near Johannesburg, but to the west, south and east it is overlaid by up to 4,000 meters of volcanic and sedimentary rocks. The Witwatersrand Basin is Archaean in age, meaning the sedimentary rocks are of the order of 2.8 billion years old. Gold mineralization occurs within laterally extensive quartz pebble conglomerate horizons called reefs, which are developed above unconformable surfaces near the basin margin. As a result of faulting and primary controls on mineralization processes, the goldfields are not continuous and are characterized by the presence or dominance of different reef units. The reefs are generally less than two meters in thickness and are widely considered to represent laterally extensive braided fluvial deposits or unconfined flow deposits, which formed along the flanks of alluvial fan systems around the edge of an inland sea. Dykes and sills of diabase or dolerite composition are developed within the Witwatersrand Basin and are associated with several intrusive and extrusive events. Gold generally occurs in native form, often associated with pyrite, carbon and uranium. Pyrite and gold within the reefs display a variety of forms, some obviously indicative of detrital transport within the depositional system and others suggesting crystallization within the reef itself. The most fundamental controls of gold distribution are the primary sedimentary features such as facies variation and channel directions. Consequently, the modeling of sedimentary features within the reefs and the correlation of payable grades within certain facies is key to in situ reserve estimation as well as effective reef definition drilling programs, operational mine planning and grade control. Gold mineralization at South Deep is hosted by conglomerates of the Upper Elsburg reefs and the Ventersdorp Contact Reef, or VCR. The Upper Elsburg reefs sub-crop against the VCR in a northeasterly trend, which defines their western limits. To the east of the sub-crop, the Upper Elsburg reefs are preserved in an easterly diverging sedimentary wedge attaining a total thickness of approximately 120 meters, which is subdivided into the lower “Individuals” and the overlying “Massives.” To the west of the sub-crop, only the VCR is preserved. The stratigraphic units at South Deep generally dip southward at approximately 12 to 15 degrees and the gold-bearing reefs occur at depths of 1,500 meters to 3,500 meters below surface. Production at South Deep is currently derived from the Upper Elsburg Reefs. In general terms, the Upper Elsburg succession represents an easterly prograding sedimentary sequence, with the Massives containing higher gold grades and showing more proximal sedimentological attributes in the eastern sector of the mining authorization than the underlying Individuals. The sedimentary parameters of the Upper Elsburg reef units influence the overall tenor of the reefs with gold grade displaying a gradual, general decrease toward the east, away from the sub crop. The North-South trending “normal” West Rand and Panvlakte faults, which converge on the Western side of the lease area, are the most significant large-scale faults in the area and form the western limit to gold mineralization for the mine. 59 Table of Contents Mining South Deep is designed to access and exploit one of the largest undeveloped ore bodies in the world. The 37 Moz reserve is understood to appropriate levels of confidence needed to support a multi-decade life of mine plan. Key required primary infrastructure has been installed and expanded as the mine is still in production build-up. At a steady state, the mine will be a low cost, long life mechanized mining operation. Due to its depth and fully mechanized bulk mining nature, South Deep has no real operating proxy in the gold mining industry, making benchmarking difficult and the current focus therefore remains on establishing a platform to ensure traction is maintained on driving productivity and leveraging unit costs on an ongoing basis. South Deep entered a critical stage of its evolution at the beginning of fiscal 2015 when Gold Fields made the decision to take a step back and fix the operating base at the mine before determining the new long-term steady state profile. As part of this process, Gold Fields removed the previous production and cost targets to afford the new South Deep management team the time to get the basics right and determine the way forward. However, in the absence of long-term production targets, Gold Fields stated that it was its goal to get the mine to cash breakeven by the end of fiscal 2016, a goal that Gold Fields is pleased to have achieved. For fiscal 2016, South Deep generated net cash flow of U.S.$12 million compared with cash outflows of U.S.$80 million in fiscal 2015. Even after stripping out the benefit of the rand hedge, the mine achieved cash breakeven for the year. In February 2017, South Deep delivered the Rebase Plan to market. This plan incorporates all recent improvements in mine design, geotechnical parameters as well as the infrastructure required to support the production plan and was approved by the Board in February 2017. The Rebase Plan sets the mine up to reach steady state production of approximately 500,000 oz by fiscal 2022 at an AIC of below U.S.$900 per ounce in fiscal 2017 terms. The Rebase Plan required a diagnostic of the full value chain, from design to skills training, conducted by management and external consultants. This review highlighted opportunities for improvements. Consequently, South Deep’s own technical abilities were strengthened, along with input from various technical experts, as part of developing a high confidence level mine plan. The actions required in the Rebase Plan are aimed at laying foundations for long term success. The mine design together with infrastructure design was revised and refined for increased efficiency. These improvements lay the foundation for long term sustainable gold production, supported by a continuous business improvement strategy based on the Sandcone Model of improvement driving quality, dependability, throughput, flexibility and ultimately value, in this order. The process resulted in 68 business improvement projects being identified to create a long-life, sustainable mechanized mine in fiscal 2016. To date, 29 projects have been completed, with 27 expected to be closed out in fiscal 2017 and the remaining 12 expected to be completed in fiscal 2018. South Deep has faced a number of challenges over the years, which can best be summarized in four broad categories: People and skills; Fleet and maintenance; Underground working conditions; and Mining method. While Gold Fields has made good progress on all categories over the past two years, continued improvement is anticipated during the ramp-up to steady state: • People and skills: The first priority was to establish an experienced management team with extensive exposure to mechanized and deep level mining. This objective was successfully achieved with most of the new management team now in place since mid-fiscal 2015. A further 168 critical skill positions requiring experienced and skilled staff were identified at the start of fiscal 2015. Most of these positions were filled by the end of fiscal 2016 with only a limited number of appointments still outstanding. Furthermore, the development of mechanized mining skills was highlighted as a specific and critical requirement for the future success of the mine. As such, a mechanized mining skills development program focusing on supervisors, artisans and operators was implemented and relevant South Deep employees have been receiving ongoing training; 60 Table of Contents • Fleet and maintenance: South Deep instituted a number of key strategies to upgrade the condition of its mechanized equipment fleet and effectiveness of its maintenance practices. As part of the fleet renewal strategy, 58 category 1 units have been commissioned since early fiscal 2015. The total category 1 fleet currently stands at 111. An expansive and fully equipped underground workshop spanning a total footprint of 200 x 200m was commissioned on 93 level to provide the working conditions necessary for maintenance personnel to perform their tasks more effectively. Maintenance skills development programs were introduced to upskill our engineering personnel. In addition, outsourced OEM maintenance contracts were concluded with two key suppliers to effect immediate improvements, which will be gradually handed over to South Deep teams; • Underground working conditions: The new management team identified poor underground working conditions as a key impediment to turning South Deep around. A number of business improvement projects were initiated to remediate this deficiency and focused on various elements of the underground infrastructure, including roadways, water management, backfill and ventilation; and • Mining method: As a deep level bulk mine, geotechnical considerations and mine design are critical elements in implementing the successful extraction of the ore body. To this end, several improvements in the overall design and mining layouts have been implemented during the past two years. • Regional Pillars: The overall regional support design was improved by reducing the corridor span between regional pillars from 240m to 180m and by increasing the dimensions of crush pillars in the destress cuts from 10 x 6m to 8 x 20m. Regional pillar width has remained at 60m. The design improvements resulted in lower excavation convergence rates and an increase in overall rockmass stability; and • High Profile Destress: Over the past two years, South Deep converted from a low profile (2.2m) destress mining method to a high profile (5.5m) layout. This has eliminated an inefficient and cumbersome multi-step mining process, which included footwall or hangwall ripping to open excavations for longhole stoping equipment, and enabled mechanized roofbolt installation. In a significant step for the mine, low profile was completely phased out during fiscal 2016 and all destress development will now entail the high profile method. This method was also further improved with a new pillar layout, increasing ground stability and operational efficiency due to less backfill being required. The initiatives that were implemented over the past two years have started to yield results during fiscal 2016, which was a milestone year for South Deep. In terms of the Rebase Plan, it is anticipated that South Deep will reach steady state production in fiscal 2022. During this ramp-up period, tonnes mined are expected to ramp up at a fairly steady rate from the average 135,000 tonnes per month run rate in 2016 to 230,000t/m when at steady state. A big driver of the volume growth to steady state is the increased contribution from longhole stoping. The production ramp-up is planned from the current mine in the North of Wrench mining area, or NoW, which is a lower extension to the current mining operations and contains reserves of 10.6 Moz. The NoW expands into six corridors with independent operating and ventilation systems. The NoW will build up in production synchronously with current mine area declining in output. The NoW is designed as a massive bulk mine, while the current mine area employed a more selective method. Current primary production is provided from two discrete mining areas, Current Mine and NoW, and are exploited by means of distinctly different mining methods. The current mine area is characterized by conventional mining that was employed historically and before ownership by Gold Fields, which served as destressing for mechanized massive mining, including long hole stoping above and below these horizons in the remaining Elsburg reefs. Mining activities are largely scattered over the whole of current mine. The NoW area is largely unmined and as such will benefit from utilization of the optimized mine design and extraction sequencing which can be effectively applied to a “blank canvass” with no constraints from historical mining. This massive mining method (long hole stoping) is aimed at 61 Table of Contents the efficient extraction of the thick ore body with minimum dilution and ore loss. Productivity and efficiency of extraction is expected to improve for the future of the mine. Continuous infrastructure expansion is required to support the production build up from the NoW. Importantly, most of the operating expenditure is now in the cost base of the mine, with the majority of the key skills and fleet now in place. As the mine ramps up to steady state, we expect to see the operational gearing expected from a fixed cost mine like South Deep. As a result, we expect steady state production AIC of below U.S.$900 per ounce (in 2017 terms). Detailed below are the operating and production results at South Deep for fiscal 2016, 2015 and 2014: Fiscal 2016 Fiscal 2015 Fiscal 2014 Production Tonnes (‘000) 2,248 1,496 1,323 Recovered grade (g/t) 4.0 4.1 4.7 Gold produced (‘000 oz) 290 198 201 Results of operations Revenues (U.S.$ million) 358.2 232.3 254.8 Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(1) 271.6 236.6 245.5 All-in sustaining cost net of by-product revenues per ounce of gold sold (U.S.$)(1) 1,207 1,490 1,548 All-in costs net of by-product revenues per ounce of gold sold (U.S.$)(1) 1,234 1,559 1,732 Note: (1) For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net of by-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. AIC and AISC are calculated per ounce of gold sold, excluding gold equivalent ounces. See “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. Total tonnes milled increased by 47% from 1.5 million tonnes in fiscal 2015 to 2.2 million tonnes in fiscal 2016. Gold produced increased from 0.198 million ounces in fiscal 2015 to 0.290 million ounces in fiscal 2016. Due to the 40% improvement in tonnes mined, which resulted in higher consumable spend and higher utility consumption as well as improved bonuses, operating costs including gold inventory change but excluding amortization and depreciation, or “net operating costs” increased by 15% from U.S.$236.6 million in fiscal 2015 to U.S.$271.6 million in fiscal 2016 in U.S. dollar terms. The increased costs were also due to negotiated annual salary hikes as well as higher staff numbers following the employment of an additional 164 mechanized mining professionals during fiscal 2015. A decreased AIC of U.S.$1,234 per ounce in fiscal 2016, compared with AIC of U.S.$1,559 per ounce in fiscal 2015, was due to higher gold production, partially offset by higher operating costs and capital expenditure. South Deep’s power usage has increased over the years as it builds up production and prepares for the development of long-term infrastructure. All required power related infrastructure is installed to support the production ramp up. South Deep sourced its electricity supply from Eskom. See “Risk Factors—Power cost increases may adversely affect Gold Fields’ business, operating results and financial condition”. In order to mitigate the cost impact of these increases, numerous power saving projects were initiated to reduce power consumption. South Deep will be developing a long-term energy security plan (which will include an assessment of renewable energy options) to manage supply risks currently faced by Eskom. In the short term, a load curtailment arrangement has been negotiated with Eskom to minimize production disruptions and ensure the continued safe operation of the mine. 62 Table of Contents Assuming there are no material changes to the reserves estimates at South Deep, or to the life of mine plan, South Deep’s December 31, 2016 proven and probable managed reserves of 37.3 million ounces (34.1 million ounces of which are attributable to Gold Fields, with the rest attributable to non-controlling shareholders) will be sufficient to maintain production through to fiscal 2095 (79 years). However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors which can affect reserve estimates and the mine plan, which could thus materially change the life of mine. South Deep is engaged in underground mining and is thus subject to all of the underground mining risks discussed in “Risk Factors”. The primary safety issues facing South Deep underground operations include seismicity (including seismically induced falls of ground), falls of ground due to gravity and the risk of pedestrians being struck by mobile equipment. To prevent falls of ground accidents, South Deep has implemented a comprehensive health and safety strategy. For more information about this strategy as well as details about workplace injuries at South Deep, see “Directors, Senior Management and Employees—Employees—Safety and Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”. There were no strikes and/or labor stoppages at South Deep in fiscal 2016 and none to date since December 31, 2016. Processing All processing at South Deep is carried out at a single gold extraction plant. The following table sets forth the year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and metallurgical recovery factors during fiscal 2016 for the plant. Processing Techniques Plant Year commissioned(1) Comminution phase Treatment phase Capacity(1) Average milled for fiscal 2016 Approximate recovery factor for fiscal 2016 (tonnes/month) Twin Shaft Plant 2002 Primary SAG and Secondary Ball milling Leach CIP, with elution and electrowinning 330,000 187,000 96 % Note: (1) Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in a level of throughput over and above the designed nameplate capacity. Capital Expenditure Gold Fields spent U.S.$77.9 million on capital expenditures at the South Deep operation in fiscal 2016, primarily on fleet, the refurbishment of the main winder at the Twin Shaft complex and higher spending on employee accommodation. Gold Fields expects to spend approximately R1,309 million (U.S.$92.6 million) on capital expenditures at South Deep in fiscal 2017, primarily on infrastructure, trackless equipment, new mine development, secondary support and the 80 level fridge plant at south shaft. West Africa Operations The West Africa operations comprise the Tarkwa and Damang gold mines in Ghana. The West Africa region had oversight of Gold Fields’ APP in Finland, prior to the transfer of its management to the Corporate office. Gold Fields Ghana, which holds the interest in the Tarkwa mine, and Abosso, which owns the interest in the Damang mine, are 90% owned by Gold Fields and 10% by the Ghanaian government. 63 Table of Contents For a discussion on the energy supply in Gold Fields Ghana, see “Risk Factors—Power cost increases may adversely affect Gold Fields’ business, operating results and financial condition”. Tarkwa Mine Introduction The Tarkwa mine is located in southwestern Ghana, about 300 kilometers by road, west of Accra. The Tarkwa mine consists of several open pit operations on the original Tarkwa property and the adjacent southern portion of the property, which was formerly referred to as the Teberebie property and was acquired by Gold Fields in August 2000. Gold Fields added a SAG mill, a ball mill and a CIL plant. The Tarkwa mine operates under mining leases with a total area of approximately 20,800 hectares, the entirety of which are surface operations. The Tarkwa mine has access to the national electricity grid, water, road and railway infrastructure, although rail service has been non-operational for many years. Most supplies are trucked in from either the nearest seaport, which is approximately 90 kilometers away by road in Takoradi, or from Tema, near Accra, which is approximately 300 kilometers away by road. History Investment in large-scale mining in the Tarkwa area commenced in the last quarter of the nineteenth century. In 1993, Gold Fields of South Africa took over an area previously operated by the State Gold Mining Corporation, or SGMC. SGMC had, in turn, acquired the property from private companies owned by European investors. Mining operations by Gold Fields commenced in 1997 following initial drilling, feasibility studies and project development (which included the removal of overburden and the resettlement of approximately 22,000 people). Geology Gold mineralization at Tarkwa is hosted by Proterozoic Tarkwaian metasediments, which overlie but do not conform to a Birimian greenstone belt sequence. Gold mineralization is concentrated in conglomerate reefs and has some similarities to deposits in the Witwatersrand Basin in South Africa. The deposit comprises a succession of stacked, tabular palaeoplacer units consisting of quartz pebble conglomerates. Approximately 10 such separate economic units occur in the concession area within a sedimentary package ranging from 40 meters to 110 meters in thickness. Low-grade to barren quartzite units are interlayered between the separate reef units. Mining The existing surface operation currently exploits narrow auriferous conglomerates from six pits, namely Pepe, Akontansi, Teberebie, Atuabo, Maintrain and Kottraverchy. Tarkwa uses the typical open pit mining methods of drilling, blasting, loading and hauling. During fiscal 2016, mineral reserves at Tarkwa decreased by 9.8% (net of depletion) to 6.1 million ounces. Restructuring the mine to operate at lower total mining volumes (90 – 100Mtpa total mining) is expected to ensure operational flexibility and underpin targeted head grades to deliver 520,000 to 570,000 ounces of gold per year. No greenfields projects were commenced in fiscal 2016. A geochemical soil sampling program was carried out in Tarkwa in fiscal 2014 to explore part of the concession, which previously had limited exploration. A number of hydrothermal and paleo placer targets were identified as a result of this program, and initial drilling commenced in fiscal 2015. The continuation of the drilling program in respect of these targets was a focal point in fiscal 2016. 64 Table of Contents Detailed below are the operating and production results at Tarkwa for fiscal 2016, 2015 and 2014. Fiscal 2016 Fiscal 2015 Fiscal 2014 Production Tonnes milled (‘000) 13,608 13,520 13,553 Recovered grade (g/t) 1.3 1.3 1.2 Gold produced (‘000 oz)(1) 568 586 558 Results of operations Revenues (U.S.$ million) 708.9 680.7 706.7 Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(2) 327.3 326.9 371.5 All-in sustaining cost net of by-product revenues per ounce of gold sold (U.S.$)(2) 959 970 1,068 All-in costs net of by-product revenues per ounce of gold sold (U.S.$)(2) 959 970 1,068 Notes: (1) In fiscal 2016, 2015 and 2014, 0.511 million ounces, 0.527 million ounces and 0.502 million ounces of production, respectively, were attributable to Gold Fields, with the remainder attributable to minority shareholders in the Ghana operations. (2) For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net of by-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. AIC and AISC are calculated per ounce of gold sold, excluding gold equivalent ounces. See “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. In fiscal 2016, gold production decreased by 3% to 0.568 million ounces from 0.586 million ounces in fiscal 2015, mainly due to shift away from the Teberebie pillar and surrounding high grade areas. Net operating costs increased marginally to U.S.$ 327.3 million in fiscal 2016 from U.S.$326.9 million in fiscal 2015. AIC improved by 1% to U.S.$959 per ounce in fiscal 2016 from U.S.$970 per ounce in fiscal 2015 primarily due to lower capital expenditure, partially offset by lower gold sold. Assuming that Gold Fields does not increase or decrease ore reserves estimates at Tarkwa and that there are no changes to the current mine plan at Tarkwa, Tarkwa’s December 31, 2016 proven and probable reserves of 6.1 million ounces (5.5 million ounces of which are attributable to Gold Fields, with the remainder attributable to the Ghanaian government) will be sufficient to maintain production through fiscal 2031 which includes re-treatment of the South Heap Leach at the end of the life of mine. However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors which can affect reserve estimates and the mine plan, which could thus materially change the life of mine. The Tarkwa mine is engaged in open pit mining and is thus subject to all the risks associated with open pit mining discussed in “Risk Factors”. For more information about workplace injuries at Tarkwa, see “Directors, Senior Management and Employees—Employees—Safety and Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”. There were no strikes and/or labor stoppages at Tarkwa in fiscal 2016 and none to date since December 31, 2016. Processing Tarkwa’s ore is processed using SAG milling at its CIL plant. Prior to the restructuring, the operation also incorporated two separate heap leach circuits, the North Plant and the South Plant. As part of the restructuring, the South Heap Leach Facility was closed in December 2012 and stacking of ore ceased at the North Heap Leach facility in December 2013. The following table sets per month, as well as average tonnes milled per month and metallurgical recovery factors during fiscal 2016, for each of the plants at Tarkwa. 65 Table of Contents Processing Techniques Plant Year commissioned Comminution phase Treatment phase Capacity(1) Average milled for fiscal 2016 Approximate recovery factor for fiscal 2016(2) (tonnes/month) CIL Plant 2004 SAG milling (with ball mill)(3) CIL treatment 1,125,000 1,134,000 97 % Notes: (1) Nameplate capacity as designed. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. (2) Percentages are rounded to the nearest whole per cent. (3) The ball mill was added in December 2008. In fiscal 2016, the carbon-in leach plant throughput increased from 13.5Mt to 13.6Mt, with yield decreasing from 1.35g/t to 1/30g/t due to lower grades processed. Capital Expenditure Gold Fields spent U.S.$168.0 million on capital expenditures at the Tarkwa operation in fiscal 2016, principally due to deferred stripping to expose ore, upgrading of the tailings storage facilities and the purchasing of new mining vehicles and equipment. Gold Fields has budgeted approximately U.S.$180.4 million for capital expenditures at Tarkwa for fiscal 2017, as it plans to continue to focus on prestripping and heavy mining equipment, or HME, major components. Damang Mine Introduction The Damang deposits are located in the Wassa West District in southwestern Ghana approximately 330 kilometers by road west of Accra and approximately 30 kilometers by road northeast of the Tarkwa mine. The mine exploits hydrothermal in addition to Witwatersrand-style palaeoplacer gold. The Damang mine consists of an open pit operation with a SAG and ball mill and CIL processing plant. Damang operates under a mining lease with a total area of approximately 8,100 hectares. The Damang mine has access to the national electricity grid and water and road infrastructure. Most supplies are brought in by road from the nearest seaport, Takoradi, which is approximately 135 kilometers away, or from Accra, which is approximately 360 kilometers away by road. History Mining on the Abosso concession began with underground mining in the early twentieth century. Surface mining at Damang commenced in August 1997 and Gold Fields assumed control of operations on January 23, 2002. Historically, the underground mine was in operation from 1878 until 1956. Geology Damang is located on the Damang Anticline, which is marked by Tarkwaian metasediments on the east and west limbs, around a core of Birimian metasediments and volcanics. Gold in the Tarkwaian metasediments and volcanics is predominantly found in the conglomerates of the Banket Formation and is similar to the Witwatersrand in South Africa; however, at Damang, hydrothermal processes have enriched this palaeoplacer 66 Table of Contents and the adjacent metasediments within the Banket formation. Within the region, the contact between the Birimian and Tarkwaian metasediments and volcanics is commonly marked by zones of intense shearing and is host to a number of significant shear hosted gold deposits, including Prestea, Bogoso, and Obuasi. Palaeoplacer mineralization occurs on the west limb of the anticline at Abosso, Chida, and Tomento, and on the east limb of the anticline at the Kwesie, Lima South, and Bonsa North locations. Hydrothermal enrichment of the Tarkwaian palaeoplacer and metasediments also occur at the Rex, Amoanda, and Nyame areas on the west limb and the Damang and Bonsa areas on the east limb. Mining Damang uses the typical open pit mining methods of drilling, blasting, loading and hauling. The primary operational challenges include improved grade and dilution control, blasting optimization and maintaining load and haul efficiencies given that the mine has a number of different ore sources (Huni, Saddle Area, Juno and Lima South), and maintaining adequate and timely supply of appropriate plant feed blend (i.e. where possible a blend of fresh and oxide materials). A comprehensive review of the mine to address the loss making position of Damang, which commenced during the fourth quarter of fiscal 2015, continued during fiscal 2016 with a final decision made to do a push back to expose the higher grade ore under the original Damang pit. During the period under review, exploration activities at Gold Fields’ West African operations were dominated by resource conversion projects through infill drilling and extensions to known targets at Damang. No greenfields projects were commenced in fiscal 2016. In October 2016, Gold Fields announced the U.S.$341 million Damang Reinvestment Plan, which is expected to extend the LoM by eight years from fiscal 2017 to fiscal 2024. The Damang Reinvestment Plan will enhance the Group’s presence in one of our key operating regions and result in significant social benefits for the country, including the creation and preservation of 1,850 direct employment positions. The Damang Reinvestment Plan entails a major cutback to both the eastern and western walls of the DPCB. The cutback will have a total depth of 341m, comprising of a 265m pre-strip to access the base of the existing pit. This will be followed by a deepening of the pit by a further 76m which will ultimately provide access to the full Damang orebody including the high grade Tarkwa Phyllite lithology. To provide short term ore supply whilst the Damang pre-strip is in progress, mining will occur at the Amoanda, and paleaoplacer satellite pits (Lima South, Kwesi Gap and Tomento East). In addition, the plan feed will be supplemented by low grade surface stockpiles. Mining will be undertaken by two mining contractors, which are expected to be mobilized early in fiscal 2017. Inclusion of the Damang cutback as the key component of the Damang Reinvestment Plan has impacted an increase of 72% in proven and probable reserves from those declared in December 2015, from 0.97 Moz to 1.67 Moz. 67 Table of Contents Detailed below are the operating and production results at Damang for fiscal 2016, 2015 and 2014. Fiscal 2016 Fiscal 2015 Fiscal 2014 Production Tonnes milled (‘000) 4,268 4,295 4,044 Recovered grade (g/t) 1.1 1.2 1.4 Gold produced (‘000 oz)(1) 148 168 178 Results of operations Revenues (U.S.$ million) 183.4 194.8 224.6 Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(2) 136.1 186.4 179.7 All-in sustaining cost net of by-product revenues per ounce of gold sold (U.S.$)(2) 1,254 1,326 1,175 All-in costs net of by-product revenues per ounce of gold sold (U.S.$)(2) 1,254 1,326 1,175 Notes: (1) In fiscal 2016, 2015 and 2014, 0.133 million ounces, 0.151 million ounces and 0.160 million ounces of production, respectively, were attributable to Gold Fields, with the remainder attributable to non-controlling to shareholders in Abosso. (2) For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net of by-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. AIC and AISC are calculated per ounce of gold sold, excluding gold equivalent ounces. See “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. In fiscal 2016, managed gold production decreased by 12% to 0.148 million ounces from 0.168 million ounces in fiscal 2015, mainly as a result of lower than planned plant feed grade. Net operating costs decreased by 27% to U.S.$136.1 million in fiscal 2016 from U.S.$186.4 million in fiscal 2015 mainly due to lower mining and consumable costs in-line with the lower production. Total AISC decreased by 5% to U.S.$1,254 per ounce in fiscal 2016 from U.S.$1,326 per ounce in fiscal 2015, due to lower use of diesel generators as the number of power outages dropped during the year. Assuming that Gold Fields does not increase or decrease reserves estimates at Damang and that there are no changes to the current mine plan, Damang’s December 31, 2016 proven and probable reserves of 1.67 million ounces (0.17 million of which are attributable to the Ghanaian government, with the remainder attributable to Gold Fields) will be sufficient to maintain production through fiscal 2024 (8 years). However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are many factors that can affect reserve estimates and the mine plan, which could thus materially change the life of mine. The Damang mine comprises open pit mining, and is thus subject to all of the risks associated with open pit mining discussed in “Risk Factors”. For more information about workplace injuries at Damang, see “Directors, Senior Management and Employees—Employees—Safety and Wellness—Safety Management” and “Directors, Senior Management and Employees—Safety and Wellness—Employees—TRIFR, Fatalities and Fatal Injury Frequency Rate”. There were no strikes and/or work stoppages at Damang in fiscal 2016 and none to date since December 31, 2016. Processing All ore at Damang is processed through a single facility. The following table sets forth the year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and metallurgical recovery factor during fiscal 2016 for the plant. 68 Table of Contents Processing Techniques Plant Year commissioned Comminution phase Treatment phase Capacity(1) Average milled for fiscal 2016 Approximate recovery factor for fiscal 2016(2) (tonnes/month) Processing Plant 1997 (3) Primary and two- stage secondary crushing with SAG and ball milling CIL treatment 350,000 356,000 91.9 Notes: (1) Nameplate capacity as designed. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. (2) Percentages are rounded to the nearest whole per cent. (3) The secondary crusher was commissioned in 2010. Preparatory construction works on the new Far East Tailings Storage Facility, or FETSF, commenced in fiscal 2013 but the project was suspended in September 2013, when Abosso received notice of an application for an injunction to restrain from proceeding with the FETSF construction on the basis that it was outside its mining lease. In fiscal 2014, Gold Fields settled with these claimants and resumed work on the FETSF project but the construction was delayed in fiscal 2015 when the investment plan scenarios for the mine were being considered. In fiscal 2015, the ETSF was raised by 5 meters to an elevation of 1,005 mRL. The facility is currently being raised a further 2.5 meters to an elevation of 1,007.5 mRL. The construction began in the fourth quarter of fiscal 2016 and is expected to be completed by end of the first quarter of fiscal 2017. The ETSF has 3.8Mt of remaining capacity and it is estimated that the ETSF will be at full capacity by November 2017. The FETSF is being constructed to sustain production for the remaining LoM requirement. The full design capacity of the FETSF is 44.4Mt to a 1,000 mRL and the construction will occur in two stages: • Stage 1—19.7Mt capacity to a 980mRL; and • Stage 2—24.7Mt additional capacity to the 1,000mRL. Stage 1 construction will commence in the first quarter of fiscal 2017 and is estimated to be completed by end of fiscal 2017 to ensure continuous production. Capital Expenditure Abosso spent U.S.$37.9 million on capital expenditure in fiscal 2016, principally on Amoanda capital waste stripping, ETSF raise and resource infill drilling. Abosso has budgeted approximately U.S.