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AUSTRALIAN INTERNATIONAL MINE MANAGEMENT CONFERENCE 22 AUGUST 2016 CAN THE GOLD INDUSTRY AVOID THE SINS OF THE PAST? NI...

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AUSTRALIAN INTERNATIONAL MINE MANAGEMENT CONFERENCE 22 AUGUST 2016

CAN THE GOLD INDUSTRY AVOID THE SINS OF THE PAST? NICK HOLLAND CEO GOLD FIELDS

MESSAGE OF THE PRESENTATION In 2012 I said that the industry needed to change the way it operated.

The fall in gold price forced a change in focus from growth to Free cash flow

Costs have been cut, unprofitable production closed, greenfields exploration slowed and new projects delayed

To come to our conclusions, we have analysed financial and operating trends between 2012 and 2015 of a sample of the largest global gold producers to form an industry proxy. COMPANIES INCLUDE:

Now, producers have to provide shareholders with a return on investment and leverage to the gold price

BUT, have we as an industry done enough? Are we losing focus with the recent recovery in gold price? WHERE TO FROM HERE? 1

MESSAGES FROM THE MELBOURNE MINING CLUB IN 2012

2

2012 MESSAGE

WHEN I PRESENTED AT THE MELBOURNE MINING CLUB IN 2012, I SAID THAT THE INDUSTRY WAS FAILING ITS SHAREHOLDERS IN KEY AREAS:

METRIC

Volume growth Margin expansion Capital optimisation

Balance sheet leverage Dividends

UP UNTIL 2012, THE INDUSTRY HAD FAILED TO OPTIMISE CAPITAL:

PASS/FAIL Capex/oz 10-year CAGR (to 2012) of 32%

M&A spend/oz 10year CAGR (to 2012) of 17%

BUT, production had declined slightly

Management teams were in the habit of overpromising and under delivering However, rhetoric among the producers was beginning to change in 2012: Cash is king, not growth

THE GOLD INDUSTRY WAS FAILING SHAREHOLDERS 3

PARTING THOUGHTS FROM 2012 CONCLUDING COMMENTS FROM 2012 It’s not about ounces for ounces’ sake. The focus had to shift from ounces in the ground and level of production to free cash flow

The Industry had to adopt an all encompassing cost measure

Mining companies needed to optimise their mining practices and capital allocation Management teams had to deliver on promises (production and cost guidance). No more overpromising and under delivering

Believe in the product: stay focused on gold

CHANGE WAS NECESSARY 4

WHAT HAS HAPPENED SINCE 2012?

5

MACROS TURNED… GOLD TANKED

GOLD PRICE 2 000

US$/oz

1 800 1 600 1 400 1 200 1 000

Nov-15

Jul-15

Sep-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

May-14

Mar-14

Jan-14

Nov-13

Sep-13

Jul-13

May-13

Jan-13

Mar-13

Nov-12

Jul-12

Sep-12

May-12

Mar-12

Jan-12

Nov-11

Sep-11

Jul-11

Mar-11

May-11

Jan-11

800

Source: Bloomberg

GOLD EQUITIES LOST SIGNIFICANT VALUE 140

The gold equity indices fell on average 75% from the beginning of 2011 to their lows at the end of 2015

120 100 80 60 40 20

XAU

JSE gold index

ASX gold index

Oct-15

Jul-15

Apr-15

Jan-15

Oct-14

Jul-14

Apr-14

Jan-14

Oct-13

Jul-13

Apr-13

Jan-13

Oct-12

Jul-12

Apr-12

Jan-12

Oct-11

Jul-11

Apr-11

0 Jan-11

The gold price peaked at US$1,900/oz in September 2011 before falling to a low of US$1,050/oz in December 2015

