[PDF] - What Do Investors Want From a Gold Mining Stock? Key Note Speech PDF Document

SLIDE 1

What Do Investors Want From a Gold Mining Stock?

Key Note Speech Presented to the Melbourne Mining Club

n

31 July 2012 by Nick Holland Chief Executive Officer Gold Fields Limited

SLIDE 2

Nick Holland CEO, Gold F Keynote Pre 31 July 201

Good Mo When I w under the I therefor the most best cash The topic given mu stock? In coming

ne-on-o

but they independ well as a

d Fields Limited esentation, Me 2

rning Ladie

was invited t e sun, excep re decided n innovative h producing c that I want uch thought g to the vie ne session are large fu dent intervie recent JP M

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es and Gent to talk to yo pt about my not to talk a gold mining and divide t to focus o t to over th ews that I a s so far thi unds that te ews and sur Morgan surv

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tlemen. u here toda y own comp bout Gold F g companies nd paying p n today is a he past few am sharing is year. And end to show rveys condu vey of over

2

ay the organ pany. Fields Limite s, with the m pedigrees in actually som w years. And with you to d they’re n w the way. ucted on my 200 investm nisers told m ed - not to t most excitin n the indust mething tha d that is w

day I’ve pe
t necessa

My views a y behalf with ment funds

Nick Hol

me that I ca tell you that ng project p ry. t, surprising hat do inve ersonally sp rily investo also incorpo h several le from aroun

lland, Melbourn

an talk abou t Gold Field pipeline, and gly, many o estors want poken to 72 rs in Gold

rate a num

eading gold nd the world

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t any subje s is one of d one of the f us have n t from a go 2 investors Fields toda mber of oth investors, a d.

b

ct e not

ld

in ay, er as

SLIDE 3

Nick Holland CEO, Gold F Keynote Pre 31 July 201

What is g Well, let’s Gold Cou When we 70% of th to 10 yea As you c available value of ~ The good into the g However stocks a performa Obviously understan

d Fields Limited esentation, Me 2

going on in t s try and an uncil. e introduced he total hold ar period we can see we’ to investor ~US$120 bi d news: ET gold fold. ET , there is a nd 2) ETF

nce. For go

y the simpl nd and you

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the gold sec nswer this q d the inaugu dings in gol e could get s ’ve hit that rs, with a fu illion and ho TFs have m TF’s have e also a dow Fs have co

ld stocks, E

le way for don’t have

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ctor?

question. I

ural produc d ETF’s, we sales of 500 and gone w rther 8 sim

ld a massiv

ade it easy xceeded all wnside for s

ntributed t

ETFs are a people to g to worry ab

3

remember ct, the so-ca e set ourse 0 tonnes, th way beyon ilar product ve 2,500 to y to invest i l expectatio stocks: 1) i to a widen double-edg get into go bout stock s when we la alled GLD, w elves some hat would be d it. In fact

ts. These fu
nnes.

n gold and

n and that

nvestors ha ning gap be ged sword. ld is just g selection etc

Nick Hol

aunched thi which now

targets. We

e a home ru , there are unds have a have broug must be go ave often b etween the

and buy

c.

lland, Melbourn

is product v makes up a e thought th un. currently 1 a total com ght many n

od for gold.

bought ETF e gold pric the ETF.

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via the Wor about 60% hat if over a 12 gold ETF bined mark new investo . Fs instead ce and stoc It’s simple

b

rld to a 5 Fs ket

rs
f

ck to

SLIDE 4

Nick Holland CEO, Gold F Keynote Pre 31 July 201

The ETF changed. generalis the easie Now, I do market ca market va But you c rather tha stocks. The chall to attract

d Fields Limited esentation, Me 2

F craze ha . Ten years st investors est way to ge

n’t think w

apitalisation alue of abou can see fro an into ma enge now f some of the

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s been giv s ago we and emerg et in? Just g we can blam n is about $ ut US$120

m recent t

ajor gold eq for gold stoc e incremen

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ven further used to ha ing market get the ETF me all of th $400 billion billion. trade volum

quities. It h

cks is how t tal investme

4

impetus a ave more investors w F. e ills of the , which is s mes that the has canniba to provide i ent into gold as the inve professiona who want to e gold secto still significa ere has be alised som nvestors wi d equities.

Nick Hol

estor univer al gold inve get gold in

r on ETFs

antly more t en a prono e investme th leverage

lland, Melbourn

rse in gold

estors. Tod

nto their por s because t than the co

unced mov

ent away fr e over the g

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d stocks ha day we hav

rtfolio. What

the total go

mbined ET

ve into ETF rom the go

ld price an

b

as ve t’s

ld

TF Fs

ld

nd

SLIDE 5

Nick Holland CEO, Gold F Keynote Pre 31 July 201

Why do p They wan They wa between And effec superior r

d Fields Limited esentation, Me 2

people want nt to get lev nt to see the gold pri ctively they

returns. I do

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t to buy gold verage to the that, with a ice and ear y want us a

n’t think th

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d stocks? e gold price a rising go nings. as manage is informatio

5

e.

ld price, th

ers to optim

n should s

here is mo mise our as surprise any

Nick Hol

re than a

ssets and m yone in this

lland, Melbourn

ne-to-one

make sure room.

