Gold Fields Limited (GFI) Q3 FY2025 Earnings Call Transcript & Summary

Good day, ladies and gentlemen. Welcome to the Gold Fields Q3 FY 2025 Operating Update Conference Call. [Operator Instructions] Please note that this event is being recorded. I will now hand you over to the CEO, Mr. Mike Fraser. Please go ahead, sir.

Thank you, Judith. Good morning, and good afternoon, everyone, and thank you for joining us on today's market call to discuss Gold Fields quarter 3 2025 operating update. I'm joined on this call by members of our Executive Committee, Jongisa Magagula, our EVP of External and Corporate Affairs; Alex Dall, our Chief Financial Officer; and Chris Gratias, EVP of Strategy and Corporate Development. So I'll start with a couple of comments and then pass on to questions. I think, firstly, I'll just say that quarter 3 for us was a fairly good quarter for us, and most of our operations delivered according to their plans. I think firstly, though, just starting on our safety journey, we've made a huge amount of strides in improving the predictable and reliable operational performance of our business. And whilst we made good progress with our safety improvement plan and improving our overall risk management maturity, we did have 3 serious injuries during the quarter, and that reminds us of the need to continuously focus and improve effort on our safety performance. From a production point of view, we delivered another solid performance during the quarter with attributable production increasing 6% quarter-on-quarter and 22% year-on-year. A lot of that supported by obviously the improvement and the ramp-up at Salares Norte, but also just the stability that we're seeing across the other operations. Costs were better. So all-in costs decreased 11% quarter-on-quarter and 4% year-on-year, whilst all-in sustaining costs decreased 10% quarter-on-quarter and 8% year-on-year. Some of that was obviously supported with the rollover on gold sales of 45,000 ounces, which rolled into early July from quarter 2. Importantly, our guidance for 2025 remains on track, and we are well on track to deliver on our full year guidance that we provided in February. We will expect to see production in the upper half of our guidance and costs tracking well within guidance. The other thing that we announced today was in respect of Tarkwa, we are in the midst of a conversation on lease renewal in Ghana. And as part of that, we have declared an increase to our reserve from 4.3 million ounces on a managed basis to 7.4 million ounces and overall mineral resources increased to 11.2 million ounces. This is really a key focus for us is around extending and supporting the extension of Tarkwa life to support this lease extension. The increase in reserves has really been contributed by a couple of things. Firstly, we have also announced the intention to increase our reserve and resource planning price assumptions to $2,000 for reserves and $2,300 for resources. We also have undertaken -- removed a few operational constraints like some of the mining distances from our CIL plant which has given us again some additional inventory. In addition, we haven't yet seen the full value of some of the cost optimization projects that are underway, and we expect to see some further opportunities emerging through reducing costs at Tarkwa. We have had some constructive initial engagements with the government of Ghana in relation to this lease renewal and certainly, they have encouraged us to commence this process early. So we'll provide further updates during the course of 2026. In respect to Windfall, we continue to advance the permitting processes, we've been engaging with COMEX and the environmental ministry as well as the mining ministry in Quebec on the EIA approvals as well as secondary permits and we continue to engage with the Cree First Nation of West Winnipeg in respect to the IBA. We will obviously provide a lot more detail on the outlook for Windfall at our Capital Markets Day on the 12th of November, including both schedule and capital estimates. With respect to Salares Norte, pleasingly, we were able to deliver a really safe and reliable ramp-up during winter and achieved commercial production on the first of September 2025, and expect to be at steady-state levels by year-end. We expect to at least be within around the midpoint of guidance for 2025. I think the only other call out I'd make is on Gruyere. We've been playing catch-up certainly after a tough start to the year, and particularly on the plant side. But I think one thing to call out, which is a real positive is the level of mining that we're running at, and we're probably running at the highest level of mining rates we've ever seen and been running at over 70 million tonnes per annum run rate. So -- and hitting a number of those days. So I think that's certainly positive. But there's a huge amount of strip that we're still working through, and we're probably only going to start seeing some of those real benefits of the higher ore rates later in '26. So I think I'll pause there and then just hand over to the operator to take questions.

