Earnings Call Transcript - GFI Q4 2025

Operator, Operator

Good afternoon, ladies and gentlemen, and welcome to the Gold Fields' Q4 Results Presentation. Please note that this event is being recorded. I will now hand the conference over to Chief Executive Officer, Mike Fraser. Please go ahead, sir.

Michael Fraser, CEO

Thank you very much. Good afternoon, good morning and good evening for those that have joined the presentation of our financial year 2025 results. On behalf of the team at Gold Fields, I'm pleased to deliver a very strong set of results for the group. I have with me our Chief Financial Officer, Alex Dall, as well as Jongisa Magagula, our Executive Vice President of Corporate Affairs; and Chris Gratias, our EVP of Strategy and Business Development. We will run through a short presentation shared between Alex and me, followed by time at the end for your questions. First, a quick disclaimer on the forward-looking statements. We are proud to deliver strong operating and financial performance for 2025. Firstly and most importantly, we had a safe delivery during the year. Our safety improvement plan is starting to deliver positive outcomes for the group. In terms of production, attributable production was up 18% year-on-year to 2.44 million ounces, which was at the upper end of our guidance of 2.25 million to 2.45 million ounces. This was assisted by a strong performance across many of our assets, especially through the contribution of our Salares Norte mine in Chile. Our all-in costs and all-in sustaining costs were within guidance, though marginally higher than 2024. This was largely due to higher sustaining capital, royalties, and stronger producing currencies. Our portfolio improvements are noteworthy, including the commercial production of Salares Norte achieved in quarter 3 and steady-state production in quarter 4. The ramp-up of Salares has been a significant part of our delivery during 2025. We also completed the acquisition of Gold Road Resources during quarter 3, allowing us to consolidate 100% of Gruyere and its surrounding tenements. Additional progress includes advancing the Windfall Project towards FID, updating execution plans, and ongoing conversations with our host community regarding the impact and benefit agreement and final environmental approvals. Moreover, we identified numerous asset optimization opportunities across our operations, which we have started to embed into our 2026 plans. Importantly, we've significantly increased returns to shareholders, as communicated in our results today. Following our decision to revamp our capital allocation policy in November, we are now delivering 35% of free cash flow before discretionary investments. We also announced a special dividend of ZAR 4.50 per share and a $100 million share buyback program to be executed over the next 12 months. This results in a total shareholder return of ZAR 31.85 per share, which, in our view, reflects an upper quartile yield of over 6%. We decided to allocate an additional $250 million to our top-up program over the next 2 years, increasing the total program to around $750 million, with $353 million delivered in this result. Overall, our key message is that we've achieved safe and reliable operations in 2025 with strong cash flow generation, allowing us to reinvest in our business and return additional cash to our shareholders. Gold Fields today is a global gold miner with assets in high-quality jurisdictions, comprising 9 mines and 1 project across 6 countries. We delivered adjusted free cash flow of just under $3 billion during 2025, with approximately 44% of our production from Australia and key growth from Chile and Canada via Salares Norte and our Windfall Project. In terms of operational performance, we’re proud of our safety record; however, we did face 7 serious injuries across the year, which motivates us even more to improve safer outcomes. We completed all 23 Elizabeth Broderick & Co recommendations, enhancing our continuous improvement culture. Attributable production of 2.44 million ounces reflected an 18% year-on-year improvement, allowing us to deliver within our original production and cost guidance set at the start of 2025. All-in costs increased by 3% and all-in sustaining costs by 1%. The increase is largely due to royalty payments, in addition to strengthening producer currencies, but offset by dilution from higher ounces produced and quality ounces from Salares Norte. Despite challenges in 2024, the safe ramp-up at Salares Norte enabled us to deliver well above market guidance for 2025, leading to a 175% increase in cash flow from operations. Alex will later clarify some allocation differences between operational cash flow and the group's total cash flow, which has increased nearly fourfold since 2024. Our ESG performance is notable; we achieved a zero-incident rate for serious environmental incidents for the past 7 years. We've made progress with 27% female representation among our employees and 28% in leadership, with 20% of women in core operating roles. Our strong cash generation allowed us to positively impact stakeholders, delivering ZAR 1.4 billion to host communities out of the ZAR 5.7 billion generated. Progress was made in our group legacy programs in Peru, Ghana, Chile and South Africa, with work underway for the Australian legacy program. In terms of decarbonization, we achieved a 15% absolute emission reduction against our 2026 baseline. We have full compliance with the global GISTM on tailings management and reached a 74% water recycling rate against our target of 73%. Our midterm review of the 2030 targets resulted in the consideration of changing our decarbonization target to an intensity reduction target to align with portfolio changes, as well as setting context-based water targets due to saline operating environments. As for production specifics, we saw a notable increase in Gruyere by 42,000 ounces, primarily from the full inclusion of 100% production in quarter 4 and increased tonnes milled. Granny Smith production decreased as planned, but we are observing better grades with deeper mining. St Ives benefitted from higher tonnes milled and better yields from fresh material compared to stockpiles. South Deep, pleasingly, was up 16%, driven by improved mining grades and stope turnover. However, Damang's production was down due to stockpiling, and Tarkwa's production decreased due to prioritizing stockpile feed over ore mining. Salares Norte provided a 16% increase. Alex, please give us an update on cost changes year-on-year.