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e relationsh that we giv

b

hip ve

SLIDE 6

Nick Holland CEO, Gold F Keynote Pre 31 July 201

There are are looki productio showing available Now, if yo do? You’d borrowing common Dividends which the them say returns is In my min that we discipline price kick That’s wh

d Fields Limited esentation, Me 2

e two types ng for. If y

n volumes,

that you ca for shareho

u’re a larg

d look to lev g money an cause.

s. Are divid

ey put out ju y dividends s important. nd, if you lo

ffer a hig
e. Investors

k, then you hat investor

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f compan

you are run , margin ex an increase

lders at a p

e publicly li verage the nd gearing dends impo ust before I are importa

k at the po

gh dividend want to se get a mult rs are lookin

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ies that you nning a sin xpansion an e the return particular go sted compa balance sh up the equ

rtant? Som

left to come ant and abo

or perform

d yield. It n ee that if yo iplier effect ng for.

6

u can really ngle asset nd capital o n on the m

ld price.

any with a p heet and ma uity returns me people s e here – the

ut 40% sa

mance of gol not only he

u get all o

like we us look at to d mining com

ptimisation

ine and tha portfolio of m ake sure tha that you ge say they ar eir poll of in ay that reinv ld stocks ov elps to diff

f these thi

ed to see i

Nick Hol

determine w mpany, the . In other w at you can mining asse at you can e et as a con ren’t. JP Mo vestors indi vesting cas ver the past ferentiate u ngs right, a n the gold

lland, Melbourn

what measu e metrics a words, you w increase t ets, what els enhance yo nsequence.

rgan just

icates that a sh flows to t ten years i us, but it d and you ge sector som

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ures investo are growth want to kee he cash flo se would yo

ur returns b

I think that did a surve about 40% give superi it is importa demonstrate t a nice go me years ag

b

rs

in ep

w
u

by t’s ey

f
r

ant es

ld

go.

SLIDE 7

Nick Holland CEO, Gold F Keynote Pre 31 July 201

As you a strong lev This ma underperf Often wh

n?”

d Fields Limited esentation, Me 2

all know the vels of late. akes the rformed the hen I go into

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e gold price Five years performanc gold price.

investor m

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e over the p few of us w ce of gold meetings, th

7

past few ye would have d equities his graph g ears has ris predicted c so disap ets pulled o

Nick Hol

sen strongly current price ppointing.

ut and I ge

lland, Melbourn

y and main e levels. We have et asked: “W

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ntained thes significant What’s goin

b

se tly ng

SLIDE 8

Nick Holland CEO, Gold F Keynote Pre 31 July 201

To get to measures

d Fields Limited esentation, Me 2

the botto

s over the la

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m of this

ast decade?

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let’s look ?

8

at how the e industry

Nick Hol

has perform

lland, Melbourn

med agains

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st these ke

b

ey

SLIDE 9

Nick Holland CEO, Gold F Keynote Pre 31 July 201

Gold prod (35%) of I’ve been consisten productio But if we have drop Even thou not come since 200 These tre the more productio Colombia

d Fields Limited esentation, Me 2

duction. If y

the industry n going to nt theme in

n is going t

had actua pped outpu ugh the gol e from the m 06 though m ends are als mature ma

n declined

a, have add

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you look at y’s current p investor co n the prese to the moon lly met all o t on a comp d industry a major produc most of this so evident in arkets such by ~5.3Moz ed a combi

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the eight m production o

nferences

entations o n.

ur product

pound annu as a whole h

cers. Other

growth has n a geograp as South A z since 200 ned ~7.6Mo

9

majors (liste

f about 60
ver my la
f all of th

tion promise ual basis by has gone u producers s come sinc phic breakd Africa, Austr

6. Emergin
z of additio

ed on the s million to 7 ast 15 year e large go es over the y 2% betwee p somewha have instea e 2008. down of prod alia, Peru a g markets,

nal produc

Nick Hol

lide), we m 70 million ou rs at Gold

ld produce

e last five y en 2006 and at - by 3% p ad increase duction, wh and the USA notably Chi ction since 2

lland, Melbourn

make up jus unces. Fields and ers, includin years then w d 2011. p.a. over this ed productio ich has dro A, where an ina, Mexico 2006.

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t over a thi d there’s on ng us - th we would n s period - it’

n by 6% p.a

pped in all nnual

, Russia an

b

rd ne hat not ’s a.

f

nd

SLIDE 10

Nick Holland CEO, Gold F Keynote Pre 31 July 201

So the gr allocate s increased A lot of it It’s not so difficult it Central b increasin There’s o the avera But that is we’ve gon That is w productio majors - w The key m have bec now king And, wha

d Fields Limited esentation, Me 2

rowth in pro some funds d by 21% p. comes dow

easy to fin

is to find ne banks, as yo

g. But supp
ne more iss

age grade th s no longer ne the othe hy I believe

n growth w

will merely message he come scepti , not growth at will the re

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duction has

to the gold .a. over tho wn to the fac nd gold any ew deposits

u will see la

ply isn’t kee sue - back hat was bei r the case a er way. e investors a will average maintain ou ere is that g

cal. This ha

h, and we’re esultant gold

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sn’t come fr

space. We

se five year ct that Gold

more. Cert

s. ater, are bu ping pace. in the days ng mined w nd 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-t e’ve got to a rs. d is becomin tainly from a uying, not se when the g was often hig sult we have be sceptica

num. It is lik

have not m months led

spending. T

mean for futu to stocks us ask ourselve ng scarce. an explorati

elling. ETFs

gold price w gher than th en’t really gr al of claims kely that at b met their pro d to a chang This raises t ure gold pric

Nick Hol

sed by inve es why not w

n perspec

s are increa was $200, $3 he average rown produ that over th best the ind

duction pro

ge in rhetori two questio ces?

lland, Melbourn

stors when when the g ctive we kno

asing. Dema

300, $400 a grade of ou ction volum he next five dustry – in p

mises and

ic from mine

ns. Is this j

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they want t

ld price ha
w how

and is an ounce - ur reserves

mes. In fact,

years particular the investors

ers. Cash is

ust rhetoric

b

to as . e s c?

