nick holland 31072012

What Do Investors Want From a Gold Mining Stock?

Key Note Speech Presented to theMelbourne Mining Club

on31 July 2012

by

Nick Holland Chief Executive Officer

Gold Fields Limited

Nick HollandCEO, Gold FKeynote Pre31 July 201

Good Mo

When I wunder the

I thereforthe most best cash

The topicgiven mustock?

In comingone-on-obut they independwell as a

dFields Limited esentation, Me2

orning Ladie

was invited te sun, excep

re decided ninnovative

h producing

c that I wantuch thought

g to the viene sessionare large fu

dent intervierecent JP M

lbourne Mining

es and Gent

to talk to yopt about my

not to talk agold mining and divide

t to focus ot to over th

ews that I as so far thiunds that teews and surMorgan surv

g Club

tlemen.

u here today own comp

bout Gold Fg companiesnd paying p

n today is ahe past few

am sharingis year. Andend to showrveys conduvey of over

2

ay the organpany.

Fields Limites, with the mpedigrees in

actually somw years. And

with you tod they’re nw the way. ucted on my200 investm

nisers told m

ed - not to tmost excitinn the indust

mething thad that is w

oday I’ve peot necessaMy views a

y behalf withment funds

Nick Hol

me that I ca

tell you that ng project pry.

t, surprisinghat do inve

ersonally sprily investoalso incorpoh several lefrom aroun

lland, Melbourn

an talk abou

t Gold Fieldpipeline, and

gly, many oestors want

poken to 72rs in Gold orate a numeading gold nd the world

ne Mining Club

t any subje

s is one of d one of the

f us have nt from a go

2 investors Fields toda

mber of othinvestors, a

d.

b

ct

e

not old

inay, eras


What is g

Well, let’sGold Cou

When we70% of thto 10 yea

As you cavailablevalue of ~

The goodinto the g

Howeverstocks aperforma

Obviouslyunderstan


going on in t

s try and anuncil.

e introducedhe total holdar period we

can see we’to investor

~US$120 bi

d news: ETgold fold. ET

, there is and 2) ETFnce. For go

y the simplnd and you

lbourne Mining

the gold sec

nswer this q

d the inaugudings in gole could get s

’ve hit that rs, with a fuillion and ho

TFs have mTF’s have e

also a dowFs have coold stocks, E

le way for don’t have

g Club

ctor?

question. I

ural producd ETF’s, wesales of 500

and gone wrther 8 sim

old a massiv

ade it easyxceeded all

wnside for sontributed tETFs are a

people to gto worry ab

3

remember

ct, the so-cae set ourse0 tonnes, th

way beyonilar productve 2,500 to

y to invest il expectatio

stocks: 1) ito a widendouble-edg

get into gobout stock s

when we la

alled GLD, welves some hat would be

d it. In factts. These fu

onnes.

n gold and on and that

nvestors haning gap beged sword.

ld is just gselection etc

Nick Hol

aunched thi

which now targets. Wee a home ru

, there are unds have a

have brougmust be go

ave often between the

o and buy c.

lland, Melbourn

is product v

makes up ae thought thun.

currently 1a total com

ght many nood for gold.

bought ETFe gold pric

the ETF.

ne Mining Club

via the Wor

about 60% hat if over a

12 gold ETFbined mark

new investo.

Fs instead ce and stoc

It’s simple

b

rld

to a 5

Fsket

ors

ofck

to


The ETFchanged.generalisthe easie

Now, I domarket camarket va

But you crather thastocks.

The challto attract


F craze ha. Ten years

st investors est way to ge

on’t think wapitalisationalue of abou

can see froan into ma

enge now fsome of the

lbourne Mining

s been givs ago we and emerget in? Just g

we can blamn is about $ut US$120

om recent tajor gold eq

for gold stoce incremen

g Club

ven further used to haing market get the ETF

me all of th$400 billionbillion.

trade volumquities. It h

cks is how ttal investme

4

impetus aave more investors w

F.

e ills of the, which is s

mes that thehas canniba

to provide ient into gold

as the inveprofessiona

who want to

e gold sectostill significa

ere has bealised som

nvestors wid equities.

Nick Hol

estor univeral gold inve

get gold in

or on ETFsantly more t

en a pronoe investme

th leverage

lland, Melbourn

rse in goldestors. Tod

nto their por

s because tthan the co

ounced movent away fr

e over the g

ne Mining Club

d stocks haday we havrtfolio. What

the total goombined ET

ve into ETFrom the go

old price an

b

asvet’s

oldTF

Fsold

nd


Why do p

They wan

They wabetween

And effecsuperior r


people want

nt to get lev

nt to see the gold pri

ctively theyreturns. I do

lbourne Mining

t to buy gold

verage to the

that, with aice and ear

y want us aon’t think th

g Club

d stocks?

e gold price

a rising gonings.

as manageis informatio

5

e.

old price, th

ers to optimon should s

here is mo

mise our assurprise any

Nick Hol

ore than a

ssets and myone in this

lland, Melbourn

one-to-one

make sure room.

ne Mining Club

e relationsh

that we giv

b

hip

ve


There areare lookiproductioshowingavailable

Now, if yodo? You’dborrowingcommon

Dividendswhich thethem sayreturns is

In my minthat we disciplineprice kickThat’s wh


e two types ng for. If y

on volumes,that you cafor shareho

ou’re a largd look to levg money ancause.

s. Are dividey put out juy dividends s important.

nd, if you looffer a hig

e. Investors k, then you hat investor

lbourne Mining

of companyou are run, margin exan increaseolders at a p

e publicly liverage the nd gearing

dends impoust before I are importa

ok at the pogh dividend

want to seget a mult

rs are lookin

g Club

ies that younning a sin

xpansion ane the returnparticular go

sted compabalance shup the equ

ortant? Somleft to comeant and abo

oor performd yield. It nee that if yoiplier effect

ng for.

