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RYK VAN NIEKERK: Gold Fields is one of the world's largest gold producers. Its roots go back to 1887 when it was founded by Cecil John Rhodes and Charles Rudd as the Gold Fields of South Africa company to mine gold here on the Witwatersrand.
Over the years, there have been many mergers and acquisitions [M&As], but the current company was formed in 1998 by the merger of the gold assets of Gold Fields of South Africa and Gencore.
The company is listed on both the JSE and the New York Stock Exchange and owns eight mines in Australia, Peru, Ghana, Canada, Chile and South Africa. The mine in South Africa is the South Deep Mine in Gauteng.
Today, the group announced its profits for 2023. Turnover was 5% up at $4.5 billion. Headline earnings were 23% down at $810 million. The board declared a final dividend of R4.20/share, and that means the total dividend for the year was R7.45/share. During the year, the group produced 2.3 million ounces of gold, which is about 75 tonnes of gold.
Mike Fraser is the CEO, and on January 1 this year, he took the reins from Chris Griffith, who resigned after the company's attempt to acquire the Canadian group Yamana in 2022.
Mike, thank you so much for your time. You've been in the hot seat for six weeks. Have you had time to visit all Gold Fields's operations around the world?
MIKE FRASER: Yes, I have had the privilege of travelling to all of our regions in the past six weeks. Tragically I spent quite a bit of time at South Deep with the team there, after the really unfortunate fatality that we had on the 2nd of January, which is never a great way to start. But in some respects, that has presented a catalyst for us to really rethink how we deliver safe and reliable production in our business.
But, as you say, this is a business that's been around for a very, very long time, and we are very conscious that what we want to do with Gold Fields is to continue building a high-quality and sustainable business for the future and for the generations to come.
RYK VAN NIEKERK: The group has had some, I don't want to say, headwinds – but unfortunate developments. The big one is the failed Yamana acquisition, and that is why your predecessor also resigned. So where does Gold Fields find itself currently? Or maybe put differently, how should shareholders look at this performance in the context of what happened over the past few years?
MIKE FRASER: If you look at the background – and I don't want to go into the whole details of unpacking the Yamana transaction, the rationale at the time was reasonably sound – if you look at Gold Fields, while we have a very clear line of sight to a good level of production performance over the next decade, when you look beyond that, we need to start filling the pipeline with good projects. And when you look through transformative M&A, which has always got to be part of the way that you look at strategy, it can be quite a viable alternative.
I think the problem is that when you look at long-dated optionality and big transactions, the payback on some of these are sometimes outside the horizon of our investors.
That's where some of the challenge sits. So while it has a lot of strategic logic in the long run, in the short term, sometimes shareholders don't like that.
As I see growth for the business, we do need to replace reserves, and that's going to come from a number of sources.
I believe there will be further consolidation in the sector, but what I much prefer are kind of bolt-on acquisitions where you find mispriced assets or opportunities to collaborate. Great examples like that are the Windfall acquisition we are going to partner with Osisco Mining Development. That is a great opportunity. The Tarkwa Iduapriem joint venture with AngloGold Ashanti will provide additional opportunities for growth.
In addition, working with juniors on advanced exploration projects, we've got a number of partnerships in the portfolio that will allow us to give line of sight at a fairly low-cost way into potential additional resource additions and our own near-term mine development.
We've got a lot of opportunity to continue to add and convert resource to reserve, and we've demonstrated that in Australia, for example, where we've had a very good programme of adding reserves at a very low cost. And in Australia, I think on average over the last seven years, the cost of reserve addition has been below $100/oz, which is very good. There's going to be a combination of things that we all apply, and we need to work all of the levers to add reserves for the long term.
RYK VAN NIEKERK: The gold price is currently relatively strong, around $2 000/oz. I think if it can stay there, virtually all gold mines will report good profits. But you state in your results you believe it may not last; it may pull back a bit – or there's a possibility of that. So what are your views on the future of the gold price?
MIKE FRASER: We are always sensible and pragmatic. I have a view that the gold price will be supported for the time being. I think there are a number of global factors supportive of gold, not least of which is, I believe, that inflation is going to be sticky for some time while there's been some relief there as we see interest rates coming off – which have to start coming off, otherwise we're really going to have some challenges. There's also strong central buying support.
So I think those will continue, particularly because of a bit of polarisation that's going on in the world and the reducing reliance on the US dollar – or some people trying to reduce the reliance on the US dollar for the reserves. And I think that will all be supportive of gold.
The other thing is that gold will always have a role to play in people's portfolios and, as we know, we are not the only ones struggling with reserve replacement.
So supply is not going to be that easy to add, in which case I would suspect that would be supportive. But, having said all of that, we are very mindful of consensus, which is really a set of really good economic thinking which comes up with a long-term price point – and we manage our business largely to that.
We try to create enough flexibility that we can respond to rapid up-cycles and down-cycles. But overall in long-term planning, we plan for a consensus price, which is probably lower than where we are today.
RYK VAN NIEKERK: In your overview of the South Deep mine here in South Africa, you refer to the tragic incident where one of your employees passed away – which disrupted operations there. But you also say you find it challenging to get some key skills; that also has an impact on the business. What skills are you looking for, and why are they not available?
MIKE FRASER: Ryk, the challenge that we had in 2023 – and this is largely a problem that we have got over to a degree – was that we were really struggling with drill rig operators, to be perfectly honest. It's a very specific skill, and we were finding, particularly with the development of some new underground projects in South Africa, that some people were attracted away. We know that we do have very capable people operating in some fairly challenging underground conditions; they were lured away and we had to go through a process of replacing those.
So there was a bit of a disruption in probably the second and third quarters of last year, but we seem to have got that back on track and certainly from the beginning of this year, that seems to be a problem that we have resolved.
Just an aside, which is really interesting, is that we've actually trialled the first drill operation from surface, as an example. So we are really thinking through technology as to how we can mitigate some of those skill shortages. But I think for 2024, I'm confident that we've kind of moved past that crisis that we had last year.
RYK VAN NIEKERK: We've seen several other mining groups in South Africa announce job cuts. Are you looking at reducing your workforce?
MIKE FRASER: No. I think, if you look at Gold Fields globally, we have between 21 000 and 22 000 people that we acknowledge are part of our larger workforce, of which only 6 600 are really our own employees and the rest are largely contract provided.
I think the improvement in our business is not really going to come through cost-cutting and headcount reductions as such, but really driving predictable and reliable production performance and meeting our commitments and slowly incrementing the ramp up.
And particularly at South Deep last year, we produced 322 000 ounces. We think that the right number for that mine long term is around 380 000 ounces, which is certainly achievable. To us it's a value equation and what I'd much rather see is us delivering a safe and value-accretive ramp up rather than delivering ounces for the sake of ounces.
RYK VAN NIEKERK: Thank you Mike. That was Mike Fraser, the chief executive of Gold Fields.