SLIDE 11

Nick Holland CEO, Gold F Keynote Pre 31 July 201

Expandin

perating

If you me have ach It’s obviou Margins a

d Fields Limited esentation, Me 2

ng margins. g profit? We easure the ieved grow us that we h are up, but

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How have ell, over the compound th of only 8 haven’t deli nowhere ne

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the majors period from growth in % against a vered the le ear the rise

11

s done in te m 2002 to 20 EBITDA be an annual in everage. in the gold erms of EB 011 – you c etween 200 ncrease in t price over t

Nick Hol

ITDA margi can see the 06 and 201 the gold pric the same ti

lland, Melbourn

ins - which impact. 11, the eigh ce of 21%. me frame.

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is effective ht companie

b

ely es

SLIDE 12

Nick Holland CEO, Gold F Keynote Pre 31 July 201

Let’s try a Operating inflation h and this annum go Why is th price, I’m steel pric we think years ago Of late a next year inflation i responsib The othe yields am

f this de

can be se Over the declined annum fr further do

d Fields Limited esentation, Me 2

and explore g costs are had been ar is just on a

ing forward

hat the case m afraid, doe ce goes up. we are. Th

, as it is to

lot of the la

r. How is th

is increasin bility costs t r issue that mongst the m ecline will h een in long- last 30 ye by ~3% pe rom 1998 to

wnward pr

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e why. e increasing round 10% a cost per

d. This mea

e? It’s skills esn’t go up Cement go hat’s one o day. arge mining hat possible ng, and it is that the indu t the industr major produ ave been d

term explor

ars, ore gra r annum. T

2008. As

ressure on a

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g. Paulson

per annum ton basis – ans you’re g shortages. by itself. E

es up. Wa
f the revela

companies e? It’s the c s escalating ustry is attra ry has to co ucers have d driven by a ration disco ades from g his trend ha these disc average yie

12

& Co told

m. What I tho

– that cost going to see . It’s the cos Everything e ages go up ations that s have warn combined e g even mo acting.

nfront is th

dropped by gradual de

veries:

global prim as continue coveries co elds. d me last y

ught was s

t inflation w e a doubling st of consu else moves . So we’re maybe was ned that cas effect of all re today be hat our grad y 5% per an ecline in the mary gold di d more rec me through

Nick Hol

year that h scary is tha was probabl g of costs ov

mables. It’s

with it. The not as leve sn’t as wel sh costs are

f these is

ecause of de has decl num over th e quality of scoveries g ently, with g h to produc

lland, Melbourn

istorically t at they were ly going to ver five yea s energy co e oil price g ered to the l understoo e going to be ssues I men the rapidly ined over ti he last five

re-bodies

greater than grades fallin ction, we’re

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they felt co e predicting be 15% p ars.

sts. The go

goes up. Th gold price a

d five to te

e 20% high

ntioned. Co

rising soci

ime. Averag
years. Som

, a trend th n 1Moz hav ng by 4% p likely to se

b

st

– er

ld

he as en er

st

ial ge me hat ve er ee

SLIDE 13

Nick Holland CEO, Gold F Keynote Pre 31 July 201

How hav comparis 20% per The indus per annum greenfield 2006 to 2 And then

years. An

is actually If you loo at a lowe

n a per o

d Fields Limited esentation, Me 2

ve we done

son. Over la

annum. stry’s capita m over the d developm 2011.

n top of th

nd of course y replace pr

k at the co

er grade to g

unce basis

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as an indu ast ten year al expenditu same perio ment capex, hat M&A sp e M&A hasn roduction th mbined effe get the sam s to actually

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ustry in ter rs, on a com ure on a pe

d. Growth i

which on its pend has go n’t grown th hat has bee ect of all of me gold and y sustain an

13

ms of optim mpound an er ounce ba in capital ex s own has g

ne up 17%

e productio n falling off that, it mea d, combined nd build new mising our nual growth asis, howeve xpenditure p gone up by % per annum

n base, as

. So we’re s ans that we d with rising w operation

Nick Hol

capital? He h basis, the er, has gon per ounce h an estimate m on a $/oz you saw ea spending m e’ve got to m cost inflatio s.

lland, Melbourn

ere’s anothe e gold price ne up by 32 has been dr ed 50% per basis over

arlier. What

more to stand mine more t

n, it is cos

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er interestin has risen b 2% per ounc riven more b r annum fro the past 10 it has done d still. tonnes of o sting us mo

b

ng by ce by

m

e re re

SLIDE 14

Nick Holland CEO, Gold F Keynote Pre 31 July 201

If you com capital ex chart –we Compare would ma anywhere said to yo Just a b performa $1,000 an Who are generate The only you’re ma royalties We’ve go about wh else, but It is like s

d Fields Limited esentation, Me 2

mbine the e xpenditure – e have in fa ed with the ake is that e near the s

u earlier, in

brief word nce – that w n ounce. we trying to after every people we aking super and so on.