Alex Dall, CFO

Thanks, Mike. We've seen a 3% year-on-year increase in all-in costs. This is higher volumes offsetting inflation as well as investing in our future at Windfall. The higher operating costs are driven by the inclusion of Salares Norte as it achieved commercial production levels, accounting for Gruyere now at 100% for the fourth quarter, and higher mining costs due to both volumes and contractor rate increases. Sustaining capital increased primarily due to investments in the winterization project at Salares Norte. Additionally, growth expenditures at Windfall reflected a full year of consolidated costs after acquiring Osisko Mining in Q4 2024. Notably, the higher gold volumes have positively impacted our cost base. Thank you, Mike.

Michael Fraser, CEO

Thanks very much, Alex. Now just briefly moving on to individual assets before skipping back to Alex for a detailed financial overview. Starting with Gruyere, we're pleased to consolidate Gruyere, which provides us with an unconstrained opportunity to unlock the asset's potential. During 2025, we made significant progress despite not delivering all the ounces we aimed for; we achieved record material movements, a 37% increase year-on-year in tonnes mined, focused primarily on accelerating the Stage 5 waste strip. This translated into high-cost factors due to larger development capital at the site. Achieving record throughput at our mill of 9.6 million tonnes was also a significant achievement. For Granny Smith, production reductions aligned with our plan as we prioritized development, notably in infrastructure, such as ventilation and energy reticulation capital. St Ives had a pleasing year with a 12% production increase and higher grades through the mill. Although all-in costs were up 14% largely due to capital spends on renewable energy, all-in sustaining costs decreased by 5% year-on-year. Agnew saw a 7% rise in production due to improved mine and process grades. However, a 21% increase in capital spend led to a 14% cost increase, primarily driven by developing the Barren Lands underground mine. South Deep, which we've touched on, showed a production increase of nearly 16%, leading to a diluted cost increase of only 3%, showcasing the leverage at South Deep because of its fixed-cost structure. A significant growth in free cash flow from South Deep is promising. Damang experienced a production drop of 28% due to stockpile processing, yet maintained decent cash flow. Tarkwa's production decreased by 12% similarly due to prioritizing waste stripping over ore mining, resulting in higher unit costs and lower ounces mined. Salares Norte's mill performance is strong, and we're seeing better-than-anticipated recoveries. With slight capital increases due to winterization, Alex can elaborate later. Now, I'll hand over to Alex for the detailed financial performance.

