Post Earnings Coverage as Gold Fields Reports Blowout Quarter

LONDON, UK / ACCESSWIRE / August 24, 2016 / Active Wall St. announces its post-earnings coverage on Gold Fields Ltd. (NYSE: GFI). The company posted its first half 2016 results on August 18, 2016. The Gold miner reported more than 77% increase in normalized earnings on strong performance from its South Deep mine. Register with us now for your free membership at: http://www.activewallst.com/register/.

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Earnings Reviewed

For the six months ended on June 30, 2016, Gold Fields reported normalized earnings of US$103 million, or $0.13 per share, significantly higher from earnings of $8 million, or $0.1 per share, seen in the first half of 2015. In-line with the trading statement published on July 19, 2016, headline earnings for the first half were $124 million, or $0.16 per share, compared to $5 million, or $0.1 per share, for the first half of 2015. Gold Fields reported revenue of $1.3 billion, up 2.4% on y-o-y basis. The improvement in earnings was attributed to lower operating costs that have been impacted by weaker local currencies against the U.S. dollar; the company also attributed the higher earnings to a 3% y-o-y recovery in gold price. The firm’s operating profit also increased by 22% from $522 million to $639 million due to the increase in revenue and the decrease in net operating costs.

“It is pleasing to report our H1, 2016 results into a much more buoyant gold market compared with the start of the year. Following Brexit at the end of June, the gold price has increased almost $100/oz. and is approximately $250/oz. higher than our planning price for 2016,” said Gold Fields CEO Nick Holland.

Mines Performance

South Deep

Production at South Deep increased by 87% to 4,356 kg (140 000 oz.) from 2, 332 kg (75 000oz) in H1 FY15, driven by increased volumes and grade. All-in Costs (AIC) in H1 FY16 decreased 19% on y-o-y basis to R622 453 /kg ($1 257/oz.). All-in sustaining costs (AISC) declined by 17% from R731, 017 per kilogram (US$1,912 per ounce) to R608, 825 per kilogram (US$1,229 per ounce) mainly due to increased gold sold, partially offset by higher operating costs and higher sustaining capital expenditure.

Australia

Gold production in the Australian region for H1 FY16 was 2% lower on y-o-y basis at 466koz due to lower production at all operations except Darlot; however all mines exceeded guidance. AIC for the region was only marginally higher in A$ terms at A$1,265/oz., but 6% lower on y-o-y basis in US$ terms at US$928/oz. due to the weakening of the A$ against the US$. Net cash flow from the region for H1 FY16 was US$121m.

West Africa

Attributable gold production from the West Africa region was 7% lower on y-o-y basis in H1 FY16 at 311 000 oz., due to lower production at both Tarkwa and Damang. However, AIC for the region decreased 9% on y-o-y basis to $1 052/oz., mainly as a result of lower net operating costs and lower capital expenditure, partially offset by lower gold sold. The region generated net cash flow of $26 million for the six months to June 2016. The conclusion of a development agreement with the government of Ghana was a key milestone during H1FY16 and provides the platform for targeting many years of sustainable production by Gold Fields in Ghana.

Strong Cash Position

Gold Fields reported that its net debt decreased to US$1.16 billion during H1 FY16, from US$1.38 billion at end December 2015 following the bond buyback and subsequent equity raising undertaken in the period. The net debt to EBITDA ratio reduced to 1.05x at 30 June 2016, from 1.38x at end-December 2015 and positions the company well to meet its net debt to EBITDA target of 1.0x by year-end.

As of June 30, 2016, Gold Fields had $503.4 million in cash and deposit, a 14.4% increase from December 31, 2015. Recently Gold Fields refinanced its existing credit facilities due in November 2017 to $1.290 billion and extended the maturity of its debt, of which the first maturity will be in June 2019.

Dividend

Gold Fields has declared a dividend of 0.50 rand per share which is 12.5 times higher than the 2015 semi-annual dividend of 0.04 rand per share.

Raising Forecast

Improvements at South Deep meant Gold Fields raised its production target to 2.1 million to 2.15 million ounces this year compared with a previous estimate of 2.05 million to 2.1 million. The company expects AISC to remain unchanged at $1,000 to $1,010 an ounce.

Stock Performance

Gold Fields’ stock price declined 2.91% on August 23, 2016, closing the trading session at $6.01, with a total of 4.71 million shares traded for the day. The company’ stock price has more than doubled, advancing 117.71% since the beginning of the year on rising gold prices.

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