[Operator Instructions] Our first question comes from Adrian Hammond of SBG.

Two questions, please. Mike, the first one on the announcement or news flow around the main audit on mining companies. Have you received any formal notification from the government and what's the nature of this audits. I don't think they've done one for some years. And obviously, there's your current Tarkwa mining licenses is being reviewed currently. So is there any risk to, do you see any risk there? And when do you think you'll get an answer on this mining license renewal for Tarkwa. So quite a few things on Tarkwa. And then secondly, on the reserve price that you've increased quite a substantial increase on Tarkwa's reserves with this new price parameter. I assume that -- this will be applied to the rest of the group and perhaps we could expect some large increases again at the full year results. Is my thinking correct there and perhaps given the large increase of life at Tarkwa how does this impact your average life of mine for the group?

Yes. Thanks, Adrian. And I don't want to short shift your answer to this because I think we will be trying to dive into many of the assets next week at the Capital Markets Day. So we'll have a better idea of being able to just unpack what this actually means in the pathway to life extension at each of the assets because each asset has got a slightly different journey behind that we're working to. But I think just to start with the second question because it is an important one. I think when we looked at the reserve price, we said, look, two things. One is we don't want to just lift reserve price and just see a cost escalation. So it was a really mindful way of thinking about whilst are there marginal ounces that we are leaving outside of the pit shell that we would actually bring in because, frankly, to try and add those ounces into the portfolio through other means would be a much more expensive exercise. But I think when we get to next week, what we'll be able to demonstrate is certainly over the near-term horizon that we aren't seeing a huge step up -- an incremental ongoing step-up in costs on the portfolio because of those increased ounces when you take a portfolio view. So I think we've been very mindful that we shouldn't then just see a big step up in costs. What we will do in March, when we do our normal MRE update, we will obviously apply the new reserve prices on the rest of the portfolio, and you will see some incremental ounces coming through, but you won't see the full impact of that. And you should start seeing as we deliver some of these asset optimization initiatives and bigger opportunities some of that even flowing into future years. But again, we'll unpack that a little bit about what it means for each asset next week. Coming to Tarkwa and the audit. What we're probably going to see, and we have had a formal notification from the ministry as all large producers to do the audit. We, in fact, have discussed it with the Minister and his deputy who's running the process. And they just said, look, they've been doing a lot of work on the artisanal sector. And I think politically, they just want to make sure that they can go out as they think about the revisions to the mining legislation that all of the large producers are acting in line with what the -- their leases are. So I mean we're not concerned about it. I think we feel quite comfortable that we've been operating into -- in line with the terms of our lease and the fiscal provisions. So we're not certainly afraid of the audit that's underway. We only expect, however, to probably engage on that audit in about the second quarter of next year. So we're probably not going to have too much from that until around mid-2026, any kind of feedback at the very earliest. So we don't see that really impacting our lease application process because we've certainly have asked the minister and he's certainly encouraged us to engage early and that's why we're probably going to be looking at an engagement around Tarkwa lease even before the end of this year -- a calendar year to give ourselves enough runway to get this thing resolved during the course of 2026. So whilst they -- you can kind of draw the line between the 2, in our mind, the timing of these 2 processes aren't really linked at this stage.

Next question comes from Josh Wolfson of RBC Capital Markets.

I had a question following up on the reserve pricing changes. I understand there's going to be more information issued at the Capital Markets Day. But I guess I just wanted to understand at a high level, how is the company thinking about the impact of higher pricing and what that's going to do to grade and similarly, what that impact is on costs. I did notice the Tarkwa grade declined by 10%. And I'm wondering how this is taken in the context of margins and overall volumes?