Alex Dall, CFO

Thank you, Mike. Backed by the higher production levels previously discussed, and an average gold price of about $3,500 per ounce, our headline earnings have increased by 117% year-on-year to $2.6 billion. Adjusted free cash flow stands at just under $3 billion for the year, marking a 391% increase year-on-year, or $3.32 per share. This allows us to declare a record base dividend for the full year of ZAR 25.50 per share, which includes the interim dividend of ZAR 7 per share and a final dividend payable in quarter 1, 2026 of ZAR 18.50 per share. Additionally, we can announce returns to shareholders amounting to $353 million, consisting of a special dividend of ZAR 4.50 per share, bringing total dividends for the year to ZAR 30 per share and a $100 million share buyback program to be executed over the next 12 months. Our balance sheet remains robust following the acquisitions of Osisko and Gold Road, reflected in a net debt-to-EBITDA ratio of 0.26x. Our operations generated cash pre-tax of $5.5 billion; after taxes, royalties, interest, and working capital adjustments, operational cash flows pre-investing activities reached $4.5 billion. After accounting for capital of $1.4 billion, lease payments, and rehabilitation outflows, we realized free cash flow of $3 billion, nearly five times the $600 million from 2024. This chart illustrates our capital allocation framework, which we communicated at our Capital Markets Day. Our priority remains to invest in assets for safe, reliable, and cost-effective operations, uphold an investment-grade credit rating, and deliver sector-leading dividends. Regarding our cash allocation for 2025, free cash flow before capital and dividends stood at $4.4 billion, enabling disciplined allocation among our three core pillars—reinvestment, balance sheet flexibility, and shareholder returns. We reinvested over $1 billion in sustaining capital and allocated $665 million for growth capital and exploration expenditure to bring Salares Norte to commercial levels, advance the Windfall Project, and boost life and reduce costs at existing operations. We returned $1.4 billion to shareholders through our base dividend, aligned with our revised policy, and additional returns of up to $353 million. This left $944 million of cash used to decrease debt and enhance balance sheet flexibility after financing both Osisko and Gold Road transactions. We ended the year with net debt of $1.4 billion, including leases of approximately $500 million. As stated at the CMD, we are declaring a full year dividend of $1.4 billion, special dividends of $253 million, and a buyback of $100 million, delivering total shareholder returns of $1.7 billion, which is 44% of free cash flow before growth and 54% of total free cash flow, well above half of our cash returned to shareholders. Enhanced by the performance and additional returns in response to a stronger gold price, we can also increase our top-up program from $500 million to $750 million over the next 2 years, leaving $400 million available under the program. This graph illustrates our dividend history over the past five years. In 2025, we delivered peak shareholder returns of ZAR 31.90 per share, a 220% rise from 2024, which corresponds to an industry-leading yield of 6.3%. Thank you, Mike, and back to you.