t to change

hat it really to talk abou scoring an o

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effect of the – as depicte act not creat explosion in the indust same exten n five years

n NCE. A

we are mak

kid? We d

ything is acc ’re kidding r profits, ple e the lens t costs to pro ut cash cost

wn goal ev

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increases i ed by the No ted much le n the gold p try’s all-in-c

nt. In fact w

that means At investor king significa don’t kid the counted for. are govern ease pay u through wh

duce an o

ts only is no very time yo

14

in operating

tional Cas

everage at a price over t costs - repr we’ve had a s costs hav r conferenc ant operatin e investors The sell-si nments and

p. And befo

ich we and

unce of go
t telling the
u play, and

g costs, the sh Expenditu all. the same pe resented by a 16% annu e doubled. ces the ind ng cash flow because th de also und communiti

re we kno

the world v

ld. I don’t c

e full story. being prou

Nick Hol

decline in g ure (NCE) y eriod the a y NCE - sh ual increase We’ve lost dustry often w margins - hey know ho derstands th es who, no w it we hav view this in care if we c ud of it!

lland, Melbourn

grades, the you can see assumption houldn’t ha e in our tota a lot of the n extolls it sometimes

w much ca

his.

t surprising

ve windfall ndustry, and call it NCE

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increase in e on this most peop ve escalate al costs. As upside! ts cash co s in excess ash we rea gly, say oka taxes, high d start talkin

r somethin

b

n ple ed s I

st
f

lly ay, er ng ng

SLIDE 15

Nick Holland CEO, Gold F Keynote Pre 31 July 201

What has gold com cap, we’v And if you Good wo been ann spend its projects i

ver the n

What’s c declining we’re dea 70 million Having s message Most rec greater e in capital be trimm environm But the ju

d Fields Limited esentation, Me 2

s happened mpanies and ve invested u look at co rk done by nounced in t s market ca nto product next six yea concerning . We know aling with a n to 80 millio aid that, in e to the indu cently, and emphasis on spend, and

ed. But this

ment. ury is still ou

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d to capital d you look 40% of ou

mmunicate

the World G the gold ind ap again -

tion. It is es

ars to progre is that the that we’re a situation w

n ounces a

vestors are

ustry. And w

in line with n capital sp d focusing m s will in tur ut and, not s

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expenditure at their spe r market ca ed investme Gold Counc dustry over in other wo stimated tha ess all of th ese projects mining finit where, in or a year, it is e fed up wi we are starti h the broad end discipli more on ret rn impact o surprising, i

15

e? If you ta ending ove

ap. That’s m

ent plans for cil shows th the next ten

rds $400 b

at as much he projects c s aren’t al te resources rder for us going to co ith promise ng to wake der mining

ine. Gold m

turns than o

n future pr

investors ar ake the ave r the last fi more than w r the next fiv at if we imp n years, the billion woul as 60% of m currently on l going to

s. A lot of t

to sustain t

st a lot of m

s of jam to up to what industry, g miners are b

n growth. W

roduction gr re cynical.

Nick Hol

erage marke ve years in what we did ve years, it’ plement all o e gold indus d have to b market valu n the table. be growth hat is going this industry money over

morrow an

investors w gold CEOs beginning to We can exp rowth in an

lland, Melbourn

et cap of th n relation to the previou s going up

f the proje

stry will prob be spent to ue may hav h, because g to be repl ry at somew the next te nd they are want. are indica

walk the t

pect announ n already fla

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he eight larg

that mark

us five year even furthe ects that hav bably have

bring thes

e to be spe the base

lacement. S

where aroun n years. e sending th ating a muc talk of reinin nced plans at productio

b

ge ket rs. er. ve to se ent is So nd he ch ng to

n

SLIDE 16

Nick Holland CEO, Gold F Keynote Pre 31 July 201

Let’s look The one Historical really leve leveraged Having s have had But certa haven’t n The long-

d Fields Limited esentation, Me 2

k at some o depicted lly the gold eraging a lo d enough. aid that, a d to be retire ainly if we’re ecessarily o

term debt m

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f the financ here, in p d industry h

t of the bal

lot of the b ed as well a e going to

ptimised in

markets are

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ial issues c particular, is has turned ance sheet balance she as extra fund follow a cla n the gold in e attractive,

16

confronting t s difficult: to equity d t with debt. eets have b ding that ha assic mode ndustry and but this wo the industry provide ba deals to fina So you mig been put un as been nee el of leverag d should con

n’t last fore

Nick Hol

y. alance she ance major ght argue in nder pressu eded for ove ged returns nsider more ever.

lland, Melbourn

eet leverag r expansion some case ure by gold erruns on p s, it’s somet e in future.

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e with deb

ns. We’re n

es we haven hedges th rojects. thing that w

b

bt. not n’t hat we

SLIDE 17

Nick Holland CEO, Gold F Keynote Pre 31 July 201

Dividend the gold sector ha Historical But peop premium comparis I’ve been want to g do that, sustaining But inves Having s average d Why don Paying ou and again

d Fields Limited esentation, Me 2

yields cont sector? W as not done lly we’ve fel ple aren’t lo isn’t as att son with oth asked by s get our stock because th g capital or stors are hu aid that, G dividend yie ’t we get c ut one good n to be belie

