Gold Fields to improve on 2020’s strong performance

Mining giant, Gold Fields, hopes to improve on its performance as announced in 2020 for the current financial year.

Gold Fields announced a profit of US$879 million for last year, according to its 2020 Financial Results. This represents US$1.00 per share and is compared with normalised profit of $343m (US$0.42 per share) for last year.

Indeed, the company benefited from the windfall of gold prices, following the covid-19 pandemic which compelled investors to invest in gold, considered as a safe haven in periods of economic uncertainties.

A final dividend of 320 South African cents per share (gross) will be payable on 15 March 2021, giving a total dividend for the year ending 31 December 2020 of 480 South African cents per share (gross)

In what would be his last message as Gold Fields CEO, Nick Holland said the company had experienced the most unusual year in that Covid-19 had changed life as he knew it, but that the company managed to adapt to what appears to be a new normal.

“Despite the challenges and disruptions experienced during the year, the integrity of our operations has been maintained, while putting our people first.

“Overall, Gold Fields has delivered a strong set of results for 2020, with production and costs both within the revised guidance. The impact of Covid-19 on the operations was 80 000 oz, or 4% of total production,” he stated.

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Gold Fields posted 2.23-million ounces of attributable gold production, a 2% increase on the 2.19-million ounces produced in the prior year. The company set its revised guidance range at between 2.2-million and 2.25-million ounces.

A strong operational performance, combined with an increase in the gold price during the year, drove a significant increase in cash flow from operating activities to $868-million, excluding project capital costs.

At the end of the year, the company’s core net debt stood at $640-million.

While the company remains cautious of the ongoing impact of Covid-19, it expects this year will be another strong year for Gold Fields, particularly as there is much hope being placed on the roll-out of vaccines globally.

Among the operational highlights for the 2020 financial year was the Damang mine, in Ghana, delivering a strong performance in the second half of 2020 as mining moved into the heart of the main orebody, while the Gruyere mine, in Australia, is starting to hit expected targets.

Total production increased by 3% year-on-year to 862 000 oz in 2020 at Damang, while gold production from the Australian region increased by 11% year-on-year to 1.01-million ounces.

Gold Fields is in the process of trialing electric-powered vehicles underground at its Australian mines, which may well be the blueprint to roll out these vehicles to more operations.

The South Deep mine, in South Africa, has achieved continuous improvement through 2020 and, had it not been for Covid-19-related disruptions, the mine would have exceeded its original production guidance. Gold production at South Deep increased by 2% year-on-year to 226 000 oz, while it generated net cash of $34-million – more than double that of 2019.

Holland said South Deep has the potential to expand production output by between 20% and 30% over the next five years, which the company will look into unlocking.

Construction activities at the Salares Norte mine, in Chile, remain relatively unaffected by Covid-19 and the project remains on schedule, with construction of the plant having started in January this year. The company aims to be at 70% completion by the end of this year.

The Cerro Corona mine, in Peru, was most impacted by Covid-19 from a production perspective, reporting decreased equivalent gold production of 29% year-on-year to 207 000 oz.

At the end of the year, the company’s attributable gold equivalent reserves stood at 52.1-million ounces, compared with attributable gold equivalent reserves of 51.3-million at the end of 2019.

Since 2015, the company has put five-million ounces back after depletion, which indicates a 9% reserve growth over the last six years.

In the year under review, Gold Fields increased its strategic shareholding in Canada-listed Chakana Copper Corporation from 16.8% to 19.99% for $2.3-million through its participation in a wider private placement equity capital raise by the company.

Chakana is advancing the prospective Soledad copper/gold/silver project, in Peru, with proceeds from the raise being used to accelerated exploration at the project.

Holland said 2021 would be a big capital expenditure (capex) year for the company, given peak spending at Salares Norte and an increase in sustainable capital for the group.

This increase in sustaining capital will allow the company to spend on key projects toward sustaining its production base of two-million to 2.5-million ounces for the next eight to ten years.

Total capex for the group for the year is expected to be $1.177-billion. Sustaining capital is expected to be $538-million, with non-sustaining capex expected to be $639-million.

The largest component of the capex budget for the year is Salares Norte, with $508-million earmarked to be spent on this project alone.

The company also plans on expanding the processing plant at the Agnew mine, as well as developing a second decline at the Granny Smith mine for de-bottlenecking purposes.

Gold Fields has set its 2021 attributable gold-equivalent production guidance at between 2.3-million and 2.35-million ounces.

As announced previously, former Anglo American CE Chris Griffith will be taking over as Gold Fields CEO, effective April 1.

Holland during a conference call discussed his industry view, pointing out that there is not enough exploration going on, while mines have been strangled in terms of earning growth capital, as well as sustaining capital, which is worrying.

“Companies are now trying to use the high gold price to catch up on capital they have not spent, but the trend will remain for mergers and acquisition to happen for survival. Either big companies will continue buying up smaller companies, or big companies will continue merging.”

By Adnan Adams Mohammed