6

u can reallyngle asset nd capital on on the mold price.

any with a pheet and mauity returns

me people se here – theout 40% sa

mance of golnot only heou get all o like we us

look at to dmining com

optimisationine and tha

portfolio of make sure thathat you ge

say they areir poll of inay that reinv

ld stocks ovelps to diffof these thied to see i

Nick Hol

determine wmpany, the. In other wat you can

mining asseat you can eet as a con

ren’t. JP Movestors indivesting cas

ver the pastferentiate ungs right, an the gold

lland, Melbourn

what measue metrics awords, you w

increase t

ets, what elsenhance yonsequence.

organ just icates that a

sh flows to

t ten years ius, but it dand you gesector som

ne Mining Club

ures investoare growth want to keehe cash flo

se would yoour returns b

I think that

did a surveabout 40% give superi

it is importademonstratet a nice go

me years ag

b

ors in

epow

oubyt’s

eyof or

ant es

oldgo.


As you astrong lev

This maunderperf

Often whon?”


all know thevels of late.

akes the rformed the

hen I go into

lbourne Mining

e gold price Five years

performancgold price.

o investor m

g Club

e over the pfew of us w

ce of gold

meetings, th

7

past few yewould have

d equities

his graph g

ears has rispredicted c

so disap

ets pulled o

Nick Hol

sen stronglycurrent price

ppointing.

out and I ge

lland, Melbourn

y and maine levels.

We have

et asked: “W

ne Mining Club

ntained thes

significant

What’s goin

b

se

tly

ng


To get tomeasures


o the bottos over the la

lbourne Mining

om of this ast decade?

g Club

let’s look ?

8

at how thee industry

Nick Hol

has perform

lland, Melbourn

med agains

ne Mining Club

st these ke

b

ey


Gold prod(35%) of

I’ve beenconsistenproductio

But if wehave drop

Even thounot comesince 200

These trethe more productioColombia


duction. If ythe industry

n going to nt theme inon is going t

had actuapped outpu

ugh the gole from the m06 though m

ends are alsmature ma

on declined a, have add

lbourne Mining

you look at y’s current p

investor con the preseto the moon

lly met all ot on a comp

d industry amajor producmost of this

so evident inarkets such by ~5.3Mozed a combi

g Club

the eight mproduction o

onferences entations o

n.

our productpound annu

as a whole hcers. Other growth has

n a geograpas South Az since 200ned ~7.6Mo

9

majors (listeof about 60

over my laof all of th

tion promiseual basis by

has gone uproducers

s come sinc

phic breakdAfrica, Austr

6. Emerginoz of additio

ed on the s million to 7

ast 15 yeare large go

es over they 2% betwee

p somewhahave insteae 2008.

down of prodalia, Peru ag markets, onal produc

Nick Hol

lide), we m70 million ou

rs at Gold old produce

e last five yen 2006 and

at - by 3% pad increase

duction, whand the USAnotably Chi

ction since 2

lland, Melbourn

make up jusunces.

Fields anders, includin

years then wd 2011.

p.a. over thised productio

ich has droA, where anina, Mexico2006.

ne Mining Club

t over a thi

d there’s onng us - th

we would n

s period - it’on by 6% p.a

pped in all nnualo, Russia an

b

rd

nehat

not

’sa.

of

nd


So the grallocate sincreased

A lot of it

It’s not sodifficult it

Central bincreasin

There’s othe averaBut that iswe’ve gon

That is wproductiomajors - w

The key mhave becnow kingAnd, wha


rowth in prosome funds d by 21% p.

comes dow

o easy to finis to find ne

banks, as yog. But supp

one more issage grade ths no longerne the othe

hy I believeon growth wwill merely

message hecome scepti, not growth

at will the re

lbourne Mining

oduction hasto the gold

.a. over tho

wn to the fac

nd gold any ew deposits

ou will see laply isn’t kee

sue - back hat was beir the case aer way.

e investors awill average

maintain ou

ere is that gcal. This ha

h, and we’reesultant gold

g Club

sn’t come fr space. Wese five year

ct that Gold

more. Certs.

ater, are buping pace.

in the days ng mined wnd as a res

are right to 6% per ann

utput.

gold miners as in recent e reining in d scarcity m

10

rom the go-te’ve got to ars.

d is becomin

tainly from a

uying, not se

when the gwas often higsult we have

be scepticanum. It is lik

have not mmonths ledspending. T

mean for futu

to stocks usask ourselve

ng scarce.

an explorati

elling. ETFs

gold price wgher than then’t really gr

al of claims kely that at b

met their prod to a changThis raises ture gold pric

Nick Hol

sed by invees why not w

on perspec

s are increa

was $200, $3he average rown produ

that over thbest the ind

oduction proge in rhetoritwo questioces?

lland, Melbourn

stors when when the g

ctive we kno

asing. Dema

300, $400 agrade of ouction volum

he next five dustry – in p

omises and ic from mine

ons. Is this j

ne Mining Club

they want told price ha

ow how

and is

an ounce -ur reserves

mes. In fact,

yearsparticular the

investors ers. Cash isust rhetoric

b

toas

.

e

sc?