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tinue to und e’ve lagged so. lt that this w

oking at g

tractive as i er mining s some invest k up we’ve hen we will maintaining ngry for a d

ld Fields

eld of about credit for it? d year of di eved in a w

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der-perform

d. The min

was ok beca gold counte t used to b ectors. tors why ca got to push l be paying g our curren dividend yie is ahead in t 3.8%. The ? Because i vidends is n

rld that is

17

in a yield-h ning sector ause gold is ers in the

be. So we’re

an’t we pay h dividend y g out all ou nt productio eld, so they’ n the gold s rest of the investors d not enough becoming i hungry envir

verall has

s money. Yo same way e not payin

ut a divide

yields into th ur earnings

n base.

re not parti sector at th peer group

n’t believe
h. You’ve go

ncredibly cy

Nick Hol

ronment. So

s picked up

u buy gold

anymore g dividends end yield of hose territor

s. We won’t

cularly enth he moment. is at an av e we can re

t to repeat

ynical.

lland, Melbourn

what has

p recently, d stocks you and the so s that are c 5% to 10%

ries. But we

t have any hralled by th . We are p verage of ab epeat that p t that perfor

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happened but the go u buy mone

-called go

competitive %? If we rea e simply can ything left f his argumen paying out a bout 1.8%. performanc rmance aga

b

to

ld

ey.

ld

in lly n’t for nt. an ce. ain

SLIDE 18

Nick Holland CEO, Gold F Keynote Pre 31 July 201

The posit a premium closed th The gold been able talked ab

d Fields Limited esentation, Me 2

tive rating m m to other s e gap, thou premium is e to get the

bout. Investo

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multiplier eff

sectors. We

ugh we’re st s still a very e re-rating. W

rs have rea

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fect is also e’ve actually till trading a y important We’ve been acted throu

18

not a good y come bac t a premium considerat n punished gh the ratin news story ck to the S& m to base m ion, but the in part beca ngs.

Nick Hol

. The gold i &P 500 and metal miners e gap has n ause of som

lland, Melbourn

industry use d diversified s.

narrowed. S

me of the is

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ed to trade miners hav So we haven sues I’ve ju

b

at ve n’t ust

SLIDE 19

Nick Holland CEO, Gold F Keynote Pre 31 July 201

Guidance able to ac This is cr enough to potential Managem meeting starting to The othe as a who don’t ana They’ve g wrong, w

d Fields Limited esentation, Me 2

e. Over-prom

chieve our g ritical as mo

have grea

that exists ment credib

ur guidan
revise the

r thing with

le. When o

alyse compa get a secto e’re going t

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mising and goals within

re and mor

at ore bodie in your com ility for the

ce. I’m see

eir guidance the industr

ne of the la

anies to the

ral view on

to be unsca

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under-deliv n a tolerance re investors

es. It’s a que

mpany and t industry is a eing the ev e, and that in ry is that if arge compa nth degree n what they

thed. They

19

vering. If yo

e level of 5% s are investi estion of “c translate tha a big issue ven in the ncludes us.

ne of us g

anies gives e, often take y should d think it’s ou

u go back o

%. ng, first and an you guy at into botto and we do senior pee It’s a blac gets it wron bad news, e that as a s

. So we s

ur turn next.

Nick Hol

ver time 4

d foremost, s execute?

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n’t do ourse r group mo k eye for th g, investors the genera sell signal fo shouldn’t th . And often

lland, Melbourn

40% of us h in manage Can you ta very? “ elves any fa

re compan

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r the entire

hink if some it is.

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ave not bee

ement. It’s n

ake the late avours by n nies are no

m the sect

anagers wh e sector. ebody gets

b

en not ent not

w

tor ho it

SLIDE 20

Nick Holland CEO, Gold F Keynote Pre 31 July 201

So, I’m af terribly w

d Fields Limited esentation, Me 2

fraid to tell y ell on any o

lbourne Mining

you, and if w

f the six ke

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we’re really ey metrics o

20

y brutally ho

ver the pas
nest with o

st decade.

Nick Hol

urselves, th

lland, Melbourn

he industry

ne Mining Club

has not don

b

ne

SLIDE 21

Nick Holland CEO, Gold F Keynote Pre 31 July 201

So the qu we going

d Fields Limited esentation, Me 2

uestion is, w to take?

lbourne Mining

what’s the

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model for t

21

he industry y going to b

Nick Hol

be in the fut

lland, Melbourn

ture and wh

ne Mining Club

hich road a

b

re

SLIDE 22

Nick Holland CEO, Gold F Keynote Pre 31 July 201

First of a decisions ETFs con to believe Furtherm assets un The doom going to know tha Investors fundamen

d Fields Limited esentation, Me 2

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

re, even a

nder manag msday prop end in tear t the world s are recogn ntally any ti

lbourne Mining

about our p

easier. Bu
crease. We

and will wan at current in

gement. Sur

phets will sa

rs. But more

economy is nising gold’ me soon.

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product. If w

t our produ e’ve gone w ne significan vestment le rely there is ay that the e and more s not in grea s role as a

22

we don’t ha uct is attrac way beyond ntly. evels, inves s potential fo gold price e people ar at shape, an safe haven ve a produc ctive and g the 500 ton tment in go

r this to inc

has run too re putting th nd it is not g n and there

Nick Hol

ct that is at

ld’s funda

nnes dream

ld is very lo

crease.

far, that it

heir money going to get e are no sig

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ttractive the amentals re m and there

w. It’s only

t is a bubble into gold b t better in a gns that this

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en a lot of o emain stron is no reaso y 1% of glob e and it is a because the hurry. s will chang

b

ur ng.

