Our opinion on the current state of GFIELDS(GFI)Gold Fields (GFI) is a relatively high-cost international gold mining house with a single mine in South Africa - South Deep.
South Deep was bought by Gold Fields in 2006, and it has struggled to make the mine profitable, pouring in a total of R32bn (R22bn purchase price plus R10bn in development costs) into it over the past 14 years. Brett Kebble once described South Deep as, "The world's most expensive long drop...".
South Deep is 3 kilometres deep and a very difficult mine with many technical complications, but it is the second-largest unmined gold resource in the world - hence Gold Fields' persistence. Gold Fields is working with an independent power producer (IPP) to build a 50MW project in SA.
The company has spent a total of $502m over the past two years to ensure that Damang and Gruyere (international operations) would produce 2 million ounces a year for the next ten years. South Deep now has R800m less in costs and R400m less in capital expenditure.
The company is focusing on bringing the new Salares Norte gold mine in Chile into production. On 11th July 2022, the company said that it would list on the Toronto Stock Exchange and that it would adopt a dividend policy of paying between 30% and 45% of profits out.
Its protracted investment in South Deep is definitely beginning to pay off with output expected to rise by about 25% over the next four years. On 12th August 2024, the company announced that it had acquired the remaining 50% of Osisko Mining for $1.57bn (R29bn).
In its results for the six months to 30th June 2024, the company reported attributable production down by 20% at 918,000 ounces. All-in sustaining costs were $2,060 per ounce. Earnings per share (EPS) was down 22% at 40c (US) compared with 51c in the previous period.
The company said, "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 six months to 30th June 2024, the company estimated that HEPS would fall by 21% in rands. The company said, "...the Group generated auction revenues during the period of USD 120.6 million, as well as USD 6.6 million from Fabergé, contributing to another profitable period albeit at a reduced level when compared to the same period last year."
In an operational update for the 3 months to 30th September 2024, the company reported production up 12% and all-in sustaining costs down 3%. The company said, "Net debt decreased by US FWB:30M to US$1,123m at the end of September 2024, mainly due to strong cash generation which was partially offset by payment of the interim dividend of US$152m (June 2024: US$153m)."
In a trading statement for the year to 31st December 2024, the company estimated that HEPS would increase by between 41% and 52%.
Technically, the share is very volatile and subject to shifts in the international price of gold, but it has been in an upward trend over the past five years. It remains a volatile commodity play.