Expandinoperating

If you mehave ach

It’s obviou

Margins a


ng margins.g profit? We

easure the ieved grow

us that we h

are up, but

lbourne Mining

How haveell, over the

compoundth of only 8

haven’t deli

nowhere ne

g Club

the majorsperiod from

growth in % against a

vered the le

ear the rise

11

s done in tem 2002 to 20

EBITDA bean annual in

everage.

in the gold

erms of EB011 – you c

etween 200ncrease in t

price over t

Nick Hol

ITDA margican see the

06 and 201the gold pric

the same ti

lland, Melbourn

ins - which impact.

11, the eighce of 21%.

me frame.

ne Mining Club

is effective

ht companie

b

ely

es


Let’s try a

Operatinginflation hand this annum go

Why is thprice, I’msteel pricwe think years ago

Of late a next yearinflation iresponsib

The otheyields amof this decan be se

Over the declinedannum frfurther do


and explore

g costs arehad been aris just on aoing forward

hat the casem afraid, doece goes up.

we are. Tho, as it is to

lot of the lar. How is this increasinbility costs t

r issue thatmongst the mecline will heen in long-

last 30 yeby ~3% pe

rom 1998 toownward pr

lbourne Mining

e why.

e increasinground 10% a cost per d. This mea

e? It’s skillsesn’t go up Cement gohat’s one oday.

arge mining hat possibleng, and it isthat the indu

t the industrmajor produave been d-term explor

ars, ore grar annum. To 2008. Asressure on a

g Club

g. Paulson per annumton basis –

ans you’re g

shortages.by itself. E

oes up. Waof the revela

companiese? It’s the cs escalatingustry is attra

ry has to coucers have ddriven by a ration disco

ades from ghis trend ha these discaverage yie

12

& Co toldm. What I tho

– that costgoing to see

. It’s the cosEverything eages go upations that

s have warncombined eg even moacting.

onfront is thdropped bygradual de

overies:

global primas continuecoveries coelds.

d me last yought was st inflation we a doubling

st of consuelse moves. So we’re maybe was

ned that caseffect of all re today be

hat our grady 5% per anecline in the

mary gold did more recme through

Nick Hol

year that hscary is tha

was probablg of costs ov

mables. It’swith it. The

not as levesn’t as wel

sh costs areof these is

ecause of

de has declnum over th

e quality of

scoveries gently, with gh to produc

lland, Melbourn

istorically tat they werely going to ver five yea

s energy coe oil price g

ered to the l understoo

e going to bessues I menthe rapidly

ined over tihe last five ore-bodies

greater thangrades fallinction, we’re

ne Mining Club

they felt coe predicting

be 15% pars.

sts. The gogoes up. Thgold price a

od five to te

e 20% highntioned. Co

rising soci

ime. Averagyears. Som, a trend th

n 1Moz havng by 4% plikely to se

b

ost – er

old heasen

erostial

gemehat

veeree


How havcomparis20% per

The indusper annumgreenfield2006 to 2

And then years. Anis actually

If you looat a loweon a per o


ve we doneson. Over laannum.

stry’s capitam over the d developm2011.

on top of thnd of coursey replace pr

ok at the coer grade to gounce basis

lbourne Mining

as an induast ten year

al expenditusame perio

ment capex,

hat M&A spe M&A hasnroduction th

mbined effeget the sams to actually

g Club

ustry in terrs, on a com

ure on a peod. Growth i

which on its

pend has gon’t grown thhat has bee

ect of all of me gold andy sustain an

13

ms of optimmpound an

er ounce bain capital exs own has g

one up 17%e production falling off

that, it mead, combinednd build new

mising our nual growth

asis, howevexpenditure pgone up by

% per annumon base, as . So we’re s

ans that wed with risingw operation

Nick Hol

capital? Heh basis, the

er, has gonper ounce han estimate

m on a $/oz you saw ea

spending m

e’ve got to m cost inflatios.

lland, Melbourn

ere’s anothee gold price

ne up by 32has been dred 50% per

basis over arlier. What

more to stand

mine more ton, it is cos

ne Mining Club

er interestinhas risen b

2% per ouncriven more br annum fro

the past 10it has done

d still.

tonnes of osting us mo

b

ngby

ceby

om

e

re re


If you comcapital exchart –we

Comparewould maanywheresaid to yo

Just a bperforma$1,000 an

Who are generate

The only you’re maroyalties

We’ve goabout whelse, but

It is like s


mbine the expenditure –e have in fa

ed with the ake is that e near the sou earlier, in

brief word nce – that wn ounce.

we trying toafter every

people weaking superand so on.

ot to changehat it really to talk abou

scoring an o

lbourne Mining

effect of the – as depicte

act not creat

explosion inthe indust

same extenn five years

on NCE. Awe are mak

o kid? We dything is acc

’re kidding r profits, ple

e the lens tcosts to prout cash cost

own goal ev

g Club

increases ied by the Noted much le

n the gold ptry’s all-in-cnt. In fact wthat means

At investorking significa

don’t kid thecounted for.