n

bal all ey ge

SLIDE 23

Nick Holland CEO, Gold F Keynote Pre 31 July 201

Demand. around 5 meaningf their grow and 7% fo Those tw recently,

future. S

principal

d Fields Limited esentation, Me 2

China and 50% now. T ful growth o wth has slo

r India – a

wo countries it is still a s

I believe

drivers, Ch

lbourne Mining

d India have These are

f late and w
wed, but g

a lot better th s have a stro strong cultu e that dema ina and Ind

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e doubled th the only tw which accou growth proje han any of t

ng affinity

ural issue in and is reas ia, continue

23

heir demand wo large e unted for 35 ections for the other la towards go n that coun sonably so e to grow int d of gold in economies 5% of globa 2012 are s arge econom

ld. And eve

try and gold

lid and sho

to the future

Nick Hol

five years in the worl al GDP grow somewhere mies. en though In d off-take s

uld remain

e, which loo

lland, Melbourn

from 25% o ld which h wth last yea e between 8 ndia has co should incre n so, prov

ks likely.

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f the total

ave reporte

ar. Admitted

8% for Chin

me off it a b

ease again ided the tw

b

to ed dly na bit in wo

SLIDE 24

Nick Holland CEO, Gold F Keynote Pre 31 July 201

Central b Central b it goes u demand i China is diversify.

buying. T

absorbing producer

d Fields Limited esentation, Me 2

bank buying banks are st

up. So if go

is self-gene sitting with They don’t They want t g all the pro , on its own

lbourne Mining

has been a trange anim

ld keeps g

erating. h a massiv t want to bu to keep a n

duction in

n this is not

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a strong fea

mals. They t

going up th ve over-exp uy gold in th nice balanc their countr enough to s

24

ature of the tend to sell hey will pro posure to he open ma ce between ry but, even satisfy the s market ove when the p

bably kee

US Dollars arket, beca the US do n though Ch state’s dema

Nick Hol

er the past fi rice goes d p buying. I s and they’ use they do

llar and the

hina is now and.

lland, Melbourn

five years. down and th In this way ’re looking

n’t want to

e gold price w the world’s

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hey buy whe y increment for ways

signal pan
e. So they’

s largest go

b

en tal to nic re

ld

SLIDE 25

Nick Holland CEO, Gold F Keynote Pre 31 July 201

Productio supply-de would ha find any m So what going aro going to p Based on those sal the gold i

d Fields Limited esentation, Me 2

n. Primary

emand fund ave thought more, as I h has been t

und trying

pay what it’s n analysis b es to mate ndustry wo

lbourne Mining

gold produ damental ra there’d be have said ea the filler? A to buy you s really wor by the World

rialise. So i

uld already

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uction has n atio, with go a lot more arlier All sorts of ur old jewel

rth. How mu

d Gold Cou if it wasn’t f be in mass

25

not gone up

ld rising fi

e gold comin people sell

lery. Obvio

uch of this c uncil, we’re for people s sive deficit. p anywhere ve or six ti ng to the m ing their jew usly they w can still kee going to ne selling their

Nick Hol

near dema mes over e

market. But
wellery. Th

want to mak p coming to eed to see h r jewellery a

lland, Melbourn

and growth. eight or nin it’s just not ere are go ke money s

market?

higher price and mercha

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On a class ne years, yo t that easy ld merchan so they’re n es for more ants buying

b

sic

u

to nts not

f

g it

SLIDE 26

Nick Holland CEO, Gold F Keynote Pre 31 July 201

We have interestin it’s a telli wrong se And des consensu Now, the quarter - long-term So, if all o harvest a hits us. If you loo contracts The way it’s going

wn conc

d Fields Limited esentation, Me 2

e talked abo

g. If you loo

ing picture. even years o pite that, t us forecast e big eight was US$1 m consensus

f this is tru

and get as m

k at future

s that expire the analyst to be dow clusions.

lbourne Mining

ut the fund
k at the for

The analy

ut of seven

they’re still is US$1,21 companies’ ,380 per ou s forecast o ue, what we much as we es prices – e at year-en ts see it, th n in the lon

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damentals a recast gold ysts, who k

n. That’s a r

telling us 4 per ounce ’ all-in cost unce of gol

f US$1,214

e should be e can in the this graph ds in 2012, e gold price ng term. Jud

26

and they d prices over keep telling remarkable that gold e! t (on an NC ld produced 4 per ounce e doing is to e next two o is based o 2013, 2014 e is going d dging from

support a

r the last se us the gol track recor is going d CE basis) t

d. Based o

e, we don’t h

stop all of
r three yea
n futures c

4 and 2015

down. It’s g

their past 7

Nick Hol

a higher go even years, d price is g rd! down again today – bas n that, and have an ind

ur capital

ars, before curves built

what can
ing to be

7-year track

lland, Melbourn

ld price. H

against the going down n! The CIB sed on the if we belie dustry. investment the dooms t on Bloomb you expect up in the s k record, yo

