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Second party assurance on reporting

 

Second party assurance on reporting

Background

This is the first year of collaboration between Gold Fields and Maplecroft. Our work focuses on the joint development of an integrated annual report and the development of a leading strategy for sustainable gold. Maplecroft recognises that while it is a third party, it is not an independent party. The Maplecroft team includes experienced experts in social and environmental auditing, reporting, consultancy and design.

This statement provides commentary on our work with Gold Fields, recommendations in respect of Gold Field’s sustainable gold strategy and is an account of our experience in respect of:

  • Undertaking fieldwork and site visits to collect data and develop case studies; analysing and processing data; verifying and checking substantive issues; drafting text including detailed case studies in collaboration with sustainability managers and senior executives in Gold Fields; compiling content; writing, designing and implementing this report in alignment with relevant global and industry standards; ensuring compliance with the King III integrated reporting guidelines.
  • Our engagement with more than 80 senior managers, discipline experts and other relevant Gold Fields employees both in person at Gold Fields facilities worldwide and its head office in South Africa and through telephone interviews and communications, with strict adherence to social auditing best practice in respect of inspection (of relevant and material documents), enquiry (interviewing key informants) and observation (fieldwork and site visits to see Gold Fields in action).

Methodology

Maplecroft worked closely with relevant Gold Fields discipline experts in the compilation, analysis and review of information and data across a range of areas, including operational performance, health and safety, environment, socio-economic issues and business ethics.

The validity of original data was not checked at source by Maplecroft although we did follow up and check to ensure consistency and to understand trends and reasons for improvements or changes. We completed a rigorous peer review of all data and documentation within Maplecroft to ensure the accurate and comprehensive representation of original data, any anomalies or gaps in data that could not be resolved by Maplecroft were referred back to relevant employees within Gold Fields for clarification and later audit by an independent third party organisation.

Maplecroft supplemented primary data with:

  • Extensive fieldwork and face to face interviews in Ghana, Peru and South Africa
  • Visits to company facilities and operations in Ghana, Peru and South Africa
  • Further telephone interviews with employees in Australia and the United States
  • The review of articles, agendas, minutes, presentations and other relevant and material documents

Maplecroft was given a high level of access to discipline experts from across Gold Fields for the purpose of information gathering, clarification, review and feedback. Our engagements covered all of the Gold Fields regions, and cut across operational, sustainability and financial disciplines. We also prepared drafts of all text and worked closely with discipline experts in the refinement of report content to ensure the information presented is fair, accurate and in line with the expectations of stakeholders.

All work completed by Maplecroft is informed by best practice initiatives and standards. These include the integrated reporting guidance included in the King III Code. We are also informed by the United Nations Global Compact, the United Nations Millennium Development Goals, the Global Reporting Initiative (GRI) G3 Guidelines, the GRI Mining and Metals Sector Supplement, the ICMM principles and World Gold Council Responsible Gold criteria as well as the AA 1000 assurance standard.

AA 1000 principles

We believe Gold Fields has achieved broad compliance with the AA 1000 principles of materiality, completeness and responsiveness.

Materiality

In line with the recommendations made in the King III Code around integrated reporting this report discloses and explains an integrated and coherent framework for the analysis of Gold Fields strategy, risks, performance and sustainability. In our view, this report directly and transparently addresses Gold Fields top 10 risks, including:

  • Safety and production stoppages (p71-77)
  • Operational delivery (p54-69, 92-109)
  • Erosion of NCE margin (p56)
  • Social and political demands (p17-18)
  • Skill shortages (p145-167)
  • Project delivery (p112-125)
  • Gold price and currency volatility (p10-11, 18)
  • Energy security (p67-69)
  • Negative perceptions of host countries (p9, 16-19)
  • Potential loss of social licence to operate (p156-170)

The Gold Fields Annual Report also discloses and examines relevant and material stakeholder issues, including effective risk management, mineral royalties and taxes, the granting of a new mining right at South Deep, productivity in South Africa, ethical value chain management, Acid Mine Drainage and water management, carbon management, HIV/AIDS, the promotion of local socio-economic development and indigenous peoples.

The report provides a comprehensive overview of all that Gold Fields is doing to manage proficiently and responsibly these and other issues.

Examples include: business re-engineering in South Africa , implementation of the Employee Share Ownership Plan in South Africa, enhancements around recruitment and retention, promotion of a safe production mentality and enhanced mine development and mechanisation in South Africa .