are governease pay u

through whoduce an ots only is no

very time yo

14

in operatingotional Cas

everage at a

price over tcosts - reprwe’ve had as costs hav

r conferencant operatin

e investors The sell-si

nments and p. And befo

ich we andounce of goot telling the

ou play, and

g costs, the sh Expendituall.

the same peresented bya 16% annue doubled.

ces the indng cash flow

because thde also und

communitiore we kno

the world vold. I don’t ce full story.

being prou

Nick Hol

decline in gure (NCE) y

eriod the ay NCE - shual increaseWe’ve lost

dustry oftenw margins -

hey know hoderstands th

es who, now it we hav

view this incare if we c

ud of it!

lland, Melbourn

grades, the you can see

assumption houldn’t hae in our totaa lot of the

n extolls it sometimes

ow much cahis.

ot surprisingve windfall

ndustry, andcall it NCE

ne Mining Club

increase ine on this

most peopve escalateal costs. Asupside!

ts cash cos in excess

ash we rea

gly, say okataxes, high

d start talkinor somethin

b

n

pleeds I

ostof

lly

ay, er

ngng


What hasgold comcap, we’vAnd if you

Good wobeen annspend itsprojects iover the n

What’s cdecliningwe’re dea70 million

Having smessage

Most recgreater ein capital be trimmenvironm

But the ju


s happenedmpanies andve invested u look at co

rk done by nounced in ts market canto productnext six yea

concerning . We know aling with an to 80 millio

aid that, ine to the indu

cently, and emphasis on

spend, anded. But this

ment.

ury is still ou

lbourne Mining

d to capital d you look 40% of ou

ommunicate

the World Gthe gold indap again - tion. It is esars to progre

is that thethat we’re

a situation won ounces a

vestors areustry. And w

in line withn capital spd focusing ms will in tur

ut and, not s

g Club

expenditureat their sper market ca

ed investme

Gold Councdustry over in other wo

stimated thaess all of th

ese projectsmining finit

where, in ora year, it is

e fed up wiwe are starti

h the broadend disciplimore on retrn impact o

surprising, i

15

e? If you taending oveap. That’s ment plans for

cil shows ththe next ten

ords $400 bat as much he projects c

s aren’t alte resourcesrder for us going to co

ith promiseng to wake

der mining ine. Gold mturns than o

on future pr

investors ar

ake the aver the last fi

more than wr the next fiv

at if we impn years, thebillion woulas 60% of mcurrently on

l going to s. A lot of tto sustain t

ost a lot of m

s of jam toup to what

industry, gminers are bon growth. Wroduction gr

re cynical.

Nick Hol

erage markeve years in

what we did ve years, it’

plement all oe gold indusd have to bmarket valun the table.

be growthhat is goingthis industry

money over

omorrow aninvestors w

gold CEOs beginning toWe can exprowth in an

lland, Melbourn

et cap of thn relation to

the previous going up

of the projestry will probbe spent to

ue may hav

h, because g to be replry at somewthe next te

nd they arewant.

are indicao walk the tpect announn already fla

ne Mining Club

he eight largo that markus five yeareven furthe

ects that havbably have o bring these to be spe

the base lacement. S

where arounn years.

e sending th

ating a muctalk of reininnced plans at productio

b

geketrs.er.

vetose

ent

isSond

he

chngtoon


Let’s look

The oneHistoricalreally leveleveraged

Having shave had

But certahaven’t n

The long-


k at some o

depicted lly the golderaging a lod enough.

aid that, a d to be retire

ainly if we’reecessarily o

-term debt m

lbourne Mining

f the financ

here, in pd industry hot of the bal

lot of the bed as well a

e going to optimised in

markets are

g Club

ial issues c

particular, ishas turned ance sheet

balance sheas extra fund

follow a clan the gold in

e attractive,

16

confronting t

s difficult: to equity dt with debt.

eets have bding that ha

assic modendustry and

but this wo

the industry

provide badeals to finaSo you mig

been put unas been nee

el of leveragd should con

on’t last fore

Nick Hol

y.

alance sheance majorght argue in

nder pressueded for ove

ged returnsnsider more

ever.

lland, Melbourn

eet leveragr expansion some case

ure by golderruns on p

s, it’s somete in future.

ne Mining Club

e with debns. We’re nes we haven

hedges throjects.

thing that w

b

bt. not n’t

hat

we


Dividendthe gold sector ha

HistoricalBut peoppremiumcomparis

I’ve beenwant to gdo that, sustaining

But invesHaving saverage d

Why donPaying ouand again


yields contsector? W

as not done

lly we’ve felple aren’t loisn’t as att

son with oth

asked by sget our stockbecause thg capital or

stors are huaid that, Gdividend yie

’t we get cut one goodn to be belie

lbourne Mining

tinue to unde’ve laggedso.

lt that this wooking at gtractive as ier mining s

some investk up we’ve hen we willmaintaining

ngry for a dold Fields

eld of about

credit for it?d year of dieved in a w

g Club

der-performd. The min

was ok becagold countet used to bectors.

tors why cagot to pushl be payingg our curren

dividend yieis ahead int 3.8%. The

? Because ividends is norld that is

17

in a yield-hning sector

ause gold isers in the

be. So we’re

an’t we pay h dividend yg out all ount productio

eld, so they’n the gold s rest of the

investors dnot enoughbecoming i

hungry enviroverall has

s money. Yosame way

e not payin

out a divideyields into thur earningson base.