TSX gold index

Source: Bloomberg, Indexed at 100 in January 2011

PRODUCERS WERE FORCED TO RESTRUCTURE 6

ETF HOLDINGS VS. GOLD PRICE Moz

Nov-15

Jul-15

Mar-15

May-15

Jan-15

Nov-14

Jul-14

Sep-14

Mar-14

May-14

Jan-14

Nov-13

Jul-13

Sep-13

Mar-13

May-13

Jan-13

Nov-12

Jul-12

2 000 1 800 1 600 1 400 1 200 1 000 800 600 400 200 0

Gold price

ASSETS UNDER MANAGEMENT OF GOLD FUNDS HAVE FALLEN SIGNIFICANTLY 150 100 50

First Eagle Gold Fund

Asa Gold & Precious Metals

Fidelity Select Gold Portfolio

Fidelity Advisor Gold

Franklin Gold & Prec Mtl

Tocqueville Gold Fund

Usgi Gld & Prec Metls

Usaa Precious Metals & Miner

Van Eck Intl Invest Gold

Nov-15

Sep-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

May-14

Mar-14

Jan-14

Nov-13

Sep-13

Jul-13

May-13

Mar-13

Jan-13

Nov-12

Sep-12

Jul-12

May-12

Jan-12

Mar-12

Nov-11

Sep-11

Jul-11

Index (Jan 2011 = 100)

Jan-11

0

May-11

Combined AUM at the 9 biggest global gold funds fell from US$24bn at the beginning of 2011 to US$5bn at end-2015

Mar-11

ETF holdings peaked at 2,632 tonnes (85Moz) in 2013. At end-2015, total assets under management amounted to 1,467 tonnes (47Moz)

Sep-12

Mar-12

May-12

Jan-12

Jul-11

Sep-11

Mar-11

May-11

Jan-11

Nov-11

ETF holdings

Source: Bloomberg

Sep-15

US$/oz

90 80 70 60 50 40 30 20 10 0

Jul-15

INVESTORS FLED

Source: Bloomberg

CONFIDENCE IN THE SECTOR DECLINED

7

PRODUCTION GROWTH SLOWED

PRODUCTION FROM THE TOP 11 PRODUCERS 34 000

koz

32 000 30 000 28 000 26 000 24 000

22 000 20 000 2011 Source: Company Reports

2012

2013

2014

2015

5-YEAR PRODUCTION CAGR

Marginal increase in production from our sample of producers in the last 4 years (2011 to 2015)

Lower production from the blue chips has been replaced by growth from the mid tier producers

25% 20% 15% 10% 5% 0% -5%

Source: Company Reports Note: Gold Fields has been adjusted to account for spin off of Sibanye assets

Agnico

Randgold

Goldcorp

Sibanye

Polyus

Gold Fields

Kinross

Newmont

Newcrest

NO REAL GROWTH IN PRODUCTION

AngloGold

Barrick

-10%

8

BUT THE PRODUCERS REACTED

VAST IMPROVEMENT IN REPORTED COSTS

SIGNIFICANT REDUCTION IN CAPEX

• AISC 22% lower in 2015 than in 2012. Three year CAGR of – 8% • AIC 36% lower in 2015 than in 2012. Three year CAGR of –14%

• Both stay-in-business (SIB) and project capex

EXPLORATION SPEND HAS MORE THAN HALVED IN 2015 COMPARED TO 2012

BALANCE SHEET DELEVERAGING IS FIRMLY UNDERWAY

• US$36/oz in 2015 vs. US$78/oz in 2012

• Industry proxy of net debt/EBITDA of 1.45x in 2015, down from peak of 1.89x in 2014

CAPITAL DISCIPLINE HAS IMPROVED

9

REPORTED AISC AND AIC HAVE COME DOWN INDUSTRY AISC AND AIC TRENDS 1 600

In 2013, the World Gold Council introduced the All-in Sustaining Cost (AISC) measure to show all costs associated with producing an ounce of gold

US$/oz 1 490 1 395

1 400

1 200

1 115

1 087

1 067

959

949

1 000

873 800

600

On the face of it, the industry has done a great job in bringing costs under control

400

200

0 2012

2013

2014 AISC

2015

AIC

Source: Company Reports

Question: Is the lower cost base sustainable or has the industry gone too far?