$139.6 million for capital expenditures at Damang for fiscal 2017. Australasia Operations St. Ives Introduction St. Ives is located 80 kilometers south of Kalgoorlie and 20 kilometers south of Kambalda, straddling Lake Lefroy in Western Australia. It holds exploration licenses, prospecting licenses and mining leases covering a total area of approximately 123,291 hectares. St. Ives is both a surface and underground operation, with a number of 69 Table of Contents open pits, one operating underground mine and a metallurgical CIP plant. The St. Ives operation obtains electricity pursuant to a contract with BHP Nickel West that expires in January 2023 and has access to water, rail, air and road infrastructure. Consumables and supplies are trucked in locally from both Perth and Kalgoorlie. History Gold mining began in the St. Ives area in 1897, with intermittent production until Resources Ltd, or WMC, commenced gold mining operations at St. Ives in 1980. Gold Fields acquired the St. Ives gold mining operation from WMC in November 2001. Geology The gold deposits of St. Ives are located at the southern end of the Norseman-Wiluna greenstone belt of the West Australian Goldfields Province. In the St. Ives area, the belt consists of Kalgoorlie Group volcanic rocks, Black Flag group felsic volcanic rocks and sediments and a variety of intrusive and overlying post-tectonic sediments. The area is structurally complex, with metamorphism ranging from lower greenschist and lower amphibolite facies. Shear hosted gold mineralization has been discovered in all stratigraphic units. Deposit styles and ore controls are varied ranging from minor structures, including vein arrays, breccia zones and central, to quartz-rich and mylonitic parts of shear zones. Mining Gold production takes place over an extensive tenement area at St. Ives. St. Ives has the Lefroy processing plant and SAG mill that treats primary ore. St. Ives previously had a heap leach facility which treated low- and marginal-grade ore. This heap leach facility operated in a residual leach mode during fiscal 2014, 2015 and through to April 2016 when it closed as leaching was no longer economic. In fiscal 2016, St. Ives reported decreased production and decreased operational costs. The decreased production was mainly due to lower grades associated with increased open pit mining and a decline in mining at the Athena, underground mine which closed in February 2016. The decreased operational costs were mainly due to a reduction of mining costs in the open pit areas. In fiscal 2016, exploration expenditure decreased by A$1.0 million to A$40.9 million and 241km of drilling was completed. This exploration discovery and extensional drilling replaced all the 376,000 ounces depleted in 2016 and added a further 198,000 ounces to reserve. This included an additional of 288,000 ounces to the Invincible underground reserve and the declaration of a maiden open pit reserve of 47,000 ounces at Incredible. Positive results were returned from broad gold intercepts in shallow drilling at the Retribution project. Extensive follow up drilling is expected to be completed during fiscal 2017 to further define the gold mineralization and to define resources. The exploration strategy at St. Ives is to continue to develop the exploration pipeline and define further resources, with a priority on open pit resources. In addition, St. Ives plans to investigate the potential for significant palaeochannel hosted mineralization, along with alternate methods for mining these gold deposits. 70 Table of Contents Detailed below are the operating and production results at St. Ives for fiscal 2016, 2015 and 2014. Fiscal 2016 Fiscal 2015 Fiscal 2014 Production Tonnes (‘000) 4,046 3,867 4,553 Recovered grade (g/t) 2.8 3.0 2.4 Gold produced (‘000 oz) 363 372 362 Results of operations Revenues (U.S.$ million) 452.3 431.8 458.8 Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(1) 181.8 220.3 282.3 All-in sustaining cost net of by-product revenues per ounce of gold sold (U.S.$)(1) 949 969 1,164 All-in costs net of by-product revenues per ounce of gold sold (U.S.$)(1) 949 969 1,164 Note: (1) For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net of by-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. AIC and AISC are calculated per ounce of gold sold, excluding gold equivalent ounces. See “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. In fiscal 2016, gold production decreased by 2% to 0.363 million ounces from 0.372 million ounces in fiscal 2015, primarily due to lower grades associated with increased open pit mining and a decline in mining at the Athena underground mine which closed in the first half of fiscal 2016. Net operating costs decreased by 17% to U.S.$181.8 million in fiscal 2016 from U.S.$220.3 million in fiscal 2015 due to the closure of the Cave Rocks and Athena underground mines, efficiencies in the open pits on larger volumes and productivity improvements and a gold-in-process credit of U.S.$11.0 million in fiscal 2016, compared with a charge of U.S.$25.3 million in fiscal 2015. Total AIC decreased to U.S.$949 per ounce in fiscal 2016 compared with U.S.$969 per ounce in fiscal 2015. Assuming that Gold Fields does not increase or decrease reserves estimates at St. Ives and that there are no changes to the current mine plan, St. Ives’ December 31, 2016 proven and probable reserves of 1.7 million ounces will be sufficient to maintain production through fiscal 2021. However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors which can affect reserve estimates and the mine plan, which could thus materially change the life of mine. St. Ives is engaged in underground mining and in both open pit and production stockpile surface mining, and is thus subject to all of the underground and surface mining risks discussed in “Risk Factors”. The primary safety risk at St. Ives is falls of ground at the underground operations, which is addressed through the use of ground support, paste filling of open stopes and sequencing of mine operations to improve overall stability of the ground. For more information about workplace injuries at St. Ives, see “Directors, Senior Management and Employees—Employees—Safety and Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”. The St. Ives mine is currently in the process of re-certification following an initial negative finding by the International Cyanide Management Institute, or ICMI. See “License to Operate—Waste and Training”. There were no strikes and/or material work stoppages at St. Ives in fiscal 2016 and none to date since December 31, 2016. 71 Table of Contents Processing The table below sets forth year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and metallurgical recovery factors during fiscal 2016, for the plant at St. Ives. Processing Techniques Plant Year commissioned Comminution phase Treatment phase Capacity(1) Average milled for fiscal 2016 Approximate recovery factor for fiscal 2016(2) (tonnes/month) Lefroy Plant 2005 Single-stage crushing and SAG milling CIP 375,000 337,000 93 % Notes: (1) Nameplate capacity as designed. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. (2) Percentages are rounded to the nearest whole percent. Capital Expenditure Gold Fields spent A$188.0 million or U.S.$140.0 million on capital expenditures at St. Ives in fiscal 2016. This was primarily on exploration across the site, the development of the Invincible and Neptune open pit mines and the development of the Hamlet underground mine. Gold Fields has budgeted approximately A$184.6 million, or U.S.$135 million, for capital expenditures at St. Ives in fiscal 2017. These funds are principally earmarked for exploration, underground mining development and mine infrastructure. Agnew/Lawlers Introduction Agnew/Lawlers is located 23 kilometers west of Leinster, approximately 375 kilometers north of Kalgoorlie and 630 kilometers northwest of Perth, Western Australia. Together, Agnew and Lawlers hold exploration licenses, prospecting licenses and mining leases covering a total area of approximately 88,180 hectares. Agnew/Lawlers has one metallurgical plant in operation and is serviced by sealed road infrastructure to the mine gate. Supplies are generally trucked in from Perth or Kalgoorlie. Agnew/Lawlers is largely a fly-in fly-out operation with local services, including air transport with a sealed runway and accommodation, provided pursuant to an arrangement with a nearby major mining company. Agnew/Lawlers has access to electricity pursuant to a contract with the same major mining company as St. Ives which expires in May 2019. The bulk of the water is supplied from the mining operations and recovered from the in-pit tailings facility and previously mined pits. History Gold was discovered at Agnew in 1895 and production was intermittent until WMC acquired the operation in the early 1980s and constructed the current mill in 1986. Since that time, numerous open pits and underground operations have been mined. Gold was discovered around the same time at Lawlers. In 1984, Forsayth NL purchased the Great Eastern lease and constructed the Lawlers processing plant, or the Lawlers Mill. Mechanized open pit mining commenced in 1986. The New Holland underground mine opened in 1998 and in 2001 Barrick acquired Lawlers as part of its merger with Homestake. In 2013, Gold Fields purchased Lawlers from Barrick and the Lawlers Mill was placed on care and maintenance. 72 Table of Contents Geology The Agnew and Lawlers deposits are located within the northwest portion of the Norseman-Wiluna greenstone belt of the Western Australian Goldfields. This greenstone belt consists of an older sequence of ultramafic flows, gabbros, basalts, felsic volcanics and related sedimentary rocks. The rocks are folded about the large, moderately north plunging Lawlers Anticline. The Agnew deposits are located on the western limb of this anticline, and major deposits discovered to date lie on sheared contacts between stratigraphic units. The anticline is cut by north-northeast trending faults such as the Waroonga and East Murchison Unit shear zones. The Lawlers deposits occur along the eastern limb of the Lawlers Anticline with the main Genesis-New Holland deposit located within the Scotty Creek Sediments west of Waroonga. Mining The principal production sources at Agnew/Lawlers are the Waroonga and New Holland underground mining complexes. The mining method at Waroonga involves longhole open stoping with paste filling. Access to the ore body is through a decline tunnel which accommodates workers, materials and equipment. At the New Holland underground mine at Lawlers, the selection of the stoping method is dependent upon the geometry of the ore structure. Two primary methods are employed: uphole retreat open stoping and room and pillar longhole. Access to the mine is via two declines. At both Waroonga and New Holland, ore is trucked to a mine ore pad located at the base of either the Waroonga or New Holland open pits, where it is then hauled to the Agnew processing facility using haul trucks operated by a contractor. Waroonga is in transition as the Kim lode matures. During fiscal 2015, the new drive from the Kim decline to the FBH ore bodies was completed. Development activities have commenced with production from FBH reducing dependence on the Kim ore body in fiscal 2016. In addition, production at the Cinderella ore body in the New Holland complex commenced in fiscal 2016. Exploration at Agnew/Lawlers in fiscal 2016 focused on extensions to both the Waroonga and New Holland mineralized systems. Drill testing north of Waroonga has continued to return significant gold intersections with frequent visible gold intersections from both the Kath and Waroonga North projects. A reserve of 59,000 was declared for Waroonga North at December 31, 2016. At New Holland, drilling focused on extending the 500 Series lode and also targeted the 600/700 Series, which is located beneath the current mine development. The drilling has confirmed that the 500 Series structure is breaking up to the north. There is potential for smaller discrete mineable blocks but the overall tenor of the lode has clearly diminished. Drilling of the 600/700 Series during fiscal 2016 failed to significantly increase these resources. At Cinderella, several drilling campaigns were completed, initially as step-out programs, to define the extent of the resource and subsequently in-fill programs to delineate the reserve. Cinderella comprises two main lodes. Both lodes remain open to the east and to the south and potentially to the north, further extensional and infill drilling is planned in fiscal 2017 to test the extent of this mineralization. 73 Table of Contents Detailed below are the operating and production results at Agnew/Lawlers for fiscal 2016, 2015 and 2014. Fiscal 2016 Fiscal 2015 Fiscal 2014 Production Tonnes (‘000) 1,176 1,218 1,246 Recovered grade (g/t) 6.1 6.0 6.8 Gold produced (‘000 oz) 229 237 271 Results of operations Revenues (U.S.$ million) 285.4 273.9 342.5 Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(1) 140.5 141.4 172.6 All-in sustaining cost net of by-product revenues per ounce of gold sold (U.S.$)(1) 971 959 990 All-in costs net of by-product revenues per ounce of gold sold (U.S.$)(1) 971 959 990 Note: (1) For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net of by-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. AIC and AISC are calculated per ounce of gold sold, excluding gold equivalent ounces. See “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. In fiscal 2016, gold production decreased by 3% to 0.23 million ounces from 0.24 million ounces in fiscal 2015, primarily due to a drop in tonnes processed. Net operating costs decreased marginally from U.S.$141.4 million in fiscal 2015 to U.S.$140.5 million in fiscal 2016. In U.S. dollar terms, total AIC increased to U.S.$971 per ounce in fiscal 2016 compared with U.S.$959 per ounce in fiscal 2015 due primarily to a reduction in ounces sold. Assuming that Gold Fields does not increase or decrease reserves estimates at Agnew/Lawlers and that there are no changes to the current mine plan, the December 31, 2016 proven and probable reserves at 0.5 million ounces will be sufficient to maintain production at Agnew/Lawlers through fiscal 2019 (three years). However, as discussed earlier in “Risk Factors” and “Description of Mining Business—Mine Planning and Management,” there are numerous factors which can affect reserve estimates and the mine plan, which could thus materially change the life of mine. Agnew/Lawlers is engaged in underground mining and is thus subject to all of the underground and surface mining risks discussed in “Risk Factors”. The primary safety risk at Waroonga is falls of ground at the underground operations, which is addressed through the use of ground support, paste filling of open stopes and sequencing of mine operations to improve overall stability of the ground. The primary safety risk at New Holland is falls of ground at the underground operations, which is addressed through the use of ground support and sequencing of mine operations to improve stability of the ground. For more information about workplace injuries at Agnew/Lawlers, see “Directors, Senior Management and Employees—Employees—Safety and Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”. There were no strikes or material work stoppages at Agnew/Lawlers in fiscal 2016 and none to date since December 31, 2016. Processing All processing at Agnew/Lawlers is undertaken through a single processing facility. The following table sets forth year commissioned, processing techniques and processing capacity per month, as well as average tonnes 74 Table of Contents milled per month and the metallurgical recovery factor during fiscal 2016 for the plant. The Lawlers Mill was placed on a care and maintenance basis after existing stockpiles were treated shortly after the acquisition was completed. Processing Techniques Plant Year commissioned Comminution phase Treatment phase Capacity(1) Average milled for fiscal 2016 Approximate recovery factor for fiscal 2016(2) (tonnes/month) Agnew Mill 1986 Two-stage ball milling CIP treatment 100,000 98,000 94 % Notes: (1) Nameplate capacity as stated by the manufacturer. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. (2) Percentages are rounded to the nearest whole per cent. Capital Expenditure Gold Fields spent A$94.0 million or U.S.$70.0 million on capital expenditures at Agnew/Lawlers in fiscal 2016, primarily on capital development at Waroonga and New Holland and on exploration. Gold Fields has budgeted approximately A$86.8 million, or U.S.$63.7 million, for capital expenditures at Agnew/Lawlers for fiscal 2017, primarily for exploration, ventilation at Waroonga north, the cyanide detoxification plant and the new in-pit tailings facility. Granny Smith Introduction Granny Smith is located 27 kilometers southwest of the town of Laverton in the Northern Goldfields of Western Australia and is accessible via the Mt. Weld Road. Laverton has sealed road to Perth, 950 kilometers to the southwest, and Kalgoorlie, 400 kilometers to the south. Granny Smith holds exploration licenses, prospecting licenses and mining leases covering a total area of approximately 72,236 hectares. The operation runs on a fly-in fly-out basis with variable rosters. A well-maintained unsealed airstrip located approximately eight kilometers northeast of the camp provides air access from Perth for the majority of employees. Flights are made four days per week and the average flight time is approximately 1.5 hours. History The Granny Smith deposits were discovered in 1987. In 1989, mining at Granny Smith commenced in the Granny Smith pit and continued in subsequent years, with the development of a series of open pits. In 1998 the Wallaby deposit was discovered 11 kilometers southwest of Granny Smith. In November 2001, the first Wallaby ore was delivered to the mill. The Wallaby Open Pit was mined from October 2001 until December 2006. Underground mining at Wallaby commenced in December 2005 and is ongoing. As noted above, Gold Fields acquired the mine in October 2013. 75 Table of Contents Geology Granny Smith is located in the Eastern Yilgarn Craton. At a regional scale, the map patterns of Laverton are dominated by the Mt. Margaret Dome in the northwest and the Kirgella Dome in the southeast. These domes are flanked to the east and west by north-northwest-striking shear zones, and the central zone between the two domes is dominated by north to north-northeast-striking sigmoidal shear zones. These distinctly different strikes to the shear zones developed early in the tectonic evolution and resulted in a favorable architecture for late-stage orogenic gold mineralization. Mining The Wallaby underground operation has been in operation since December 2005. Access to the Wallaby underground mine is via a portal established within the completed Wallaby open pit. The mine operation is trackless, with truck haulage from underground via the ramp to the surface. The Wallaby underground mine is currently designed to exploit six stacked mineralized lodes to a depth of 1.1 kilometers. Two primary underground mining methods are used, with minor adjustments to suit localized geometry. Inclined room and pillar is used in areas with a moderate dip and moderate width zones, and transverse longhole stoping is used in zones which are thicker (six to 15 meters) with variable dips. Two other mining methods are used to a lesser extent. Narrow vein longhole stoping may be utilized in some areas with the benefit of reduced planned footwall dilution, and bulk longhole stoping is used in thicker zones under varying dip conditions. In fiscal 2016, Granny Smith continued its extensive program of mine development. The mine development program advanced 6.1km of horizontal capital development to provide access to lower ore horizons at the Wallaby mine. Extensive vertical development was also undertaken to enhance ventilation to access these lower levels. The exploration activity was on a range of activities from early stage target identification through to the definition of extensions to the Wallaby deposit. Granny Smith was again successful in extending reserves, replacing the full 323,000 oz of gold mined and adding a further 375,000 mineable ounces to it reserve. Detailed below are the operating and production results at Granny Smith for fiscal 2016, 2015 and 2014. Fiscal 2016 Fiscal 2015 Fiscal 2014 Production Tonnes (‘000) 1,446 1,451 1,472 Recovered grade (g/t) 6.1 6.5 6.7 Gold produced (‘000 oz) 284 301 315 Results of operations Revenues (U.S.$ million) 355.8 348.4 399.8 Operating costs (excluding amortization and depreciation) (U.S.$ million)(1) 133.8 141.3 182.6 All-in sustaining cost net of by-product revenues per ounce of gold sold (U.S.$)(1) 834 764 809 All-in costs net of by-product revenues per ounce of gold sold (U.S.$)(1) 834 764 809 Note: (1) For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net of by-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. AIC and AISC are calculated per ounce of gold sold, excluding gold equivalent ounces. See “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. 76 Table of Contents In fiscal 2016, gold production decreased by 6% to 0.28 million ounces from 0.30 million ounces in fiscal 2015, primarily due to lower grades and an increase in stockpiled ore because of the timing of the December milling campaign. Net operating costs decreased by 5% to U.S.$133.8 million from U.S.$141.3 million in fiscal 2015, primarily due to higher mining cost as a result of higher mining volumes offset by a gold-in-process credit to cost associated with the timing of milling campaigns. Total AIC in Australian dollar terms increased by 10% due to a drop in gold output and higher capital expenditures, partially offset by lower net operating costs. In U.S. dollar terms, total AIC increased to U.S.$834 per ounce in fiscal 2016 compared with U.S.$764 per ounce in fiscal 2015 as a result of lower gold sold and higher capital expenditure partially offset by lower operating costs. Assuming that Gold Fields does not increase or decrease reserves estimates at Granny Smith and that there are no changes to the current mine plan, Granny Smith’s December 31, 2016 proven and probable reserves of 1.7 million ounces will be sufficient to maintain production through fiscal 2025. However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors which can affect reserve estimates and the mine plan, which could thus materially change the life of mine. Granny Smith is engaged in underground mining and is thus subject to all of the underground and surface mining risks discussed in “Risk Factors”. The primary safety risk at Granny Smith is falls of ground at the underground operations, which is addressed through the use of ground support, backfilling of open voids and sequencing of mine operations to improve overall stability of the ground. For more information about workplace injuries at Granny Smith, see “Directors, Senior Management and Employees—Employees—Safety and Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”. There were no strikes and/or material work stoppages at Granny Smith in fiscal 2016 and none to date since December 31, 2016. Processing The Granny Smith processing plant consists of a crushing circuit, SAG and ball milling, leach and CIP circuits and a gravity tailings retreatment circuit to concentrate and fine-grind sulphide minerals, primarily pyrite, for gold recovery. As the processing plant was designed to treat much larger tonnages of open pit ore than the tonnages that the Wallaby underground mine can supply, the plant is run on a campaign basis. The table below provides details of the Granny Smith plant, including year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and metallurgical recovery factors during fiscal 2016. Processing Techniques Plant Year commissioned Comminution phase Treatment phase Capacity(1)(2) Average milled for fiscal 2016 Approximate recovery factor for fiscal 2016(3) (tonnes/month) Granny Smith Processing Facility 1990 Crushing and SAG and Ball milling Leaching/CIP, gravity circuit and refinery 283,000 120,000 93 % Notes: (1) Nameplate capacity as stated by the manufacturer. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. 77 Table of Contents (2) The plant has gone through a number of upgrades and re-configurations over the years and has treated ore from different sources. The throughput capacity is in excess of three million tonnes per annum, however it is currently operated on a campaign basis of up to approximately 1.5 million tonnes per annum, and is only used to treat the ore from the Wallaby underground mine. (3) Percentages are rounded to the nearest whole percent. Capital Expenditure Gold Fields spent A$121.0 million, or U.S.$90.0 million, on capital expenditures at Granny Smith in fiscal 2016, primarily on capital development, exploration and the establishment of new ventilation raises. Gold Fields has budgeted approximately A$114.7 million, or U.S.$84.1 million, for capital expenditures at Granny Smith in fiscal 2017. These funds are principally earmarked for development, exploration and procurement of mining equipment. Darlot Introduction Darlot is located in the Eastern Yilgarn Craton, approximately 55 kilometers southeast of Leinster and some 700 kilometers northeast of Perth in Western Australia. It holds exploration licenses, prospecting licenses and mining leases covering a total area of approximately 13,981 hectares. Darlot is currently an underground operation. The Darlot operation obtains electricity pursuant to a contract with an electricity generating contractor that expires in March 2020 and has access to water, rail, air and road infrastructure. Consumables and supplies are trucked in locally from both Perth and Kalgoorlie. History Gold was first discovered in the Lake Darlot region in an alluvial field in late 1894, which triggered a gold rush that lasted until 1913. Modern exploration commenced in the late 1970s and focused on a re-evaluation of historical mining camps, and extensions and repetitions of known mineralized veins. During August 1996, while diamond drilling a step-out program, a drill hole intersected a 33 meter section at a grade of 8.0g/t Au. This discovery drill hole for the Centenary orebody was approximately 1.2 kilometers east of the Darlot open pit. Underground development to the Centenary orebody from Darlot was initiated during December 1996 and by December 1998 stoping activities commenced. The Centenary orebody thereafter became the primary production source. Gold Fields acquired the mine in October 2013. Geology Darlot is located in the eastern portion of the Yilgarn Craton in Western Australia. The Yilgarn Craton is Archean-aged and comprises north-northwesterly trending greenstone belts and granitic intrusions. The Darlot Centenary deposit is located within the Mount Margaret mineral field which lies to the southern end of the Yandal Greenstone Belt. The Centenary orebody is located approximately 1.2 kilometers east of the Darlot open pit and has been defined from approximately 150 to 700 meters below surface. Gold mineralization occurs within sub-horizontal to 20 degrees westerly dipping stacked quartz veins bounded to the west by the Oval Fault and to the east by the Lords Fault. 78 Table of Contents Mining The underground mine is accessed via two portals within the Darlot open pit, namely the Centenary and Millennium declines. A third decline named Federation with access to the underground mine is accessed from the Centenary decline. The mine is sub-divided into two mining areas, the Darlot lodes and Centenary orebody. The former is the down-dip extension of lodes, mined in the pit whereas the latter is located approximately 1.2 kilometers from the open pit. The Darlot lodes and Centenary orebody are further sub-divided into various lodes and mining areas. A number of laddered raises connect levels to a fresh air base and declines. Decline and lateral development is by electro-hydraulic twin boom jumbos. Ore is transported to the processing plant by haul trucks operating through the two declines. Gold production takes place at Darlot solely from underground operations. Sustained mining and extensions to the underground Lords South Lower, or LSL, area were achieved in fiscal 2016. During fiscal 2016, Darlot also started a decline to the Oval ore body which will become the primary ore source in fiscal 2017. This capital was funded from cash generated during the year. In fiscal 2016, the continued focus remained on supporting self-funded integrated exploration programs to replace production depletion and to extend the LoM for Darlot. During the year, surface and underground exploration processes and methodologies were reviewed and a number of new exploration strategies and applications were initiated. In late fiscal 2016, work commenced on the development and construction of an integrated three dimensional structural model for the mine and regional tenement area. The survey within a one kilometer radius of the existing mine will generate a three dimensional seismic cube to map out all potential structures and develop potential targets that could be accessed from the existing infrastructure. The survey is expected to be fully complete and interpreted by the end of March 2017. Detailed below are the operating and production results at Darlot for fiscal 2016, 2015 and 2014. Fiscal 2016 Fiscal 2015 Fiscal 2014 Production Tonnes (‘000) 454 457 525 Recovered grade (g/t) 4.6 5.3 5.0 Gold produced (‘000 oz) 66 78 84 Results of operations Revenues (U.S.$ million) 83.1 91.3 106.2 Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(1) 57.7 59.2 83.6 All-in sustaining cost net of by-product revenues per ounce of gold sold (U.S.$)(1) 1,238 1,057 1,222 All-in costs net of by-product revenues per ounce of gold sold (U.S.$)(1) 1,238 1,057 1,222 Note: (1) For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net of by-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. AIC and AISC are calculated per ounce of gold sold, excluding gold equivalent ounces. See “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. In fiscal 2016, gold production decreased by 15% to 0.07 million ounces from 0.08 million ounces in fiscal 2015, due to lower grades mined. Net operating costs decreased by 3% in 2016 to U.S.$57.7 million from U.S.$59.2 million in fiscal 2015 due to cost reductions in mining activities. Total AIC in Australian dollar terms increased by 18% due to lower gold output and higher capital expenditures, partially offset by lower operating costs. In U.S. dollar terms, total AIC increased to U.S.$1,238 per ounce in fiscal 2016 compared with U.S.$1,057 per ounce in fiscal 2015, due to lower gold sold and higher capital expenditures partially offset by lower operating costs. 79 Table of Contents Assuming that Gold Fields does not increase or decrease reserves estimates at Darlot and that there are no changes to the current mine plan, Darlot’s December 31, 2016 proven and probable reserves of 0.06 million ounces will be sufficient to continue decreasing levels of production through early to mid-fiscal 2018. Without additional conversion or discovery, the production levels are however expected to decline over time. As discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors which can affect reserve estimates and the mine plan. Darlot is engaged in underground mining and is thus subject to all of the underground mining risks discussed in “Risk Factors”. The primary safety risk at Darlot is falls of ground at the underground operations, which is addressed through the use of ground support and sequencing of mine operations to improve overall stability of the ground. For more information about workplace injuries at Darlot, see “Directors, Senior Management and Employees—Employees—Safety and Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”. There were no strikes or material work stoppages at Darlot in fiscal 2016 and none to date since December 31, 2016. Processing Darlot has a mill that treats primary ore. The table below sets forth year commissioned, processing techniques and processing capacity per month, as well as average tonnes milled per month and metallurgical recovery factors during fiscal 2016, for the plant at Darlot. Processing Techniques Plant Year commissioned Comminution phase Treatment phase Capacity(1) Average milled for fiscal 2016 Approximate recovery factor for fiscal 2016(2) (tonnes/month) Darlot Mill 1988 Three stage crushing and two stage ball mills CIL 64,000 38,000 95 % Notes: (1) Nameplate capacity as stated by the manufacturer. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. (2) Percentages are rounded to the nearest whole percent. Capital Expenditure Gold Fields spent A$28.7 million, or U.S.$21.4 million, on capital expenditures at Darlot in fiscal 2016, primarily on exploration and capital development. Gold Fields has budgeted approximately A$11.8 million, or U.S.$8.4 million, for capital expenditures at Darlot in fiscal 2017. These funds are principally earmarked for capital development and exploration. Americas Operations Prior to fiscal 2013, Gold Fields owned a 98.5% economic interest in the Cerro Corona mine through its shareholding in La Cima. Gold Fields increased its economic interest in La Cima to 99.53% through a reduction in capital carried out in December 2013. 80 Table of Contents Cerro Corona Introduction The Cerro Corona mine became operational by the end of the third quarter of fiscal 2008. It forms part of a porphyry copper-gold deposit situated within the Hualgayoc Mining District in northern Peru. It is located in the highest part of the Western Cordillera of the Andes, in northern Peru, close to the headwaters of the Atlantic continental basin. Cerro Corona is located approximately 80 kilometers by road north of the City of Cajamarca. La Cima holds mining concessions covering a total area of approximately 4,400 hectares and Cerro Corona is being developed over an area of approximately 1,300 hectares of superficial land (the rights to which are held by Gold Fields). Cerro Corona’s electricity is supplied through a long-term contract with a Peruvian power supplier and transported through the national power transmission system and a 34 kilometer transmission line constructed by the project. Cerro Corona’s water requirements are provided primarily by retention of rainfall and pit dewatering; water is continuously recycled. History In December 2003, Gold Fields, through a subsidiary, signed a definitive agreement to purchase an 80.7% economic and 92% voting interest in the Cerro Corona mine from a Peruvian family-owned company, Sociedad Minera Corona S.A. The agreement called for a reorganization whereby the assets of Cerro Corona were transferred to La Cima, in July 2004. Following the approval of an environmental impact assessment, or EIA, on December 2, 2005, Gold Fields completed the purchase of the 92% voting interest (80.7% economic interest) in La Cima in January 2006, for a total consideration of U.S.$40.5 million. La Cima subsequently obtained all requisite additional permits to construct the mine. Construction commenced in May 2006. Geology The Cerro Corona gold-copper deposit is hosted by a 600- to 700-meter diameter sub-vertical cylindrical-shaped quartz diorite porphyry stock emplaced into mid-Cretaceous limestone and marls and siliclastic rocks. Within the porphyry, gold-copper mineralization is primarily hosted by extensive zones of stockwork veining. There are at least two phases of diorite placement, only one of which is mineralized. The non-mineralized diorite is generally regarded as the last phase, and is referred to as “barren core.” The latest re-modeling suggests that the Cerro Corona porphyry is probably composed of four or five satellite stocks with the last two being barren. The intrusive has been emplaced at the intersection of Andean-parallel and Andeannormal (transandean) structures. Supergene oxidation and leaching processes at Cerro Corona have led to the development of a weak to moderate copper enrichment blanket, allowing for the subdivision of the deposit, from the surface downward, into an oxide zone, a mixed oxide-sulphide zone, a secondary enriched (supergene) sulphide zone and a primary (hypogene) sulphide zone. Mining The Cerro Corona deposit is mined by conventional, bulk surface mining methods. The Cerro Corona operation involves a single surface mine. This ore is treated in a conventional milling and sulphide flotation concentrator capable of treating 6.7 million tonnes per annum of ore and producing between 100,000 and 150,000 tonnes per annum of concentrate containing copper and gold, which is treated mainly at smelters in Japan and Germany. The single largest contractor employer is San Martin Contratistas Generales S.A., or San Martin. San Martin carries out all mining activities. All mine planning, excavation and head grade and engineering specifications to meet the required design performance through the life of mine are directly managed by La Cima personnel. Other contractors provide camp administration and catering, security, safety and laboratory operations. In addition, approximately 500 temporary contractors are involved in the construction of the tailings facility. 