re not partisector at thpeer group

on’t believeh. You’ve goncredibly cy

Nick Hol

ronment. Sos picked up

ou buy gold anymore g dividends

end yield of hose territors. We won’t

cularly enthhe moment. is at an av

e we can reot to repeat ynical.

lland, Melbourn

o what has p recently,

d stocks youand the so

s that are c

5% to 10%ries. But wet have any

hralled by th. We are p

verage of ab

epeat that pt that perfor

ne Mining Club

happenedbut the go

u buy moneo-called gocompetitive

%? If we reae simply canything left f

his argumenpaying out about 1.8%.

performancrmance aga

b

toold

ey. old

in

llyn’tfor

nt. an

ce.ain


The posita premiumclosed th

The gold been abletalked ab


tive rating mm to other se gap, thou

premium ise to get the

bout. Investo

lbourne Mining

multiplier effsectors. We

ugh we’re st

s still a verye re-rating. Wors have rea

g Club

fect is also e’ve actuallytill trading a

y important We’ve beenacted throu

18

not a good y come bact a premium

consideratn punished gh the ratin

news storyck to the S&m to base m

ion, but thein part beca

ngs.

Nick Hol

. The gold i&P 500 and

metal miners

e gap has nause of som

lland, Melbourn

industry used diversifieds.

narrowed. Sme of the is

ne Mining Club

ed to trade miners hav

So we havensues I’ve ju

b

atve

n’tust


Guidanceable to ac

This is crenough topotential

Managemmeetingstarting to

The otheas a whodon’t ana

They’ve gwrong, w


e. Over-promchieve our g

ritical as moo have greathat exists

ment credibour guidano revise the

r thing withole. When oalyse compa

get a sectoe’re going t

lbourne Mining

mising and goals within

ore and morat ore bodiein your com

ility for the ce. I’m see

eir guidance

the industrone of the laanies to the

oral view onto be unsca

g Club

under-delivn a tolerance

re investorses. It’s a quempany and t

industry is aeing the eve, and that in

ry is that if arge companth degree

n what theythed. They

19

vering. If yoe level of 5%

s are investiestion of “ctranslate tha

a big issue ven in the ncludes us.

one of us ganies gives e, often take

y should dthink it’s ou

ou go back o%.

ng, first andan you guyat into botto

and we dosenior pee It’s a blac

gets it wronbad news,

e that as a s

o. So we sur turn next.

Nick Hol

over time 4

d foremost, s execute?

om-line deliv

n’t do ourser group mok eye for th

g, investorsthe genera

sell signal fo

shouldn’t th. And often

lland, Melbourn

40% of us h

in manage Can you tavery? “

elves any faore compane industry.

s retreat froalist fund mor the entire

hink if someit is.

ne Mining Club

ave not bee

ement. It’s nake the late

avours by nnies are no

om the sectanagers wh

e sector.

ebody gets

b

en

notent

notow

torho

it


So, I’m afterribly w


fraid to tell yell on any o

lbourne Mining

you, and if wof the six ke

g Club

we’re reallyey metrics o

20

y brutally hoover the pas

onest with ost decade.

Nick Hol

urselves, th

lland, Melbourn

he industry

ne Mining Club

has not don

b

ne


So the quwe going


uestion is, wto take?

lbourne Mining

what’s the

g Club

model for t

21

he industryy going to b

Nick Hol

be in the fut

lland, Melbourn

ture and wh

ne Mining Club

hich road a

b

re


First of adecisionsETFs conto believe

Furthermassets un

The doomgoing to know tha

Investorsfundamen


ll, let’s talk s would be ntinue to ince that dema

ore, even ander manag

msday propend in teart the world

s are recognntally any ti

lbourne Mining

about our peasier. Bu

crease. Weand will wan

at current ingement. Sur

phets will sars. But moreeconomy is

nising gold’me soon.

g Club

product. If wt our produ

e’ve gone wne significan

vestment lerely there is

ay that the e and more

s not in grea

s role as a

22

we don’t hauct is attrac

way beyond ntly.

evels, invess potential fo

gold price e people arat shape, an

safe haven

ve a producctive and gthe 500 ton

tment in goor this to inc

has run toore putting thnd it is not g

n and there

Nick Hol

ct that is atold’s funda

nnes dream

old is very locrease.

o far, that it heir money going to get

e are no sig

lland, Melbourn

ttractive theamentals rem and there

ow. It’s only

t is a bubble into gold bt better in a

gns that this

ne Mining Club

en a lot of oemain stron

is no reaso

y 1% of glob

e and it is abecause thehurry.

s will chang

b

urng.on

bal

alley

ge


Demand.around 5meaningftheir growand 7% fo

Those twrecently,future. Sprincipal


China and50% now. Tful growth owth has sloor India – a

wo countriesit is still a so I believedrivers, Ch

lbourne Mining

d India haveThese are of late and wowed, but ga lot better th

s have a strostrong cultu

e that demaina and Ind

g Club

e doubled ththe only tw

which accougrowth projehan any of t

ong affinity ural issue inand is reasia, continue

23

heir demandwo large eunted for 35ections for the other la

towards gon that counsonably soe to grow int

d of gold ineconomies5% of globa2012 are s

arge econom

old. And evetry and gold

olid and shoto the future

Nick Hol

five years in the worl

al GDP growsomewhere mies.

