Gold Fields Ltd. (GFI, Financial) released the financial and operating results for the first six months of fiscal 2017 on Aug. 17.
The South African gold mining company closed the first half of fiscal 2017 with gold production – attributable to the company – of 1.047 million ounces, flat from the comparable of fiscal 2016 when Gold Fields reported a production of 1.044 million ounces. These figures refer to the production that came from the miner’s continuing operations.
The decreased production of the yellow metal Gold Fields reported year over year at Darlot in Australia and at South Deep in South Africa negatively offset the increases the miner reported at its West African operations, in Peru and at the other three assets – St. Ives, Agnew/Lawlers, Granny Smith – in Australia. The huge impact on the first half of 2017 production came from the 15% year-over-year decline the miner reported at South Deep because of a lower grade of the metal mined and decreased volumes. Two fatalities that occurred during the period also negatively influenced the production at South Deep.
During the first six months of fiscal 2017 Gold Fields invoiced customers for $1.335 billion for the yellow metal sold, a 2% increase year over year thanks to a higher gold price realized from the sale of one ounce of gold equivalent (up 1% from $1,218 per ounce in the first half of 2016 to $1,232 per ounce in the first half of 2017) and increased gold sold (up 1% from 1.07 million ounces of gold equivalent sold in the first half of 2016 to 1.08 million ounces of gold equivalent sold during the first half of 2017).
The all-in sustaining cost (AISC) was $980 per ounce of metal in the first half of 2017 versus a $992 per ounce of gold in the comparable of 2016. The 1% decline was mainly due to a decrease in the sustaining capital expenditure while the all-in cost was $1,103 per ounce in the first six months of 2017 versus $1,024 per ounce in the comparable period of fiscal 2016. The 8% increase was mainly due to an increase in the nonsustaining capital expenditure. The latter was a consequence, writes Gold Fields, of the “inclusion of $53 million on the Damang reinvestment project and $49 million ($37 million) on the Gruyere project.” A consequence of the inclusion of this nonsustaining capex was the fact that Gold Fields reported a net cash outflow of $102 million in the first six months of fiscal 2017 versus a cash inflow of $60 million in the comparable period of fiscal 2016.
Therefore, Gold Fields’ net debt balance increased by 17% from $1.166 billion in the first half of 2016 to $1.365 billion in the comparable of 2017, for a net debt-EBITDA ratio of 1.12 compared to a ratio of 0.95 at the end of fiscal 2016. The company says that this is “still well below the debt covenant level of 2.5x.”
Increases on a year-over-year basis in the operating costs and in noncash charges for amortization and depletion, plus a $30 million impact on the first-half income statement for the allocation of a provision to settle future silicosis class action suits, more than offset the positive effects of more ounces of gold equivalent sold and higher gold price realized per ounce of metal sold during the period. Gold Fields closed the first half of 2017 reporting a 54% decline in the net profit attributable to the parent company’s owners, a 43.6% decline in headline earnings and a 25.5% decrease in the normalized earnings.
The South African mining company says that normalized earnings in the first six months of fiscal 2017 were $77 million versus $103 million in the comparable of fiscal 2016 and that normalized earnings from continuing operations were $80 million in the first half of 2017, an 18% decrease from the same item of one year ago.
For full fiscal 2017 Gold Fields still expects gold production to range between 2.1 million and 2.15 million ounces.
The South African gold mining company also informed its shareholders that for the reporting period in question it will pay a dividend of 40 cents of South African rand (3 cents), which is lower than the dividend of 50 cents of rand the miner paid to its shareholders for the comparable of fiscal 2016.
Gold Fields is currently trading at $4.16 per share with a market capitalization of $3.24 billion. Although the company reported lower earnings year over year, the gold stock is up 4.12% from Wednesday’s close price.
Disclosure: I have no position in Gold Fields.