Michael Fraser, CEO

Thanks very much, Alex. The work we've done on revising our capital allocation strategy has provided significant clarity on positioning the business for the future. Importantly, our efforts do not restrict our capacity to enhance our portfolio quality moving forward. We'll now discuss the three growth levers we are focusing on to improve our portfolio. Throughout the year, despite generating significant cash and returning it to shareholders, we made disciplined investments across three growth levers. In terms of bolt-on M&A, we completed the Gold Road acquisition, allowing us to consolidate 100% of Gruyere and the surrounding land package. We also progressed our Windfall Project significantly, preparing for FID mid-2026. Our brownfields exploration efforts have been fruitful, and we've seen a 9% increase in reserves for 2025 through a $129 million investment program, which yielded positive results. Additionally, we revitalized our greenfields exploration program, investing $101 million during 2025, including a $35 million equity investment in Founders Metals for exposure to the Antino Gold project in Suriname, and $21 million on our broader Windfall land package. We integrated Gold Fields’ exploration portfolio, boosting our Gruyere mine's exposure significantly. Salares will continue to be a vital contributor to our value growth in upcoming years. Uninterrupted operations in 2025, despite weather challenges, underscored our preparations for winter. We achieved commercial production levels in quarter 3 and maintained steady-state production in quarter 4. Our focus in 2026 will be sustaining throughput stability; we have about two years of mine material available, thus minimizing mine constraints. We'll advance the Chinchilla capture and relocation program and prepare for the Agua Amarga pioneering and pre-strip activities mid-year. Our 2026 guidance remains on track: 525,000 to 550,000 ounces of gold equivalent with all-in sustaining costs between $450 and $600 per ounce. The next key growth lever is progressing Windfall toward a final investment decision, with critical deliverables for 2026 including finalizing the execution plan, completing environmental assessments, and obtaining necessary permitting approvals by the end of June to maximize weather window advantages ahead of the winter season. This will facilitate the start of plant construction during the first half of 2027, commissioning in late 2028, with first gold production in 2029. Ensuring we have all site clearances and essential infrastructure in place is pivotal. Briefly, the Gold Road acquisition was well-executed: for a net $1.4 billion, we consolidated 100% of this asset, allowing full realization of resource potential and optimization of the entire life of the mine. We will prioritize advancing studies to maximize deposits, specifically acceleration access to high-grade materials, supplementing Gruyere operations, alongside further drilling across the Yamana land asset. Our reserve replacement metrics are essential to gauging the health of our portfolio. In 2025, we added 4 million ounces in reserves, strengthening our position by 9%. Gruyere's reserve addition improved by 50%. We also included the Z150 discovery in Granny Smith while adding ounces for Santa Ana and Invincible at St Ives. Agnew’s performance remained stable, consistently replacing resource depletion, while Tarkwa transitioned resources to reserves via price assumption adjustments and key operational constraint removals. We remain committed to reserve replacement as a strategic focus. Transitioning to outlook and concluding remarks, our production guidance for 2026 remains in alignment with the Capital Markets Day figures: targeting 2.4 million to 2.6 million ounces, total capital investments between $1.9 billion and $2.1 billion, all-in sustaining costs between $1,800 and $2,000, and all-in costs from $2,075 million to $2,300 million. The only adjustments taken into account for the 2026 guidance relate to foreign exchange and royalties. Our emphasis this year is on improving safety, ensuring predictable delivery of our plans, and enhancing portfolio quality via greenfields programs and progressing Windfall to FID. Key priorities for our assets are aligned with the Capital Markets Day strategy encompassing studies and capital investments to improve asset quality, alongside progressing vital permitting processes for Tarkwa and Windfall. We have a clear and actionable plan, and we are diligently progressing within our strategic objectives outlined at the Capital Markets Day in November. Thank you for your attention. We will now pass it over to Jongisa for questions.

Jongisa Magagula, Executive VP of Corporate Affairs

Thank you so much, Mike. We have participants joining on the webcast as well as on the Chorus Call. To keep things balanced, I will take two questions from the webcast and then switch to the voice-only Chorus Call questions. The first question comes from E. Adeleke from Marotodi Capital Markets. Congratulations on your stellar set of results. The first question is, what is the most troublesome KPI on your radar at the moment? How do you anticipate moving the needle on it? His second question is about outlining the current exploration roadmap and clarifying if excess liquidity is being prioritized in these operations.

Michael Fraser, CEO

Thank you for the questions. Indeed, cost inflation is currently the most pressing concern across the industry. This isn't just about heightened costs in general; it includes the impact of stronger producer currencies and increased royalty rates. Fortunately, we have numerous opportunities to address these challenges, and these were central to our discussions at the Capital Markets Day. Regarding exploration, prioritizing brownfield exploration has consistently provided the lowest cost per ounce replaced. We're keen on advancing our brownfield program, particularly in Windfall, where a substantial land package could yield significant opportunities. Additionally, we're ramping up our greenfields program, as evidenced by our investment in the Antino project through Founders Metals, positioning us for long-term value generation.