THE INDUSTRY HAS DONE WELL IN CONTAINING COSTS, ON THE FACE OF IT

10

CURRENCIES AND OIL HAVE BEEN MAJOR TAILWINDS CURRENCIES ARE VOLATILE A$/US$ ; C$/US$

0,14

1,20

0,12

1,10

0,10

1,00 0,90

0,08

0,80

0,06 0,04

0,60

USD/ZAR (lhs)

AUD/USD (rhs)

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

May-14

Mar-14

Jan-14

Nov-13

Sep-13

Jul-13

May-13

Mar-13

Jan-13

Nov-12

Sep-12

0,40

Jul-12

0,00

May-12

0,50

Mar-12

0,02

Jan-12

50% - 60% OF PRODUCTION IS IN LOCAL CURRENCIES Since mid-2012, ZAR has depreciated by 47%, AUD by 26%, and CAD by 21% relative to the USD

0,70

US$/ZAR

CAD/USD (rhs)

Source: Bloomberg OIL HAS FALLEN SIGNIFICANTLY 140 120 100 80 60 40

US$/barrel

20

Nov-15

Sep-15

Jul-15

May-15

Mar-15

Jan-15

Nov-14

Sep-14

Jul-14

May-14

Mar-14

Jan-14

Nov-13

Sep-13

Jul-13

May-13

Mar-13

Jan-13

Nov-12

Sep-12

Jul-12

May-12

Mar-12

0

Jan-12

ON AVERAGE, DIESEL ACCOUNTS FOR 10% - 15% OF THE TOP PRODUCERS’ OPERATING COSTS Since mid-2012, the oil price has fallen by 55%

Source: Bloomberg

CURRENCIES AND OIL WILL NORMALISE AT SOME POINT

11

0,8

0,7

0,5

0,4 0,5

Source: Bloomberg

May-02

Oct-01

Mar-01

Aug-00

CURRENCIES DO NOT ONLY MOVE IN ONE DIRECTION

Jan-14 Aug-14 Mar-15 Oct-15 May-16

Mar-15 Oct-15 May-16

Jun-13 Jun-13 Jan-14

Nov-12 Nov-12

Aug-14

Apr-12

Jul-10 Jul-10

Apr-12

Dec-09 Dec-09

Feb-11

May-09 May-09

Sep-11

Oct-08 Oct-08

Feb-11

Mar-08 Mar-08

Sep-11

Jan-07 Aug-07

Jan-07

Jun-06 Jun-06 Aug-07

Apr-05 Nov-05

Apr-05 Nov-05

Feb-04

0,6

Sep-04

0,7

Feb-04

0,6

Sep-04

0,8

Jul-03

0,9

Jul-03

1,0

Dec-02

Source: Bloomberg

Dec-02

1,0

May-02

1,1

Oct-01

1,2 CAD/USD 1,1

Mar-01

0,9

Aug-00

AUD/USD

Jan-00

History shows that currencies are volatile and do not only move in one direction

Jan-00

Jan-00 Jul-00 Jan-01 Jul-01 Jan-02 Jul-02 Jan-03 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Jul-08 Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jan-16 Jul-16

HISTORY SHOWS THAT CURRENCIES REVERT ZAR/USD

18

16

14

12

10 8

6

4

Source: Bloomberg

12

CAPEX HAS FALLEN DRAMATICALLY

Capital expenditure has been one of the ‘low hanging fruits’ targeted by gold miners in their cost cutting drives

In the charts below, we illustrate the extremity of these cuts

Was the industry really that poor at allocating capital or have miners been cutting too much sustaining capex to lower AIC and preserve margins?

INDUSTRY CAPEX PER OUNCE PRODUCED

ABSOLUTE CAPEX OF INDUSTRY PROXY 25 000

Of concern is the notable decrease in Stay In Business (SIB) capex from US$305/oz in 2012 to US$160/oz in 2015

US$m

Project capex

SIB capex

400 350

20 000

US$/oz

US$/oz

359

700

311

305

300

600

235

250

15 000

500 180

200 10 000

150

300

121 75

50 2012 Source: Company Reports

2013

2014

2015

200 100

0

0

400

160

100

5 000

800

0

2012

2013 SIB capex (lhs) Source: Company Reports

2014 Project capex (lhs)

SIB CAPEX DECREASED FROM 46% OF OPEX IN 2012 TO 26% IN 2015

2015 Opex (rhs)

13

PRODUCTION GROWTH WAS PUT ON THE BACK BURNER • •

New projects have been deferred or cancelled due to an uptick in opposition from host communities and environmental authorities as well as financial constraints and failing to meet internal hurdle rates Possible outcome: JVs on new projects to spread the risk and lower the capital outlay