81 Table of Contents A pre-feasibility study has been completed to determine if the prevailing tailings storage facility constraint on Cerro Corona’s mineral reserves could be lifted and allow for the placement of additional tailings material over the life of mine. The study builds on previous work by incorporating the latest design updates for the tailings storage facility, including optimization of the mine in the potential expanded case, as well as the assessment of additional new opportunities. In fiscal 2016, additional studies were completed (including a study for the possibility to increase the level of the tailings dam), and final assessment of the available opportunities and the preferred case is planned for fiscal 2017. The option to process both oxide stockpiles and sulphide ore through the current sulphide plant in conjunction with each other is under review. During fiscal 2016, a number of studies with respect to treating the oxide stockpiles were conducted, including the completion of the flotation test work and leaching in tanks. In fiscal 2014, Gold Fields extended its electricity supply agreement with private utility Kallpa Generacion S.A. to supply power to the mine until 2027. Detailed below are the operating and production results at Cerro Corona in fiscal 2016, 2015 and 2014. Fiscal 2016 Fiscal 2015 Fiscal 2014 Production Tonnes (‘000) 6,977 6,710 6,797 Gold Head grade (g/t) 1.03 1.07 1.06 Copper Head grade (%) 0.53 0.52 0.58 Combined yield (g/t) 1.2 1.4 1.5 Gold produced (‘000 oz) 150 159 151 Copper produced (‘000 tonnes) 31 29 32 (1) Gold equivalent ounces (‘000 eq oz) 270 296 327 Results of operations Revenues (U.S.$ million) 322.3 292.2 375.5 Operating costs (including gold inventory change but excluding amortization and depreciation) (U.S.$ million)(2) 139.9 144.8 159.7 All-in sustaining cost net of by-product revenue per ounce of gold sold (U.S.$)(2) 499 718 316 All-in costs net of by-product revenue per ounce of gold sold (U.S.$)(2) 499 718 316 All-in sustaining cost gross of by-product revenue per equivalent ounce of gold sold (U.S.$)(2) 762 777 702 All-in costs gross of by-product revenue per equivalent ounce of gold sold (U.S.$)(2) 762 777 702 Notes: (1) Equates to 136,700 ounces on a gold equivalent basis at a price of U.S.$1,163 per ounce of gold and U.S.$5,533 per tonnes of copper. (2) For a reconciliation of Gold Fields’ operating costs excluding amortization and depreciation to its AISC and AIC net of by-product revenues per ounce of gold sold for fiscal 2016, 2015 and 2014, see “Operating and Financial Review and Prospects—All-in Sustaining and All-in Cost”. In fiscal 2016, total managed gold equivalent production decreased by 9% to 0.27 million equivalent ounces from 0.30 million equivalent ounces in fiscal 2015, mainly as a result of the lower gold-copper price ratio, lower gold head grades treated and reduced gold recoveries. Net operating costs decreased by 3% to U.S.$140.0 million from U.S.$145.0 million in fiscal 2015, mainly due to a U.S.$3.8 million buildup of concentrate inventory in fiscal 2016 compared to a U.S.$1.0 million drawdown in fiscal 2015. AISC and AIC amounted to U.S.$499 per ounce in fiscal 2016 compared with U.S.$718 per ounce in fiscal 2015 due to higher by-product credits and lower capital expenditure, partially offset by the drop in gold sold. AISC and AIC, on a gold equivalent basis, totaled 82 Table of Contents U.S.$762 per ounce in fiscal 2016 compared with U.S.$777 per ounce in fiscal 2015 due to higher by-product credits and lower capital expenditure, partially offset by the drop in gold sold. Assuming that Gold Fields does not increase or decrease reserve estimates at Cerro Corona and that there are no changes to the current mine plan, Cerro Corona’s December 31, 2016 proven and probable reserves of 1.30 million ounces of gold and 456 million pounds of copper (of which, 1.30 million ounces of gold and 454 million pounds of copper are attributable to Gold Fields, with the remainder attributable to non-controlling shareholders at La Cima) will be sufficient to maintain production through fiscal 2023 (seven years). However, as discussed earlier in “Risk Factors” and “—Description of Mining Business—Mine Planning and Management”, there are numerous factors that can affect reserve estimates and the mine plan, which could thus materially change the life of mine. The Cerro Corona mine involves open pit mining, and is thus subject to all of the risks associated with open pit mining discussed in “Risk Factors”. For more information about workplace injuries at Cerro Corona, see “Directors, Senior Management and Employees—Employees—Safety and Wellness—Safety Management” and “Directors, Senior Management and Employees—Employees—Safety and Wellness—TRIFR, Fatalities and Fatal Injury Frequency Rate”. Cerro Corona experienced no work stoppages in fiscal 2016 and has experienced none to date since December 31, 2016. Processing The following table sets forth year commissioned, processing techniques and processing capacity per month, for the processing plant at Cerro Corona: Processing Techniques Plant Year commissioned Comminution phase Treatment phase Capacity(1) Average milled for fiscal 2016 Approximate recovery factor for fiscal 2016(2) (tonnes/month) Main Plant 2008 SAG/ball milling Conventional sulphide floatation circuit 560,000 581,000 Gold 64.5% Copper 86.57 Notes: (1) Nameplate capacity as designed. Plant/Mill nameplate capacities are based on a number of operating assumptions, including assumptions regarding the blend of soft and hard ores processed, that can change and which may result in an increased level of throughput over and above the designed nameplate capacity. (2) Percentages are rounded to the nearest whole percent. Capital Expenditure Gold Fields spent U.S.$42.8 million on capital expenditures at Cerro Corona in fiscal 2016, primarily on tailing dam storage and waste storage construction. Gold Fields has budgeted approximately U.S.$52.9 million for capital expenditures at Cerro Corona for fiscal 2017, primarily on the tailings storage facility and the water treatment plant for tailings water. 83 Table of Contents Projects Arctic Platinum Project APP is located approximately 60 kilometers south of the city of Rovaniemi in northern Finland. APP is assessing a number of potential surface mineable platinum group elements plus copper and nickel deposits located within the Portimo and Narkaus mafic layered intrusions. The principal prospects under consideration occur within the Suhanko Project area, comprising of the Konttijarvi, Ahmavaara, and Suhanko North deposits. APP has been earmarked for disposal due to the focus of the Group’s strategy on gold deposits, following the dissolution of the Group’s GIP division in fiscal 2013. Pending the sale, Gold Fields has reduced the APP’s utilization of cash resources. Management of the APP has been transferred from the West Africa region to the corporate development department at Gold Fields’ corporate office, pending sale. Gruyere, Western Australia In December 2016, Gold Fields entered into a 50:50 unincorporated joint venture with Australian miner Gold Road for the development and operation of the Gruyere Gold Project in Western Australia, one of the country’s largest undeveloped gold projects. It comprises the Gruyere gold deposit and 144 km2 of exploration tenure. Gruyere is a large shear hosted porphyry gold deposit, with reserves of 3.5Moz. It is located in Australia’s newest goldfield, the Yamarna Belt, 200 kilometers east of Laverton in Western Australia, where our Granny Smith mine is located. Gold Fields acquired a 50% interest in the Gruyere Gold Project for a total purchase consideration of A$350 million (U.S.$259 million) and a 1.5% royalty on Gold Fields’ share of production when total mine production exceeds 2Moz. The cash consideration will be split, with A$250 million paid on completion of the transaction and A$100 million payable according to an agreed construction cash call schedule. Gold Fields is funding the deal through existing cash resources and banking facilities in Australia. The feasibility study for the Gruyere Gold Project, which was completed in October 2016 by Gold Road, indicated that the Gruyere Gold Project’s current reserves will support average annualized production of 270,000 oz for a 13-year LoM. AISC over the LoM are expected to be A$945 per ounce (U.S.$690 per ounce) and AIC are expected to be A$1,103 per ounce (U.S.$805 per ounce), with un-escalated construction capital expenditure estimated at A$507 million (U.S.$385 million). First production from the Gruyere Gold Project is expected at the end of fiscal 2018 or early fiscal 2019. Gold Fields took over management of the project in February 2017. The Gruyere Gold Project will comprise an open pit mining operation utilizing conventional drill, blast, load and haul activities with a process plant and associated infrastructure including an accommodation village, power station, gas pipeline and sealed airstrip. The power station and gas pipeline are contracted out as part of a build own and operated strategy and the capital cost is excluded from construction capital expenditure. The process plant will be a conventional gravity and carbon-in-leach plant. The joint venture will continue to explore for similar-scale deposits near the Gruyere Gold Project and has budgeted A$11m (U.S.$8 million) comprising of 57,000m of drilling for this exploration program during fiscal 2017. The required environmental and regulatory approvals have been received from the Western Australian government. The Gruyere Gold Project’s tenements are subject to the native title rights of the local indigenous population. In May 2016, Gold Road concluded a native title agreement with the registered claim group, the Yilka and Cosmo Newberry Aboriginal Corporation, or CNAC. This agreement provides access to the area, subject to the provision of financial, contracting and employment benefits to the Yilka and CNAC. This 84 Table of Contents agreement has been assigned to Gold Fields. On June 29, 2016, the Federal Court of Australia determined the registered Yilka native title claim group and the unregistered Sullivan and Edwards native title claim group were entitled to hold native title together. The final form of the determination is yet to be settled. Far Southeast, Philippines The Far Southeast project, or FSE, is a proposed underground mine, which is approximately 250km north of Manila. The project is held by FSE Gold Resources, or FSGRI, in which Gold Fields has a 40% interest, with an option to increase its stake to 60%, and is adjacent to an existing mining operation with established infrastructure. Lepanto Consolidated Mining Company, or LCMC, of the Philippines holds the remaining 60% interest and manages the existing LCMC mining operation. Gold Fields has partially impaired its investment in FSE to U.S.$129 million in fiscal 2015, as determined by an evaluation of LCMC’s market value on the Philippine Stock Exchange. For Gold Fields to obtain a further 20% interest in the project, a Financial or Technical Assistance Agreement, or FTAA, is required from the Philippine government, and is dependent on obtaining the Free, Prior and Informed Consent, or FPIC, of the local Kankana-ey indigenous people. A further condition is the renewal for a further 25 years of the mineral production sharing agreement, or the Mineral Production Sharing Agreement, in which most of the FSE deposit occurs. The legal process for renewal is pending resolution. The application for a FTAA was denied by the Mines and Geo-Sciences Bureau, or MGB, in November 2015. FSGRI filed a motion for reconsideration with the MGB to reinstate the FTAA application but this motion remains pending. The application for Certification Precondition from the National Commission on Indigenous People, or NCIP, which will complete the FPIC process, also remains under consideration by the NCIP. Amid the legal and administrative delays, the holding costs of this project have been reduced to approximately U.S.$210,000 per month, related mainly to environmental baseline monitoring, community engagement work as well as activities to support the permitting process. Further material development of the project will be dependent on the renewal of the Mineral Production Sharing Agreement and Gold Fields obtaining majority ownership of the project. The project’s copper-gold porphyry is a deeply concealed deposit associated with a Pleistocene diorite-dacite intrusion complex intruded into Eocene basaltic country rocks. The mineralization is mostly hosted in the intrusion complex and to a lesser extent the basaltic country rocks and is characterized by disseminated sulphides and multi-phase sulphide-bearing quartz and quartz-anhydrite vein sets and stockworks. No exploration or additional conceptual mine design studies were conducted on the project during fiscal 2016. There is no reserve reported for the project but the resource was reported inside a mining constraint, which assumed an eventual non-selective, bulk underground mining method. The lower confidence classification for the resource was applied based on drill hole spacing, estimation quality, geological continuity and geological understanding of the deposit in early 2012, supported by a view on reasonable prospects for eventual economic extraction. The resource has a lower relative confidence and cannot therefore be converted to a mineral reserve at this stage. Salares Norte, Chile The Salares Norte project is 100% owned by Gold Fields and is focused on a gold-silver deposit in the Atacama region of northern Chile. Mineralization is contained within a high-sulphidation epithermal system, offering high-grade oxides. The project is located within a core 1,800ha concession area. Gold Fields has an option to purchase one adjoining concession that would add a further 1,200ha. The Group spent U.S.$39 million on pre-feasibility study work and further drilling in fiscal 2016, following on the U.S.$17 million spent in fiscal 2015. Almost 100km of drilling has been completed to date. The Group has budgeted U.S.$64 million for further drilling and studies in fiscal 2017 with a decision on whether the project should progress to feasibility status expected by the second half of fiscal 2017. 85 Table of Contents In December 2016, Gold Fields updated the project’s resources for the Brecha Principal area (at pre-feasibility status) as well as the nearby Agua Amarga deposit (scoping study status). Preliminary indications suggest Salares Norte could be an open pit mine, while metallurgical test work suggests that hybrid carbon-in-leach processing could deliver recovery rates of around 90% for gold. On completion and review of the PFS work for Agua Amarga, the project will be in a position to assess the viability of reporting a maiden reserve for Agua Amarga and the Brecha Principal. Importantly, a land easement for 30 years and water rights for the project were both granted in December 2016. Salares Norte is also developing the environmental and social baseline to support the project schedule as part of its EIA. The environmental work comprises biological and bio-diversity studies, including the protection of the endangered short-tailed chinchilla in the area. Biological consultants are currently in the process of gathering data on the chinchilla to determine their movement and behavior. Once the research has been completed, which is expected in the fourth quarter of fiscal 2017, Salares Norte will present the Chile’s Ministry of Environment with options on how to protect the chinchilla, including possible relocation to a protected area within the concession. The research work undertaken at Salares Norte will also be used to inform a nationwide study on the conservation and management of the species. The social baseline at Salares Norte has been expanded. While there are no indigenous claims or presence on the concession or the dedicated access routes, Salares Norte has embarked on an extensive engagement program with impacted communities, including investments in community projects. Insurance Gold Fields has insurance policies to protect against catastrophic events which could have significant adverse effects on its operations and profitability, subject to the availability and cost of such insurance. Gold Fields maintains its philosophy of placing coverage with secure underwriters that offer programs to suit Gold Fields’ specific needs. Gold Fields has global insurance policies covering general liability, accidental loss or material damage to its property, business interruption in the form of fixed operating costs or standing charges and other losses. Gold Fields does not insure all potential losses associated with its operations as some insurance premiums are prohibitively expensive, some risks are considered too remote to insure and some types of insurance cover are not available. For example, Gold Fields insurance policies do not cover loss of profits. Should an event occur for which there is no or limited insurance cover, this could affect Gold Fields’ cash flows and profitability. Management believes that the scope and amount of insurance coverage is adequate, taking into account the probability and potential severity of each identified risk. Gold Fields’ insurance coverage is consistent with customary practice for a gold mining company of its size with multinational operations. See “Risk Factors—Gold Fields’ insurance coverage may not adequately satisfy all potential claims in the future”. The Gold Mining Industry Background Gold is a dense, relatively soft and rare precious metal which occurs in natural form as nuggets or grains in ore, underground veins and alluvial deposits. Gold mining operations include both underground and open pit operations with gold currently able to be commercially extracted from ore grades in amounts as low as 0.5 grams/metric tonne (open pit). The majority of gold production is used for jewelry production and for investment purposes, in the latter case because some investors view it as a store of value against inflation. In addition, certain physical properties of gold, including its malleability, ductility, electric conductivity, resistance to corrosion and reflectivity, make it the metal of choice in a number of industrial applications. 86 Table of Contents Global Markets Demand The two main categories of demand for gold are fabrication (primarily jewelry) and investment (private and governmental). Gold demand over the last few years has been mainly driven by China and India, which accounted for 60% of the total global demand in 2016, 2015 and 2014. The price of gold has fallen by around 19% between 2011 and 2016. Since 2015, it has recovered somewhat and at April 3, 2017 the price of gold was U.S.$1,247 per ounce. More than any other variable, the gold price is the key dynamic informing Gold Fields’ business strategy and the volatility of the price over the past few years has been one of the key reasons for the strategic restructuring undertaken by the Company. Much of the traditional investor case for gold as a safe haven has come under pressure over the past four years. In 2012, investor demand eased as it became apparent that many of the feared economic worst-case scenarios were unlikely to materialize. The gold price subsequently fell, as the equity and real estate markets started to offer stronger returns. As a result, many investors sold their physical gold holdings in 2013 and 2014, resulting in a sharp drop in the gold price. Nevertheless, the gold price continues to defy most analysts’ projections. Amid Brexit and the outcome of the US presidential election, to name just two events that contributed to political and economic uncertainty in 2016, the gold price should have been significantly higher than it is today. This has not been the case. Furthermore, equity markets, particularly in the U.S., are at record high-levels amid rising U.S. interest rates and expected tax reductions, detracting investors from gold. Gold Field expects that the performance of gold in 2017 is likely to be undermined by continued inflows into equity markets and further US interest rate hikes. Gold Fields is thus planning its business for 2017 on the assumption of a U.S.$1,100 per ounce gold price. Our longer-term outlook, however, is more optimistic. While gold prices in the short term will be largely dictated by macro events, in the longer-term supply and demand fundamentals cannot be ignored. On the supply side, research we have undertaken indicates that primary gold supply is close to a peak and likely to decline in the years to come. This is largely due to the cut in exploration spending as well as the dearth of new mines being built. This is exacerbated by declines in grades and increasing depth and complexity of ore bodies being mined. The gold price recovered in 2016 by 8.3% from 2015 year-on-year amid fears of an interest rate hike in the United States and increased global political uncertainty. On balance, the negative supply and demand trends have seen the average gold price received by Gold Fields decline to U.S.$1,241 per ounce in 2016 from a high of U.S.$1,656 per ounce in 2012. While much of the gold price’s short-term movements are the result of market sentiment, the longer-term movements remain underpinned by supply and demand fundamentals. Based on these fundamentals, management believes that the gold price will improve over the next few years though it will undoubtedly experience more short-term volatility. According to the WGC, gold demand was little changed from last year, increasing from 4,216 tonnes in 2015 to 4,309 tonnes in 2016. Demand in India and China, while significantly down on its highs over the last five years, should remain strong given economic growth in these countries, rising urbanization and traditional affinity towards gold in those countries. Central banks continue to buy and it appears that most of the central banks who were looking to sell gold have already done so. In the longer term, management believes that key demand fundamentals will assert themselves due to: • A continued build-up of gold reserves by the world’s central banks (or, at least, maintaining their current holdings) amid economic and political uncertainty and reserve diversification away from the U.S. dollar. 87 Table of Contents Net purchases by central banks and other official institutions totaled 384 tonnes in 2016, a pronounced decline from the purchases of around 600 tonnes per annum for each of the preceding three years; and • The continued need for a safe haven asset in times of economic and political uncertainty. Though this may not have been as prevalent a factor over the past five years as previously used to be the case, the gold price’s more recent recovery to levels of around U.S.$1,250 per ounce has been driven amid investor uncertainty in global stock markets. These factors bode well for the future of gold and Gold Fields expects to see a strong gold price in the next five years. While some have questioned the continued safe-haven status of gold in times of political and economic uncertainty, we believe that the longer-term effects of the current geo-political turmoil will eventually work their way through to a firmer gold price. Investors will continue to diversify some of their risk into gold, both as a hedge against inflation and flat currencies. Supply Supply of gold consists of new production from mining, the recycling of gold scrap and releases from existing stocks of bullion. Mine production represents the most important source of supply. Management believes that long-term gold supply issues will act to support a recovery in the gold price. According to the WGC, total gold supply declined by 11% in the fourth quarter of 2016, due to an estimated 4.6% drop in global mine output, the largest quarterly reduction since 2008. Total mine production for 2016 at 3,236 tonnes was flat compared to 2015 production, its slowest annual increase since 2008. This trend is set to continue. The Gold Fields Mineral Services Ltd. consultancy predicts a further drop in mine production in 2016, due to lower production at more mature mines, a decline in average grades at most gold operations and a lack of new mines coming on stream. Many analysts believe peak mine production was reached in 2015, coinciding with a high in gold discoveries in the mid-1990s and assuming an average 20-year development cycle. Goldman Sachs has stated that there may be only 20 years of known mineable reserves of gold left. Price The market for gold is relatively liquid compared to other commodity markets, with London being the world’s largest gold trading market. Gold is also actively traded via futures and forward contracts. The price of gold has historically been significantly affected by macroeconomic factors, such as inflation, exchange rates, reserves policy and by global political and economic events, rather than simple supply/demand dynamics. Gold is often purchased as a store of value in periods of price inflation and weakening currency. The price of gold has historically been less volatile than that of most other commodities. In 2015, the price of gold fell by 10% but recovered by 8.5% in 2016. The closing gold price on December 31, 2016 was U.S.$1,130 per ounce. In 2016, the spot gold price was as high as U.S.$1,365 and as low as U.S.$1,060. Top Producers Based on fiscal 2016 production, the first, second, third and fourth largest gold producers in the world were Barrick, Newmont, AngloGold Ashanti and Goldcorp, respectively. According to publicly available sources, at December 31, 2016, Barrick had 13 operations in eleven countries, Newmont had 15 operations in five countries, AngloGold Ashanti had 17 operations in nine countries and Goldcorp had 12 operations in six countries. In fiscal 2016, Gold Fields was the seventh largest gold producer in the world. Performance and Outlook During the past year Gold Fields undertook an analysis of the performance of the top gold producers in the Industry over the past four years. On the whole the industry has responded well to the reduction in the gold price since 2012 and has brought back the focus to profitability and cash flow. As a consequence, margins have improved and balance sheets have been de-risked. 88 Table of Contents However, we need to be careful to declare a complete victory as external factors, like lower exchange rates against the US dollar and lower oil prices, have helped significantly. Also there is a suspicion that sustaining capital may have been cut, the effects of which will be realized later. Much the same happened in the early 2000’s after the gold price recovered from U.S.$250/oz. Furthermore, many companies will have some concerns about their future production profiles given the large cut-backs in both exploration and project expenditures, and will be looking to fill these potential gaps over the next year or two. Mergers and acquisitions have as a result become more competitive and are the reason why high premiums are being paid for good assets in production. Gold companies have done as well as they can be expected to in terms of reducing their costs, and there is a greater probability of costs rising from here onwards. This could be exacerbated if there is an overall mining recovery and we revert back to annual mining cost inflation of between 8-10%, as it was a few years back. Should that happen, further rationalization in the industry, with all the concurrent job losses, would then be inevitable. It is thus imperative that we learn the lessons from the past and be cautious about expanding by taking on more debt as we did previously. Debt has a role, but capital allocation must be disciplined if debt is taken on board. The industry’s work is not yet done. Guidance for 2017 Gold Fields’ strategic review for fiscal 2017 takes into account a largely unchanged gold price and our budgets have been built around an anticipated average price of U.S.$1,100/oz – the same we used during fiscal 2016. The investment in our business is a priority for fiscal 2017, which includes U.S.$20 million for South Deep, U.S.$120 million for Damang, U.S.$112 million for Gruyere and U.S.$64 million for Salares Norte. As a result, our AIC cost guidance for fiscal 2017 is U.S.$1,170/oz – U.S.$1,190/oz compared to U.S.$1,006/oz in fiscal 2016. The guidance for AISC is U.S.$1,010/oz – U.S.$1,030/oz compared to U.S.$980/oz in fiscal 2016. Capital expenditure for the year is forecast to rise to U.S.$869 million (fiscal 2016: U.S.$650 million) as a result of our significant investment in Salares Norte, Gruyere, Damang and South Deep. Our production guidance for the year is 2.10 – 2.15 million attributable ounces, compared with the 2.15 million attributable ounces achieved in fiscal 2016. Notable contributions for fiscal 2017 are: • Further rise in production at South Deep from 290,000 oz in fiscal 2016 to 315,000 oz; • A decline in Damang’s production to 120,000 oz from 148,000 oz in fiscal 2016; • Stable production profiles at Tarkwa and our remaining three Australian mines; and • A rise in gold-equivalent production at Cerro Corona from 270,000 oz in fiscal 2016 to 290,000 oz in fiscal 2017 due to expectations of higher copper prices. Environmental and Regulatory Matters South Africa Environmental Gold Fields’ South African operations are subject to various laws relevant to its activities that relate to the protection of the environment. South Africa’s Constitution grants the people of South Africa the right to an environment that is not harmful to human health or wellbeing and to the protection of that environment for the benefit of present and future generations through reasonable legislative and other measures. The South African Constitution and the National Environmental Management Act, No. 107 of 1998, or NEMA, as well as various other related pieces of legislation enacted, grant legal standing to a wide range of interest groups to bring legal proceedings to enforce their environmental rights, which are enforceable against private entities as well as the South African government. 89 Table of Contents South African environmental legislation commonly requires businesses whose operations may have an impact on the environment to obtain permits, authorizations and other approvals for those operations. The applicable environmental legislation also imposes general compliance requirements and incorporates the “polluter pays” principle. On September 2, 2014, a number of amendments to the environmental laws were published. Such amendments were aimed at, among other things, resolving the problem of fragmented regulation of the mining industry, by creating what is known as the “One Environmental System”. Although the amendments were published on September 2, 2014, some of them only became effective on December 8, 2014. Prior to these amendments, there was debate as to whether an environmental authorization was required for mining operations if a mining entity had an environmental management plan/program, or EMP, approved by the DMR. This debate was settled by the amendments to the environmental laws, which have made it clear that in terms of the “One Environmental System”, as of December 8, 2014, environmental authorizations are required for prospecting/mining operations and related activities, in addition to an EMP. The DMR is now the competent authority to grant environmental authorizations under NEMA. However, the competent officials at the DEA remain the appellate authority. Directors may be held liable under provisions of the NEMA for any environmental degradation and/or the remediation thereof. The Minerals and Petroleum Resources Development Amendment Bill was published on December 27, 2012 for public comment. A second version of this Bill was published in June 2013 and although the parliamentary process is complete, the Bill has yet to be published as an Amendment Act as the President has referred it back to parliament because in his view, certain of its provisions were not in accordance with the Constitution of South Africa. See “—Mineral Rights”. This Bill contains further proposed amendments to allow for a smooth transition to the “One Environmental System”. Another proposed amendment to the MPRDA is for the holder of a mining right, previous holder of an old order right, or previous owner of works that has ceased to exist to remain liable for any latent or residual environmental liability, pollution, ecological degradation, the pumping and treatment of extraneous water which may become known in the future, notwithstanding the issuance of a closure certificate in terms of the MPRDA. The NEMA has been amended to provide that every holder, holder of an old order right or owner of works will remain responsible for any environmental liability, pollution or ecological degradation, the pumping and treatment of polluted or extraneous water and the management and sustainable closure thereof, notwithstanding the issuing of a closure certificate. South African mining companies are required by law to undertake rehabilitation work as part of their ongoing operations in accordance with an approved EMP, which supports a mine closure plan. Gold Fields funds these environmental rehabilitation costs as part of its operating cash flows, and its long-term closure costs are funded by making cash contributions into an environmental trust fund with the difference between the closure provision made to date and the final closure cost estimate funded through insurance guarantees. These costs are collectively referred to as the “financial provision”. During fiscal 2016, South Deep also conducted an independent compliance audit with the EMP and the associated audit report was submitted to the DMR on April 25, 2016. Regulations Pertaining to the Financial Provision for Prospecting, Exploration, Mining or Production Operations, which were published in terms of NEMA on November 20, 2015, or the Financial Provision Regulations, were debated by the Chamber and the respective government departments during fiscal 2016 and negotiations were ongoing in early fiscal 2017. These regulations apply to holders of converted old order mining rights and require such holders to “review and align” their approved financial provision by undertaking a review of the provisioning in accordance with the Financial Provision Regulations by February 2019. A key challenge the regulations pose in their current form (to the industry as a whole) is the potential for duplicate funding in that mining companies will continue to fund on-going rehabilitation activities through operating costs but will also provide for on-going concurrent rehabilitation and environmental management costs in the financial provision fund. Further, permit holders, after November 20, 2015, will no longer use “trust funds” as vehicles for financial provision for annual rehabilitation, final rehabilitation, decommissioning and closure. Holders who made use of a trust fund as a financial provision vehicle to obtain environmental authorization would need, in the next annual review and adjustment, to amend any trust fund and update as required by the regulations to get a mining or prospecting right. Also, given the wording of the existing and draft trust deed, it might not be possible to withdraw the excess funds from the trust to be used for financial guarantees. These regulations provide for an interim period to comply which expires in February 2019. 