Our opinion on the current state of GFIELDS(GFI)Gold Fields (GFI) is a relatively high-cost international gold mining company with one mine in South Africa—South Deep. Acquired in 2006, South Deep has been a challenging asset for Gold Fields, with the company investing a total of R32 billion (R22 billion for the purchase and R10 billion for development) over 14 years to make the mine profitable. Brett Kebble once famously described South Deep as "The world's most expensive long drop," reflecting the operational difficulties the mine has faced. Located 3 kilometers deep, South Deep is technically complex but holds the second-largest unmined gold resource in the world, which has kept Gold Fields committed to its development.
In an effort to lower costs and boost efficiency, Gold Fields has cut R800 million in costs and R400 million in capital expenditure at South Deep. Additionally, the company is working with an independent power producer (IPP) to build a 50MW energy project in South Africa. On the international front, Gold Fields has invested $502 million over the last two years to ensure that the Damang and Gruyere operations produce 2 million ounces of gold per year over the next decade. The company is also focusing on bringing the new Salares Norte gold mine in Chile into production.
On 11th July 2022, Gold Fields announced plans to list on the Toronto Stock Exchange and introduced a dividend policy that will pay out between 30% and 45% of profits. Its long-term investment in South Deep is starting to show promise, with production expected to increase by 25% over the next four years.
On 12th August 2024, the company announced the acquisition of the remaining 50% of Osisko Mining for $1.57 billion (R29 billion), expanding its global operations. However, in its results for the six months ending 30th June 2024, Gold Fields reported a 20% decline in attributable production to 918,000 ounces, with all-in sustaining costs rising to $2,060 per ounce. Earnings per share (EPS) dropped by 22% to 40c (US), compared with 51c in the previous period. The company noted that "Group performance in H1 2024 was impacted by weather-related events and operational challenges at some of our assets."
In a trading statement for the same period, Gold Fields estimated a 21% decline in headline earnings per share (HEPS) in rands. Despite the challenges, the company generated auction revenues of USD 120.6 million and an additional USD 6.6 million from Fabergé, contributing to profitability, albeit at a lower level than the previous year.
Technically, Gold Fields' stock is highly volatile and sensitive to fluctuations in the international gold price. However, the stock has been in an upward trend over the past five years, making it a volatile but potentially rewarding commodity play for investors seeking exposure to gold.