Look, Josh, I mean, I think at the highest level, absolutely managing that margin between your all-in sustaining cost and what your consensus pricing. And part of what we thought about this is when you look at where we were at $1,500 per ounce of reserve price and you're dealing with -- I think the latest consensus is getting up close to $2,000. We're at the widest range ever between reserve price and consensus prices. And if you think about creating a sustainable business, if you continue to leave your reserve price at where it is, you probably then end up allocating capital incorrectly and end up probably prioritizing external opportunities above what you have internally. And I think what we've been able to demonstrate -- Gold Fields has demonstrated successfully in the past is the ability to extend life at a very low reserve addition from your existing resource. And so when we went through that thinking, we said, look, let's just make sure it's an even playing field. And I think what we'll see also next week when we talk about our internal portfolio, the opportunities to extend life certainly get unlocked. And what we will do is show roughly where all-in costs -- all-in sustaining costs go. And we can see that even with this increase in reserve price, it doesn't have a material impacts on our margin. And again, even if you just look at the forward curve on gold, I think we're still in a really very good position, and we can use this time over the next 5 years to do a number of things. One is making sure we're competitive in returns to shareholders; two, we can improve and strengthen our balance sheet, and we can invest in our business. So I think it gives us a number of opportunities there. But Alex, I don't know if you want to comment on that margin question. And maybe from your perspective, whether you have any concerns about the lift in reserve price on costs and margins?

Thanks, Mike and thanks, Josh, for the question. I think Mike has answered it pretty well. What it does, it obviously opens up a lot of internal opportunities, and we are going to be very disciplined in how we allocate the capital to make sure it has adequate returns, and it will potentially come with slightly higher capital upfront as we do make these investments. But I do think on an overall driving -- increasing cash flow per share for our shareholders, it is going to be very accretive. And it's not a material move on the cost base at all.

And Josh, I'd just say one thing again, and Alex will talk to capital allocation and our thinking behind it next week. But we made that point all along is that what's going to mean -- what success will look like is being able to hold the tension of how you allocate these cash flows that we're going to be -- we're going to be generating and making sure that we are disciplined around investing in our business, and making sure that our shareholders are appropriately rewarded as well at this time. So it's holding the tension on all of those things.

And I heard your comments earlier about providing Windfall scheduling updates at the Capital Markets Day. Maybe just more specifically on the permitting -- it sounds like things are kind of moving forward? Is there any additional perspective you can provide on just your expectations for that part of the milestone in the process?

Look, I think the biggest issue that is just such a difficulty with regards to Windfall is that if there are any delays in permitting, and it's not even the primary permits, but also secondary permits. Because of the winter schedule, you can quite easily lose 12 months. So I think what we'll do next week is we're really unpacked to say, look, this is our pathway to 2028. But if we have government not coming to the party and helping us get these permits in place, then you could quite easily see a scenario where these slips. So we'll try and just be very transparent about what we need to see to deliver this '28 plan. And -- but we're also being -- certainly in our guidance, we'll be appropriately conservative in how we include Windfall in our 5-year plan.

And then just one last question. Capital spending in 2025 is sort of tracking somewhat light and perhaps there's some accounting variances included within that. Just sort of drilling down on, number one, I guess, what's driving that? Is that windfall related or other items? And then second to that, will some of the CapEx from this year be deferred into next year?

Alex, you might want to take that one?

Thanks, Chris, I mean, Josh. So the majority of it does relate to Windfall where we -- in the guidance range there was more included as capital that is pre-FID, it's actually being expensed as exploration. So it is a bit of a classification and accounting treatment difference, as well as Damang. So any of the strip at Damang because of the lease being less in 12 months, that's also being expensed instead of capitalized. So I do think we'll be a bit light on capital for the spend in this year. There is not really any -- and where we have seen over spenders obviously relating to winterization at Salares Norte being the main one. And I think we are now finished with that capital, and there might be a little bit of carryover of capital into next year as we just get ready for winter, but nothing material. And there's no other real carryover capital into next year.

[Operator Instructions] Our next question comes from Chris Nicholson of RMB Morgan Stanley.