en though Ind off-take sould remaine, which loo

lland, Melbourn

from 25% old which hwth last yea

e between 8

ndia has coshould incren so, provoks likely.

ne Mining Club

of the total ave reporte

ar. Admitted8% for Chin

ome off it a bease again ided the tw

b

toeddlyna

bitin

wo


Central b

Central bit goes udemand i

China is diversify. buying. Tabsorbingproducer


bank buying

banks are stup. So if gois self-gene

sitting withThey don’t

They want tg all the pro, on its own

lbourne Mining

has been a

trange animold keeps g

erating.

h a massivt want to buto keep a noduction in n this is not

g Club

a strong fea

mals. They tgoing up th

ve over-expuy gold in thnice balanctheir countrenough to s

24

ature of the

tend to sell hey will pro

posure to he open ma

ce between ry but, evensatisfy the s

market ove

when the pobably kee

US Dollarsarket, becathe US do

n though Chstate’s dema

Nick Hol

er the past fi

rice goes dp buying. I

s and they’use they do

ollar and thehina is now and.

lland, Melbourn

five years.

down and thIn this way

’re looking on’t want toe gold price

w the world’s

ne Mining Club

hey buy whey increment

for ways o signal pane. So they’s largest go

b

ental

tonicre

old


Productiosupply-dewould hafind any m

So what going arogoing to p

Based onthose salthe gold i


on. Primary emand fundave thought more, as I h

has been tound trying pay what it’s

n analysis bes to matendustry wo

lbourne Mining

gold produdamental ra

there’d be have said ea

the filler? Ato buy you

s really wor

by the Worldrialise. So iuld already

g Club

uction has natio, with go

a lot morearlier

All sorts of ur old jewelrth. How mu

d Gold Couif it wasn’t fbe in mass

25

not gone upold rising fi

e gold comin

people selllery. Obviouch of this c

uncil, we’re for people ssive deficit.

p anywhere ve or six ting to the m

ing their jewusly they wcan still kee

going to neselling their

Nick Hol

near demames over e

market. But

wellery. Thwant to makp coming to

eed to see hr jewellery a

lland, Melbourn

and growth. eight or ninit’s just not

ere are goke money so market?

higher priceand mercha

ne Mining Club

On a classne years, yot that easy

ld merchanso they’re n

es for more ants buying

b

sicouto

ntsnot

ofg it


We haveinterestinit’s a telliwrong se

And desconsensu

Now, thequarter - long-term

So, if all oharvest ahits us.

If you loocontracts

The way it’s goingown conc


e talked abog. If you looing picture.

even years o

pite that, tus forecast

e big eight was US$1

m consensus

of this is truand get as m

ok at futures that expire

the analyst to be dow

clusions.

lbourne Mining

out the fundok at the for The analy

out of seven

they’re still is US$1,21

companies’,380 per ous forecast o

ue, what wemuch as we

es prices – e at year-en

ts see it, thn in the lon

g Club

damentals arecast gold ysts, who kn. That’s a r

telling us 4 per ounce

’ all-in costunce of gol

of US$1,214

e should bee can in the

this graph ds in 2012,

e gold priceng term. Jud

26

and they dprices over

keep telling remarkable

that gold e!

t (on an NCld produced4 per ounce

e doing is toe next two o

is based o 2013, 2014

e is going ddging from

o support ar the last seus the goltrack recor

is going d

CE basis) td. Based oe, we don’t h

o stop all of or three yea

on futures c4 and 2015

down. It’s gtheir past 7

Nick Hol

a higher goeven years, d price is g

rd!

down again

today – basn that, and have an ind

our capital ars, before

curves built - what can

oing to be 7-year track

lland, Melbourn

old price. Hagainst thegoing down

n! The CIB

sed on the if we belie

dustry.

investmentthe dooms

t on Bloombyou expect

up in the sk record, yo

ne Mining Club

ere’s what e actual pricn, have bee

BC long-ter

March 201eve the CIB

t now, and sday scenar

berg data ft?

hort term bou draw yo

b

is ce,en

rm

12BC

to rio

for

butur


What do

We need going to price. Ob

Investorsfocussed

And stay there is nNAV com

If we acqto do thiscomponeassets.

Hedging.and we smay get i

How mucunderwatunhedged


investors w

to believe drive long-t

bviously we

s interested on gold. Th

focussed onot a gold p

mpared to 1.

uire pure bas. They can ent from gol

I will guarashouldn’t dot right in ce

ch has beenter hedges.d – investor

lbourne Mining

want us to do

in our produterm returnshouldn’t b

in gold stohat is the st

on gold as tpremium rig.5 to 2 times

ase metals do it themsd assets is

antee you to it. In the loertain peaks

n spent on r I’m afraid rs can hedg

g Club

o?

