Gold Fields Ltd. (NYSE:GFI) provided the public with its first-half results on Aug. 18.
Gold Fields reported revenue of $1.3 billion (+2.4% year over year), and in line with the trading statement published on July 19 headline earnings for the first half were $124 million or 16 cents per share compared to $5 million or 1 cent per share for the first half of 2015.
Normalized earnings for the period were $103 million or 13 cents per share compared to $8 million or 1 cent per share reported for the first half of 2015.
Higher 2016 first-half earnings were driven by the following factors:
- Gold Fields' earnings increase has mainly been generated by lower operating costs that have been influenced by weaker local currencies against the U.S. dollar: AISC decreased 8.40% from $1,083 per ounce in first-half 2015 to $992 per ounce in the first half of this year, and AIC decreased 7.6% from $1,108 per ounce in first-half 2015 to $1,024 per ounce in the first half of this year.
- The company also attributed the higher earnings to a 3% year-over-year recovery in the gold price, even though on the London Bullion Market the gold price increased on average only 1.1% from $1,206.149 in first-half 2015 to $1,219.702 in the first half of this year.
- In first-half 2016 the attributable gold equivalent production increased 0.8% (from 1.036 million ounces to 1.044 million ounces), and it is in line with guidance. In fact between 2.05 million ounces and 2.10 million ounces of attributable gold were expected to be produced by the company in 2016.
Even when $22 million spent on further drilling at Salares Norte is taken into account, the group's net cash flow increased 5,900% year over year (from $1 million in first-half 2015), mainly due to the higher profit reported for the period.
The group has declared a semiannual dividend of 0.50 rand per share (26% of normalized earning) which is 12.5 times higher than the 2015 semiannual dividend of 0.04 rand per share.
As of June 30, Gold Fields had $503.4 million in cash and deposit, a 14.4% increase from Dec. 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.
Therefore, the debt maturity ladder of Gold Fields is as follows:
As of June 30, the total long-term debt amounted to $1.658 billion of which $21.3 million is the current portion (due by the end of this year), $127.0 million is due by the end of 2017 and $1.510 billion is due between Jan. 1, 2018 and Dec. 31, 2021.
In March the miner strengthened the balance sheet applying the proceeds from the private placement to institutional investors ($150 million) to the existing revolving credit facility that was partially utilized to buy back $148 million of its $1 billion 4.875% guaranteed notes due October 2020.
On Aug. 18 Gold Fields Limited (ADR) closed at $6.42 per share, up 2.72% from the previous close. The stock gained 132% year to date and is uptrending. The postponement of interest hikes by the Fed is putting more pressure on the price of gold and Gold Fields' share price will increase as gold trades higher.
The Enterprise Value/EBITDA is 7.36, and the price-book (P/B) ratio is 1.88.
Disclosure: I have no positions in Gold Fields.
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