90 Table of Contents In line with the achievement of the “One Environmental System”, the National Water Act, No. 36 of 1998, or the NWA, was also amended. Due to the past delays surrounding the processing of water use licenses, the NWA now requires the Minister of Water and Sanitation to align and integrate the process for consideration of a water use license with the timeframes and processes additional to applications for prospecting and mining rights under the MPRDA, as well as environmental authorizations of the NEMA. Another amendment to the NWA is the insertion of a provision to the effect that a person aggrieved in regard to a decision made on an application for a water use license (particularly for prospecting or mining) can appeal directly to the Minister of Water and Sanitation. Further, under the NWA, all water in the hydrological cycle is under the custodianship of the South African government held in trust for the people of South Africa and water users have been required to re-register their water uses under the NWA. In addition, the NWA governs waste and waste water discharges that may affect a water resource. The South African government uses various policy instruments and mechanisms, such as the water use license regime and the proposed waste discharge charge system, to ensure compliance with prescribed standards and water management practices according to the user pays and polluter pays principles, and to shift some of the treatment and clean-up cost back to the polluters. Gold Fields continues to use all reasonable and practical measures to remove underground water to permit the routine safe functioning of South Deep. South Deep was issued with a water use license in November 2011 by the DWS. Certain conditions and other aspects of the approved license were identified as requiring modification and an application to address these was submitted to the DWS in February 2012. A further amended water use license application was submitted to the DWS in November 2013, primarily to reflect the results of a re-assessment of expected water use requirements and a changing water balance. No response was received from the DWS in relation to the 2013 amendment. In November 2014, an agreement was reached with the DWS to withdraw the 2013 amendment and to submit an updated amendment application in May 2015. The May 2015 amendment application reflects the proposed changes to the approved 2011 water use license conditions. In addition, the updated amendment reflects a variety of water management projects and initiatives that were implemented during fiscal 2014 and that are planned for implementation during fiscal 2015 and beyond. A presentation was provided to the DWS in March 2015 to appraise them of the proposed structure and content of the new amendment, prior to the re-submission in May 2015. Gold Fields continued to make representations to the DWS during fiscal 2016 and is currently waiting to receive an approved amended license. The existing approved license will remain in place while the application is processed by the DWS. Under the National Environmental Management Air Quality Act, No. 39 of 2004, or Air Quality Act, the South African government has established minimum emission standards for certain activities which result in air emissions and for which atmospheric emissions licenses, or AELs, must be held. The Amended Minimum Emissions Standards related to the list of activities resulting in atmospheric emissions, or Listed Activities, were released by the Minister of Water and Environmental Affairs and came into operation on November 22, 2013. Existing plants were required to comply with the Minimum Emissions Standards by April 1, 2015. Newly granted AELs under the Air Quality Act will incorporate the Minimum Emissions Standards as conditions. Non-compliance with the Minimum Emissions Standards is an offense under the Air Quality Act. South Deep mine undertakes activities which result in atmospheric emissions, as provided for by the Air Quality Act, and holds a registration certificate authorizing such activities under previous legislation. South Deep has submitted the necessary application for a new license under the Air Quality Act in respect of some of the emitting activities undertaken at South Deep. South Deep submitted an application for an AEL in March 2013. A meeting was held in March 2014 with the West Rand District Municipality to discuss the AEL application. The outcome of this meeting required South Deep’s application to be amended to include Listed Activities. Gold Fields resubmitted an amended AEL application to the West Rand District Municipality, following which a provisional AEL for South Deep was granted pursuant to section 40(1)(a) of the Air Quality Act in respect of South Deep’s three listed activities. The provisional AEL was valid for a period of one year of operation from November 13, 2014 and an extension was granted in November 2015. The application for the final AEL was filed in November 2015. An air quality license was issued in December 2016 by the Rand West City Local Municipality, authorizing South Deep to undertake smelting activities under the National Environmental Air Quality Act. Gold Fields developed an Air Quality Plan Management Plan in 2015 in an effort to ensure it complies with the applicable requirements of the Air Quality Act, including the new minimum emissions standards. 91 Table of Contents The introduction of a carbon tax has been pending since 2011. The carbon tax design requires the calculation of liability to be based on the volume of fossil fuel input which results in Scope 1 greenhouse gas emissions, and for such liability to commence at a marginal rate of R120 per tonne of CO2e, increasing by 10% per annum. The design also anticipates tax-free exemptions ranging between 60% and 95%, with various allowances that would permit a tax liable entity to further mitigate its liability. Accordingly, the effective tax rate will vary between R6 and R48 per tonne of CO2e. Such allowances include an increased tax free threshold for trade exposed sectors, recognition of emission reduction efforts, additional allowance for participating in the national carbon budgeting system and the use of carbon offsets against a carbon tax liability. If South Deep is liable to pay carbon tax, it is expected to qualify for at least 80% of the allowances. As such, its exposure is expected to be initially calculated (in the first year of carbon tax exposure) on 20% of the mine’s Scope 1 emissions which have been estimated to be 8,640 tonnes of CO2e in fiscal 2016. Based on these emissions, the potential tax liability in 2018 is estimated at approximately U.S.$14,800. The South African Minister of Finance reiterated in his February 2017 budget speech that the tax would be promulgated, though he did not give a starting date. He repeated an earlier undertaking that the tax will have no net impact on the electricity price before 2020. The National Environmental Management Waste Act, No. 59 of 2008, or the Waste Act, commenced on July 1, 2009, with the exception of certain sections relating to contaminated land which came into force on May 2, 2014. Responsible waste management has become a priority for the DEA. Gold Fields is currently working with the DMR in order to ensure it is in compliance with the Waste Act. South Deep has one waste disposal facility which is currently dormant. The site consists of different waste streams, including waste that has radiation levels that are slightly above background levels, being the naturally occurring levels in geology. There is now a duty to rehabilitate this dormant site. South Deep must ensure that it has the appropriate waste management licenses and environmental authorizations for the closure and rehabilitation of all its waste sites. South Deep applied on 13 January 2015 for a waste license in respect of two facilities: a waste transfer station and a salvage yard. On June 2, 2014, amendments to the Waste Act were published, which had the effect that as of December 8, 2014, residue deposits and residue stockpiles would be brought within the Waste Act’s scope of operation. Accordingly, as of December 8, 2014, in terms of the “One Environmental System”, residue stockpiles and residue deposits are now subject to regulation under the Waste Act and waste management licenses for activities relating to their establishment and reclamation will need to be obtained, subject to the transitional provisions in the amendments which were published in July 24, 2015. Such licenses will need to be obtained from the DMR, which is the competent authority to issue such licenses for mining operations. The Regulations regarding the Planning and Management of Residue Stockpiles and Residue Deposits which were published on July 24, 2015 are also likely to have a financial impact on the management of these facilities, since they impose various classifications and associated liner requirements for new residue stockpiles and deposits. This is a fundamental shift in regulation as the Waste Act previously excluded residue deposits and residue stockpiles from its ambit. The 2013 Amendment Bill to the MPRDA also proposes the amendment of the definition of residue stockpiles to include historic mines and dumps created before the implementation of the MPRDA. Gold Fields undertakes activities which are regulated by the National Nuclear Regulator Act, No. 47 of 1999, or the NNR Act. The NNR Act requires Gold Fields to obtain authorization from the National Nuclear Regulator, or NNR, and undertake activities in accordance with the conditions of such authorizations. Prior to the Spin-off, Gold Fields’ South African mining operations possessed and maintained Certificates of Registration issued by the NNR. After the Spin-off, South Deep continues to possess and maintain its Certificate of Registration, or CoR, as required under the NNR Act. Although South Africa has a comprehensive environmental regulatory framework, enforcement of environmental law has traditionally been poor. The DEA and the DWS have indicated that enforcement will improve and that Environmental Management Inspectors will be provided with greater resources going forward. As of December 8, 2014, under the “One Environmental System”, separate Environmental Management Inspectors were appointed under the DMR to regulate environmental compliance of the mining industry. 92 Table of Contents Although the DMR is still in the process of growing its inspectorate, related departments such as the DWS have generally shown an increased willingness to enforce the provisions of the NWA through the issue of pre-directives under the NWA. Health and Safety The principal objective of the South African Mine Health and Safety Act No. 29 of 1996, or the Mine Health and Safety Act, is to provide for the protection of the health and safety of employees and other persons at mines. The Mine Health and Safety Act requires employers and others to ensure their operating and non-operating mines provide a safe and healthy working environment, as far as reasonably practicable. The Mine Health and Safety Act provides for penalties and a system of administrative fines for non-compliance with the provisions thereof. The Mine Health and Safety Act further provides for employee participation through the establishment of health and safety committees and by requiring the appointment of health and safety representatives. It also provides for an employee’s right to refuse dangerous work. Finally, it describes the powers and functions of the Mine Health and Safety Inspectorate, or MHSI (which inspectorate is part of the DMR and the process of enforcement). The Mine Health and Safety Act authorizes the MHSI to restrict or stop work at any mine and require an employer to take steps to minimize health and safety risks at any mine. Under the Mine Health and Safety Act, an employer is obliged, among other things, to ensure, as far as reasonably practicable, that its mines are designed, constructed and equipped to provide conditions for safe operation and a healthy working environment. The employer is also required to ensure, as far as reasonably practicable, that its mines are commissioned, operated, maintained and decommissioned in such a way that employees can perform their work without endangering their health and safety or that of any other person. Every employer must ensure, as far as reasonably practicable, that persons who are not employees, but who may be directly affected by the activities at a mine, are not exposed to any hazards to their health and safety. Any person, which may include an employer, who fails to comply with a provision of the Mine Health and Safety Act commits an offense and may be charged and, if successfully prosecuted, fined or imprisoned, or both. In addition, inspectors from the MHSI have the right to halt any part, or all, of the operations of a mine in the event of any circumstances, which the inspector has reason to believe endangers the health and safety of any person at the mine. The MHSI also has the power to impose administrative fines upon an employer in the event of a breach of the Mine Health and Safety Act. The maximum administrative fine that may be imposed is R1 million per offense. The principal health risks associated with Gold Fields’ mining operations in South Africa arise from occupational exposure and community environmental exposure to silica dust, noise, heat and certain hazardous substances, including toxic gases, water, soil or air contamination and radioactive particulates. The most significant occupational diseases affecting Gold Fields’ workforce include lung diseases (such as silicosis, tuberculosis, a combination of the two and COAD) as well as NIHL. The Occupational Diseases in Mines and Works Act, No. 78 of 1973 (South Africa), or the ODMWA, governs the payment of compensation and medical costs related to certain illnesses, such as silicosis, contracted by persons employed in mines or at sites where activities ancillary to mining are conducted. See “Risk Factors—Gold Fields’ operations are subject to environmental and health and safety regulations, which could impose additional costs and compliance requirements and Gold Fields may face claims and liability for breaches, or alleged breaches, of such regulations and other applicable laws”. In 2011, the South African Constitutional Court ruled that a claim for compensation under ODMWA does not prevent the employee from seeking to recover damages from the employer as a civil action under common law. While issues, such as negligence and causation, need to be proved by the claimant on a case-by-case basis, such a ruling could expose Gold Fields to claims related to occupational hazards and diseases (including silicosis or other ailments alleged to arise due to exposure to hazardous materials and substances), which may be in the form of an individual claim, a class action or similar group claim. Although risks associated with alleged 93 Table of Contents occupational exposure are likely to be greater, such actions may also arise in connection with the alleged incidence of such diseases in communities proximate to Gold Fields’ mines. A consolidated application has been brought against several South African mining companies, including Gold Fields, for certification of a class action on behalf of current or former mineworkers (and their dependents) who have allegedly contracted silicosis and/or tuberculosis while working for one or more of the mining companies listed in the application On May 13, 2016, the South Gauteng High Court ordered, amongst other things the certification of the two separate classes for silicosis and tuberculosis. Subsequently the mining companies listed in the application were granted leave to appeal against all aspects of the class certification judgment. See “—Legal Proceedings and Investigations”. If a significant number of such claims were suitably established against it, the payment of compensation for the claims could have a material adverse effect on Gold Fields’ business, reputation, results of operations and financial condition. In addition, Gold Fields may incur significant additional costs arising out of these issues, including costs relating to the payment of fees, increased levies or other contributions in respect of compensatory or other funds established (if any) and expenditures arising out of its efforts to remediate these matters or to resolve any outstanding claims or other potential action. Mineral Rights The MPRDA See “Risk Factors—Gold Fields’ mineral rights are subject to legislation, which could impose significant costs and burdens and which impose certain ownership requirements, the interpretation of which are the subject of dispute”. The BBBEE Act and the BBBEE Amendment Act The BBBEE Act established a national policy on broad-based black economic empowerment with the objective of increasing the participation of HDSAs in the economy. The BBBEE Act provides for various measures to promote black economic empowerment, including empowering the Minister of Trade and Industry to issue the BBBEE Codes with which organs of state and public entities and parties interacting with them or obtaining rights and licenses from them would be required to comply. There has been some debate as to whether or to what extent the mining industry was subject to the BBBEE Act and the policies and codes provided for thereunder. On October 24, 2014, the BBBEE Amendment Act No. 46 of 2013 was brought into operation. The BBBEE Amendment Act inserts a new provision in the BBBEE Act, whereby the BBBEE Act would trump the provisions of any other law in South Africa which conflicts with the provisions of the BBBEE Act, provided such conflicting law was in force immediately prior to the effective date of the BBBEE Amendment Act. The BBBEE Amendment Act also stipulates that this provision would only be effective one year after the BBBEE Amendment Act is brought into effect. This provision came into effect on October 24, 2015 and on October 27, 2015, the Minister for Trade and Industry published a government gazette notice declaring an exemption in favor of the DMR from applying the requirements contained in section 10(1) of the BBBEE Act for a period of 12 months, ending October 27, 2016. The Minister of Trade and Industry has not published any further notices since this date to provide clarity on his position but the exemption and its expiry can be read as confirmation that the South African Department of Trade and Industry sees the BBBEE codes as “applicable” to the Mining Industry. In any event, it is not clear whether the DMR is likely to continue implementing the Mining Charter in its current form or whether it will apply the BBBEE Act or whether it would follow the BBBEE Codes. This raises the question of whether the BBBEE Act and the BBBEE Codes may overrule the Mining Charter in the future. There is no clarity on this point at this stage. The revised Broad-Based Black Economic Empowerment Codes of Good Practice, or the Revised BEE Codes, became available for voluntary use on October 11, 2013 and became effective on May 1, 2015. Both the BBBEE Amendment Act and the Revised BEE Codes expressly stipulate that, where an economic sector in South Africa has a sector code, or Sector Code, in place for BEE purposes, companies in that sector must comply with the Sector Code. For purposes of the BBBEE Act, the Mining Charter is not a Sector Code. On February 17, 2016, the Minister of Trade and Industry published a gazette notice which repealed or confirmed the validity of a number of Sector Codes. The omission 94 Table of Contents of the Mining Charter from the notice can be interpreted as confirmation that the Mining Charter is not contemplated as a Sector Code. This supports the interpretation that the BBBEE Act did not intend to trump the Mining Charter. While it remains to be seen how this will be interpreted, it appears that the BBBEE Act and the BBBEE Codes will not overrule the Mining Charter in the future. Although the Mining Charter is not a Sector Code, Gold Fields regularly reviews its status against the provisions and obligations of the Revised BEE Code, or Codes, to internally measure what its compliance would be if it were subject to the Codes. To date, we believe we would be compliant with the Codes; however there is no certainty as to whether the current obligations would supersede the Mining Charter or whether there would be a revision of the current Mining Charter. The current version of the New Draft Mining Charter does not align the Mining Charter with the BBBEE Act, 2003, or BBBEE Act, and the BBBEE Codes, which apply generally to other industries in South Africa. Accordingly, if brought into effect in its current form, the New Draft Mining Charter could potentially create further uncertainty. See “Risk Factors—Gold Fields’ mineral rights are subject to legislation, which could impose significant costs and burdens and which impose certain ownership requirements, the interpretation of which are the subject of dispute”. The Royalty Act The Mineral and Petroleum Resources Royalty Act, No. 28 of 2008, or the Royalty Act, imposes a royalty on refined and unrefined minerals payable to the South African government. The royalty in respect of refined minerals (which include gold and platinum) is calculated by dividing earnings before interest and taxes, or EBIT, by the product of 12.5 times gross revenue calculated as a percentage, plus an additional 0.5%. EBIT refers to taxable mining income (with certain exceptions such as no deduction for interest payable and foreign exchange losses) before assessed losses but after capital expenditure. A maximum royalty of 5% of revenue has been introduced for refined minerals. Gold Fields currently pays a royalty based on the refined minerals royalty calculation as applied to its gross revenue. The Minister of Finance has appointed the Davis Tax Review Committee to look into and review the current mining tax regime. The Committee’s First Interim Report on Mining, which was released for public comment on August 13, 2015, proposed no changes to the royalty regime but recommended the discontinuation of the upfront capital expenditure write-off regime in favor of an accelerated capital expenditure depreciation regime. In addition, the report recommended retaining the so called “gold formula” for existing gold mines only, as new gold mines would be unlikely to be established in circumstances where profits are marginal or where gold mines would conduct mining of the type intended to be encouraged by the formula. An alternative recommendation was to phase out the gold formula for all mines over a reasonable period of time. The Committee also recommended to phase out the additional capital allowances available to gold mines in order to bring the gold mining corporate income tax regime in line with the tax system applicable to all taxpayers. Exchange Controls South African law provides for Exchange Control Regulations which, among other things, restrict the outward flow of capital from the CMA. The Exchange Control Regulations, which are administered by the Financial Surveillance Department of the SARB, are applied throughout the CMA and regulate international transactions involving South African residents, including companies. The South African government has committed itself to gradually relaxing exchange controls and various relaxations have occurred in recent years. SARB approval is required for Gold Fields and its South African subsidiaries to receive and/or repay loans to non-residents of the CMA. Funds raised outside of the CMA by Gold Fields’ non-South African resident subsidiaries (whether through debt or equity) can be used for overseas expansion, subject to any conditions imposed by the SARB. Gold Fields and its South African subsidiaries would, however, require SARB approval in order to provide guarantees for the obligations of any of Gold Fields’ subsidiaries with regard to funds obtained from non-residents of the CMA. Debt raised outside the CMA by Gold Fields’ non-South African subsidiaries must be repaid or serviced by those 95 Table of Contents foreign subsidiaries. Absent SARB approval, income earned in South Africa by Gold Fields and its South African subsidiaries cannot be used to repay or service such foreign debts. Unless specific SARB approval has been obtained, income earned by one of Gold Fields’ foreign subsidiaries cannot be used to finance the operations of another foreign subsidiary. Transfers of funds from South Africa for the purchase of shares in offshore entities or for the creation or expansion of business ventures offshore require exchange control approval. However, if the investment is a new outward foreign direct investment where the total cost does not exceed R1 billion per company per calendar year, the investment application may, without specific SARB approval, be processed by an authorized dealer, subject to all existing criteria and reporting obligations. Gold Fields must obtain approval from the SARB regarding any capital raising involving a currency other than the Rand. In connection with its approval, it is possible that the SARB may impose conditions on Gold Fields’ use of the proceeds of any such capital raising, such as limits on Gold Fields’ ability to retain the proceeds of the capital raising outside South Africa or requirements that Gold Fields seeks further SARB approval prior to applying any such funds to a specific use. Ghana Environmental The laws and regulations relating to the environment in Ghana have their roots in the 1992 Constitution which charges both the state and others with a duty to take appropriate measures to protect and safeguard the natural environment. Mining companies are required, under the Minerals and Mining Act, Environmental Assessment Regulations 1999 (LI 1652) and Water Use Regulations 2001 (LI 1692), to obtain all necessary approvals from the Environmental Protection Agency, or Ghanaian EPA, a body set up under the Environmental Protection Agency Act 1994 (Act 490), and, where applicable, the Water Resources Commission and/or the Minerals Commission before undertaking mining operations. There are further requirements under the Minerals and Mining (Health, Safety and Technical) Regulations, 2012 L.I 2182 to obtain the necessary permits from the Inspectorate Division of the Minerals Commission for the operation of mines. The Minerals and Mining Act also requires that mining operations in Ghana comply with all laws for the protection of the environment. Non-compliance with the provisions of these laws could result in the imposition of fines and in some cases a term of imprisonment. Under the relevant environmental laws and regulations, mining operations are required to undergo an EIA process and obtain approval for an environmental permit prior to commencing operations. EMPs are first submitted to the Ghanaian EPA 18 months after the initial issuance of the permit and then every three years thereafter. The plan must include details of the likely impacts of the operation on the environment and local communities, as well as a comprehensive plan and timetable for actions to lessen and remediate adverse impacts. Approval of the management plan results in the issuance of an environmental certificate. The laws also require mining operations to rehabilitate land disturbed as a result of mining operations pursuant to an environmental reclamation plan agreed with the Ghanaian regulatory authorities. The reclamation plan includes two cost estimates, namely the cost of rehabilitating the mining area for the life of the mine as well as the cost of rehabilitating the mine as at the date of the reclamation plan. These estimates are reviewed annually and updated every two years. The Environmental Assessment Regulations, 1999 (LI 1652) requires each mining company to post a reclamation bond. The terms of each reclamation bond are determined by a Reclamation Security Agreement between that company and the Ghanaian EPA. Mining companies are typically required to secure a percentage (typically between 50% and 100%) of the current estimated rehabilitation costs by posting reclamation bonds underwritten by banks and restricted cash. Gold Fields Ghana and Abosso maintain reclamation bonds underwritten by banks and restricted cash in order to secure a percentage of their total mine closure liability. 96 Table of Contents In the third quarter of fiscal 2016, Gold Fields submitted an application for a revised Environmental Impact Statement for the Amoanda—Juno Growth Corridor Project located in the Damang mine with the Ghanaian EPA. The Tarkwa and Damang mines have existing approvals to operate tailings storage facilities at Tarkwa and Damang, respectively. See “License to Operate—Environmental approvals” and “License to Operate—Waste and tailings”. Health and Safety A mining company is statutorily obligated to, among other things, take steps to ensure that the mine is managed in accordance with applicable legislation, including the Minerals and Mining (Health, Safety and Technical) Regulations, 2012 (L.I 2173), to ensure the safety and wellbeing of its employees. Additionally, both the Tarkwa and Damang mines are required, under the terms of their respective mining leases, to comply with the reasonable instructions of the Chief Inspector of Mines regarding health and safety at the mines. A violation of the provisions of the health and safety regulations or failure to comply with the reasonable instructions of the Chief Inspector of Mines could lead to, among other things, a shutdown of all or a portion of the mine or the imposition of more stringent compliance procedures. The Tarkwa and Damang mines have potential liability arising from injuries to, or deaths of, workers, including, in some cases, workers employed by their contractors. Although Ghanaian law provides statutory workers’ compensation for injuries or fatalities to workers, it is not the exclusive means by which workers or their personal representatives may claim compensation. Both companies’ allotted insurance for health and safety claims and the relevant workers’ compensation may not fully cover them in respect of all liability arising from any future health and safety claims, since employees may still resort to other claims through the Ghanaian courts and/or legal system. Mineral Rights Gold Fields Ghana has two major mining leases in respect of its mining operations, namely the Tarkwa property lease and the Teberebie property lease. There are three mining leases under the Tarkwa property lease, all of which were granted in 1997 and will expire in 2027, and two mining leases under the Teberebie property lease, which were granted between 1988 and 1992, and expire in 2018. Under the provisions of the Minerals and Mining Law, 1986 (PNDCL 153), or the Minerals and Mining Law, and the terms of the mining leases, all of the mining leases under the Tarkwa and Teberebie properties are renewable by agreement between Gold Fields Ghana and the government of Ghana. The Minerals Commission has approved Gold Fields Ghana’s application for an extension of the Teberebie leases to 2036 and has made recommendations to the Minister responsible for Lands and Natural Resources to grant the extension. Gold Fields Ghana has fully paid for the fees associated with the extension. Abosso holds the mining lease in respect of the Damang mine which was granted in 1995 and expires in 2025, as well as the mining lease in respect of the Lima South mine that was granted in 2006 and expires in 2017. As with the Tarkwa and Teberebie mining leases, these leases are renewable under their terms and the provisions of the Minerals and Mining Law by agreement between Abosso and the government of Ghana. Gold Fields submitted an application for renewal of Lima South in the last quarter of 2016. The Minerals and Mining Act, 2006 (Act 703), or the Minerals and Mining Act, came into force on March 31, 2006. Although the Minerals and Mining Act repealed the Minerals and Mining Law, and the amendments to it, the Minerals and Mining Act provides that leases, permits and licenses granted or issued under the repealed laws will continue under those laws unless the Minister responsible for minerals provides otherwise by regulation. It also provides that the Minister responsible for minerals shall grant the extension of the term of a lease on conditions specified in writing as long as the holder of mineral rights has materially complied with its obligations under the Act. Management believes that all of Gold Fields’ operations in Ghana are materially compliant with the relevant legislative requirements. Therefore, unless and until any new regulations are passed in respect of Gold Fields’ mineral rights, the Minerals and Mining Law will continue to apply to Gold Fields’ current operations in Ghana. 97 Table of Contents The major provisions of the Minerals and Mining Act include: • the government of Ghana’s right to a free carried interest in mineral operations of 10% and the right to a special share (discussed below); and • mining companies which have invested or intend to invest at least U.S.$500 million (as Gold Fields has) may benefit from stability and development agreements, relating to both existing and new operations, which will serve to protect holders of current and future mining leases for a period not exceeding 15 years against changes in laws and regulations generally and, in particular, relating to customs and other duties, levels of payment of taxes, royalties and exchange control provisions, transfer of capital and dividend remittances. A development agreement may contain further provisions relating to the mineral operations and environmental issues. Each stability and development agreement is subject to the ratification of parliament. In 2010, the Minerals and Mining Act was amended to provide for a fixed royalty rate of 5% of the total revenue earned from minerals obtained, with effect from March 17, 2010. Although payment of the royalty rate became effective in March 2010, Gold Fields did not begin submitting the required payment until April 1, 2011 due to a moratorium on the tax burden for mining leases in place prior to commencement of the Mineral and Mining Act, which ended on March 31, 2011. The Ghanaian parliament passed an act that, effective March 9, 2012, increased taxes on mining companies. These changes included introducing a separate tax category for companies engaged in mining, which raised the applicable corporate tax rate from 25% to 35% and reduced the capital allowance regime from 80% for the first year with reductions to a uniform regime of 20% over five years. Under a new Income Tax Act enacted in 2015 (Act 896), unutilized capital allowance cannot be deferred if not used in the tax year. Further, a draft bill was proposed which sought to impose a windfall profit tax of 10% of the cash balance of a company engaged in mining activities. The planned windfall tax has, however, been on hold indefinitely since January 2014. On March 17, 2016, the parliament of Ghana ratified development agreements between Gold Fields Ghana, Abosso and the government of Ghana. Parliamentary proceedings leading to the ratification were officially published on parliament’s website on March 21, 2016. The development agreements provide for, among other things, a fixed corporate tax rate of 32.5%, beginning on March 17, 2016, and exemption from certain import duties. In addition, Gold Fields is to pay royalties on a sliding scale, replacing the current fixed rate, with effect from January 1, 2017. Additionally, under the development agreements, Gold Fields agreed to forgo the previous exemptions from withholding tax under the deed of warranty between Abosso and the government of Ghana and the project development agreement between Gold Fields Ghana and the government of Ghana. Under the old Abosso deed of warranty, there was no withholding tax applicable on payments from the external account in connection with interest and other borrowing costs/fees, payments to suppliers, consultants and contractors of goods or services and dividends to external shareholders. With respect to the Tarkwa project development agreement, there was no withholding tax on dividends and capital repayments to non-resident shareholders, interest, commitment or other fee or capital redemption payment in foreign currency from non-Ghana resident lenders. Under the development agreements, Gold Fields committed to pay compensation for assets used at Tarkwa since the divestiture of the Ghanaian State Gold Mining Company and, in years where a dividend is not declared and paid, to make a payment of 5% of profits after tax in the relevant year to the government (which will be offset against the eventual dividend payment). Government Option to Acquire Shares of Mining Companies Under Ghanaian law, the government is entitled to a 10% interest in any Ghanaian company which holds a mining lease in Ghana, without the payment of consideration for the shares therein. The government of Ghana has already received this 10% interest in each of Gold Fields Ghana and Abosso. The government also has the 98 Table of Contents option, under the Minerals and Mining Law, of acquiring an additional 20% interest in the share capital of mining companies whose rights were granted under the Minerals and Mining Law at a price agreed upon by the parties, at the fair market value at the time the option is exercised, or as may be determined by international arbitration. The government of Ghana exercised this option in respect of Gold Fields Ghana and subsequently transferred the interest. The government of Ghana retains this option to purchase an additional 20% of the share capital of Abosso. As far as management is aware, the government of Ghana has not exercised this option for any other gold mining company in the past, other than Gold Fields Ghana. Under the Minerals and Mining Law, which continues to apply to Gold Fields Ghana’s operations, and under the Minerals and Mining Act, the government has a further option to acquire a “special share” in a mining company for no consideration or in exchange for such consideration as the government and that company shall agree. This interest, when acquired, constitutes a special share which gives the government the right to attend and speak at any general meeting of shareholders, but does not entitle the government to any voting rights. The special share does not entitle the government to distributions of profits of the company which issues it to the government. The written consent of the government is required to make any amendment to a company’s regulations relating to the government’s option to acquire a special share. Although the government of Ghana has agreed not to exercise this option in respect of Gold Fields Ghana, it has retained this option for Abosso. Exchange Controls Under Ghana’s mining laws, the Bank of Ghana or the Minister for Finance may permit the holder of a mining lease to retain a percentage of its foreign exchange earnings for certain expenses in bank accounts in Ghana. Under a foreign exchange retention account agreement with the government of Ghana, and in line with the Development Agreement, Gold Fields Ghana & Abosso are required to repatriate 30% of its revenues derived from the Tarkwa mine to Ghana and use the repatriated revenues in Ghana or maintain them in a Ghanaian bank account. The Bank of Ghana issued notices on February 4, 2014 and June 13, 2014 that imposed further restrictions on the operation of Foreign Exchange Accounts and Foreign Currency Accounts. However, on August 8, 2014, it reversed virtually all the restrictions that it had imposed through these notices. Increased Electricity Costs On December 11, 2015, the Public Utilities Regulatory Commission increased the average electricity tariffs for the GRIDCo by approximately 59.2%, increasing the tariff paid by Tarkwa only from U.S.