uct. If we’res, we’ve goe using ridic

ocks believetrong messa

here is still ght now becs a few yea

assets, weselves withofine, but th

that hedginong run you and trough

repairing bato tell you,

ge for thems

27

e going to suot to believeculous price

e in our proage coming

a gold premcause the s

ars. But aga

e will dilute oout paying ahere’s no pl

g is going u can’t beahs, but you w

alance shee hedging isselves

ustain this be in the goles, but we s

oduct and thg back cons

mium. On asenior peer inst base m

our relative an acquisitiace in a go

to come baat spot. Empwill give it a

ets? Possibs coming ba

Nick Hol

business intld price. Doshouldn’t ca

hey want usistently ove

fundamentgroup are

metals there

premium. Ion premium

old miner’s p

ack into vogpirical data all back ove

ly as much ack. It’s a s

lland, Melbourn

to the futureon’t bet agaall it down to

s to do so er the last th

tal, absolutetrading at a

e is still a go

nvestors dom. Having aportfolio for

gue. It will supports thr time.

as $30 billsilly thing to

ne Mining Club

e and if we’ainst the gooo low.

as well! Stahree years.

e value basabout 0.85

ood premium

o not want ua base metar pure copp

be a mistakhis view. Yo

ion in retirino do. Rema

b

reold

ay

sisto

m.

usalser

keou

ngain


Focus onreturns. Ethose crit

Now, youequity is They wantake a bigthis is our

I’m not saabout assoptimising

Cash andthat we h


n cash flow.Everything wteria we hav

u’ve almost very, very

nt to see rog company r own mone

aying we’reset strippingg every Dol

d cash returave the righ

lbourne Mining

At the endwe do has ve to ask ou

got to taketough on a

obust returnlike us, or t

ey. Every do

not doing ig. It’s aboullar we spen

rns. Makinght to spend

g Club

d of the daygot to be m

urselves wh

e a private eallocation ofns with conshis industryollar we spe

it, but the sut optimisingnd and max

g sure we dmore mone

28

y why are wmeasured ahether it ma

equity stylef capital invservative tey, and say leend is abso

ector overag how we rximising our

o get our mey.

we here? Weagainst shakes sense a

e approach vestments.echnical paret’s changelutely critica

all probably run our minr ore flow an

money back

Nick Hol

e are here tareholder reat all.

to managinThey want

rameters. Ae the way weal.

needs to does, sweatinnd our grad

. That will d

lland, Melbourn

to generateeturns. If it

ng the busit short paybAnd you’ve ae run this b

o more of itng our assee.

demonstrate

ne Mining Club

e shareholddoesn’t me

ness. Privaback periodalmost got usiness, as

t. And it’s nets. It’s abo

e to investo

b

ereet

ateds.to

s if

notout

ors


So what d

We’ve gowe don’t. It means

That’s a mto go dowdecline?

Many invwe’re goiounces fomoney ar


does this m

ot to get baAnd it is nofocusing in

mind shift fown. What am

vestors still ing to look or ounces’ re surely a b

lbourne Mining

mean for the

ck to reallyot about ounstead on m

or us, becam I going to

focus heavat your cosake. It sh

better optio

g Club

industry?

y looking at nces in the etrics such

use everyoo tell my inve

vily on produosts, and wehould be oun?

29

KPIs that mground. It’sas free cas

ne in the inestors? How

uction. Thee’ll figure o

unces that m

measure ws not about sh flow per s

ndustry is tew can I tell

ey say, we’rout what themake mone

Nick Hol

hether we aproduction.share.

errified that tthem that m

re going to e gold priceey. Fewer o

lland, Melbourn

actually ma. It’s not abo

their producmy productio

look at youe is. But it ounces tha

ne Mining Club

ake money out reserves

ction is goinon is going

ur productioshouldn’t b

t make mo

b

ors.

ngto

on, bere


We as andemonstrcompany

As I explathis Notioof runninga lot of ouhigher tax

We are ncapital spand to en

Focus onsustainingthe end ogrown. Al


n industry nerate the true

y’s ability to

ained earlieonal Cash Eg a mine. Nur problemsxes on us b

ow taking Npend, whichnsure that e

n the all-in cg, replacem

of the day, wll capital is s

lbourne Mining

eed to get ae value of oprovide inv

er, we at GoExpenditure NCE tells it ls linked resobecause the

NCE a step h historicallyffective cap

cost of produment or growwhat has thesustaining c

g Club

a much bettur investme

vestors with

old Fields ha(NCE) - wh

ike it is. Andource nation

ey think we’r

further to sy has simplypital disciplin

ucing an ouwth capital. e industry dcapital. Tha

30

ter grip on sents – unfocleverage o

ave reportehich captured if we can nalism. Govre making s

seek greatery been consne is applie

unce of goldIt’s all going

done over fivat is the real

so-called grcused sustaver the gold

d for some es both the get the induvernments asuper profits

r transparensidered essd.

d. Don’t get g to end upve years? Tlity of our bu

Nick Hol

owth and suaining capitad price.

time on a tooperating custry to tell are seekings - the oppo

ncy on the rential to sus

mixed up inin the sam

The top eighusiness tod

lland, Melbourn

ustaining caal spend ca

otal cost bacosts and cait like it is, i

g to impose osite is true.

returns genstain mine o

n the debatee bucket beht companie

day.

ne Mining Club

apital to an destroy a

asis – we caapital costs t might solvsignificantly

.

erated by operations

e on what isecause, at es have not

b

a

all

vey

-

s

t


The industhe line.

The investhat we h

The key pounces thinvestors encouragreturns.