Jongisa Magagula, Executive VP of Corporate Affairs

Good, I'll pause and hand over to the operator on the Chorus call to see if there are questions. I'm not hearing any queries on the Chorus call, so I'll continue. The next question, from Luca Grassadonia of VSME report, is requesting clarification on the rationale for a $100 million buyback on a market cap of $47 billion.

Michael Fraser, CEO

Thanks, Luca. I'll hand this question over to Alex.

Alex Dall, CFO

Certainly. Thanks, Mike, and thank you, Luca, for the question. We must consider that our shareholder priorities vary by jurisdiction. North American shareholders, for instance, often prefer buybacks. The buyback program represents a small fraction of total shareholder returns, approximately 6%. Thus, we aim to strike a balance among dividends, special dividends, and buybacks.

Michael Fraser, CEO

I would add that opinions on buybacks among shareholders can be quite polarized. This marks our initial foray into share repurchases, offering us a low-risk entry point in this regard.

Jongisa Magagula, Executive VP of Corporate Affairs

I will pause again and see if there are any questions on the Chorus Call, operator.

Operator, Operator

We have a few questions. The first comes from Chris Nicholson of RMB Morgan Stanley.

Christopher Nicholson, Analyst

I have two questions, please. Can you provide clarity on the current situation in Ghana? I understand the royalty bill is before parliament. Is it your expectation that royalties will increase on Tarkwa specifically? Regarding ongoing lease renewal negotiations with the government, is the 10% government ownership among the topics at stake? Lastly, looking at CapEx for about $2 billion this year, what would the Australian region's CapEx number look like for 2026?

Michael Fraser, CEO

Thank you, Chris. I’ll address the Ghana situation first: the royalty bill is indeed in front of parliament, and unless withdrawn, it will likely be enacted soon. As for Tarkwa, our current lease agreement encompasses stability provisions, meaning we won’t be immediately impacted; this will hold until our lease expires in April 2027. The implications of the royalty rates remain uncertain. The dialogue on the 10% ownership model is ongoing, finding a balance of value-sharing while ensuring investment feasibility is critical. We're engaging in pragmatic discussions about these elements with Ghanaian authorities. Now, Alex, in terms of the CapEx question?

Alex Dall, CFO

Thanks, Chris. For 2026, capital investments in Australia are set to increase significantly. Gruyere's capital will be up about $150 million due to consolidating at 100%. Granny Smith is earmarked for a near $100 million rise as we focus on upgrades to ventilation, cooling, and power access to exploit the Zone 150 ore body. Agnew will see a $50 million uptick due to tailings paste plant construction, while St Ives will experience a $50 million increase related to Invincible complex development. Considering exchange rates, we expect to cross into the $1 billion region.

Jongisa Magagula, Executive VP of Corporate Affairs

We have additional questions on the Chorus Call. Any further inquiries, operator?

Operator, Operator

The next question comes from Rene Hochreiter of NOAH Capital.

Ren Hochreiter, Analyst

First off, commendable cost control, Mike. You have a dividend policy that I understand. Would you consider establishing a special dividend policy in the future, as currently, special dividends seem conditional on capital allocation?

Michael Fraser, CEO

Thank you for that question, Rene. I’ll ask Alex to weigh in as well. Our viewpoint on top-ups is influenced by three factors: ensuring a robust balance sheet, not hindering future reinvestment, and maintaining competitive dividends relative to peers. Therefore, the nature of our special dividend will always depend on these three variables rather than being a fixed policy. We strive to maintain an upper quartile for total returns in shareholder dividends.

Alex Dall, CFO

Absolutely agree, Mike. We've also benchmarked our base dividend status as a sector leader. The board believes that delivering a third of free cash flow before growth investments will result in strong shareholder returns, especially at consensus gold prices, leaving room for special dividends if prices exceed these benchmarks.

Ren Hochreiter, Analyst

Just a couple more questions. Any updates on underground drilling results at Gruyere?