Completeness

Our inspection of documents, as well as our engagement with and enquiry of discipline experts did not identify any material shortfalls with respect to completeness of reporting. Indeed, Gold Fields has proactively sought to identify and report on potentially challenging and sensitive dilemmas, risks and responsibilities in respect of the following relevant and material issues:

  • Unintended consequences of the provision of Living Out Allowances, including the apparent encouragement of informal settlements (p71-77)
  • The strategic need to address sub-optimal NCE margins in South Africa (p54-69, 61-63)
  • Ongoing challenges around the ‘war for talent’ in the mining sector (p144)
  • Acid Mine Drainage in the Wits Water Basin (p91)
  • High labour turnover in Australia’s flexible ‘fly-in, fly-out’ mining sector (p55, 93)
  • Challenges around energy security in Australia, Ghana and South Africa (p67-69)
  • Community sensitivity around water quality and access at Cerro Corona (p162-163)
  • Hardening, or potentially hardening, fiscal regimes in Ghana, Peru and South Africa (p18)
  • Management of illegal mining and theft of gold (p177-179)

Responsiveness

Gold Fields carries out a wide range of stakeholder engagement activity, both at strategic (i.e. head office) and operational (i.e. mine, project or exploration camp) levels. It is our view that these interactions have done much to inform the content and form of this report. This includes, for example, increased emphasis on:

  • Integrated operational, sustainability and financial reporting
  • Risk identification, management and mitigation
  • Forward looking scenario planning and the identification of challenges and dilemmas
  • The understanding of concerns relevant and material to investors as stakeholders

Recommendations

Key areas for further improvement:

Sustainability data

There were some challenges in relation to data-gathering. This appears to be partly due to the maintenance of separate reporting systems in each regional business unit and a devolved data-gathering structure. In addition, were data collection and analysis to be completed earlier, this would enhance the potential for enhanced identification of relationships between quantitative and qualitative content. It is recommended that Gold Fields investigate opportunities to enhance the coordination and standardisation of data gathering to support the external reporting process. Nonetheless, data gathering was found to be meticulous and those responsible to be well trained and committed to the reporting process.

Internal sustainability reporting structures

It is recommended that each region has an appointed coordinator to act as the main contact point for all reporting activity. This will help ensure that each region is able to deliver a complete and contextualised picture of risks, opportunities and performance – and that all relevant relationships between the company’s operational and financial performance are identified from the ground-up. This will also help in the identification of shared relevant and material issues, as well as solutions to dilemmas and challenges.

A more direct relationship between stakeholder engagement and reporting

It is recommended that Gold Fields seeks expert and independent stakeholder opinion on the specific issues being reported on, as well as how they are reported on. This might include, for example, targeted focus groups, round-table discussions or external opinions around the disclosures in this report – including potential gap analysis. The outcomes of these interactions should be recorded, considered for action, or reported on as relevant – for example in the form of quotes, articles, testimonials and opinion-pieces in the annual report.

Greater detail around local engagement

Similarly, Gold Fields should consider opportunities to directly address specific issues raised by local stakeholders. Whilst the report currently provides a good overview of ’group-level’ stakeholder engagement, it would benefit from greater detail around specific incidences of local-level engagement, as well as examination in future reporting of the efficacy of relevant outcomes and responses.

Enhanced reporting around the total socio-economic development spend

We believe Gold Fields is making progress in providing a more accurate assessment of its total socio-economic development spend. Nonetheless, we also believe that enhanced reporting mechanisms would give a truer picture, as we believe this spending to be greater than that captured by current accounting methods. This is partly due to the need for a comprehensive definition of social investment that can be used by each of the regional teams. This would help with the identification of spending that benefits local communities, but which does not necessarily fall within each region’s formal socio-economic development budget. This might include, for example, the provision of medical and educational services to local community members via mine clinics and schools (i.e. spending that forms part of Gold Fields everyday running of the business).

Prioritisation and tailoring of content

The report is a substantial document, with considerable breadth and depth of information. We believe this will be particularly helpful to investors at a time when the world is fast recognising the importance of an integrated understanding of risk and responsibility. This includes the need for business to invest in the shaping of its own growth environment to ensure it can flourish – particularly when operating in emerging economies and less developed countries.

As integrated reporting becomes further embedded within Gold Fields, it is recommended that increased use is made of supportive online content so that hard copy content can be more closely prioritised and tailored in line with the precise reporting requirements of investors and other stakeholders. Generic’ material (including, for example, certain GRI indicators, formal Mineral Resource and Reserve statements, ‘static’ corporate governance information, illustrative case studies etc) might be reported on separately online and/or in multimedia format.

We believe this report represents a relevant and complete statement of the integrated performance of Gold Fields. In our view, the Gold Fields statement that it has applied the GRI G3 guidelines at level A+ is also fairly stated.

Professor Alyson Warhurst
Dr Kevin Franklin
Gus Mcfarlane
Maplecroft, United Kingdom

23 March 2011
www.maplecroft.com