Considerrequired pmarginal,unexplore

Key pointtechnical


stry needs t

stment caseave in front

point here ishat are not ewith the lev

ges mine tea

r a project wprocessing, but justify ed ore body

t: ensure thsolution tha

lbourne Mining

to look at al

e has got tot of us.

s to be bullieconomicalverage to thams to incre

where the knplants. Thea decision t

y in the vicin

at the projeat barely cle

g Club

ll of the opti

o stand on it

sh on the gl. These addhe gold pricease produ

nown ore boe project feato proceed nity of know

ect feasibilityears the inv

31

ions and no

ts own two f

gold price…ditional mar

ce they seekction or ext

ody is attracasibility teamon the basi

wn resource

y considersvestment hu

ot just the m

feet, based

.but not to arginal ouncek. The risk itend lives of

ctive, but tom recognises of the unqs. This can

s all commeurdle.

Nick Hol

marginal oun

on the hard

allow this toes will not ns that chasif mines, rath

o small to ce the projecquantified “on be danger

rcial options

lland, Melbourn

nce that get

d technical

o justify goinnecessarily ing marginaher than op

carry the coct return andoption valuerous.

s, not just t

ne Mining Club

ts you over

information

ng after morprovide

al ounces ptimise cash

osts of the d payback ie” of the

he preferred

b

n

re

h

s

d

Nick Holland CEO, Gold Fields Limited Keynote Presentation, Melbourne Mining Club 31 July 2012

Nick Holland, Melbourne Mining Club 32

30

What investors want

2. Focus on cashflow

3. Deliver on relevantpromises

1. Believe in our product •Manage portfolio for cash returns and investment payback

•Translate cash returns into production guidance (and not vice versa)

•Ensure guidance is realistic and transparent regarding likely impact of gold price movements

•Ultimately, delivery remains paramount

This industry is suffering from a management credibility discount. I’m not sure what that discount is, but it is high because we don’t deliver on our promises.

Execution is everything. We can have great assets, we can have great ore bodies, but if we can’t execute on our promises there is a massive discount.

We need to focus on metrics that we can control and not lose sight of cash returns. We must give realistic production and cost guidance, supported by underlying information that is credible.


Earn the

If we wanoff a solid

How are billion, whexisting a

It’s a fair actually u


right to spe

nt to go andd platform.

people goinhen we havassets?

question, I using invest

lbourne Mining

end money.

spend a w

ng to believeve not been

have to saytors money

g Club

hole lot of m

e that the inable to man

y. So we hawisely.

33

money on g

ndustry shonage their m

ave to earn t

growing this

uld go and money as o

the right to

Nick Hol

company, l

spend anotptimally as

spend mon

lland, Melbourn

let’s make s

ther $200 bwe should

ney. Show t

ne Mining Club

sure we do

illion or $30have on ou

hat we’re

b

it

00ur


This charfrom 201

On the levaluationacross th

So, if we at 10%, w

On our cuinvestmecost discidemonstrmajor turn

If we can rating – bdeliver cogrowth of


rt shows the1-2015, ass

eft you can smultiples ree Top 8 go

believe in awhat sort of

urrent multint that is in iplines in plarate that wenaround.

achieve thaby rating heonsiderablef ~7% p.a. T

lbourne Mining

e average esuming tha

see that theemain as thld majors

a gold pricereturns are

ples as an iline with anace I talked

e can offer le

at an improre we’re tal high leveraThis should

g Club

expected ant the gold p

e average rehey were in

of $2,000 be we going t

industry wen apprectiond about earleverage to

vement in oking principage vs the gmake more

34

nnual sharehprice increas

eturns will ju2011 – whi

by 2015 andto get by 20

e have a rean of the goldier - we havthe gold pri

our ratings spally about egold price, we investors

holder returses to $2,00

ust exceed ich using EV

d if we belie015?

asonable opd price. At tve a chanceice. Matchin

should folloenterprise vwith averagesit up and t

Nick Hol

rn for the m00/oz by 20

the growth V/EBITDA w

eve that cos

pportunity tothat level – e for the firsng the gold

w. And at avalue dividee returns ofake notice.

lland, Melbourn

ajor gold pr015

in gold pricwas about 8

st inflation w

o make retuassuming w

st time in fivprice would

a 25% increed by EBITDf ~15% vs g

ne Mining Club

roducers

ce if average8x EBITDA

will continue

urns on the we have theve years to d represent

ase in our DA – we cangold price

b

e

e

e

a

n


But, if thethe gold pwill not ha

If you arethe short higher retprojects a

So, manathe gold pthat highe

Thank yo


e gold price price, unlesappen

e going to interm. And yturns for shand deliver

agers and dprice to remer price.

ou for your a

lbourne Mining

remains simss cost inflat

nvest in goldyou have goareholders on their pro

directors – dmain robust

attention.

g Club

milar to todation can be

d stocks, yoot to believeand that m

omises.

don’t bet aga– but they d

35

ay’s price, wdramaticall

ou need to be that the inanagement

ainst your indemand tha

we’re not goly reduced,

believe in a ndustry will t can actual

nvestors – tat you provid

Nick Hol

oing to see which - giv

gold price obe able to dly do that. D

they believede them wit

lland, Melbourn

any leveragven current

of at least $deliver the gDeliver thei

e in gold.Thth a decent

ne Mining Club

ge against price trends

$2000/oz in gold price inr growth

hey expect return at

b

s -

n

nick holland 31072012

Documents