PROJECTS DELAYED/CANCELLED OVER THE PAST 5 YEARS PROJECT

COUNTRY

REASON FOR STOPPAGE/DELAY

RESERVES (MOZ)

PLANNED PEAK PRODUCTION (KOZ PA)

Conga

Peru

Stopped due to community opposition

6.1

300 - 350

Pascua Lama

Chile/Argentina

Stopped by environmental authorities

18.0

750 - 800

Cerro Casale

Chile

Delayed due to unfavourable economics

23.0

1000 - 1100

Obuasi

Ghana

Delayed due to restructuring and illegal mining

5.7

400

Rosia Montana

Romania

Stopped by environmental authorities

10.1

500

Pebble

USA

Delayed due to community opposition

37.0 (Resources)

na

La Colosa

Colombia

Delayed due to environmental issues

12.4

800 - 1000

Skouries

Greece

Delayed due to community opposition and environmental authorities

2.2

140 14

SO, WHAT IF WE NORMALISE FOR CURRENCY, OIL AND SIB CAPEX?

We have normalised for currency, oil and SIB capex by using the previous three-year average for currencies (CAD, AUD and ZAR) and oil, and assuming SIB capex of US$250/oz

Combined impact of these three variables on AISC: 2013: US$28/oz 2014: US$104/oz 2015: US$188/oz

Some capital has potentially been misallocated between sustaining capital and project capital. If taken into account, this could make the impact on AISC more pronounced

ADJUSTING AISC FOR CURRENCY, OIL AND SIB

IMPACT OF VARIABLES ON INDUSTRY AISC

US$/oz 1 115 1 200

90 1 115

1 067

1 094 949

1 000

1 061

1 053 873

80

85 US$/oz 65

70

60

60

800

50

600

42

40

400

30

200

31 23

20

0 Reported Adjusted 2012

Reported Adjusted 2013 Base

Source: Company Reports

Currency

Reported Adjusted 2014 Oil

Reported Adjusted 2015

10

2

7

2

0 2013

SIB

2014 Currency

Oil

2015 SIB

Source: Company Reports

HAVE COSTS REALLY DECLINED SUSTAINABLY?

15

WHAT DOES HISTORY TELL US ABOUT PERIODS OF CURRENCY WEAKNESS? PERIODS OF CURRENCY WEAKNESS HAVE HISTORICALLY LED TO INFLATION IN THE LOCAL ECONOMY

CHANGE IN ZAR VS. CPI 40%

0%

30% 4%

20% 10%

8%

0% 12%

-10% -20%

16%

-30%

A weaker trade-weighted ZAR leads to higher SA inflation. AUD weakness leads to and increase in Australian CPI

There is a lag of roughly 2 quarters for the impact to be felt

-40%

20% 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12 14 16 Trade-weighted ZAR YoY%

S. Africa CPI YoY % (rhs, inverted)

Source: I-Net Bridge CHANGE IN AUD VS. CPI 30%

-1%

20%

1%

10% 3%

0% 5% -10% 7%

-20% -30%

9%

87

CURRENCY BENEFIT IS NOT FOR FREE

89

91

93

95

97

AUD/USD YoY%

99

01

03

05

07

09

11

13

Aus CPI YoY % (rhs, inverted)

Source: I-Net Bridge 16

COMPANIES HAVE BEEN SPENDING LESS ON EXPLORATION

Exploration budgets have been slashed

The bulk of exploration is focused on brownfields projects and near-mine development

TOTAL EXPLORATION 2 500

Greenfields exploration has all but dried up

If this continues, what does this mean for the industry in five years’ time?