$0.01539/kWh to U.S.$0.024252/kWh. In addition, the new Energy Sector Levies Act enacted in 2015 (Act 899) imposed a levy of 9% per kilowatt hour of electricity, on both public lighting and national electrification, applicable to all consumers (resulting in an increased charge to Tarkwa from the VRA of 1.2 c/kWh). While in his budget speech on March 2, 2017, the Minister of Finance announced that the levy of 9% on public lighting and national electrification will be reduced to 2% and 3% respectively there can be no guarantee that this reduction will be enacted. During fiscal 2016, new gas power plants, operated by an independent power producer, were commissioned at the Tarkwa and Damang mines. These power plants are expected to have the capability to supply 100% of the power required by Tarkwa and Damang by the end of fiscal 2017. These power plants have significantly reduced the mines’ dependence on grid electricity. Australia Environmental Gold Fields’ gold operations in Australia are primarily subject to the environmental laws and regulations of the State of Western Australia which require, among other things, that Gold Fields obtains necessary environmental approvals, environmental licenses, works approvals and mining approvals to implement and carry out its mining operations. In addition, under the Environment Protection and Biodiversity Conservation Act 1999 (Cth), or the EPBC Act, it may be necessary to obtain separate approval from the federal government if any new 99 Table of Contents project (including some expansions of existing facilities) has, will have or is likely to have, a significant impact on “matters of national environmental significance” under the EPBC Act (known as a “controlled action”). At the state level, Gold Fields is subject to the Environmental Protection Act 1986 (WA), or EP Act, under which it is obliged to prevent and abate pollution and environmental harm. The EP Act also prescribes sanctions and penalties for a range of environmental offenses, including orders which may effectively suspend certain operations or activities. Under Part IV of the EP Act, a proposal that is likely to have a significant effect on the environment must be referred to the Western Australian Environmental Protection Authority, or the Western Australian EPA, which undertakes the EIA of the proposal. An EIA is a systematic and orderly evaluation of a new proposal (including an expansion of an existing development) and its impact on the environment. The assessment includes considering ways in which the proposal, if implemented, could avoid or reduce any impact on the environment. After completing its assessment of a proposal, the Western Australian EPA prepares a report for the Western Australian Minister for the Environment who must decide whether or not to approve the proposal and, if approved, what conditions are appropriate to regulate the implementation of the proposal. In addition to this approval, under Part V of the EP Act, a works approval and environmental license must be obtained from the Department of Environment Regulation, or DER, for the construction and operation of facilities with significant potential to cause pollution, such as the ore processing facility, tailings storage facility, landfill and waste water treatment plant. Gold Fields is also required to obtain a water license from the Western Australian Department of Water to extract water for its mining activities. Prior to the commencement or expansion of any mining operations, Gold Fields is also required to prepare a mining proposal in accordance with published guidance material and submit the mining proposal to the DMP for approval under the Mining Act 1978 (WA), or Mining Act. Once approved by the DMP, the requirement to comply with the mining proposal becomes a condition of the mining tenement. Gold Fields is required to prepare and submit an Annual Environmental Report to the DER and DMP under the conditions attached to its environmental approvals, licenses and mining tenements. During the operational life of its mines, Gold Fields is required by law to prepare a Mine Closure Plan which is to make provisions for the ongoing rehabilitation of its mines and to provide for the cost of post-closure rehabilitation and monitoring once mining operations cease. Under the Mining Act, Gold Fields has previously been required to guarantee its environmental obligations by providing the Western Australian government with unconditional bank-guaranteed performance bonds. From July 1, 2014, Gold Fields has been required to pay an annual levy into a mining rehabilitation fund administered by the DMP instead of providing performance bonds. The annual levy payable by Gold Fields is 1% of an estimate of the cost per hectare to rehabilitate the disturbed land. The funds held by the DMP in the mining rehabilitation fund are used to rehabilitate abandoned mines, and are not refundable or reimbursable to the contributing entities for their own rehabilitation liabilities. Under the National Greenhouse and Energy Reporting scheme, Gold Fields Australia has operational control over the four Australian operations which have combined emissions exceeding 125kt CO2e each fiscal year. Accordingly, Gold Field Australia is required to report as the registered “controlling corporation” for the purposes of the scheme. In December 2014, the Emissions Reduction Fund, or the ERF, came into effect. The ERF is a voluntary scheme that aims to provide financial incentives for emitters to reduce, abate or sequester greenhouse gas emissions. Gold Fields registered the Granny Smith Gas Power Station Project with the ERF for carbon abatement in May 2015 under the Industrial Fuel and Energy Efficiency Method. Gold Fields entered a reverse 100 Table of Contents auction with the Clean Energy Regulator in April 2016 under the Emissions Reduction Fund in order to sell the project’s carbon abatement to the Australian government. This bid was successful and on May 5, 2016, Gold Fields entered into a contract with the Emissions Reduction Fund for the sale of its abatement credits. Health and Safety The Mines Safety and Inspection Act 1994 (WA), or the Safety and Inspection Act, and the Mines Safety and Inspection Regulations 1995 (WA) together regulate the duties of employers and employees in the mining industry with regard to occupational health and safety and outline offenses and penalties for breach. Resources Safety, a division of the DMP, administers this legislation. Under the approach utilized by Resources Safety, it is the responsibility of each employer to manage safety (i.e. a general duty of care exists in mines located in Western Australia). A violation of the safety laws or failure to comply with the instructions of the relevant health and safety authorities is a criminal offense that could lead to, among other things, a temporary shutdown of all or a portion of the mine, a loss of the right to mine, or the imposition of costly compliance procedures and/or financial penalties. The Work Health and Safety Bill 2014 (WA), or the WHS Bill (which is based on the federal Model Work Health and Safety Act), has been drafted in respect of general industry and was open for public consultation until January 2015. Further modifications were required as a result of the consultation process, and the WHS Bill is yet to be finalized. In mid-2015, the DMP released a “mock up” of a harmonized Work Health and Safety (Resources and Major Hazards) Bill 2015 (WA), or the WHS Resources Bill, to consolidate the safety provisions of existing mining, petroleum and major hazard facilities legislation into one statute that will supplement the WHS Bill. While drafting commenced on the WHS Resources Bill in 2016, all work on the legislation was suspended pending the outcome of the March 2017 state election. If introduced, the WHS Resources Bill will replace the current mines safety legislation referred to above. However, it is not clear if the legislation will proceed in its current form under a new state government. Mineral Rights In Australia, the ownership of land is separate from the ownership of most minerals (including gold), which are the property of the states and are thus regulated by the state governments. The Mining Act is the principal piece of legislation governing exploration and mining on land in Western Australia. Licenses and leases for, among other things, prospecting, exploration and mining must be obtained pursuant to the requirements of the Mining Act before the relevant activity can begin. Prospecting licenses, exploration licenses and mining leases are subject to prescribed minimum annual expenditure commitments. Royalties are payable to the state based on the amount of ore produced or obtained from a mining tenement. A quarterly production report must be filed and royalties are calculated ad valorem at a fixed rate of 2.5% of royalty value in respect of gold, and at other rates (depending on the relevant mineral) in respect of ore produced or obtained from a mining tenement. The royalty value of gold is the amount of gold produced during each month in a relevant quarter multiplied by the average gold spot price for that month. Despite the discussion above, no royalty is payable in respect of the first 2,500 ounces of gold metal produced during a financial year from gold-bearing material produced or obtained from the same gold royalty project. Land Claims In 1992, the High Court of Australia recognized a form of native title which protects the rights of indigenous people in relation to land and water in certain circumstances. As a result of this decision, the Native Title Act 1993 (Cth), or Native Title Act, was enacted to recognize and protect existing native title by providing a mechanism for the determination of native title claims and a statutory right for Aboriginal groups or persons to negotiate, object, and/or be consulted when, among other things, there is an expansion of, or change to, the rights and interests in the land which affect native title and which constitute a “future act” under the Native Title Act. 101 Table of Contents The existence of these claims does not necessarily prevent continued mining under existing tenements. Tenements granted prior to January 1, 1994 are not “future acts” and do not need to comply with the aforementioned consultation or negotiation procedures. As a general rule, tenements granted (or in some cases re-granted) after January 1, 1994 need to comply with this process. However, in Western Australia, some tenements were granted without complying with this consultation or negotiation process on the basis of then prevailing Western Australian legislation. This legislation was subsequently found to be invalid as it conflicted with the Native Title Act which is Commonwealth legislation. Subsequent legislation was passed (Titles Validation Amendment Act 1999 (WA)) validating the grant of tenements between January 1, 1994 and December 23, 1996, provided certain conditions were met under the Native Title Act. Certain of Gold Fields’ tenements are currently subject to native title claims and a determination of native title. However, most of Gold Fields’ tenements were granted prior to January 1, 1994. Where tenements were granted between January 1, 1994 and December 23, 1996, Gold Fields believes it has complied with the conditions set out by the Native Title Act for those tenements to be validly granted. On those tenements granted after December 23, 1996, Gold Fields has either entered into agreements with the claimant parties which provide the Company with security of tenure, or utilized a valid exemption from the consultation and negotiation process under the Native Title Act. Therefore, any existing or future grant of native title over any of these tenements will not have a material effect on Gold Fields’ tenure during the operation of these agreements. See “—Legal Proceedings and Investigations”. Peru Regulatory The regulatory framework governing the development of mining activities in Peru mainly consists of the General Mining Act (Ley General de Minería), or the LGM, and regulations relating to mining procedures, health and safety, environmental protection, and mining investment and guarantees. Mining activities as defined by the LGM include surveying, prospecting, exploration, exploitation, general workings, beneficiation, trading and transportation of ore. In addition to general taxation, mining companies are also subject to a special tax regime established in 2011 through the amendment of the Mining Royalty Law and enactment of the Special Mining Tax Law and the Special Mining Charge Law. Regulatory and Supervisory Entities In general terms, the principal regulator of mining activities in Peru is the Ministry of Energy and Mines, or MEM, through its General Bureau of Mining (Dirección General de Minería), or DGM, and its General Bureau of Mining and Environmental Affairs (Dirección General de Asuntos Ambientales Mineros). Additionally, since December 28, 2015, the National Environmental Certification Service for Sustainable Investment, or SENACE, has been authorized to review and approve the EIA studies of projects that have a national or multi-regional influence, and that may generate significant environmental impacts. Other relevant regulatory institutions include the INGEMMET, the OSINERGMIN, the OEFA, the National Water Authority, the Ministry of Culture and the National Superintendence of Labor Inspection, or SUNAFIL. Concessions In accordance with the LGM, mining activities (except surveying, prospecting and trading) must be performed exclusively under the concession system. A concession confers upon its holder the exclusive right to develop a specific mining activity within a defined area. The LGM establishes four types of concessions: 102 Table of Contents Mining Concessions A mining concession is a real property interest independent and separate from surface land located within the coordinates of the concession. Holders of mining concessions or of any pending claims for mining concessions must comply with payment of an annual mining good standing fee, or Mining Good Standing Fee, of U.S.$3.00 per year per hectare in order to maintain the concessions in good standing. The payment starts from the year in which the claim was filed and must be paid for as long as the concessions are held. Holders of mining concessions are also required to meet minimum annual production targets prescribed by law, which will have to be demonstrated in the Annual Consolidated Statement filed with the MEM. Titleholders are entitled to group multiple concessions into Administrative Economic Units to comply with the minimum production requirement, provided certain conditions are met. In the case of mining concessions obtained prior to October 2008, the minimum annual production target for concessions to mine metals is equivalent to U.S.$100.00 per hectare per year. In the case of mining concessions obtained starting in October 2008, the minimum annual production target for metallic concessions is equivalent to one Fiscal Payment Unit, or UIT, per hectare per year. The UIT is fixed on a yearly basis and is set to equal S/.4,050, or approximately U.S.$1,227, in 2017. La Cima owns mining concessions acquired before and after October 2008 and therefore is subject to both production target requirements. La Cima is currently in compliance with both requirements. Beneficiation Concessions Beneficiation or process concessions confer the right to extract or concentrate the valuable substances of an aggregate of minerals and/or to smelt, purify or refine metals through a set of physical, chemical and/or physicochemical processes. As with mining concessions, holders of beneficiation concessions are required to pay the Mining Good Standing Fee, which is calculated on the basis of the production capacity of the processing plant. La Cima was granted a permit for a processing plant with a capacity of 22,320 tonnes per day by the Ministry of Energy and Mines. The current installed capacity of the processing plant is 19,680 tonnes per day. In fiscal 2016, La Cima paid a S/.39,176.10, or approximately U.S.$11,872, Mining Good Standing Fee in connection with its beneficiation concessions. General Working Concessions General workings concessions confer the right to render ancillary services to two or more mining concession holders. The following are considered ancillary services: ventilation, drainage, hoisting or extraction in favor of two or more concessions of different concessionaires. Ore Transportation Concessions Ore transportation concessions confer the right to install and operate a system for the continuous massive transportation of mineral products between one or more mining centers and a port or beneficiation plant, or a refinery, or along one or more stretches of these routes. The ore transportation system must be non-conventional, such as conveyor belts, pipelines or cable cars, among others. Conventional transportation systems are authorized by the Ministry of Transport and Communications. Mining Royalty and Other Special Mining Taxes and Charges In addition to general taxation, mining companies are subject to a special tax regime established, in its current form, in September 2011. With respect to the general taxation regime, relevant changes have been introduced with effect from January 1, 2017 to corporate and dividends income tax rates. For fiscal 2017, the corporate tax rate has been increased from 28% to 29.5%. In turn, the dividends tax rate applicable to non-resident shareholders of Peruvian companies has reduced from 6.8% to 5%. 103 Table of Contents The special tax regime is structured around the Mining Royalty Law, the Special Mining Tax Law and the Special Mining Charge Law. The Mining Royalty Law established payment of a mining royalty by owners of mining concessions for the exploitation of metallic and non-metallic resources. This mining royalty was originally calculated on the basis of revenues obtained from the sales of minerals. However, in September 2011, an amendment to the Mining Royalty Law was approved establishing that, as of October 2011, the mining royalty will be determined by applying a sliding scale rate (ranging from 1% to 12%, previously 1% to 3% of sales) based on the quarterly operating profits of mining companies. Mining royalties are deductible for income tax purposes. Also, in September 2011, the Special Mining Tax Law and the Special Mining Charge Law were enacted. The Special Mining Tax is payable by mining companies that have not executed a Mining Tax Stability Agreement with the MEM. The Special Mining Tax is calculated by applying a sliding scale of rates (ranging from 2% to 8.4%) based on the quarterly operating profits of the mining company and is deductible for income tax purposes. This Special Mining Tax applies to La Cima as the company has not executed a Mining Tax Stability Agreement with the MEM. While the Company has not executed a Mining Tax Stability Agreement, Gold Fields concluded an Investor Stability Agreement, or ISA, with the Private Investment Promotion Agency, or PROINVERSION, which is valid for 10 years and expires in October 2017. The Special Mining Charge is similar to the Special Mining Tax but applies to mining companies that have executed a Mining Tax Stability Agreement with the MEM and the sliding scale of rates range from 4% to 13.12% based on the quarterly operating profits of mining companies. The Special Mining Charge does not apply to La Cima. In addition to the above, beginning with their annual income in calendar 2012, mining companies must contribute an amount equivalent to 0.5% of their annual income before taxes to fund the Complementary Retirement Fund for Mining, Metal and Iron and Steel. La Cima disputes the applicability of this provision. Accordingly, it initiated an arbitration against the Peruvian government in fiscal 2014, under the arbitration clause of its Legal Stability Agreement. The arbitration panel declared its legality and applicability to La Cima, so the Company is currently paying this contribution. Also, since July 2012, mining companies are required to pay an annual supervisory contribution to the OSINERGMIN and OEFA which is set by Supreme Decree. The sum of both contributions may not exceed an amount equivalent to 1% of the total value of annual invoicing for concentrate sales, after deducting VAT. For 2016, contributions to the OSINERGMIN and OEFA are equivalent to 0.19% and 0.15% of annual invoicing respectively. In fiscal 2016, La Cima paid a total of approximately U.S.$950,000 in such contributions. Gold Fields La Cima has paid these contributions under protest and has filed two constitutional actions before OEFA and OSINERGMIN disputing these contributions as unconstitutional and illegal. These actions are still in progress. Environmental The environmental impact of mining activities in Peru is regulated by the Regulations on Environmental Protection and Management for Mining Exploitation, Beneficiation, General Labor, Transportation and Storage Activities, which entered into force on March 14, 2015 with the publication of the relevant terms of reference. According to the above regulations, the following environmental instruments are required to be produced in order to perform mining activities: • Environmental Impact Declaration, or DIA, and Semi-Detailed Environmental Impact Assessment, or SD-EIA: DIAs and SD-EIAs are required for mining exploration projects, according to the magnitude and impact that the activities intended to be carried out may have on the environment. DIAs and SD-EIAs contain detailed environmental and social information on the area where exploration activities will be carried out, on the project and works to be performed, and on the measures that will be taken to control and mitigate any environmental impacts caused. Recent legislation has been enacted establishing that the initiation of exploration activities needs to have been previously authorized by the DGM. A SD-EIA or DIA is required for such authorization to be obtained. 104 Table of Contents • EIA: EIAs are required for new projects, expansions of existing operations and projects moving from the exploration stage to development. EIAs must evaluate the physical, biological, socio-economic and cultural impacts on the environment resulting from the operation of mining projects. According to Ministerial Resolution N° 120-2014-MEM/DM modifications of mining projects which entail non-significant environmental impacts are required to submit to the authority a Supporting Technical Report, or STRs, which is a simplified EIA. The period for evaluation and approval of STRs by the authority is considerably shorter than an EIA. The number of STRs is restricted to three per mining unit but only for those STRs related to the main mining components (pits, tailings storage facilities, waste rock storage facilities, concentrator plant, among others). A law regulating mine closures requires mining companies to ensure the availability of the resources necessary for the execution of an adequate mine closure plan, including a mine closure cost estimate, in order to prevent, minimize and control the risks to and negative effects on health, personal safety and the environment that may be generated or may continue after the cessation of mining operations. Furthermore, the law obligates holders of mining concessions to furnish guarantees in favor of the MEM to ensure that they will carry out their mine closure plans in accordance with the environmental protection regulations and to ensure that the MEM has the necessary funds to execute the mine closure plan in the event of non-compliance by the holder of the mining concession. Mine concession holders may satisfy these requirements by providing to the MEM stand-by letters of credit (bank guarantees) to cover the amount of any mine closure plan. La Cima’s mine closure plan for Cerro Corona was approved in 2008 and subsequently amended in 2010, 2011, 2013, 2014 and 2017. This mine closure plan is guaranteed by a bond letter of U.S.$37.8 million, issued by Credit Bank Peru. Water Quality Standards In December 2015, the Ministry of Environment passed Supreme Decree N° 15-2015-MINAM, or the Supreme Decree, which modified the Environmental Quality Standards, or the ECA, applicable to water courses. The Supreme Decree is binding from the date of its publication. This regulation established less stringent new parameters in physical and chemical, inorganic, organic, microbiological and parasitological compounds, compared to the previously approved ECA. Under the Supreme Decree, holders of mining activities that are conducting environmental studies had to report to the MEM by February 17, 2016 on whether such instruments complied with the amended ECA, or if they required an adjustment. In line with this requirement, Gold Fields La Cima, or GFLC, reported that its environmental study needed to be adjusted to the amended ECA; and submitted a response plan to the MWM on March 14, 2017. The plan will be evaluated by the MEM and the approved plan must be implemented by GFLC to comply with the ECA within three years of approval. In the response plan, GFLC proposed management activities to be conducted during the remaining operational period of Cerro Corona, as no specific comments can be made relating to the post closure water treatment plans due to the uncertainties discussed below. In the specific case of GFLC, the response plan relates to the mine’s operational stage only and neither considers nor proposes actions for the closure and post-closure phases. Detailed mine closure activities, including post closure water treatment plans, have to be submitted two years before mine closure, as required by Peruvian legislation. Based on the current life of mine for GFLC, the detailed mine closure plan will be submitted in 2021. Management has been unable to reliably estimate the post closure water liability at Cerro Corona due to the fact that there are still elements with inherent uncertainty at this point in time, primarily due to the final pit lake elevation not being defined yet, given that the geotechnical and hydrogeological models are still under development. An in-pit drilling campaign will be completed to capture additional data to develop more detailed geotechnical and hydrogeological models to better understand: • The annual water pumping rate to contain the pit lake to avoid potential seepages from the pit; • The volumes of water to be collected from the seeps and springs; 105 Table of Contents • The quantity of lime or other additives required to prepare the water collected in the pit for further treatment; • The technology to be used for water treatment since piloting, modelling and other tests need to be done to select the best option and properly cost it; and • The nature and volumes of the removed contaminants (sludge or solids, which form the wastes resulting from the water treatment). Besides the aforementioned uncertainties, management will also consider other alternatives for post-closure water management, including: • Treatment of the pit walls to prevent acid rock drainage generation and reduce the metal load in the water outflows, to avoid in-perpetuity water treatment; • Partial backfilling of the pit to construct a lined pond in the pit where runoff and other poor quality water can be separated from groundwater, to reduce significantly the volume of water to be treated; • Measures to mitigate individual springs potentially impacted by stockpiles that might be relocated; and • Alternative treatment methods that may require less energy/reagents at lower cost. Once all of the aforementioned activities have been completed, management will have sufficient information to quantify a reliable estimate of the post closure water liability and the associated provision required and will include in the detailed mine closure plan to be submitted in fiscal 2021. Other permits and Regulations Another issue at Cerro Corona, though unrelated to the pit lake issue described above, is that on May 23, 2014, La Cima received formal authorization from the Manuel Vasquez Association to relocate the Tomas Spring and to start the permit application process regarding the relocation. On March 6, 2015, La Cima obtained authorization to relocate the water source of the Tomas Spring, which is located inside the final footprint of the tailings storage facility for Cerro Corona, to a higher elevation above the final footprint, in order to continue with the planned expansion of the facility. The construction program and mitigation measures have been implemented. The Tomas Spring was sealed and its water catchment relocated to a higher elevation called TCB-25. The remaining flow of Las Tomas Spring under the seal has been diverted outside the footprint of the TSF to La Hierba creek. Other matters subject to regulation include, but are not limited to, transportation of ore or hazardous substances, water use and discharges, power use and generation, use and storage of explosives, housing and other facilities for workers, reclamation, labor standards and mine safety and occupational health. Soil Quality Standards In April 2013, the government of Peru approved soil quality standards for all industries, including extractive industries. These standards established that all companies that generate an impact on soil as a consequence of their activities must submit a report to the MEM by April 2015 with the characterization of soil quality in their areas of influence and, if applicable, a remediation plan within two years from the date of approval of such report. On April 10, 2015, La Cima submitted to the MEM the report with the results of soil sampling in Cerro Corona and nearby areas. La Cima is awaiting a response from the MEM to continue with the next steps established by the soil quality standards regulation. Environmental Sanctioning Regime In July 2014, Law 30230 was enacted to promote investment. Among the measures introduced by Law 30230 included the establishment of a three year moratorium on the imposition of environmental fines by OEFA, which will be in force until July 13, 2017. It is not expected that this moratorium will be extended. 106 Table of Contents During this moratorium, OEFA will prioritize the imposition of corrective measures and will only be entitled to impose environmental sanctions in the following exceptional cases: (i) very serious offenses that generate a real and severe damage to human life and health; (ii) activities carried out without a proper environmental instrument, or without the required licenses, or in prohibited areas; (iii) commission of the same infringement within a period of six months. Social Matters According to the Environmental Act, every individual is entitled to take part in a responsible manner in decision-making processes related to, and in the establishment and application of, environmental policies and measures, including those related to environmental components, adopted at each government level. • Citizen Participation: The mining industry in Peru is governed by citizen participation regulations that provide for the responsible participation of individuals in the definition and application of measures, actions and decisions made by competent authorities regarding sustainable operation of mining activities in the country. Mining operators must establish citizen participation mechanisms throughout the life of their projects, from initial exploration to mine closure. The legislation contemplates different types of mechanisms for citizen participation. These include public hearings, informational workshops, opinion surveys, suggestion boxes, technical panels, roundtables, participatory monitoring and permanent office information services, among others. • Right to Prior Consultation: On August 31, 2011, the Peruvian government approved the Law of Prior Consultation to Indigenous or Tribal Populations recognized in Convention 169 of the International Labor Organization. This law establishes that the Peruvian government must consult in advance with indigenous or tribal populations on legislative or administrative measures (including pending claims for mining concessions) that may directly affect the collective rights related to their physical existence, cultural identity, quality of life or development. This duty of consultation is owed by the Peruvian government, not Gold Fields or investors. While the final decision to move forward with legislative or administrative measures on which consultation is sought rests with the Peruvian government, even in the absence of agreement, the Peruvian government has an obligation to take all necessary measures to ensure that the collective rights of indigenous or tribal populations are protected. License to Operate Introduction This section deals with the areas of the business that impact Gold Fields’ ability to receive or renew its regulatory licenses to operate as well as societal acceptance of its operations—Gold Fields’ “social license to operate.” Regulatory licenses are issued by governments at all levels, including national, regional and local, and require first and foremost good corporate citizenship from Gold Fields in terms of adherence to all relevant legislation, including the payment of taxes and other levies. In Gold Fields’ 2016 Group Performance Scorecard, the Company focuses on the following material “license to operate” issues to the business: • Environmental stewardship, comprising Energy and Climate Change management (under Business Optimization), Water, Tailings and Waste and Mine Closure; and • Societal acceptance, comprising Stakeholder engagement, Community relations and Shared Value and Human rights. 107 Table of Contents Gold Fields generates and shares significant value for the societies in which it operates. Gold Fields’ total value distribution details the economic value we create at the Group level as well as in Gold Fields’ four countries of operation. During fiscal 2016, Gold Fields’ total value distribution to our stakeholders, as measured by WGC standards, was U.S.$2.5 billion, in the form of payments to governments, capital providers, business suppliers and employees. Environmental stewardship Overview Gold Fields’ approach to environmental management is determined by relevant local legislation and regulations, our sustainable development framework, as well as the ISO 14001 international environmental management system standard, the principles of the ICMM and the UN Global Compact. Additional local priorities are identified through stakeholder consultation. Each of the Group’s operations is certified to ISO 14001. Internally, Gold Fields has implemented policy statements and four Group-level guidelines, which reflect its environmental priorities. These concern energy and carbon management, water management, tailings management and mine closure. A summary of the Group guidelines can be found on the Gold Fields’ website. These guidelines set out the systems and processes necessary to ensure the application of consistently good environmental management practices across the Group while allowing a degree of adaptation to local circumstances. To ensure Group-wide conformity with the guidelines, each operation conducts self-assessments to ascertain the levels of conformance with the guidelines. Action plans have been put in place to address any gaps and these will be assessed during fiscal 2017. During fiscal 2016, the Group spent U.S.$10 million on environmental management (fiscal 2015: U.S.