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ere’s what e actual pric n, have bee BC long-ter March 201 eve the CIB t now, and sday scenar berg data f t? hort term b

u draw yo

b

is ce, en rm 12 BC to rio for but ur

SLIDE 27

Nick Holland CEO, Gold F Keynote Pre 31 July 201

What do We need going to

price. Ob

Investors focussed And stay there is n NAV com If we acq to do this compone assets. Hedging. and we s may get i How muc underwat unhedged

d Fields Limited esentation, Me 2

investors w to believe drive long-t bviously we s interested

n gold. Th

focussed o not a gold p mpared to 1. uire pure ba

s. They can

ent from gol I will guara shouldn’t do t right in ce ch has been ter hedges. d – investor

lbourne Mining

want us to do in our produ term return shouldn’t b in gold sto hat is the st

n gold as t

premium rig .5 to 2 times ase metals do it thems d assets is antee you t

it. In the lo

ertain peaks n spent on r I’m afraid rs can hedg

g Club

?
uct. If we’re

s, we’ve go e using ridic

cks believe

trong messa here is still ght now bec s a few yea assets, we selves witho fine, but th that hedgin

ng run you

and trough repairing ba to tell you, ge for thems

27

e going to su

t to believe

culous price e in our pro age coming a gold prem cause the s

ars. But aga

e will dilute o

ut paying a

here’s no pl g is going u can’t bea hs, but you w alance shee hedging is selves ustain this b e in the gol es, but we s

duct and th

g back cons

mium. On a

senior peer inst base m

ur relative

an acquisiti ace in a go to come ba at spot. Emp will give it a ets? Possib s coming ba

Nick Hol

business int ld price. Do shouldn’t ca hey want us istently ove fundament group are metals there

premium. I
n premium
ld miner’s p

ack into vog pirical data all back ove ly as much

ack. It’s a s

lland, Melbourn

to the future

n’t bet aga

all it down to s to do so er the last th tal, absolute trading at a e is still a go nvestors do

m. Having a

portfolio for

gue. It will

supports th r time. as $30 bill silly thing to

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e and if we’ ainst the go

o low.

as well! Sta hree years. e value bas about 0.85

od premium
not want u

a base meta r pure copp be a mistak his view. Yo ion in retirin

do. Rema

b

re

ld

ay sis to m. us als er ke

u

ng ain

SLIDE 28

Nick Holland CEO, Gold F Keynote Pre 31 July 201

Focus on

returns. E

those crit Now, you equity is They wan take a big this is our I’m not sa about ass

ptimising

Cash and that we h

d Fields Limited esentation, Me 2

n cash flow. Everything w teria we hav u’ve almost very, very nt to see ro g company r own mone aying we’re set stripping g every Dol d cash retur ave the righ

lbourne Mining

At the end we do has ve to ask ou got to take tough on a

bust return

like us, or t

ey. Every do

not doing i

g. It’s abou

llar we spen

rns. Making

ht to spend

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d of the day got to be m urselves wh e a private e allocation of ns with cons his industry

llar we spe

it, but the s ut optimising nd and max g sure we d more mone

28

y why are w measured a hether it ma equity style f capital inv servative te y, and say le end is abso ector overa g how we r ximising our

get our m

ey. we here? We against sha kes sense a e approach vestments. echnical par et’s change lutely critica all probably run our min r ore flow an money back

Nick Hol

e are here t areholder re at all. to managin They want

rameters. A

e the way we al. needs to do es, sweatin nd our grad . That will d

lland, Melbourn

to generate

eturns. If it

ng the busi t short payb And you’ve a e run this b

more of it

ng our asse e. demonstrate

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e sharehold doesn’t me

ness. Priva

back period almost got usiness, as

t. And it’s n
ets. It’s abo

e to investo

b

er eet ate ds. to s if not

ut
rs

SLIDE 29

Nick Holland CEO, Gold F Keynote Pre 31 July 201

So what d We’ve go we don’t. It means That’s a m to go dow decline? Many inv we’re goi

unces fo

money ar

d Fields Limited esentation, Me 2

does this m

t to get ba

And it is no focusing in mind shift fo

wn. What am

vestors still ing to look

r ounces’

re surely a b

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mean for the ck to really

t about oun

stead on m

r us, beca

m I going to focus heav at your co

sake. It sh

better optio

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industry? y looking at nces in the etrics such use everyo

tell my inve

vily on produ

sts, and we

hould be ou n?

29

KPIs that m

ground. It’s

as free cas ne in the in estors? How

uction. The

e’ll figure o unces that m measure w s not about sh flow per s ndustry is te w can I tell ey say, we’r

ut what the

make mone

Nick Hol

hether we a production. share. errified that t them that m re going to e gold price

ey. Fewer o

lland, Melbourn

actually ma . It’s not abo their produc my productio look at you e is. But it

unces tha

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ake money

ut reserves

ction is goin

n is going

ur productio shouldn’t b t make mo

b

r

s. ng to

n,

be re

SLIDE 30

Nick Holland CEO, Gold F Keynote Pre 31 July 201

We as an demonstr company As I expla this Notio

f running

a lot of ou higher tax We are n capital sp and to en Focus on sustaining the end o

grown. Al

d Fields Limited esentation, Me 2

n industry ne rate the true y’s ability to ained earlie

nal Cash E

g a mine. N ur problems xes on us b

w taking N

pend, which nsure that e n the all-in c g, replacem

f the day, w

ll capital is s

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eed to get a e value of o provide inv er, we at Go Expenditure NCE tells it l s linked reso because the NCE a step h historically ffective cap cost of produ ment or grow what has the sustaining c

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a much bett ur investme vestors with

ld Fields ha

(NCE) - wh ike it is. And

urce nation

ey think we’r further to s y has simply pital disciplin ucing an ou wth capital. e industry d

capital. Tha

30

ter grip on s ents – unfoc leverage o ave reporte hich capture d if we can

nalism. Gov

re making s seek greater y been cons ne is applie unce of gold It’s all going done over fiv at is the real so-called gr cused susta ver the gold d for some es both the get the indu vernments a super profits r transparen sidered ess d.

d. Don’t get

g to end up ve years? T lity of our bu

Nick Hol

wth and su

aining capita d price. time on a to

perating c

ustry to tell are seeking s - the oppo ncy on the r ential to sus mixed up in in the sam The top eigh usiness tod

lland, Melbourn

ustaining ca al spend ca

tal cost ba

costs and ca it like it is, i g to impose

site is true.

returns gen stain mine o n the debate e bucket be ht companie day.