TOTAL EXPLORATION / OZ

US$m

90

US$/oz

80 2 000

70 60

1 500

50 40

1 000 30 20

500

10 0

0 2012 Source: Company Reports

2013

2014

2015

2012

2013

2014

2015

Source: Company Reports

EXPLORATION SPEND WAS THE LOW HANGING FRUIT

17

AND NOT FOCUSING ON RESERVE REPLACEMENT

Gold companies have not been spending enough to replace reserves, never mind grow them

As a result of underspending and lower gold price, reserve life has fallen from 24 years in 2012 to 17 years in 2015

Acquisitions of in-production ounces is in vogue: to fill the impending production gap

RESERVES AND RESERVE LIFE 800

Years

Moz

25

700 20

600 500

15

400 10

300 200

5

100 0

0

2011

2012

2013 Reserves (lhs)

2014 Reserve life (lhs)

2015

Source: Company Reports

THE INDUSTRY NEEDS TO SPEND TO REPLACE RESERVES

18

APPARENT HIGH-GRADING HAS HELPED COSTS HEAD GRADE VS. RESERVE GRADE 2,50 g/t

US$/oz

2,00 1,50 1,00 0,50

WE HAVE CONSISTENTLY MINED ABOVE RESERVE GRADE OVER THE PAST FIVE YEARS

THIS GRADE INCREASE HAS FAVOURABLY IMPACTED AISC WHEN MEASURED IN US$/OZ

The difference between head grade and reserve grade increased in 2014 when the industry was mining almost 1g/t above reserve grade

Unit cost decreases are significantly lower when looked at in US$/tonne terms, particularly in 2014 and 2015

0,00 2011

2012

Difference Source: Company Reports

2013 Reserve grade

2014 Head grade

1800 1600 1400 1200 1000 800 600 400 200 0

2015 Gold price

YOY CHANGE IN AISC - US$/OZ VS. US$/T 0% -2% -4% -6%

-5,4%

-8%

-7,9%

-10% -12% 2013

COST SAVINGS AMPLIFIED BY HIGH-GRADING

2014 US$/oz

Source: Company Reports

2015

3-year CAGR

US$/t 19

FINANCIAL METRICS HAVE STARTED TO IMPROVE

As a result of cost saving initiatives and currency and oil tailwinds, there has been a reversal in Net cash flow and margins over the past two years

However, without a continued pick up in the gold price, we question the sustainability of this trend as gold companies now need to reinvest

NET CASH FLOW 8 000 US$m 6 000

How much of these cost savings are due to exogenous factors?

NET CASH FLOW MARGIN 15% 10%

4 000

5%

2 000 0

0%

-2 000 -5%

-4 000 -6 000

-10% 2012

2013

2014

Source: Company Reports Note: Net cash flow = Cash generated from operating activities – Total capex

2015

2012

2013

2014

2015

Source: Company Reports

COMPANIES HAVE FOCUSED ON CASH FLOW AND TRENDS HAVE IMPROVED

20

BALANCE SHEETS HAVE STRENGTHENED…

STARTING TO ADDRESS THE DEBT POSITION 35 US$bn

50%

30

40%

25

Balance sheets have strengthened but producers have been shielded by low interest rates

20

30%

15

20%

10 10%

5 0

The gold industry has been hindered by high levels of debt, with many producers turning to asset sales or equity raises as a means of addressing their indebtedness Recent equity raises: Gold Fields US$150m, Kinross US$300m, Franco Nevada US$920m, Silver Wheaton US$550m, Pretium US$150m, Independence Group US$188m, Centerra US$152m, IAM Gold US$200m

2012 Net debt (lhs)

2013 2014 Net debt/Equity (rhs)

Source: Company Reports

NET DEBT/EBITDA 1.89

2,0 Ratio 1,8

1.76

1,6

Recent asset sales: Bald Mountain & Round Mountain US$610m, Cripple Creek & Victor US$820m, Cowal gold mine US$550m, Porgera US$250m

0% 2015 Net debt/Mkt cap (rhs)

1.45

1,4 1,2 1,0

0.90

0,8

Only in the last 12 months have some of the producers applied free cash flow to reduce debt levels, albeit in small amounts

0,6 0,4 0,2 0,0 2012

2013

2014

2015

Source: Company Reports

…BUT INTEREST RATES WILL EVENTUALLY RISE 21

HAVE SHAREHOLDERS BENEFITED FROM IMPROVED CAPITAL DISCIPLINE?