Just 2 questions from me. Just the first one is just on the cash generation and the reduction in net debt in the quarter was really excellent, actually quite a bit ahead of what I had. I know you obviously destock that carryover of about 45,000 ounces of inventory, also you had the proceeds in Galiano Gold. Are there any other one-off items of movements in working capital that you'd expect to reverse or that would have helped numbers in this quarter that you could just point to? That's number one. And then number two, just relating to a comment you made earlier, you've talked to really stepping up, I think, your exploration spend. Obviously, we have the headroom to do that now, and it looks like you're making some exciting advances on various deposits. Just your thought process around that, should we expect this to be a sustained step-up over the next number of years in terms of what you're seeing for your exploration portfolio?

Thanks, Chris. I'll ask Alex to talk about the first one, but I think you're right, those are probably the only 2 abnormal ones, but I'll ask Alex to comment on that. But maybe before he does, I'll just answer the exploration one. I think longer term, we see that the appropriate level of exploration spend for greenfields and I distinguish that from our brownfields is probably around $50 million a year. That's kind of roughly the number that we'll probably look to replenish. And the idea behind this greenfields program is to look at what are we bringing into the portfolio 10 years out. That's kind of how we're thinking about it. And you've got to go kiss a lot of frogs until we find a couple of decent opportunities. Having said that, I think even in the things that we've got today, there are some interesting things. The one deal that we've done recently, which is kind of a little bit lumpier, is the Founders Metals transaction, which we announced this week. And that was a consideration of CAD 50 million or about 10.5% of the company. Now that was probably a little bit on the larger side of a package that we'd kind of expect, but there may be times where we just can't stretch ourselves a little bit when we start seeing something of scale that we really like, and this was one of those. But I think on balance, you shouldn't see this as a sustained jump up. I think our target number is still going to be roughly in that [ CAD 50 million ] a year. But Chris, you might want to comment on that as well before we hand to Alex.

Thanks, Mike. And look, I think for us, we've got a clear strategy as we think about replacing reserves and building the business from longer term, explorations are going to be a core part of that strategy. So really ramping that up, and it's going where the best opportunities are -- clearly, our main focus will be where we currently operate in our current jurisdictions, but this is a unique environment to just go where we see the best potential resources and Founders is a great example of that. And it's a measured sequenced way of getting into a new country. It's similar to what we did with the Cisco in Canada in a measured way, starting with a joint venture. So we're going to follow where the quality is. And as Mike said, it might be a little lumpy here and there, given the opportunities, but it's definitely a focus on our side is to where we look to continue to invest and create that optionality within the portfolio.

Alex, do you want to talk to the...

Yes. Thanks, Chris. I think you actually called out the 2 major drivers being the 45,000 ounces of carryover and then Galiano Gold sales. We did also -- they were not really material working capital movements, but it was a slightly positive working capital quarter. And I think just to the earlier question on capital as well, it was not a super heavy capital quarterly. Because, those main 2 ones being the 45,000 ounces on the Galiano Gold proceeds.

[Operator Instructions] With no further questions in the question queue. We have reached the end of question-and-answer session. I will now hand back to Mr. Mark Fraser for closing remarks.

Thank you, Judith. And look, again, thanks, everyone, for joining. Thanks for all the questions. I think there were excellent questions. Obviously, we'll trying to unpack many of those next week at Capital Markets Day. And hopefully, that will provide a little bit more insight into the way we're thinking about the business. But I think we've made some really good progress in the 9 months to date this year on delivering of our base plan, which was always our objective, but equally really just starting to set ourselves up for sustainable future performance. And some of the things that we are starting to see even in the greenfields program, the internal optionality that we're starting to unpack really start to help us position Gold Fields for the next generation. So thanks again, everyone, and I look forward to engaging with you next week for those that are able to join. Thank you. Bye-bye.

Thank you, sir. Ladies and gentlemen, that concludes today's event. Thank you for joining us, and you may now disconnect your lines.