Michael Fraser, CEO

It’s still early days, Rene. We’ll have more details to share in about 12 months. We're conducting a robust program this year and aim to better understand the ore body along with trade-offs between additional cutbacks versus underground transitions. We’re confident the grade remains consistent; it’s more about defining the ore body size.

Ren Hochreiter, Analyst

One more question, if I may. At St Ives, grades were down 29%, yet yield increased by 3%. At Gruyere, mine grades fell 18%, and yield decreased by 6%. Can you clarify this disparity?

Michael Fraser, CEO

The disparity relates largely to the processing of stockpile material. At St Ives, we were processing material from two open pit operations, resulting in a lower average grade than our underground material. Although mining grades were lower year-on-year, the yield was higher because more mined material went through the plant. For Gruyere, despite massive movement of material, not all could be milled as the mill itself stepped up in processing capacity.

Jongisa Magagula, Executive VP of Corporate Affairs

I’ll now return to the questions on the webcast, mindful of our time. The next question—can you discuss any outstanding permits necessary for Agua Amarga? The incoming Chilean administration has hinted at easing some regulatory burdens; can this lead to improvements at Salares?

Michael Fraser, CEO

On Agua Amarga, we feel confident that we don’t need any additional permits at this stage. Progress is closely tied to our Chinchilla capture and relocation program. Regarding Ghana, we expect that the royalty increases will impact us within five years, as our royalty payments are currently about 5%. The new sliding scale implies additional payments, potentially a 5% increase at current gold prices after our lease stability period ends in 2027. We'll make sure we navigate negotiations effectively.

Jongisa Magagula, Executive VP of Corporate Affairs

I'll now return to the Chorus Call for the next question.

Operator, Operator

The next question comes from Adrian Hammond of SBG.

Adrian Hammond, Analyst

Regarding Windfall, you provided a CapEx estimate at Capital Markets Day, but the feasibility study is still pending. How confident are you in the accuracy of that CapEx, given that feasibility is yet to be determined?

Michael Fraser, CEO

Adrian, this investment in Windfall represents the initial development phase covering provincial approvals. This first phase is structured to yield 300,000 ounces over 10 years. However, we are also concurrently working on a second phase, exploring ways to enhance the asset’s future with additional resource handling potential. The feasibility study was completed 2 to 3 years ago, so we are primarily focused on optimizing for underground mining.

Adrian Hammond, Analyst

Thank you for the details, Mike. Regarding the inflation rates across the backdrop of CapEx, could you provide insights into the labor landscape currently, especially concerning competition for labor?

Alex Dall, CFO

We’re seeing moderate inflation, approximately CPI plus a couple of percentage points for various costs. Labor pressures in Australia are apparent but manageable; we optimized our modeling during Windfall's construction by assessing labor availability against other projects in Quebec set to commence. However, our mining contractors are facing significant labor strains.

Jongisa Magagula, Executive VP of Corporate Affairs

Thank you, Alex. I’ll take another question from the webcast to ensure fairness.

Josh Wolfson, Analyst

Can you provide more details on turnover at Gruyere? How do operating trends differ from Gold Fields' other Australian operations?

Michael Fraser, CEO

Gruyere has faced contractor turnover rates nearly reaching 50% in Q4 due to competitive hiring drives from iron ore producers. Our primary contractor's market competitiveness needed adjustments, which we have begun addressing. We are hopeful to see an improvement. There won’t be major seasonal variations in production for the year; we are keen on eliminating the previous hockey stick phenomenon of second-half production spikes.

Jongisa Magagula, Executive VP of Corporate Affairs

Thank you, everyone, for your questions. I will now hand back to Mike for closing thoughts as we have exceeded our time.

Michael Fraser, CEO

Thank you for your insightful questions. We've made substantial progress on our strategy over the past year, and we're committed to further advancing it this year. We appreciate your interest in Gold Fields. Thank you for listening, and we look forward to future engagements.