Gold companies have historically used script to fund acquisitions or growth projects • Production/share three year CAGR: -1,3% • EBITDA/share three year CAGR: -15,4%

SHARES IN ISSUE VS. PRODUCTION 9 000

EBITDA AND NET CASH FLOW PER SHARE

grams/share

Shares (m)

0,109

8 750

0,108

8 500

0,107

8 250

0,106

8 000

0,105

7 750

0,104

7 500

0,103 2012

2013 Shares

Source: Company Reports

2014

2015

Gold companies need to start focusing on per share metrics to measure performance

3,50

US$/share

US$/oz

1800

3,00

1600

2,50

1400

2,00

1200

1,50

1000

1,00

800

0,50

600

0,00

400

-0,50

200

-1,00

0 2012

2013 EBITDA/share

Production (g/share)

2014 Net CF/share

2015 Gold (rhs)

Source: Company Reports

EQUITY IS NOT FOR FREE

22

THE GOLD SECTOR HAS BEEN A POOR DIVIDEND PAYER DIVIDEND YIELDS HAVE BEEN UNATTRACTIVE

3 500 US$m

Gold producers have been notoriously poor dividend payers

2,00%

1,75%

3 000

1,50% 2 500 1,25% 2 000

Dividends have generally been linked to earnings and as such have been insignificant. Do gold companies have to start rethinking dividend policies to make dividends more meaningful?

1,00% 1 500 0,75% 1 000 0,50% 500

0,25%

0

Gold companies that have paid higher dividend yields have been rewarded through equity performance

0,00% 2011

2012

2013

Dividend amount

2014

2015

Dividend Yield

Source: Company Reports

DIVIDEND PAYOUTS NEED TO BE REVIEWED

23

REVISITING THE PARTING THOUGHTS CONCLUDING COMMENTS FROM 2012

PASS/FAIL

It’s not about ounces for ounces’ sake. The focus had to shift from ounces in the ground and level of production to free cash flow The Industry had to adopt an all encompassing cost measure Mining companies needed to optimise their mining practices and capital allocation Management teams had to deliver on promises (production and cost guidance). No more overpromising and under delivering Believe in the product: stay focussed on gold

THE INDUSTRY HAS REACTED 24

WHERE TO FROM HERE?

25

2016 YEAR TO DATE GOLD HAS HAD ITS STRONGEST YEAR IN DECADES, UP 25% YEAR TO DATE GOLD EQUITY INDICES HAVE RISEN BY OVER 100% ON AVERAGE SINCE THE BEGINNING OF 2016 GOLD EQUITIES HAVE RECOUPED SOME LOSSES

THE GOLD PRICE RECOVERY HAS BEEN UNEXPECTED

300 1 400 250

1 300

200

1 200

150

Source: Bloomberg

XAU Source: Bloomberg

JSE gold index

ASX gold index

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

Jul-15

Jun-15

May-15

Apr-15

Jan-15

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

Jul-15

Jun-15

0

May-15

800

Apr-15

50

Mar-15

900

Feb-15

100

Jan-15

1 000

Mar-15

US$/oz

Feb-15

1 100

TSX gold index

A PERIOD OF RECOVERY 26

ETFs AND ASSETS UNDER MANAGEMENT HAVE FOLLOWED SINCE THE BEGINNING OF 2016, ETF HOLDINGS HAVE INCREASED BY 545 TONNES (17.5MOZ) TO 2005 TONNES (64.5MOZ) COMBINED AUM AT THE 9 BIGGEST GLOBAL GOLD FUNDS HAVE INCREASED BY US$8.2BN YEAR TO DATE STEADY INFLOWS INTO ETFS US$/oz