$35 million). Total gross mine closure liabilities in fiscal 2016 were estimated at U.S.$381 million (fiscal 2015: U.S.$353 million). Environmental incidents Gold Fields reports environmental incidents using a Level 1 (most minor) to 5 (most severe) scale. Gold Fields has not recorded any Level 4 or 5 environmental incidents in the past six years, thereby achieving its target of zero Level 4 and 5 incidents. During fiscal 2016, Gold Fields did, however, experience 131 Level 2 environmental incidents (fiscal 2015: 67) and three Level 3 environmental incidents (fiscal 2015: five). The details of the Level 3 incidents, which all occurred at Gold Fields’ Ghanaian operations in in the first quarter of fiscal 2016 and required notification to the Ghanaian EPA, were as follows: • Tarkwa, January 13, 2016: A truck reversed into another service truck, damaging the fuel pumping unit, causing around 10,500 liters of fuel to be spilled. About 8,000 liters were collected for filtration and reuse; • Tarkwa, March 12, 2016: During working operations a rock hit an excavator’s hydraulic hose, which burst and spilled about 2,900 liters of oil, the bulk of which was cleaned up; and • Damang, March 27, 2016: After heavy rainfall about 20,000 liters of tailings slurry and supernatant water spilled into a nearby event pond, causing fish in the pond to die. Most of the overflow slurry was returned to the tailings dam. To prevent a recurrence, a return pump was installed to empty the perimeter drain at all times. Additionally, the base wall for the dam perimeter was raised to increase the dam’s capacity. 108 Table of Contents Environmental approvals Environmental approvals from the relevant regulator are a prerequisite for construction, operations and mine closure as well as new projects or expansions of existing operations. Large projects require EIAs as part of the decision-making process and to identify, mitigate and manage environmental impacts. Gold Fields’ mines have for the most part developed sound working relationships with environmental authorities, which ensure that new projects and mine developments adhere to leading environmental standards. During fiscal 2016, extensive engagement with environmental regulators ensured that we received approval for a number of key projects at our operations, including: • In December 2016, St. Ives received approval from the Western Australian EPA to mine five new areas on Lake Lefroy, the salt lake on the mine’s tenement. Projects approved include the future underground operation at Invincible and the Neptune Invincible South, Incredible and Pistol Club open pits; • St. Ives has also submitted extended expansion plans for the mine entitled “Beyond 2018” which would impact a further 7,000ha on the tenement. The EPA has ruled that a full public environmental review process is required for these plans. This process includes environmental impact assessments and heritage surveys; • The Western Australian EPA also approved the Gruyere Gold Project, which is a joint venture between Gold Fields and Gold Road; • A mine closure plan has been submitted for the St. Ives mine and Cerro Corona is preparing to submit its eighth update of the mine’s EIA, which includes seeking permission for pit extensions as well as drilling downstream of the current tailings dam; • The Chilean General Water Directorate granted water rights for our Salares Norte project in December 2016, after an engagement process of almost two years; • The Salares Norte land (easement) application for almost 1,900ha was granted for a duration of 30 years following a process lasting more than two years; • South Deep finalized and submitted the consolidation of its approved EMP reports to the DMR for approval; • The Ghanaian EPA has issued the environmental certificate for the Tarkwa mine, valid from November 2015 to November 2018. The certificate excludes the construction and operation of the Tailings Storage Facility 5, which is still at permitting stage; • Tarkwa is awaiting approval from the Ghanaian EPA for the decommissioning and reclamation of its heap leach facilities; and • At Damang, the Ghana Minerals Commission approved the raising of the ETSF. 109 Table of Contents Group Environmental Performance The table below depicts the Group environmental performance for the periods indicated. Fiscal 2016 Fiscal 2015 Fiscal 2014 Fiscal 2013 Environmental incidents (Level 3)(1) 3 5 4 3 Water withdrawal (Ml)(2) 30,321 35,247 30,207 30,302 Water recycled/used (Ml) 44,274 43,120 42,409 33,453 Water discharge (Ml) 15,102 18,492 11,620 2,526 Gross closure costs (provisions) (U.S.$ millions) 381 353 391 355 CO2 emissions (scope 1 and 2) (‘000 tonnes)(3)(4) 1,964 1,323 1,258 1,235 CO2 emissions (scope 3) (‘000 tonnes)(3)(4) 450 431 436 496 Electricity (MWh)(2) 1,400,422 1,322,353 1,338,074 1,382,105 Diesel (TJ)(2) 6,609 6,930 6,066 5,509 Carbon emission intensity (tonnes CO2-e/oz) 0.69 0.59 0.55 0.61 NOx, SOx and other emissions (tonnes) 21,450 21,073 20,084 17,942 Cyanide consumption (tonnes) 7,061 7,820 10,660 13,660 Mining waste (‘000 tonnes) 187,036 167,357 138,522 190,007 Materials (‘000 tonnes) 162 145 144 176 Notes: (1) Levels 1 and 2 involve minor incidents or non-conformances, with negligible or short-term limited impact. A Level 3 incident results in limited non-conformance or non-compliance that result in ongoing but limited environmental impact. Level 4 and 5 incidents include major non-conformances or non-compliances, which could result in long-term environmental harm, with company or operation-threatening implications. (2) The numbers disclosed only include our operations, as regional and the corporate head offices are not considered to be material. (3) The CO2 emissions numbers include head offices. (4) Scope 1 emissions are those arising directly from sources managed by the company. Scope 2 emissions are indirect emissions generated in the production of electricity used by the Company. Scope 3 emissions arise as a consequence of the activities of the Company. Water Water management is a critical long-term issue for the mining industry for a number of reasons: • Mining can require large volumes of water and may take place in locations that are already water-scarce; • Poor water management can have significant social and political consequences. Local communities are affected by water scarcity and insufficient water infrastructure among other issues; and • Water is an important conduit for the potential spread of pollution (whether as a result of an immediate incident or the gradual build-up and movement of contaminants over time) making it a critical compliance issue. In this context, Gold Fields remains committed to responsible water stewardship, both for the benefit of host communities and for its own operations. This means delivering enhanced operational security through innovative technologies with optimal water conservation and demand management practices. This involves: • Measuring and reporting on water management performance; • Integrating water management into mine planning; 110 Table of Contents • Complying with regulatory requirements and, where feasible, going beyond compliance requirements; and • Leaving an enduring, positive legacy that extends beyond mine closure. Each operation implements an Environmental Management System, or EMS, through which it, among others, assesses, manages, monitors and reports on water use and the quality of any discharges. During fiscal 2016, Gold Fields spent a total of U.S.$16 million on water management and projects. Water withdrawal across the Group decreased to 30,321Mℓ (fiscal 2015: 35,247Mℓ), and, amid stable Group gold production, water withdrawal per ounce produced was down from 15.77Kℓ in fiscal 2015 to 13.67kℓ in fiscal 2016. Total water recycled or reused remained steady at 44,274 Mℓ (fiscal 2015: 43,120 Mℓ). The main reasons for the change in water withdrawal were: • A change in the internal definition of water withdrawal to align with the Minerals Council of Australia’s water accounting framework; • Significantly reduced water withdrawal at Cerra Corona, largely due to drought conditions; • During 2015, St. Ives had high water withdrawals from opening up three new pits. This was not repeated in 2016; and • Increased water withdrawal at South Deep due to the refilling of South Deep’s water storage dams and increased production demand. Gold Fields also benchmarks its water usage by participating in the CDP water disclosure program. For fiscal 2016, Gold Fields achieved an A- in the CDP water assessment, which is an improvement from last year’s score of B. The CDP’s water score is an indicator of a company’s commitment to transparency around its water risks, and the sufficiency of its response to them. As a member of the ICMM, Gold Fields subscribes to the ICMM’s new commitments on water stewardship, which were released in January 2017. The ICMM’s position statement is binding on all members within two years and requires them to apply strong and transparent water governance; manage water at operations effectively; and collaborate to achieve responsible and sustainable water use. 111 Table of Contents The graphs below set out the Group’s water withdrawal, water recycled/reused and water withdrawal per ounce of gold produced for the periods indicated. Regions During fiscal 2016, predictive and dynamic water balances were developed at all operations, except Damang, using hydrology software systems. Damang will install its system during fiscal 2017. These enable the mines to account for the water inputs to and outputs from their operations and for the flows within the system. Post-closure water management plans were also put into place or are currently being developed at the mines as part of their mine closure plans. Americas Water Balance Water is a critical issue for communities in Peru and a large part of the active resistance by communities to mining is over perceived or actual water pollution by mines. Cerro Corona has proactive engagements with community organizations and local governments in terms of which it is a large supplier of potable water to the communities. During fiscal 2016, Cerro Corona invested over U.S.$3 million in developing and upgrading water systems for nearby communities. 112 Table of Contents Updates to Cerro Corona’s geochemical and hydrogeological models will be completed during fiscal 2017 and will serve as input to the mine’s post-closure water management plan. Salares Norte Water rights at this project were granted by the regulator in December 2016. The water rights total 114ℓ per second from a nearby reservoir with sufficient supplies. The granting of the rights is a critical step in developing the project, which is situated in the Atacama Desert in northern Chile. Australia Water Balance Water balances with links to appropriate water management plans have been developed for all four mines in the portfolio. Granny Smith’s water balance is the most advanced, being both dynamic and predictive, and the lessons learnt have been applied to the other operations’ water balances. Post-closure water management is integrated into each mine’s closure plans. St. Ives has progressed furthest, having submitted its closure plan to the regulator at the end of fiscal 2016. Agnew and Darlot are on track to submit in fiscal 2017 and Granny Smith in fiscal 2018. Water Security Water security poses a significant challenge for the region’s mines, all of which are based in arid areas of Western Australia. St. Ives and Granny Smith have water agreements with outside providers. St. Ives’ water agreement was renewed early in fiscal 2015. Granny Smith’s agreement with a neighboring company for the provision of potable water was revised and signed off in late fiscal 2016. At Agnew/Lawlers, a hydrological study on the Fairyland borefield suggests that the facility can be expanded to provide more water than the current design allows. This will supplement the existing water supply at the mine. Darlot, which Gold Fields has put up for sale, is in the process of entering into an agreement with the nearby Murrin Murrin mine. Murrin Murrin is sourcing water from the same aquifer as Darlot, but will now be provided with supplementary water from their nearby Grey Mare borefield. This supplementary water supply will allow supply from the Darlot borefield to be reduced and the aquifer to be recharged. South Africa Water Balance New water balance software was implemented at South Deep with links to appropriate water management plans. Extension of the system to underground operations is being considered for fiscal 2017. During fiscal 2016, South Deep completed Phase 1 of its post-closure water management plan, which assessed risks for mines that are hydraulically connected to South Deep, including Sibanye Gold’s adjacent Ezulwini mine, which has applied to the regulator for closure permission. Phase 2 of the plan will be initiated in fiscal 2017 and will consider any potential legacy groundwater contamination. In July 2016, South Deep became the first facility outside the United States to pilot a new automated water quality monitoring technology. Funded by the US Department of Energy and developed by a private US firm, the tool detects heavy metals in water and signals an immediate warning if levels are too high. It enables unattended operations for up to 30 days, while measuring water samples every two minutes and at low concentration levels. In early fiscal 2017, Gold Fields decided not to carry out a full trial as the technology requires refinements based on the outcomes of the pilot. 113 Table of Contents Recycling and Conservation South Africa currently finds itself in a drought cycle that is one of the worst in 40 years, though good rains have fallen in early 2017. The implementation of water recycling and conservation practices is therefore critical at South Deep mine. Water awareness initiatives have been introduced to encourage a reduction in water consumption. In addition, no water is discharged from the mine, other than treated sewage effluent, in accordance with the requirements of the DWS. The drought meant that the three reverse osmosis, or RO, plants that were installed at South Deep over the past two years to treat process water and reduce the intake of municipal water, could not be operated for much of the year. Currently, only one of the three RO plants is operational. Three RO plants have been installed underground to supply drinking water. Water Security Due to the drought conditions experienced at South Deep, as well as an increase in water use by the mine, the mine experienced water supply shortages during fiscal 2015 and fiscal 2016. South Deep submitted an application to amend its 2011 water use license in May 2015, which is still being reviewed by the DWS. In 2015, South Deep concluded a water supply agreement with Sibanye Gold to supply water from Sibanye’s Ezulwini mine, via the Leeuspruit stream. The plan to secure water to support South Deep during production ramp-up could also be negatively impacted by Sibanye’s announcement on August 31, 2016 that it will be closing the Ezulwini (Cooke 4) mine. South Deep is currently assessing the implications of the closure if such application were granted. Furthermore, a Sibanye Gold and Gold Fields joint working group was established early in fiscal 2016 to identify and remedy potential contamination of the Leeuspruit river caused by decades of mining in the area. A large amount of data has already been collected by both Sibanye Gold and South Deep over the years and during fiscal 2017 new data relating to surface- and ground water, aquatic bio-monitoring and radiation will be collated and interpreted. This data will assist in determining the necessary remedial action, if any. The project is expected to be completed during fiscal 2017. Acid Rock Drainage South Deep implements a range of measures to prevent or contain ARD and there were no material cases of ARD reported in fiscal 2016. Pro-active measures include removal of the old South Shaft waste rock dump and revegetation of the mine’s environmental footprint, which was a potential source of ARD and other contamination, and ongoing water monitoring, containment of any ARD generation on the old tailings facilities and water-treatment solutions that purify surplus fissure and process water to a potable standard. Underground ARD generation is well managed during the operational phase by ongoing pumping to the surface of the underground water. Other key water management initiatives undertaken at South Deep during fiscal 2016 include: • Studying plume mitigation measures at the Doornpoort TSF and the old TSFs with implementation scheduled for fiscal 2017; and • Maintaining vegetation of the mine’s two historic TSFs, which has reduced the generation of wind-blown dust to well below the legislated airborne dust level limits. Waste and tailing Operational Waste The most significant waste materials produced by Gold Fields’ operations are tailings, waste rock, chemical waste and hydrocarbon waste. Gold mining requires large volumes of blasting agents, hydrochloric acid, lime, 114 Table of Contents cyanide, cement and caustic soda (sodium hydroxide), all of which are used on an ongoing basis. All of Gold Fields’ operations, except Cerro Corona, which does not use cyanide, have International Cyanide Management Code, or ICMC, certifications, which are renewable every three years. The St. Ives mine is currently in the process of re-certification following an initial negative finding by the ICMI. The external auditors have recommended re-certification and the ICMI is currently evaluating their findings. All of Gold Fields’ operations have tailings management plans in place, including closure and post-closure management plans. In total, these operations have 27 TSFs of which 16 are active. All TSFs, as well as associated pipeline and pumping infrastructure, are subject to a Group audit every three years (or more frequently where required by local circumstances or regulations) as well as regular inspection and formal annual reporting. Gold Fields’ last Group-wide TSF audit was conducted in fiscal 2014, the next one will take place during fiscal 2017 or early fiscal 2018, once an internal review of our facilities has been completed. Gold Fields has set a target to maintain the general landfill waste quantity at fiscal 2015 levels, by ensuring a reduction in the waste that reaches landfill through greater use of recycling and on-site waste separation. ICMM Tailings Review In response to high-profile tailings failures at both Mount Polley (Canada, August 2014) and Samarco (Brazil, November 2015), the ICMM, of which Gold Fields is a member, together with 22 other leading global mining companies, announced in December 2015 its intention to implement a global review of tailings storage facility standards and critical controls across member companies. The resultant working group is chaired by Gold Fields. A position statement, comprising a commitment to implement a new ICMM governance framework was released in December 2016. Gold Fields supports the position of the ICMM and the Group has committed to review its tailings management guidelines in early fiscal 2017 to ensure compliance with the new framework. As outlined above, internal and external Group-wide tailings audits will be conducted during fiscal 2017 to ensure Gold Fields meets the ICMM’s new framework as well as having critical controls in place to manage potential risks. Regions In fiscal 2016, the Group took the following steps towards managing waste in a safe and responsible manner: Australia At Agnew/Lawlers, Gold Fields installed monitoring bores and conducted a hydrological review of the area in the third quarter of fiscal 2016. These projects were implemented in anticipation of using the Songvang pit for tailings disposal. Gold Fields also began preparing for the rehabilitation of the old TSF that serviced the Lawlers processing plant. The plan was approved by the regulators, and rehabilitation of the facility by a contractor will commence mid-fiscal 2017 when climatic conditions are favorable. At Granny Smith, we continued to experience groundwater mounding around the tailings storage facility as a result of seepage. Groundwater mounding is a common issue in Western Australia and regulators usually require that the groundwater levels be kept at depths greater than 4m to safeguard surrounding vegetation. To address this concern, a management plan was adopted which included the installation of additional bores to recover water. The bores have the added advantage of providing an important source of water for the processing plant. 115 Table of Contents At the St. Ives mine, the Leviathan in-pit tailings facility started receiving tailings depositions after final regulatory approval was granted in fiscal 2015. The facility is set to save the mine around A$50 million (U.S.$38 million) in TSF construction and closure liabilities over LoM. During the year, the FSE joint venture in the Philippines engaged independent experts to undertake a technical audit of the TD5A tailings storage facility, which is owned by Lepanto Mining, our JV partner at FSE. The audit report concluded that the facility was well managed and laid out further recommendations for enhancements, which are being implemented. South Africa At South Deep, an integrated waste management plan was initiated, which is designed to compile a waste inventory, develop a management strategy and propose viable recycling initiatives for various waste streams. The plan will be fully implemented during fiscal 2017. As part of this plan the waste transfer station at South Deep will be upgraded to incorporate a general waste recycling initiative that generates employment for community members. Reprocessing of tailings from the two old TSFs at South Deep continued for use in the backfill plant, though this was slowed down amid the water shortages experienced in South Africa during fiscal 2016. West Africa As part of the ongoing production and long-term growth at Tarkwa and Damang new TSF capacity is required. The regional management has been working on a multi-pronged approach for a number of TSFs. Progress at the Tarkwa TSFs during fiscal 2016 was as follows: • TSF 2: The wall raise was completed during fiscal 2016 and the Minerals Commission has given approval for the deposition of tailings; • TSF 3: The National Tailings Dam Committee reviewed the wall raise design document and work commenced after approval from the Minerals Commission. The mine is awaiting review comments from the Ghanaian EPA; and • TSF 5: Basin preparation for this new TSF has been completed and lining has started with general work set to be completed by mid-fiscal 2017. Written approval for the work was received from the Minerals Commission and payment of permit fees was made to the Ghanaian EPA. The Ghanaian EPA is also currently reviewing Tarkwa’s final plan for the decommissioning and reclamation of the mine’s heap leach facilities. In the meantime, the mine has planted cover grass on the facilities to reduce wash outs. The Damang Reinvestment Plan has necessitated accelerating the construction of the FETSF as the existing ETSF is approaching full capacity. An interim 2.5m raise was started at the ETSF during fiscal 2016 and should be completed during the first quarter of fiscal 2017, providing an additional 3.6Mt tailings capacity. Stage 1 of the FETSF is planned for completion by the end of fiscal 2017 and will provide 20Mt capacity. Further future lifts of the FETSF will cater for all tailings for the new eight-year LoM at Damang. Waste Rock Both underground and open-pit operations produce substantial volumes of waste rock. This is kept in managed waste rock dumps, which are subject to comprehensive rehabilitation through the application of cover material, usually topsoil and vegetation, once they are no longer in use. Total waste volumes for the Group increased by 14% to 148m tonnes during fiscal 2016. 116 Table of Contents During fiscal 2016, two major projects to enhance waste management at Cerro Corona were completed: the expansion of the waste rock storage facility and the re-design and re-location of a topsoil stockpile to allow for optimized usage. South Deep completed the removal of the old South Shaft waste rock dump in fiscal 2016. Group-wide waste rock volumes are set to rise in fiscal 2017 as the Damang mine in Ghana commences its Damang Reinvestment Plan with major cutbacks at the Damang Pit, which involves 265m of pre-strip to a total depth of 341m to access the base of the existing pit. Mine closure Sustainable and integrated mine closure remains one of Gold Fields’ five key sustainability focus areas. In 2016, we continued to increase our efforts aimed at improving mine closure planning, management and financial provisioning processes. This was necessitated by changing legal requirements in South Africa and Australia, updated business plans as well as growing societal expectations. Gold Fields’ 2013 Group Mine Closure Guideline was reviewed in fiscal 2016, with the aim of commencing the roll out of the revised guideline from fiscal 2017. This review was largely necessitated by the need to move towards more integrated mine closure planning and processes. Key changes to the guideline include: • Care and maintenance planning; • Broadening closure planning aspects to include long-term business planning and community socio-economic requirements, in addition to the environmental aspects; and • Aligning closure risks with Group risk processes and mitigation plans. Our 2020 objective is to implement fully integrated mine closure management that in the long-term will reduce the Group’s closure liabilities. Mine Closure Liabilities The total gross mine closure liability for Gold Fields has increased by 8% from U.S.$353 million in fiscal 2015 to U.S.$381 million in fiscal 2016. This can be mostly attributed to: • A significant increase in the net area disturbed at the Damang mine in Ghana; • An increase of over a third for the waste storage and TSF areas at Cerro Corona in Peru; and • A change in how the TSF plume pumping costs are calculated and updated survey data compiled at South Deep mine in South Africa. The funding methods used in each region to make provision for the mine closure cost estimates are: • Ghana—reclamation bonds underwritten by banks and restricted cash; • South Africa—contributions into environmental trust funds and guarantees; • Australia—existing cash resources; and • Peru—bank guarantees. 117 Table of Contents The percentage contribution to the total closure liability per region as well as the percentage secured through the above-listed mechanisms for fiscal 2016 are: Region % of Group Fiscal 2016 Total Fiscal 2015 Total % Secured (%) (U.S.$) (%) Australia 48 181,822,430 186,007,171 0 (1) South Africa 10 37,071,145 28,959,039 100 West Africa 28 105,271,633 91,519,303 77 Americas 15 56,593,886 46,663,873 56 Totals 100 380,759,094 353,149,387 40 Note: (1) Due to legislative changes in Western Australia that came into effect in in July 2014, there is no longer a legal obligation to have unconditional performance bonds in place for mine closure liabilities. Companies are now required to pay a levy to the state based on the total mine closure liability. This levy is 1% of the total liability per mine, paid annually. This levy goes into a state administered fund known as the Mine Rehabilitation Fund and is similar to the U.S. Superfund where monies and interest from the fund will be used to rehabilitate legacy sites or sites that have prematurely closed or been abandoned. Company specific liabilities for active mines are therefore unfunded. Government relations As the issuers of mining licenses, developers of policy and enforcers of regulations, host governments are among Gold Fields’ most important stakeholders. Engagement with national governments typically takes place on a collective basis through local chambers of mines. Gold Fields also regularly engages with regional regulatory authorities and local government in its host communities. Gold Fields fully complies with the fiscal and taxation regulations and laws of the countries in which it operates, understanding that these fiscal contributions are critical to fund governments, its employees and public sector infrastructure and projects. Gold Fields does not provide financial contributions to political parties and lobby groups unless explicitly approved by the Board. During fiscal 2016, national elections were held in three of the countries in which we operate: Australia, Ghana and Peru. In Ghana and Peru new political parties came to power and formed the national government. We are committed to working with the new governments, as we were with the outgoing ones, in establishing sound working relationships that benefit the countries and host communities. Ghana In March 2016, Gold Fields Ghana entered into a Development Agreement with the government of Ghana for both the Tarkwa and Damang mines. The agreement was ratified by the country’s parliament on March 17, 2016. Prior to this, the playing field in Ghana’s mining industry had been uneven, given that some of Gold Fields’ peers had been operating under the protection of similar agreements. The negotiations for this agreement commenced in 2011. The highlights of the agreement include: • A reduction in the corporate tax rate from 35.0% to 32.5%, effective March 17, 2016; • A change in the royalty rate from a flat 5% of revenue to a sliding scale royalty based on the gold price (as per table below), with effect from January 1, 2017; 118 Table of Contents The table below sets out the sliding scale royalty based on the gold price, which came in effect from January 1, 2017. Royalty rate Gold price (U.S.$/oz) 3.0% 0 - 1,299.99 3.5% 1,300 - 1,449.99 4.0% 1,450 - 2,299.99 5.0% 2,300 - unlimited • The term of the agreement, effective from March 17, 2016, will be for a period of 11 years for Tarkwa and nine years for Damang, each renewable for an additional five years; and • Tarkwa and Damang commit to investments of U.S.$500 million each for the period of the agreement. The Development Agreement could be extended by a further five years each should additional investments of U.S.$300 million be made. Gold Fields Ghana also made a number of other commitments in terms of the Development Agreement: • Funding the construction of the 29km road between Tarkwa and Damang, estimated at a cost of U.S.$17 million; • Tarkwa to pay the SGMC compensation for assets that have been used by the mine since the divestiture of SGMC; and • In a year where dividends are not declared and paid, Tarkwa and Damang will make an advance payment of 5% of profits after tax that year to the state, which will be offset against an eventual dividend payment. As a result of the Development Agreement, Gold Fields Ghana committed to a U.S.$341 million reinvestment in Damang, an investment that extends the life of the mine by eight years and has significant socio-economic benefits for communities around Damang. The Development Agreement will also lead to significant cost and cash flow benefits for the Tarkwa mine, enabling it to invest in future expansion when required. Ghana is a key region for Gold Fields and this Development Agreement cements our status as one of the largest contributors to the country’s fiscus. In fiscal 2016, Gold Fields paid over U.S.$86 million in direct taxes, royalties and dividends to the government of Ghana. This made Gold Fields Ghana the highest taxpayer in Ghana in fiscal 2016, as confirmed by the Ghana Revenue Authority. Australia In fiscal 2016, Gold Fields joined with its peers in Western Australia to form the Gold Industry Group to continue highlighting the industry’s contribution to the Western Australian economy and to job creation. This follows on the successful cooperation by miners to campaign against a review of the royalties charged on mining in fiscal 2015. Gold Fields plays a prominent role in the leadership of the industry group. South Africa From a regulatory perspective, Gold Fields’ operation in South Africa is guided primarily by the MPRDA. In 2013, critical amendments to the MPRDA were tabled by the government in the MPRDB, but the bill was sent back to parliament for consideration. Amid differing policy priorities by various government departments and jurisdictions, the bill has still not been ratified. One of the key requirements of the MPRDA is to facilitate meaningful and substantial participation of HDSAs in the mining industry. To provide guidance on this open-ended requirement, the Mining Charter, as revised in 2010, was published providing for a range of empowerment actions and a corollary time frame. All 119 Table of Contents mining rights holders (including South Deep as the mining rights holder) are required to submit an annual compliance assessment to the DMR on progress made against meeting the annual targets in the Charter. Gold Fields continues to comply with this process. On March 31, 2015, the Chamber reported that the DMR believes that empowerment transactions by mining companies concluded after 2004 where the HDSA ownership level has fallen due to HDSA disposal of assets or for other reasons, should not be included in the calculation of HDSA ownership for the purposes of, among other things, the 26% HDSA ownership guideline under the Mining Charter. The position of Gold Fields is consistent with that of the Chamber, and it is that such empowerment transactions should be included in the calculation of HDSA ownership. The DMR and the Chamber agreed to approach the South African courts jointly to seek a declaratory order that will provide a ruling on the relevant legislation and the status of the Mining Charter, including clarity on the status of previous empowerment transactions concluded by mining companies. The court is yet to hear the Main Application, which has not been enrolled pending an attempt to settle the Main Application outside of court. On April 15, 2016, the DMR published the New Draft Mining Charter. The New Draft Mining Charter was open for public comment and various submissions on the New Draft Mining Charter were made as part of the public commentary process. During the latter part of 2016, the Chamber and the DMR initiated consultation in relation to the New Draft Mining Charter, which is continuing. The Minister of Mineral Resources announced on February 6, 2017, that a revised version of the New Draft Mining Charter would be published in the government gazette in March, 2017. A revised version of the New Draft Mining Charter is yet to be published in the government gazette. Throughout fiscal 2015 and early fiscal 2016, the Chamber engaged with government directly on the long term sustainability of the industry and a number of other issues confronting the sector. A tripartite forum, called Project Phakisa, comprising industry, government and organized labor, was established, followed by extensive engagement programs to map out future growth and empowerment of the South African mining industry. As at March 2017, no meaningful government strategies or policies had yet emanated from this engagement process. Mining Charter Scorecard (L3) All mining rights holders (including South Deep as the mining rights holder) are required to submit an annual compliance assessment to the DMR on progress made against meeting the annual targets in the Mining Charter. 120 Table of Contents An updated Mining Charter was set to be presented in fiscal 2016 but had not been released by March 2017. Amid the absence of new criteria and targets, Gold Fields has updated its Mining Charter performance and compliance in line with an online scorecard created by the DMR in early fiscal 2015 for the reporting of 2014 performance. The 2014 criteria and targets have remained unchanged and are applicable for fiscal 2015 and fiscal 2016. The fiscal 2016 scorecard is below. MINING CHARTER SCORECARD Element Description Measure 2014 Mining Charter Compliance Target Progress Against Targets as at December 31, 2016 Reporting Report on the level of compliance with the Revised Charter for the calendar year. Documentary proof of reciept from the DMR Annually Target met (Annual Submission) Ownership Minimum target for effective HDSA ownership. Meaningful economic participation. 26% 35% Housing and living conditions Conversion and upgrading hostels to attain the occupancy rate of one person per room. Percentage reduction of occupancy rate towards 2014 target. Occupancy rate of one person per room 0.93 person per room ratio Conversion and upgrading hostels into family units. Percentage conversion of hostels into family units. Family units established 100% Procurement and enterprise development Procurement spent on BEE entity Capital goods 40% 89% Services 70% 81% Consumable goods 50% 83% Multi-national suppliers’ contribution to the social fund. Annual spend on procurement from multi-national suppliers. 