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apital to an destroy a asis – we ca apital costs t might solv significantly . erated by

perations

e on what is ecause, at es have not

b

a all ve y

s

t

SLIDE 31

Nick Holland CEO, Gold F Keynote Pre 31 July 201

The indus the line. The inves that we h The key p

unces th

investors encourag returns. Consider required p marginal, unexplore Key point technical

d Fields Limited esentation, Me 2

stry needs t stment case ave in front point here is hat are not e with the lev ges mine tea r a project w processing , but justify ed ore body t: ensure th solution tha

lbourne Mining

to look at al e has got to t of us. s to be bulli economical verage to th ams to incre where the kn

plants. The

a decision t y in the vicin at the proje at barely cle

g Club

ll of the opti

stand on it

sh on the g

l. These add

he gold pric ease produ nown ore bo e project fea to proceed nity of know ect feasibility ears the inv

31

ions and no ts own two f gold price… ditional mar ce they seek ction or ext

dy is attrac

asibility team

n the basi

wn resource y considers vestment hu

t just the m

feet, based .but not to a rginal ounce

k. The risk i

tend lives of ctive, but to m recognise s of the unq

s. This can

s all comme urdle.

Nick Hol

marginal oun

n the hard

allow this to es will not n s that chasi f mines, rath

small to c

e the projec quantified “o n be danger rcial options

lland, Melbourn

nce that get d technical

justify goin

necessarily ing margina her than op carry the co ct return and

ption value

rous. s, not just t

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ts you over information ng after mor provide al ounces ptimise cash

sts of the

d payback i e” of the he preferred

b

n re h s d

SLIDE 32

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 relevant

promises

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.

SLIDE 33

Nick Holland CEO, Gold F Keynote Pre 31 July 201

Earn the If we wan

ff a solid

How are billion, wh existing a It’s a fair actually u

d Fields Limited esentation, Me 2

right to spe nt to go and d platform. people goin hen we hav assets? question, I using invest

lbourne Mining

end money. spend a w ng to believe ve not been have to say tors money

g Club

hole lot of m e that the in able to man

y. So we ha

wisely.

33

money on g ndustry sho nage their m ave to earn t growing this uld go and money as o the right to

Nick Hol

company, l spend anot ptimally as spend mon

lland, Melbourn

let’s make s ther $200 b we should

ney. Show t

ne Mining Club

sure we do illion or $30 have on ou hat we’re

b

it 00 ur

SLIDE 34

Nick Holland CEO, Gold F Keynote Pre 31 July 201

This char from 201 On the le valuation across th So, if we at 10%, w On our cu investme cost disci demonstr major turn If we can rating – b deliver co growth of

d Fields Limited esentation, Me 2

rt shows the 1-2015, ass eft you can s multiples re e Top 8 go believe in a what sort of urrent multi nt that is in iplines in pla rate that we naround. achieve tha by rating he

nsiderable

f ~7% p.a. T

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e average e suming tha see that the emain as th ld majors a gold price returns are ples as an i line with an ace I talked e can offer le at an impro re we’re tal high levera This should

g Club

expected an t the gold p e average re hey were in

f $2,000 b

e we going t industry we n apprection d about earl everage to vement in o king princip age vs the g make more

34

nnual shareh price increas eturns will ju 2011 – whi by 2015 and to get by 20 e have a rea n of the gold ier - we hav the gold pri

ur ratings s

pally about e gold price, w e investors holder retur ses to $2,00 ust exceed ich using EV d if we belie 015? asonable op d price. At t ve a chance

ice. Matchin

should follo enterprise v with average sit up and t

Nick Hol

rn for the m 00/oz by 20 the growth V/EBITDA w eve that cos pportunity to that level – e for the firs ng the gold

w. And at a

value divide e returns of ake notice.

lland, Melbourn

ajor gold pr 015 in gold pric was about 8 st inflation w

make retu

assuming w st time in fiv price would a 25% incre ed by EBITD f ~15% vs g

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roducers ce if average 8x EBITDA will continue urns on the we have the ve years to d represent ase in our DA – we can gold price

b

e e e a n

SLIDE 35

Nick Holland CEO, Gold F Keynote Pre 31 July 201

But, if the the gold p will not ha If you are the short higher ret projects a So, mana the gold p that highe Thank yo

d Fields Limited esentation, Me 2

e gold price price, unles appen e going to in

term. And y

turns for sh and deliver agers and d price to rem er price.

u for your a

lbourne Mining

remains sim ss cost inflat nvest in gold you have go areholders

n their pro

directors – d main robust attention.

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milar to toda tion can be d stocks, yo

t to believe

and that m

mises.

don’t bet aga – but they d

35

ay’s price, w dramaticall

u need to b

e that the in anagement ainst your in demand tha we’re not go ly reduced, believe in a ndustry will t can actual nvestors – t at you provid

Nick Hol

ing to see

which - giv gold price o be able to d ly do that. D they believe de them wit

lland, Melbourn

any leverag ven current

f at least $

deliver the g Deliver thei e in gold.Th th a decent

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ge against price trends $2000/oz in gold price in r growth hey expect return at

b