Moz

70 65

ASSETS UNDER MANAGEMENT OF GOLD FUNDS ARE RISING 1 600

200

1 400

60 1 200

55 50

1 000

45

150

100

800

40

50 600

ETF holdings Source: Bloomberg

Gold price

First Eagle Gold Fund

Asa Gold & Precious Metals

Fidelity Select Gold Portfolio

Fidelity Advisor Gold

Franklin Gold & Prec Mtl

Tocqueville Gold Fund

Usgi Gld & Prec Metls

Usaa Precious Metals & Miner

Jun-16

May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

Jul-15

Jun-15

May-15

Apr-15

Mar-15

0

Feb-15

Jul-16

Jun-16

May-16

Apr-16

Mar-16

Feb-16

Jan-16

Dec-15

Nov-15

Oct-15

Sep-15

Aug-15

Jul-15

Jun-15

May-15

Apr-15

Mar-15

Feb-15

400

Jan-15

30

Jan-15

35

Van Eck Intl Invest Gold Source: Bloomberg

INVESTMENT HAS RETURNED

27

THE EUPHORIA IS BACK The rise in gold price in 2016 has resulted in a step up in capital raisings and M&A activity:  US$2.9bn in Equity Capital Market (ECM) deals year to date

 Some of the bigger ECM deals in 2016 include: Gold Fields US$150m, Kinross US$288m, Franco Nevada US$920m, Silver Wheaton US$550m, IAM Gold US$200m, Independence Group US$188m  US$2.5bn of M&A activity year to date  Asset/company purchases in 2016: Bald Mountain & Round Mountain US$610m, True Gold mining US$180m, Amara Mining US$116m, Lake Shore Gold Corp US$547m, Claude Resources US$240m, Kaminak US$405m, Goldrock US$102m, Porgera US$250m  Barrick has noted its intention to sell its 50% stake in KGHM

OLD HABITS DIE HARD 28

IT’S BACK TO GROWTH! ● “New approach needed to prevent gold miners’ sins of the past” Miningweekly.com, 10 June 2016 ● “Australia halfway down the mining investment cliff – National Australia Bank” Miningweekly.com, 13 June 2016 ● “Australia exploration spend falls for eighth straight quarter” Miningweekly.com, 3 June 2016 ● “Australian gold output slips 2% as miners dig lower grade ore” Reuters.com, 29 May 2016 ● “Risks mount for gold producers over deep capex cuts” Mining.com, 19 May 2016 ● “Miners cut distressed debt pool by $60bn as rebound firms” Miningweekly.com, 13 June 2016 ● “Gold firms gear up for growth as cost of mining the metal falls” Mining.com 8 June, 2016 ● “Gold miners talk about expanding after years of cost cutting monologues” BDlive.co.za, 8 June 2016 ● “Gold miners set to relax death grip on spending as caution eases” Miningweekly.com, 19 July 2016 29

FUNDAMENTALS ARE SUPPORTIVE

GOLD STILL AN IMPORTANT ASSET CLASS 2000 1800

0,9% US$bn

0,8%

1600

0,7%

1400

0,6%

1200

0,5%

1000

0,4%

800

0,3%

600

Gold remains an important asset class • US$1.5tn in value in 2015; peaked at US$2.0tn in 2012

Growth in primary supply is constrained • The rate of growth in global supply has slowed to 1.5% in 2015 from 7.5% in 2009

400

0,2%

200

0,1%

0

0,0% 2006

2007

2008

2009

2010

2011

Total value

2012

2013

2014

2015

% of total assets

Source: The CPM Gold Yearbook 2016 MINE SUPPLY

YOY PRODUCTION GROWTH

16

Moz

Moz

14

8,0%

120 100

12 6,0%

80

10 8

4,0%

60

6 2,0%

40

4 20

2

0,0%

0

0 2006

-2,0% -4,0% 2007

2008

2009

Source: The CPM Gold Yearbook 2016

2010

2011

2012

2013

2014

2015

2007

2008

2009

2010

2011

2012

2013

2014

2015

Total (rhs)

South Africa

USA

Australia

Canada

Ghana

Peru

Mexico

Indonesia

Rusia

China

Source: The CPM Gold Yearbook 2016

30

FUNDAMENTALS ARE SUPPORTIVE

JEWELLERY, BARS & COINS DEMAND 100% 80% 60% 40% 20%

Demand • ETFs: Outflows have started to reverse since significant drop that began mid-2013 • Central bank buying: EM banks have been increasing reserves • Physical buying: China and India continue to drive demand

Gold price expectations • Consensus estimate: US$1,306/oz • Futures prices on Bloomberg: US$1,343/oz