0.5% of procurement value 0.77% Employment equity Diversification of the workplace to reflect the country’s demographics to attain competitiveness. Top management (Board) 40% 50% Senior management 40% 60% Middle management 40% 60% Junior management 40% 54% Core and critical skills 40% 71% Human resources development Developing requisite skills, including support for South Africa-based research and development initiatives intended to develop solutions in exploration, mining, processing, technology, mining, beneficiation as well as environmental conservation. Human resources development expenditure as a percentage of total annual payroll (excluding mandatory skills development levy). 5% 9.65% (R 180.6 million) 121 Table of Contents Element Description Measure 2014 Mining Charter Compliance Target Progress Against Targets as at December 31, 2016 Mine community development Conduct ethnographic community consultative and collaborative processes to delineate community needs analysis. Implement approved community projects. Up-to-date project implementation 83% project implementation (not assured). R55.6 million was spend on SED (including Community Trusts). 20% of the SED spend (R11.3 million), was spent on implementation of community projects, approved in the SLP. Sustainable development and growth Improvement of the industry’s environmental management Implementation of approved environmental management programs (EMP’s) 100% 100% An EMP performance assessment was undertaken in the first quarter of fiscal 2016. The assessment was conducted by ECO Partners consulting in terms of Regulation 55 of the MPRDA. The results of the assessment were submitted to the DMR in April 2016. South Deep is also ISO 14001 certified, which assists tracking the implementation of the EMP commitments. In addition, the mine commissions annual reviews of the mine closure cost estimates, using independent experts. Improvement of the industry’s mine health and safety performance Implementation of tripartite action plan on health and safety 100% 86% Utilization of South Africa-based research facilities for analysis of samples across the mining value Percentage of samples in South African facilities 100% 100% 122 Table of Contents Element Description Measure 2014 Mining Charter Compliance Target Progress Against Targets as at December 31, 2016 Beneficiation Contribution towards beneficiation Added production volume contribution to local value addition beyond the baseline Section 26 of MPRDA (% of above baseline) Current regulations and guidelines are not clear in relation to the baseline levels and targets. However, Gold Fields has made a capital intensive investment in our smelting facility at South Deep, which adds significant value to the gold being mined as well as creating jobs. Gold Fields also owns 2.76% of Rand Refinery, which has established the “Gold Zone”. The aim is for the Gold Zone to become a major hub for precious metals fabrication in South Africa for global export, while at the same time assisting local communities with skills development (including beneficiation). 123 Table of Contents Technology and Innovation Gold Fields established a new T&I division during fiscal 2016, led by Richard J. Butcher (EVP: Technical), who joined the Group in February 2016. This division has technical oversight throughout the Group and has developed a new T&I strategy by determining the best ways to improve safety, increase production and reduce operating costs. The long-term transformational goals for the company are defined by the T&I strategy. The thrust of the strategy is to modernize, integrate and optimize existing systems and processes before moving into mine automation. The strategy envisages three distinct phases, namely: • Horizon 1 (1 - 2 years): Foundational phase; • Horizon 2 (3 - 7 years): Transformational to the Gold Fields Mine of the Future; and • Horizon 3 (7 years +): The Gold Fields Mine of the Future. The ultimate goal of the strategy is to work towards the “Gold Fields Mine of the Future”, which will be premised on automation, an integrated digital data platform, remote machine operation, virtual reality and reduced mining waste. Recent advances in digitization, automation and mechanization highlight the importance of having strategies in place to implement new technologies. In addition, partnerships with IT companies and OEMs that are leaders in the field will be integral to a successful T&I strategy. As part of Horizon 1 Gold Fields has identified opportunities to boost efficiencies within Gold Fields’ current regional portfolios, which span the exploration, mining and processing areas of the mining value chain: • The key focus for the Australia region is streamlining exploration time through real time data management and the use of leading practice technologies. This work is being led by a centralized team which will focus on geochemistry, geophysics and analysis of existing geological data; • In Ghana, the focus will be on data analysis to achieve end-to-end business optimization. A key part of this program is to complete fleet automation studies and trials, which could eventually serve as a business case for other open pit automation throughout the Group; • The South Deep mine will upgrade its underground wireless connectivity and radio-communications systems, which will enable it to use technologies such as online maintenance and dispatch systems and remote operating equipment more effectively; • The Cerro Corona mine will be using upgraded operating software and a new dispatch system that will focus on porphyry ore blending to reduce variation of stock feed, thereby optimizing plant recoveries; and • One of our Australian operations will investigate the potential for a fully-automated underground trial mine. Energy and Climate Change Mining and processing of gold is an energy intensive process, exacerbated by changing ore geology, declining grades, longer hauling distances and increasing mine depths. The management of energy use and adapting to the adverse impacts of climate change are material for virtually every country and company across the world. As such, sustainable energy use and climate change mitigation and adaptation have been identified as one of Gold Fields’ top five sustainability priorities until fiscal 2020. 124 Table of Contents With energy spend accounting for a significant portion of Gold Fields’ operating costs (fiscal 2016: 19%, fiscal 2015: 22%, fiscal 2014: 21%), energy efficiency and cost savings initiatives are critical components of Group-wide cost saving initiatives. Integrated Energy and Carbon Management Through its integrated energy and carbon management strategy, Gold Fields integrates energy and carbon management into all aspects of its business to ensure energy security, improved management of energy costs, improved energy efficiencies and sustainable reduction of its carbon footprint. Full details of Gold Fields operational energy consumption and carbon emissions data is contained on our website. Some of the salient features of Gold Fields energy and carbon performance in fiscal 2016 were: • Group energy spend declined from U.S.$312 million (U.S.$139/oz) in fiscal 2015 to U.S.$289 million (U.S.$130/oz) in fiscal 2016; • Total energy consumption increased by 4% to 11,696,446GJ from 11,240,369GJ in fiscal 2015. Of total energy consumption during fiscal 2016, 57% comprised diesel (6,607,770GJ) and 43% electricity (5,041,518GJ) similar to the split in fiscal 2015; • Group electricity consumption was 1,400,422MWh, a 6% increase on fiscal 2015. This reflected higher gold production (up by 47%) at South Deep, increased tonnes mined throughout the Group, the addition of ventilation shafts at our Australian operations and increased dewatering due to heavy rains at the Australian and Ghanaian mines; • Diesel consumption reduced by 4.7% from 192,518kℓ in fiscal 2015 to 183,498kℓ due to the commissioning of the gas plant at Granny Smith, reduced usage of diesel power generators at Damang, optimized mining operations and fuel management initiatives implemented at our mines. Diesel consumption increased at the Tarkwa and St. Ives mines; • Diesel spending reduced by 13% to U.S.$129 million (fiscal 2015: U.S.$149 million) amid a stagnant oil price and reduced diesel usage at the operations; with a 1.2% modest decline in our electricity spend to U.S.$160 million (fiscal 2015: U.S.$162 million); • Commissioning of gas-powered power generation technologies at Granny Smith, Tarkwa and Damang as part of our ongoing switch to low-carbon, alternate and renewable energy sources; • Continued commitment to using 20% renewable energy on all new projects over the LoM of these projects. Salares Norte in Chile is currently undergoing an evaluation; and • Total carbon emissions increased by 12% to 1,963,758t CO2-eq from 1,753,163t CO2-eq emissions in fiscal 2015. Our scope 1 emissions rose due to higher diesel consumption, while our scope 2 increased due to country-specific emissions factors. In fiscal 2016, low global oil prices and a stagnant gold price made some of our fuel-switching energy initiatives not economically viable. Despite the difficult economic and tough physical conditions of gold mining, Gold Fields still managed to achieve some energy savings and carbon emissions reductions in fiscal 2016. These included: • Energy savings of 323TJ - 3% of our fiscal 2016 energy budget; • Financial savings of U.S.$11 million from energy initiatives - our target was U.S.$21 million; and • Avoidance of carbon emissions totaling 56,005t CO2-eq as a result of the energy and carbon reduction initiatives. Group energy budgets, energy savings and carbon reduction target estimates are determined at the beginning of each year, against the annual production plan. Thus, changes in the production will directly affect ability to reach the target estimates. 125 Table of Contents Most critically though is that our average energy spend per ounce of gold produced declined by 6.3% to U.S.$130/oz in fiscal 2016 (fiscal 2015: U.S.$139/oz, fiscal 2014: U.S.$158/oz). Energy efficiency initiatives reduced energy spend by an equivalent U.S.$5/oz. This is despite the fact that the actual energy usage per ounce of gold produced increased by 5.0% to 5.27GJ/oz in fiscal 2016. Reflecting slightly lower grades throughout our operations, the tonnage mined by Gold Fields during fiscal 2016 was up by 12%, however, mining energy intensity improved to 0.06GJ/t mined (fiscal 2015: 0.07GJ/t). Energy optimization savings initiatives take time to make an impact - we calculate that the effect of various energy efficiency and business optimization initiatives introduced across Gold Fields over the past five years have resulted in cumulative energy savings of 1,098TJ between fiscal 2012 and fiscal 2016. This has led to U.S.$41 million in cumulative cost savings and avoidance of 165,005t CO2-eq in emissions. In fiscal 2016, Gold Fields updated its Group Energy and Carbon Management Guideline to align with ISO 50001, the global energy management standard. The guideline entrenches a systematic approach to our energy management as a business optimization continual improvement program and shifts our focus from individual energy efficiency initiatives. Regional Energy and Carbon Emission Performance In fiscal 2015, Gold Fields developed and started implementation of regional five-year energy security plans, taking into account localized energy supply risks and opportunities, with a specific focus on West Africa and South African operations. From fiscal 2017 short-term operational targets for energy use, cost and carbon emissions will be set against annual energy and production plans. They will be set in absolute GJ, energy costs (U.S.$) and absolute carbon emission (tonnes CO2-eq) avoided, based on planned and feasible initiatives. Initiatives will still be recognized for three years from date of implementation. Through this process, we are able to develop Group medium-term (fiscal 2020) energy and carbon reduction targets. Most of the regions have seen a decline in energy spending per ounce as seen in the graph below, owing to a number of external and internal drivers, such as exchange rates, varying levels of increases in regional electricity and diesel unit prices and energy efficiency initiatives. Some of the successful energy spend curtailment initiatives are outlined below. Americas Peru electricity market has experienced an oversupply situation due to planned large mining projects that have not yet been implemented and the regulated electricity charges continue to increase. Thus, at Cerro Corona 126 Table of Contents we renegotiated electricity tariffs with an independent power provider for a power purchase agreement extending to fiscal 2027. Efficiency initiatives saved the mine 29,430GJ, equivalent to U.S.$0.55 million in fiscal 2016 (fiscal 2015: U.S.$3 million) and avoided 2,363t CO2-eq in carbon emissions. A trial application of a diesel additive product over a 25-day period saw fuel savings of 4.8% from selected haulage trucks. Moreover, observed carbon monoxide and nitrogen monoxide emission reductions were as low as 22% and 23%, respectively. Based on this trial’s success, we expect to save U.S.$280,000 per year in fuel when applied over Cerro Corona’s hauling fleet. The roll out for this initiative is planned for fiscal 2017. A pre-feasibility study under way at Chile’s Salares Norte mine includes the development of a plan exploring renewable energy supply options, over the LoM. Australia Due to their remote locations, Gold Fields’ Australian operations have limited, but stable, power supply. As such, the focus for fiscal 2016 has been to implement a fuel switch strategy, while reassessing energy security and monitoring energy efficiency initiatives. In fiscal 2016 we commissioned a 24MW gas-powered plant at the Granny Smith mine, our portion of the total costs was A$4.5 million (U.S.$3.3 million). Savings of around A$5.4 million (U.S.$3.9 million) a year at current oil prices are expected. All operations in Australia are now powered by gas instead of diesel. After registering the Granny Smith gas plant with the ERF, we have been able to successfully auction carbon emission credits to the Australian government as the plant switches from a heavy carbon (diesel) to a low carbon (gas) power source. The ERF is expected to abate 85,000t CO2-eq emissions potentially over seven years. Following annual energy security risk assessments, we have developed a load management action plan for Agnew/Lawlers mine, which faces heavy penalties should its contracted maximum demand of electricity be exceeded for a sustained period of time. Mitigating actions, such as running the cooling plant on diesel power, are currently being implemented, while a long-term energy security solution is explored. South Africa In response to the rolling load shedding that South Africa experienced in fiscal 2015 and uncertainties regarding electricity price increases, South Deep’s five-year energy security plan incorporates a range of energy efficiency improvements and alternative energy sources. An essential component of the plan is the use of solar power at the mine. An independent power producer was appointed in October 2016 to develop, build, own and operate a 40MW photovoltaic plant located at South Deep. The facility will be made up of approximately 150,000 solar panels. The plant is expected to generate 100GWh per year, equivalent to 20% of the mine’s annual 500GWh electricity consumption, and avoiding carbon emissions estimated at 100,000t CO2-eq per annum. We expect the initial power purchase agreement price to be on par with state utility Eskom tariffs, and set to fall below Eskom tariffs in due time. The expected commercial operation date of the project is the fourth quarter of fiscal 2018. Other initiatives completed at South Deep mine in fiscal 2016 include: • Continuing to retrofit 75kW fans with 10 energy efficient 55kW fans, resulting in an annual saving of 2,190MWh (equivalent to U.S.$100,000 in cost savings) and avoiding 2,256t CO2-eq carbon emissions; and • Installing 22 new jet fans in the destress mining area, which will see an annual saving of 500MWh (equivalent to U.S.$30,000) and avoiding 513t CO2-eq carbon emissions. 127 Table of Contents Roof top solar panels installed at Gold Fields’ Johannesburg corporate office in December 2015 led to significant savings in grid electricity usage and costs during fiscal 2016. The 128kWp (peak output), 823m2 polycrystalline solar PV array on the roof of the corporate office provides for approximately 50% of the building’s electrical load and contributes to reduction of our carbon footprint. West Africa During fiscal 2016, the electricity consumption curtailment was eased from 30% in fiscal 2015 to 25%. Supply disruptions from the state-owned VRA, due to gas shortages and low dam levels, remained an operational constraint. Energy prices also rose due to infrastructure levy increases. With electricity demand in Ghana expected to surpass generation capacity until fiscal 2020, Tarkwa and Damang initiated a number of actions during fiscal 2016 as part of their five-year energy security plans. The most significant of these was the construction of two Genser-owned gas turbine power plants to supply a total of 40MW of electricity to both mines under a purchasing power agreement. The total capacity of the Tarkwa plant (three 11MW units) and the Damang plant (five 5.5MW units) are beyond our current power requirements and will ensure a reliable supply to both operations. They were commissioned in December 2016 and will result in significant electricity cost savings. Tarkwa’s electricity supply costs are expected to drop by about 14%, and Damang’s costs by about 30%. The key features of the Genser agreement are: • It is a 20-year power purchase agreement for an initial 40MW of which 20MW is provided from dual-fuel turbines at both Tarkwa and Damang; an additional 20MW is planned for installation at Tarkwa by January 2018; • The power plants will have sufficient on-site gas storage capacity to meet each mine’s total load (36MW at Tarkwa and 17MW at Damang) thereby mitigating any gas supply disruptions; and • By January 2018, Genser should be in a position to provide 100% of the power supply needs at these operations and surplus power produced by Genser could be wheeled to other consumers. Tarkwa introduced a number of other energy efficiency initiatives during fiscal 2016: • Implementation of a dedicated eco-driver training system at Tarkwa, which is compulsory for both new and current vehicle operators. Trials during fiscal 2016 indicate that once the system is rolled out energy savings of 72,469GJ can be achieved leading to annual cost savings of around U.S.$2 million; • A new study on a fuel additive at Tarkwa indicates a possible 4,881kℓ fuel saving per annum, equating to an anticipated 13,023t CO2-eq reduction. The estimated annual monetary saving from the initiative is U.S.$2.4 million. A test trial is being developed; and • Several process optimization initiatives such as reducing tramming time and excavators’ diesel use were also implemented. An energy efficiency study of the Accra regional office showed potential energy savings of 18,922GJ (translating to a monetary saving estimate of U.S.$1.3 million) through installations of LED illumination, solar geysers and energy efficient air conditioners. The feasibility of rooftop solar power to minimize grid power dependency is also being assessed. Climate Change and Carbon Emissions Carbon emission reduction and climate change mitigation and adaptation represent a material issue for Gold Fields due to: • The long-term risks posed by climate change to the Group’s operations, host communities and to society as a whole; 128 Table of Contents • A commitment to conforming to carbon emission regulations being introduced in a range of jurisdictions; and • Rising costs associated with taxes attached by governments to non-renewable energy consumption. Gold Fields’ total scope 1 - 3 CO2-eq emissions during fiscal 2016 amounted to 1,963,759t (fiscal 2015: 1,753,163t), leading to a commensurate increase in our emissions intensity from 0.59t CO2-eq/oz in fiscal 2015 to 0.69t CO2-eq/ oz in fiscal 2016. Emission intensity varies by region, ranging from 0.31t CO2-eq/oz in Peru, which relies mainly on gas and hydro generated electricity, to 1.92t CO2/oz in South Africa, which relies almost exclusively on coal generated electricity. Gold Fields Climate Change Policy Following the climate change risk assessments carried out in fiscal 2016, a Group climate change policy was published, replacing the Group carbon management policy that has been in place since fiscal 2013 and focused mainly on addressing these effects through energy management. Thus, the policy advances and communicates a balanced mitigation and adaptation approach to achieving our climate change objectives. The policy contains a set of commitments that include: • Conducting climate change vulnerability assessments utilizing Group risk guidelines and ICMM tools and guidelines; • Annually reporting and disclosure via a number of reporting frameworks including the CDP and the Dow Jones Sustainability Index; • Mitigating the effects of climate change by increasingly investing in renewable energy and low-carbon energy sources, energy efficiency initiatives and water use optimization initiatives; • Supporting research, development and innovation to assist our operations in coping with climate change; • Factoring in a regional carbon price for both costing and as potential revenue streams; and • Participating in industrial forums, including the ICMM climate change and energy working group, stakeholder and NGO engagements. Climate Change Vulnerability Assessments During fiscal 2016, we worked with the ICMM to pilot a climate-data viewer tool that gives insight into physical changes in precipitation, temperature, wind and water stress levels from fiscal 2025 to fiscal 2045 based on 15 global climate models. This tool enables ICMM members to assess their operations’ vulnerability to climate change using a common tool. The risk assessments covered the entire mine life cycle, including post-closure. Gold Fields applied this tool in all its operations and followed that with detailed risk assessments for Peru, South Africa and Australia, with West Africa assessments scheduled for early fiscal 2017. Results from the tool indicate that our operations will to varied degrees experience higher temperatures, decreases in annual rainfalls, and an increase in the intensity of storm events, all of which may have financial and non-financial impacts both for the mines and surrounding communities. Specific implications for each operation will vary depending on the operational life cycle. Some of the key findings are listed below. Operational adaptation plans are being developed to ensure operational resilience. A critical part of this work is co-operating with NGOs and adjacent communities in addressing climate change risks around these communities. At our Cerro Corona mine in Peru, we are working with the U.S. Agency for International Development, or USAID, and the Lutheran World Relief, or LWR, on climate change adaptation and management of water resources for communities in the Hualgayoc district adjacent to the mine. Among the measures introduced are the establishment of watershed committees, the development of eight localized water systems to improve irrigation efficiencies and training in sustainable water harvesting. 129 Table of Contents Region Risk Description Americas Intense storms leading to our water pumping and treatment capacity being exceeded Interruptions to the transport network leading to bottlenecks at the concentrate storage facility Higher sea undulations could lead to disruptions in the port operations and the need to increase capacity in the concentrate storage warehouse Water availability constraints could lead to reduced agricultural productivity Australia Increases in flooding events could lead to pressure being placed on operation’s flood management capabilities and restrictions on personnel and suppliers’ access to site Declining availability of suitable quality processing water due to lower rainfall Legislative changes imposing restrictions on water use and punitively limiting emissions South Africa Increases in temperatures—potentially exposing our surface operations to heat exhaustions, in the long term, underground cooling demand will increase Increases in variability and intensity of rainfall—exposing South Deep to periods of drought and increased water stress, as well as floods as storm intensity increases Community Relations and Creating Shared Value Social license to operate Recognizing the importance of solid community relations to its social license to operate, Gold Fields is committed to minimizing, managing or avoiding, where possible, the negative impacts of its operations on communities, while also maximizing the positive benefits. Through active stakeholder engagement and its shared value development approach, the Company’s focus goes beyond just spending to the positive social and business impacts that its social investments can deliver. Gold Fields’ community relations approach is informed by an understanding of its operating contexts, garnered through ongoing risk assessments and stakeholder engagements. In fiscal 2016, plans to address material social risks were developed and implemented in each region. These risks were often linked to the local and national elections, which were held in all our operating regions. The operations were sensitized to this challenge through their community relations risk assessments undertaken in fiscal 2015 and fiscal 2016. Building relationships Gold Fields actively identifies and regularly engages with the representatives of the following groups in a formal and informal manner: • Central, regional and local government and their agencies; • Community-based organizations; • Traditional authorities; • NGOs; • Civil society; • Organized labor; and • Organized Business and companies. In fiscal 2016, all operations prepared community relations and stakeholder engagement strategies and three-year plans focused on maintaining their social license to operate. These were informed by the Company’s community relations and stakeholder engagement guideline. 130 Table of Contents As required by the Company, all operations have established mechanisms through which communities can share their grievances about Gold Fields, its actions or the behavior of its employees on social, environmental and human rights issues. These mechanisms allow for issues to be addressed and resolved. During fiscal 2016, the regions dealt with 92 grievances by their communities, of which 82 were resolved and ten are still being dealt with. Operations in Peru, South Africa and West Africa also regularly distribute communication materials to stakeholders, keeping them informed about the Company’s community relations activities and initiatives. Subsequent to community relationship assessments in Peru, South Africa and West Africa between fiscal 2014 and fiscal 2015, action plans have been implemented during fiscal 2015 and fiscal 2016 to address any gaps and further strengthen community relations. A second round of assessments commenced in late fiscal 2016 in Peru and South Africa. The ICMM “Understanding company-community relationship toolkit” is being piloted for these assessments at our South African and Ghanaian mines. Social investment As not all of the value created through royalties and taxes benefits host communities, Gold Fields focuses on socio-economic development, or SED, initiatives and Shared Value projects. Aligned to the Company’s business objectives, these sustainable development projects create positive socio-economic impacts for host communities by targeting their priority needs of employment, skills and enterprise development, and environmental rehabilitation and access to water. Gold Fields’ spending of U.S.$16 million in fiscal 2016 (fiscal 2015: U.S.$14 million) on SED and Shared Value programs reflects the Group’s direct social investment spend in host communities. The investments were made in the following areas: • Local environment; • Infrastructure; • Education and training; • Health and wellbeing; and • Economic diversification. A significant proportion of the salaries and wages paid to employees also finds its way back into our host communities. Shared Value projects Shared Value is created when companies take a proactive role in simultaneously addressing business and social needs. A key component of this approach is to ensure that the value created is shared by the business and the community. Shared Value is an imperative for Gold Fields as a key component of maintaining and strengthening its social license to operate. Gold Fields’ Shared Value approach is based on four key pillars: • Strategic interventions, to proactively address socio-economic challenges that can drive community tensions, NGO activism or more restrictive regulations; • Integration to proactively address socio-economic challenges; • Participation in collaborative action with other stakeholders; and • Transparency regarding Gold Fields’ economic contributions to its host societies in line with WGC guidelines. 131 Table of Contents Gold Fields’ regions currently have six Shared Value projects either already running or at implementation stage. These include road rehabilitation and quarry projects at the Ghanaian operations, local supplier development and water access projects at Cerro Corona and host community procurement and education and skills development projects at South Deep. Host community employment Gold Fields aims to employ host community members at its operations, where feasible. This enables alignment between the interests of host communities and the mines, expanding of local value generation and growth of local available skills. As the Company’s ability to recruit such workers may be limited due to the available skills in host communities, it is committed to local education and skills development. The focus of the Creating and Sustaining Shared Value objective for fiscal 2016 was the development of three-year local procurement and employment plans for Peru, South Africa and West Africa. The number of host community members, including both employees and contractors, working at each of Gold Fields’ regions is set out on the table below. In fiscal 2016, all operations set targets for host community employment and these were met or exceeded, except at South Deep where the definition of “host communities” was adjusted from residential address to place of origin, which was in line with the legal definition required under the mine’s SLP. Region % Host community workforce(1) employed from total workforce Fiscal 2016 Fiscal 2015 Fiscal 2014 (%) (%) (%) Peru 23 29 24 Ghana 72 67 66 Australia(2) 95 90 94 South Africa(3) 13 14 12 Group(3) 48 47 47 Notes: (1) Workforce includes the total number of employees and contractors. (2) For our Australian operations, Western Australia is classified as a host community due to the extremely remote nature of this region and the fact that many employees fly into the operations from Perth. Hence the high host community employment percentages relative to the other regions. (3) Change in definition of workforce applied at South Deep in fiscal 2016. Fiscal 2015 fiscal and 2014 figures restated accordingly. Host community procurement Where possible, Gold Fields procures goods and services in the countries in which it operates, and, where feasible, its host communities. This contributes to enhancing the national and local supplier base, which is especially important because of some mines’ remote locations, and creating local employment. Of the total fiscal 2016 procurement spend, U.S.$1.36 billion or 83% was spent on businesses based in countries where Gold Fields has operations (fiscal 2015: U.S.$1.27 billion or 75%). Within this figure, U.S.$558 million or 41% was spent on suppliers and contractors from the mines’ host communities (fiscal 2015: U.S.$514 million or 35%). Building on the work done in fiscal 2016, the operations are working towards meeting their host community employment targets developed as part of the three-year host procurement and employment plans. South Deep’s Host Community Procurement Project exceeded its target of R330 million in fiscal 2016. The project’s vision is to have 25% of total procurement spend (or R500 million, whichever is greater) redirected to the host community 132 Table of Contents by fiscal 2018 and 500 new jobs created by the end of fiscal 2020. The actual total procurement spend for fiscal 2016 was R2.6 billion (fiscal 2015: R2.0 billion) and the host community procurement spend was R356 million (fiscal 2015: R192 million), which was 14% of total spend (fiscal 2015: 10%). The number of host community suppliers to South Deep increased to 83 during fiscal 2016 (fiscal 2015: 76). The table below sets out the local and host community procurement for the periods indicated. Region Local (In Country) Procurement Host community procurement Fiscal 2016 Fiscal 2015 Fiscal 2014 Fiscal 2013(1) Fiscal 2016(1) Fiscal 2015 Fiscal 2014 Fiscal 2013(1) (%) Peru 89 87 88 91 8 7 5 6 Ghana 79 64 72 68 7 9 6 6 Australia 99 97 99 99 71 66 69 72 South Deep 100 100 100 100 14 10 9 4 Group 92 85 91 86 38 35 39 31 Note: (1) Excludes Yilgarn South Assets. In fiscal 2017, the Company plans to pilot a social and economic impact assessment and evaluation of its social investments at South Deep and develop an approach that will be rolled out in Gold Fields’ other regions thereafter. Human Rights Gold Fields applies a formal human rights policy statement, both in dealing with its communities as well as its employees. The policy statement is aligned to the relevant ICMM principles on human rights and the United Nations’ “Protect, Respect and Remedy” framework. Under the policy statement, Gold Fields commits to: • Not interfering with or curtailing other’s enjoyment of human rights; • Defending (where possible) employees and third-party individuals and groups (as defined in our community policy) against human rights abuses; and • Taking positive action to facilitate the entrenchment and enjoyment of human rights. Given the nature of Gold Fields’ footprint, activities and relationships, the human rights policy places specific emphasis on: • Community engagement; • Indigenous rights; • Resettlement; and • Security and human rights. Internally, we uphold the highest standards of human rights within our workforce, including freedom from child labor, compulsory labor and discrimination as well as the right to collective bargaining. We carry out human rights due diligence on our own activities. Gold Fields’ business relies on multiple contractors and suppliers to carry out mining, development, construction and other forms of work on its operations. All contractors are included in Gold Fields’ own health and safety management systems, to help ensure that contractor employees benefit from safe and healthy working conditions. 