Gold Fields (GFI, Financial) had put up a solid performance on the stock market since November 2014 until recently when the company reported its fourth quarter results. After rising to its 52-week high in February, the stock plunged significantly, which disappointed the street. Falling commodity prices along with the delayed plans for its south deep mine in South Africa were some of the key factors that weighed on its performance. Having a brief look at its numbers, let’s see in detail what can we expect from this company in the days ahead.
Progressing in the right direction
During the quarter, its revenue increased marginally to $699 million on a sequential basis, while reporting a loss of 3 cents per share compared to a profit of 3 cents in the previous quarter. The company generated a strong cash flow of $54 million, which reflects its improving operating results. Considering the falling gold prices, these metrics are quite decent and Gold Field is taking all measures to improve them further.
In addition, Salares Norte in Chile is yet another project that looks promising. The company had earlier stopped Greenfield exploration. However, this particular mine has proceeded into the advanced drilling level, and the miner plans to continue its drilling in this region. It plans to drill around 42,000 meters this year in the high resolution diamond drilling. It will be a matter of time to see how things turn out in this mine, but its early results are encouraging.
While these efforts will enhance the efficiency of its performing assets, the company continues to reduce its noncore assets. Over the years, it has already sold many of them including Chucapaca, Yanfolila, Talas and Asosa. In its recent consideration Gold Field is planning to sell artic platinum project (APP), another non core asset, which is largely palladium platinum deposit of polymetallic. Interestingly, it is the last project it needs to sell, which is expected to cut its debt by around $300 million in the next two years . The exclusion of this project will further enhance its bottom line in the days to come.
Going forward, its strategy would be to grow its cash flows rather than increasing production. This approach perfectly blends with the present commodity pricing environment and will also compliment its balance sheet. However in the near term it will reduce its revenue, but these short term pains will yield strong results in the days to come.
Conclusion
Last year, it reduced its debt by $282 million and if the APP deal sets, it will further add around $300 million in its debt reduction plan. Albeit slow, the initiatives are encouraging and will improve its financials. Moreover, its earnings is expected to improve considerably as evident from its forward P/E of 20.75 compared to a trailing P/E of 244.12. Therefore in the light of these facts, Gold Field seems to be a good long term bet.