0%

2006

2007

2008

2009

India Source: World Gold Council

2010

2011

China

2012

2013

2014

Rest of World

CENTRAL BANK HOLDINGS Tonnes

60 Tonnes

1 060 1 040

50 QUARTERLY ETF FLOWS 400

2015

1 020

40

Tonnes

1 000

300

30

200

20

980

100

960

10

940

0 0

-100

920 2006

-200 1Q14 2Q14 3Q14 Source: World Gold Council

4Q14

1Q15

2Q15

3Q15

4Q15

1Q16

2Q16

2007

2008

2009

World (rhs)

2010

2011

2012

China (Ihs)

2013

2014

2015

Russia (Ihs)

Source: The CPM Gold Yearbook 2016

IN THE LONG RUN, SUPPLY/DEMAND MUST PLAY A KEY INFLUENCE IN DETERMINING THE GOLD PRICE

31

WHAT DO INVESTORS WANT? What are key attributes for you to invest in a gold company?

● Focus on per share metrics. Companies need to grow value without diluting shareholders ● Risk management, capital allocation and operational delivery are important

Is growth in production important? ● Yes, if it results in increased value, otherwise no point ● Secondary to profitability What is the optimal capital structure for a gold company? ● There isn’t necessarily an ideal capital structure ● BUT the less debt the better Are dividends important? ● Views are split ● Some investors feel dividends are essential while others say they should only be paid if there aren’t better uses of the capital 32

WHAT DO INVESTORS WANT? (CONTINUED) Have gold companies been underspending capex? ● Gold companies have been poor at allocating capital ● There is a suspicion that companies might have been spending too little sustaining capex in recent years What is the optimal size of a gold company? ● There is not necessarily an optimal size but gold companies can get too big ● Consensus view on a good size: 2.0Moz – 2.5Moz with 6 – 10 mines spread across a manageable number of jurisdictions in low to medium risk geographies

Are non-financial/ESG issues important when investing in a gold company? ● Yes! And they are getting more so Should gold companies have assets in different stages of the production chain (greenfields, in development, in production)? ● Definitely! Companies have to regenerate and replace maturing mines ● Business should be diversified to operate in different point of the cycle 33

PARTING THOUGHTS ● Gold producers need to embrace innovation and technology ̵ Grades are decreasing, mining depths are increasing and mineralogy is becoming more complex ̵ Gold miners will need to get good at mining lower grade, more complex orebodies profitably ● Collaboration and the use of Joint Ventures will increase ̵ Big bang acquisitions will be less common. Producers will look to spread risk and cost (hedge bets) ● Exploration will increase, there is no choice ̵ Greenfields will return. Is the junior exploration industry the best hunting ground for the majors to get greenfields back into their portfolios?

34

PARTING THOUGHTS (CONTINUED)

● Assuming long-term estimates hold true, the gold industry will contract ̵ We have made changes in response to the fall in price but have been helped by currency weakness and a falling oil price ● Has the gold price recovery come too soon? Does there still need to be some cleansing? ● Key Question: What happens if the gold price continues to recover? ̵ Has the industry learnt from past mistakes (chasing ounces, reducing cut-off grades) or will it go back to its old ways of spending all cash flow to grow production ● Why do investors want to invest in gold companies: ̵ Margin expansion with a rising gold price ̵ Growth in free cash flow

̵ Optionality for investors looking for beta on top of cash flow

35

AUSTRALIAN INTERNATIONAL MINE MANAGEMENT CONFERENCE 22AUGUST 2016

CAN THE GOLD INDUSTRY AVOID THE SINS OF THE PAST? NICK HOLLAND CEO GOLD FIELDS INVESTOR RELATIONS CONTACTS Avishkar Nagaser Tel: +27 11 562 9775 Mobile: +27 82 312 8692 E-mail: [email protected]

MEDIA RELATIONS CONTACT Thomas Mengel Tel: +27 11 562 9849 Mobile: +27 82 315 2832 E-mail: [email protected]

Sven Lunsche Tel: +27 11 562 9763 Mobile: +27 83 260 9279 E-mail: [email protected]