133 Table of Contents All contractor employees wishing to report human rights violations are able to make use of Gold Fields’ confidential, third-party whistle-blowing hotline. Where such complaints are made, Gold Fields will pursue the matter appropriately. Gold Fields does not currently carry out human rights due diligence on its suppliers. Nonetheless, the Group is utilizing an external party screening solution to establish risk profiles of external suppliers and contractors. Among other criteria, the tool screens new and existing contractors and suppliers for human rights and related violations and/or transgressions. Gold Fields’ protection services team works with both private and public security providers for the effective and responsible protection of workers and assets. All private security contractors receive human rights training during induction. Gold Fields is committed to responsible materials stewardship. In this context, we support global efforts to tackle the use of newly mined gold to finance conflict. We have voluntarily adopted the “Conflict-Free Gold Standard” of the WGC. This has led to the standard being applied at all relevant locations through full assurance audits. Although we withdrew our WGC membership in 2014, we have and will continue to apply both the WGC standard and guidelines. Property As of December 31, 2016, Gold Fields held rights over the following mining and exploration areas/tenements, including those held as joint ventures: Gold Fields’ operative mining areas as of December 31, 2016 Operation Size (hectares) South Africa South Deep 4,268 Ghana Tarkwa 20,825 Damang 23,666 Australia (1) St. Ives 123,291 Agnew/Lawlers 88,180 Granny Smith 72,236 Darlot 13,981 Peru Cerro Corona 4,365 Note: (1) Tenement areas include: prospecting, exploration, mining, miscellaneous and non-managed or JV. Gold Fields leases its corporate headquarters in Sandton. The MPRDA vests the right to prospect and mine in the Republic of South Africa with administration by the government of South Africa. During May 2010, the DMR approved the conversion of the South Deep old order mining rights into a new order mining right. Gold Fields also owns most of the surface rights with respect to its South African mining properties. Where Gold Fields conducts surface operations on land the surface rights of which it does not own, it does so in accordance with applicable mining and property laws. In addition, Gold Fields owns prospecting and surface rights contiguous to its operations in South Africa. As required under the MPRDA, Gold Fields has registered its surface rights utilized for mining purposes. Gold Fields has received prospecting rights on properties which it has identified as being able to contribute, now or in the future, to its 134 Table of Contents business and will apply to convert those prospecting rights to mining rights under the MPRDA, when appropriate. These rights, historically known as the Fochville East, Kalbasfontein, WA4 and Wildebeestkuil prospecting rights, are in the process of being consolidated and known as the South Deep Contiguous Areas. See “—Environmental and Regulatory Matters—South Africa—Mineral Rights”. Gold Fields’ West Africa operations comprise two legally registered entities, namely Gold Fields Ghana and Abosso. Gold Fields Ghana obtained the mining rights for the Tarkwa property from the government of Ghana in 1993. In August 2000, with the consent of the government of Ghana, Gold Fields Ghana was assigned the mining rights for the northern portion of the Teberebie property. The Tarkwa rights expire in 2027, while the Teberebie rights expire in 2018. The Minerals Commission has approved Gold Fields Ghana’s application for an extension of the Teberebie rights to 2036, and has recommended that the Minister responsible for Natural Resources should grant the extension. Gold Fields Ghana has fully paid for the fees associated with the extension. Abosso holds the right to mine at the Damang property under a mining lease from the government of Ghana that expires in 2025. Gold Fields may exploit all surface and underground gold at all three sites until the rights expire, provided that Gold Fields pays the government of Ghana a quarterly royalty. See “—Environmental and Regulatory Matters—Ghana—Mineral Rights”. In Western Australia, land that is the subject of mining rights is leased from the state. West Australian mining leases have an initial term of 21 years with one automatic 21-year renewal period and thereafter an indefinite number of 21-year renewals with government approval. In relation to gold produced from the mining leases at St. Ives, Agnew/Lawlers, Granny Smith and Darlot, Gold Fields pays an annual royalty to the state of 2.5% of revenue. In Peru, exploration and extraction activities can only be performed in duly authorized areas. Authorization is granted by the Peruvian government when a mining concession is issued. Mining concessions expire if the titleholder does not exploit the concessions for a period of 15 years, unless the titleholder demonstrates to the authorities that this was through no fault of its own, in which case the authorities may allow the titleholder to begin to exploit the concession within the next 5 years that follow. The titleholder must comply with specific obligations, such as paying annual fees of U.S.$3.00 per hectare, meeting minimum investment requirements, paying a monthly royalty according to the value of the produced concentrates and other requirements. The mining concessions owned by Cerro Corona cover an area of 4,365 hectares, while the surface rights cover 1,291 hectares. See “—Environmental and Regulatory Matters—Peru—Mining Concessions”. 135 Table of Contents The maps presented below show the location of Gold Fields’ operations. South Africa Operation General location of the material assets—South Deep Gold Mine 136 Table of Contents West Africa Operations General location of the material assets—Tarkwa Gold Mine 137 Table of Contents General location of the material assets—Damang Gold Mine 138 Table of Contents Australian Operations General location of the material assets—St. Ives Gold Mine 139 Table of Contents General location of the material assets—Agnew/Lawlers Gold Mine 140 Table of Contents General location of the material assets—Granny Smith Gold Mine 141 Table of Contents General location of the material assets—Darlot Gold Mine 142 Table of Contents Americas Operation General location of the material assets—Cerro Corona Gold Mine Legal Proceedings and Investigations Randgold and Exploration Summons On August 21, 2008, GFO, formerly known as Western Areas Limited, or WAL, a subsidiary of Gold Fields, received a summons from Randgold and Exploration Company Limited, or R&E, and African Strategic Investment Holdings Limited. The summons claims that during the period that WAL was under the control of Brett Kebble, Roger Kebble and others, WAL assisted in the unlawful disposal of shares owned by R&E in Randgold Resources Limited, or Resources, and Afrikander Lease Limited, now known as Uranium One. The claims have been computed in various ways. The highest claims have been computed on the basis of the highest prices of Resources and Uranium One shares between the dates of the alleged thefts and March 2008 (between R11 billion and R12 billion, or approximately between U.S.$700 million to U.S.$800 million). The alternative claims have been computed on the basis of the actual amounts allegedly received by GFO to fund its operations (approximately R519 million, or U.S.$34 million). 143 Table of Contents Simultaneously with delivering its plea, GFO joined certain third parties to the action (namely JCI Limited, J C Lamprecht, R A R Kebble and the deceased and insolvent estate of B K Kebble), in order to enable it to claim compensation against such third parties in the event that the plaintiffs are successful in one or more of their claims. In addition, notices in terms of section 2(2)(b) of the Apportionment of Damages Act, 1956 were served on various parties by GFO, in order to enable it to make a claim for a contribution against such parties in terms of the Apportionment of Damages Act, should the plaintiffs be successful in one or more of its claims. The claims lie only against GFO, whose only interest is a 50% stake in the South Deep mine. This alleged liability is historic and relates to a period of time prior to the purchase of the company by the Group. GFO’s assessment remains that it has sustainable defenses to these claims and accordingly, GFO’s attorneys were instructed to vigorously defend the claims. Accordingly, no adjustment for any effects on the Company that may result from the outcome of the summons, if any, has been made in the consolidated financial statements. Silicosis During 2012 and 2014, two court applications were served on Gold Fields and its subsidiaries (as well as other mining companies) by various applicants purporting to represent classes of mine workers (and where deceased, their dependents) who were previously employed by or who are employees of, among others, Gold Fields or any of its subsidiaries and who allegedly contracted silicosis and/or tuberculosis. These are applications in terms of which the court is asked to certify a class action to be instituted by the applicants on behalf of the classes of affected people. According to the applicants, these are the first and preliminary steps in a process, where if the court were to certify the class action, the applicants will in the second stage bring an action wherein they will attempt to hold Gold Fields and other mining companies liable for silicosis and/or tuberculosis and the resultant consequences. The applicants contemplate dealing in the second stage with what the applicants describe as common legal and factual issues regarding the claims arising for the whole of the classes. If the applicants are successful in the second stage, they envisage that individual members of the classes could later submit individual claims for damages against Gold Fields and the other mining companies. These applications do not identify the number of claims that could be instituted against Gold Fields and the other mining companies or the quantum of damages the applicants may seek. Gold Fields has opposed the applications. The two class actions were consolidated into one application on October 17, 2014. In terms of the consolidated application, the court was asked to allow the class actions to be certified. On May 13, 2016, the High Court ordered, among other things: (1) the certification of two classes: (a) a silicosis class comprising current and former mine workers who have contracted silicosis and the dependents of mine workers who have died of silicosis; and (b) a tuberculosis class comprising current and former mine workers who have worked on the mines for a period of not less than two years and who have contracted pulmonary tuberculosis and the dependents of deceased mine workers who died of pulmonary tuberculosis; and (2) that the common law be developed to provide that, where a claimant commences suing for general damages and subsequently dies before close of pleadings, the claim for general damages will transmit to the estate of the deceased claimant. The progression of the classes certified will be done in two phases: (i) a determination of common issues, on an opt out basis, and (ii) the hearing and determination of individualized issues, on an opt in basis. In addition, costs were awarded in favor of the claimants. The High Court ruling did not represent a ruling on the merits of the cases brought by the Claimants. The amount of damages has not yet been quantified for any of the claimants in the Consolidated Class Application or for any other members of the classes. 144 Table of Contents Gold Fields and the other respondents believed that the judgment addressed a number of highly complex and important issues, including a far reaching amendment of the common law, that have not previously been considered by other courts in South Africa. The High Court itself found that the scope and magnitude of the proposed claims is unprecedented in South Africa and that the class action would address novel and complex issues of fact and law. The respondents applied for leave to appeal against the judgement because they believed that the court’s ruling on some of these issues is incorrect and that another court may come to a different decision. On June 24, 2016, the High Court granted the mining companies leave to appeal against the finding amending the common law in respect of the transmissibility of general damages claims. It refused leave to appeal on the certification of silicosis and tuberculosis classes. On July 15, 2016, Gold Fields and the other respondents each filed petitions to the Supreme Court of Appeal for leave to appeal against the certification of the two separate classes for silicosis and tuberculosis. In an attempt to shorten any delay due to an appeal process, it is permissible to request that the appeals be dealt with on an expedited basis. On September 21, 2016, the Supreme Court of Appeal granted the respondents leave to appeal against all aspects of the class certification judgment of the South Gauteng High Court delivered in May 2016. On February 28, 2017, Gold Fields filed heads of argument with the Supreme Court of Appeal in respect of its appeal against the class certification judgment of the South Gauteng High Court delivered in May. In addition to the consolidated application, an individual action has been instituted against Gold Fields and one other mining company in terms of which the plaintiff claims R25.0 million (U.S.$2 million) in damages (and interest on that amount at 15.5% from May 2014 to the date of payment and costs) arising from his alleged contraction of silicosis which he claims was caused by the defendants. Gold Fields has entered an appearance to defend the individual action and has pleaded to the claim. In January 2014, the plaintiff delivered an application to join three other mining companies (including the owners of Gold Fields’ South Deep operation) to the action. The joinder was effected and Gold Fields delivered a revised plea on behalf of the joined Gold Fields defendants. The plaintiff has since applied to amend his particulars of claim which amendment was successfully opposed by Gold Fields. While the plaintiff enrolled the trial for hearing on May 23, 2016, the matter has been removed from the trial roll. Gold Fields is proceeding with trial preparation in the normal course. The ultimate outcome of these matters cannot presently be determined and, accordingly, no adjustment for any effects on the Company that may result from these actions, if any, has been made in the consolidated financial statements. Occupational lung disease The Occupational Lung Disease Working Group, or the Working Group, was formed in fiscal 2014 to address issues relating to compensation and medical care for occupational lung disease in the South African gold mining industry, had extensive engagements with a wide range of stakeholders in fiscal 2016, including government, organized labor, other mining companies and legal representatives of claimants who have filed legal suits against the companies. The Working Group, made up of African Rainbow Minerals, Anglo American SA, AngloGold Ashanti, Gold Fields, Harmony, and Sibanye Gold, remains of the view that achieving a comprehensive settlement which is both fair to past, present and future employees and sustainable for the sector, is preferable to protracted litigation. The members of Working Group are among respondent companies in a number of lawsuits related to occupational lung disease, including the class action referred to above. These companies do not believe that they are liable in respect of the claims brought, and they are defending these. The companies do, however, believe that they should work together to seek a solution to this South African mining industry legacy issue. The Working 145 Table of Contents Group will continue with its efforts—which have been ongoing for more than two years—to find common ground with all stakeholders, including government, labor and the claimants’ legal representatives. Ngadju Native Title Claim On March 29, 2016, the Full Court of the Federal Court of Australia overturned a July 2014 Federal Court decision that the re-grant of certain tenements to Gold Fields Australia’s St. Ives mine in 2004 by the State was not compliant with the correct processes in the Native Title Act. The Full Court of the Federal Court of Australia confirmed that St. Ives’ re-granted tenements are valid for the purpose of the Native Title Act, and that while St. Ives’ rights as tenement holder and the Ngadju people’s native title rights shall coexist, St. Ives’ rights shall prevail should there be any inconsistencies. Following the decision of the Full Federal Court in favor of St. Ives, the Ngadju group applied for permission to appeal that decision to the High Court of Australia. On October 14, 2016, that request was declined by the High Court, leaving no other opportunity for review or appeal. St. Ives continues to engage with the Ngadju group in relation to routine heritage surveys and other matters. South Deep tax dispute During the September 2014 quarter, the South African Revenue Service, or SARS. issued a Finalization of Audit Letter, or the Audit Letter, stating that SARS has restated GFIJVH’s additional capital allowance balance reflected on its 2011 tax return from R2,292.0 million (U.S.$151.8 million) to nil. The tax effect of this amount is R687.6 million (U.S.$49.0 million), that being referred to above as the “additional capital allowance”. The additional capital allowance was claimed by GFIJVH in terms of section 36(11)(c) of the South African Income Tax Act, 1962. The additional capital allowance provides an incentive for new mining development and only applies to unredeemed capital expenditure. The additional capital allowance allows a 12% capital allowance over and above actual capital expenditure incurred on developing a deep level gold mine, as well as a further annual 12% allowance on the mine’s unredeemed capital expenditure balance brought forward, until the year that the mine starts earning mining taxable income (i.e. when all tax losses and unredeemed capital expenditure have been fully utilized). In order to qualify for the additional capital allowance, South Deep must qualify as a “post-1990 gold mine” as defined in the South African Income Tax Act, 1962. A “post-1990 gold mine”, according to the South African Income Tax Act, 1962, is defined as “a gold mine which, in the opinion of the Director-General: Mineral and Energy Affairs, is an independent workable proposition and in respect of which a mining authorization for gold mining was issued for the first time after 14 March 1990”. During 1999, the Director-General: Minerals and Energy Affairs, or DME, and SARS confirmed, in writing, that GFIJVH is a “post-1990 gold mine” as defined, and therefore qualified for the additional capital allowance. Relying on these representations, GFIJVH subsequently filed its tax returns on this basis, as was confirmed by the DME and SARS. In the Audit Letter, SARS stated that both the DME and SARS erred in issuing the confirmations as mentioned above and that GFIJVH does not qualify as a “post-1990 gold mine” and therefore does not qualify for the additional capital allowance. At December 31, 2016, South Deep’s gross deductible temporary differences amounted to U.S.$1,585.3 million (R22,242.2 million), resulting in a deferred tax asset balance of U.S.$475.6 million (R6,672.7 million). This amount is included in the consolidated deferred tax asset of U.S.$48.7 million on Gold Fields’ statement of financial position. South Deep’s gross deductible temporary differences comprises unredeemed capital expenditure balances of U.S.$633.2 million (R8,884.0 million) (tax effect: U.S.$190.0 million (R2,665.2 million)) at GFIJVH and U.S.$606.4 million (R8,508.0 million) (tax effect: U.S.$181.9 million (R2,552.4 million)) at GFO, a capital allowance balance (additional capital allowance) of 146 Table of Contents U.S.$163.4 million (R2,292.0 million) (tax effect: U.S.$49.0 million (R687.6 million)) at GFIJVH and an assessed loss balance of U.S.$182.3 million (R2,558.2 million) (tax effect: U.S.$54.7 million (R767.5 million)) at GFO. Gold Fields has taken legal advice on the matter and was advised by external Senior Counsel that SARS should not be allowed to disallow the claiming of the additional capital allowance. GFIJVH has in the meantime not only formally appealed against the position taken by SARS, but also filed an application in the High Court and will vigorously defend its position. A trial date in the Tax Court has been set for October 2017. Other than the proceedings and investigations described above, Gold Fields is not a party to any material legal or arbitration proceedings, nor is any of its property the subject of pending material legal proceedings. Regulatory investigation See note 35 to the consolidated financial statements included elsewhere in this annual report. 147 Table of Contents Glossary of Mining Terms The following explanations are not intended as technical definitions, but rather are intended to assist the reader in understanding some of the terms used in this annual report. “Adjusted EBITDA” means net operating profit before depreciation and amortization, adjusted for exploration expenses and certain other costs. The definition of adjusted EBITDA is as defined in the U.S.$ 1,290 million term loan and revolving credit facilities agreement. Refer note 39 to the consolidated financial statements for the calculation of adjusted EBITDA. “All-in costs” means all-in sustaining costs plus additional costs relating to growth, including non-sustaining capital expenditure and exploration, evaluation and feasibility costs not associated with current operations. “All-in sustaining costs” means operating costs excluding amortization and depreciation, plus all costs not included therein relating to sustaining current production including sustaining capital expenditure. “Backfill” means material, generally sourced from tailings or waste rock, used to refill mined-out areas to improve and maintain ground stability, minimize waste dilution and maximize extraction of the ore body, as well as typically mitigating the effects of seismicity. “Brownfield” means exploration conducted in areas where mineral deposits have already previously been discovered and is also termed near mine. “Carbon in leach”, or “CIL” means a process similar to CIP (described below) except that the ore slurries are not leached with cyanide prior to carbon loading. Instead, cyanide leaching and precious metals adsorption onto the activated carbon occur simultaneously. “Carbon in pulp”, or “CIP” means a common process used to extract gold from cyanide leach slurries. The process consists of carbon granules suspended in the slurry and flowing counter-current to the process slurry in multiple-staged agitated tanks. The process slurry, which has been leached with cyanide prior to the CIP process, contains soluble gold. The soluble gold is absorbed onto the carbon granules that is subsequently separated from the slurry by screening. The gold is then recovered from the carbon by electrowinning onto steel wool cathodes or by a similar process. “Cleaning” means the process of removing broken rock from a mine. “Comminution” means the breaking, crushing or grinding of ore by mechanical means. “Cut-off grade” means the lowest grade of mineralized material considered economic and is used in the calculation of the ore reserves in a given deposit; it distinguishes the material within the ore body that is to be extracted, treated and sold from the remaining material. “Decline” or “incline” means a sloping underground opening or ramp for machine access from the surface to an underground mine or from level to level in an underground mine. Declines and inclines are often driven in a spiral to access different elevations in the mine. “Depletion” means the decrease in quantity of ore in a deposit or property resulting from extraction or production. “Development” means activities (including shaft sinking and on-reef and off-reef tunneling) required to gain access to and to establish infrastructure in preparation for mining activities and to maintain a planned production level. 148 Table of Contents “Dilution” means the mixing of waste rock, and potentially mineralized material below the cut-off grade, with the ore, resulting in a decrease in the overall grade. “Dissolution” means the process whereby a metal is dissolved and becomes amenable to separation from the gangue material. “Electrowinning” means the process of removing mineral from solution by the action of electric currents, known as electrolysis. “Elution” means removal of the gold from the activated carbon by washing with a solvent. “Exploration” means activities associated with ascertaining the existence, location, extent or quality of mineralization, including economic and technical evaluations of mineralization. “Flotation” means the process whereby certain chemicals are added to the material fed to the leach circuit in order to float the desired minerals to produce a concentrate of the mineral to be processed. This process can be carried out in column flotation cells. “Free cash flow margin, or FCF Margin” means revenue less cash outflow divided by revenue expressed as a percentage. It is calculated as follows: Revenue (gold only = revenue as per the income statement less by-product revenue as per AIC) XXX Less: Cash outflow (XXX ) —AIC (XXX ) Adjusted for Share-based payments (as non-cash) XX Long-term employee benefits XX Exploration, feasibility and evaluation costs outside of existing operations XX —Tax paid (excluding royalties) (XX ) Free cash flow XX Free cash flow margin X % Gold sold only—ounces XXX “Gangue” means commercially valueless or waste material remaining after ore extraction from rock. “Gold reserves” means the gold contained within proven and probable reserves on the basis of recoverable material (reported as mill delivered tonnes and head grade). “Grade” means the quantity of metal per unit mass of ore expressed as a percentage or, for gold, as grams of gold per tonne of ore. “Greenfield” means a potential mining or exploration site where mineral deposits are not already known to exist, and are of unknown quantity and quality, typically located outside of current mining areas. “Grinding” means reducing rock to the consistency of fine sand by crushing and abrading in a rotating steel grinding mill. “Head grade” means the grade of the ore as delivered to the metallurgical plant. “Heap leaching” means a relatively low-cost technique for extracting metals from ore by percolating leaching solutions through heaps of crushed ore placed on impervious pads. Generally used on low-grade ores. 149 Table of Contents “Hypogene” means ore or mineral deposits formed by ascending fluids occurring deep below the earth’s surface, which tend to form deposits of primary minerals, as opposed to supergene processes that occur at or near the surface, and tend to form secondary minerals. “In situ” means within unbroken rock or still in the ground. “Kriging” means a geostatistical estimation technique used in the evaluation of ore reserves. “Leaching” means dissolution of gold from the crushed and milled material, including reclaimed slime, for absorption and concentration onto the activated carbon. “Level” means the horizontal tunnels of an underground mine used to access the workings or ore body. “Life of mine”, or “LoM” means the expected remaining years of production, based on production schedules and ore reserves. “London afternoon fixing price” means the afternoon fixing by the new electronic London Bullion Market Association, or LBMA price-discovery process. The price continues to be set twice daily, at 10:30 and 15:00 London time. “Mark-to-market” means the current fair value of a derivative based on current market prices, or to calculate the current fair value of a derivative based on current market prices, as the case may be. “Measures” means conversion factors from metric units to U.S. units are provided below. Metric unit U.S. equivalent 1 tonne (1 t) 1.10231 short tons 1 gram (1 g) 0.03215 ounces 1 gram per tonne (1 g/t) 0.02917 ounces per short ton 1 kilogram per tonne (1 kg/t) 29.16642 ounces per short ton 1 kilometer (1 km) 0.62137 miles 1 meter (1 m) 3.28084 feet 1 centimeter (1 cm) 0.39370 inches 1 millimeter (1 mm) 0.03937 inches 1 hectare (1 ha) 2.47104 acres “Metallurgical plant” means a processing plant used to treat ore and extract the contained minerals. “Metallurgical recovery factor” means the proportion of metal in the ore delivered to the mill, that is recovered by the metallurgical process or processes. “Metallurgy” means, in the context of this document, the science of extracting metals from ores and preparing them for sale. “Mill delivered tonnes” means a quantity, expressed in tonnes, of ore delivered to the metallurgical plant. “Milling”, or “mill” means the comminution of the ore, although the term has come to cover the broad range of machinery inside the treatment plant where the mineral is separated from the ore. “Mine call factor” means the ratio, expressed as a percentage, of the specific product accounted for at the mill (including residue) to the specific product contained in an ore body calculated based on an operation’s measuring and valuation methods. 150 Table of Contents “Mineralization” means the presence of a target mineral in a mass of host rock. “MPa” means a unit measurement of stress or pressure within the earth’s crust used to profile tectonic stress, which can impact ground stability and ground support requirements in underground mining. “Net cash flow” is defined as net cash flow from operations less the South Deep dividend, net capital expenditure (additions to property, plant and equipment less proceeds on disposal of property, plant and equipment), and environmental trust fund and rehabilitation payments, as per the consolidated statements of cash flows which is a non-IFRS measure. An investor should not consider this item in isolation or as an alternative to cash flow from operating activities, cash and cash equivalents or any other measure presented in accordance with IFRS. The definition for the calculation of net cash flow may vary significantly between companies, and by itself does not necessarily provide a basis for comparison with other companies. The following table sets out a reconciliation of Gold Fields’ “net cash flow from operations” in accordance with IFRS (refer to the consolidated statement of cash flows) to “net cash flows”. Net cash flow from operations(1) xx Less: South Deep dividend(1) xx Additions to property, plant and equipment(1) xx Proceeds on disposal of property, plant and equipment(1) xx Environmental and rehabilitation payments(1) xx Net cash flow xx Note: (1) As per the consolidated statements of cash flows. “Net debt” means total borrowings less cash and cash equivalents (refer note 39 to the consolidated financial statements). “Net operating costs” means operating costs including gold inventory change but excluding amortization and depreciation (refer note 2 to the consolidated financial statements). “Net smelter return”, or “NSR” means the volume of refined mineral sold during the relevant period multiplied by the average spot mineral price and the average exchange rate for the period, less refining, transport and insurance costs. “Normalized earnings” means profit for the year, excluding foreign exchange gains and losses, financial instruments gains and losses and non-recurring items (impairment of investments and assets, impairment of stockpiles and consumables, restructuring costs and profit and loss on disposal of assets), net of tax. “Open pit” means mining in which the ore is extracted from a surface pit. The geometry of the pit may vary with the characteristics of the ore body. “Ore” means a mixture of material containing minerals from which at least one of the minerals can be mined and processed at an economic profit. “Ore body” means a well defined mass of material of sufficient mineral content to make extraction economically viable. “Ore grade” means the average amount of mineral contained in a tonne of mineral-bearing ore expressed in grams per tonne, or percent per tonne. “Ore reserves”, or “reserves” means that part of a mineral deposit which could be economically and legally extracted or produced at the time of the reserve determination. 151 Table of Contents “Ounce” means one troy ounce, which equals 31.1035 grams. “Overburden” means the soil and rock that must be removed in order to expose an ore body. “Paste filling” means a technique whereby cemented paste fill is placed in mined out voids to improve and maintain ground stability, minimize waste dilution and maximize extraction of the ore. “Porphyry” means an igneous rock of any composition that contains larger, well-formed mineral grains in a finer-grained groundmass. “Probable reserves” means reserves for which quantity and grade and/or quality are computed from information similar to that used for Proven reserves, but the sites for inspection, sampling, and measurement are farther apart or are otherwise less adequately spaced. The degree of assurance, although lower than that for Proven reserves, is high enough to assume continuity between points of observation. “Production stockpile” means the selective accumulation of unprocessed ore which is actively managed as part of the current mining and processing operations. “Prospect” means to investigate a site with insufficient data available on mineralization to determine if minerals are economically recoverable. “Prospecting right” means permission to explore an area for minerals. “Proven reserves” means reserves for which: (1) quantity is computed from dimensions revealed in outcrops, trenches, workings or boreholes; (2) grade and/or quality are computed from the results of detailed sampling; and (3) the sites for inspection, sampling and measurement are spaced so closely and the geologic character is so well defined that size, shape, depth and mineral content of reserves are well-established. “Reef” means a gold-bearing sedimentary horizon, normally a conglomerate band, that may contain economic levels of gold. “Refining” means the final stage of metal production in which final impurities are removed from the molten metal by introducing air and fluxes. The impurities are removed as gases or slag. “Rehabilitation” means the process of restoring mined land to a condition approximating its original state. “Rock dump” means the historical accumulation of waste or low grade material derived in the course of mining which could be processed in order to take advantage of spare processing capacity. “Run of Mine”, or “RoM” when used with regard to grade is a term to describe the average grade of the ore mined. “Sampling” means taking small pieces of rock at intervals along exposed mineralization for assay (to determine the mineral content). “Seismicity” means a sudden movement within a given volume of rock that radiates detectable seismic waves. The amplitude and frequency of seismic waves radiated from such a source depend, in general, on the strength and state of stress of the rock, the size of the source of seismic radiation, and the magnitude and the rate at which the rock moves during the fracturing process. “Semi-autogenous grinding”, or “SAG mill”, means a piece of machinery used to crush and grind ore which uses a mixture of steel balls and the ore itself to achieve comminution. The mill is shaped like a cylinder causing the grinding media and the ore itself to impact upon the ore. 152 Table of Contents “Shaft” means a vertical underground opening providing principal access to the underground workings for transporting personnel, equipment, supplies, ore and waste. A shaft is also used for ventilation and as an auxiliary exit. It may be equipped with a surface hoist system that lowers and raises conveyances for men, materials and ore in the shaft. A shaft generally has more than one conveyancing compartment. “Slimes” means the finer fraction or tailings discharged from a processing plant after the valuable minerals have been recovered. “Slurry” means a fluid comprising fine solids suspended in a solution (generally water containing additives). “Smelting” means thermal processing whereby mineral is liberated from molten beneficiated ore or concentrate with impurities separating as lighter slag. “Spot price” means the current price of a metal for immediate delivery. “Stockpile” means a store of unprocessed ore. “Stope” means the underground excavation within the ore body where the main mineral production takes place. “Stratigraphic” means the study of rock layers (strata) and layering (stratification) and is primarily used in the study of sedimentary and layered volcanic rocks. Stratigraphic modeling is often important in profiling the regional and local geology that has played a controlling role in mineralization and ore body generation. “Stripping” means the process of removing overburden to expose the ore for mining. “Sulfide” means a mineral characterized by the linkages of sulfur with a metal or semi-metal, such as pyrite (iron sulfide). Also a zone in which sulfide minerals occur. “Supergene” means ores or ore minerals formed where descending surface water oxidizes the primary (hypogene) mineralized rock and redistributes the ore minerals, often concentrating them in zones. Supergene enrichment occurs at the base of the oxidized portion of the ore deposit. “Tailings” means finely ground rock from which the bulk of valuable minerals have been extracted by milling. “Tailings storage facility” or “TSF” means a typically earth-fill embankment dam used to store by-products or tailing from mining operations after separating the ore from the gangue. “Tonne” means one tonne is equal to 1,000 kilograms (also known as a “metric” tonne). “Tonnage” means quantities where the tonne is an appropriate unit of measure. Typically used to measure reserves of mineral-bearing material in situ or quantities of ore and waste material mined, transported or milled. “Waste” means rock mined with an insufficient mineral content to justify processing. “Yield” means the actual grade of ore realized after the mining and treatment process. 153 Table of Contents