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GOLD Fields has forecast a potential doubling in basic interim earnings and up to 300% higher headline earnings as a result of the improved gold price, but it also warned of an escalation in costs.
The R220bn gold producer – the share price of which increased 8% in Johannesburg to a new all-time high following gold's move through $2,000/oz – said in trading statement that basic share earnings for the six months ended June would be 17.1 to 18.9 US cents/share – an increase of 90% to 110%. Headline share earnings would be 290% to 310% higher increasing to as much as 20.5c for the six months, whilst normalised earnings would be 137% to 157% higher, or 20.5 to 23.5c/share.
Gold production was largely flat, despite Covid-19 related interruptions at the firm's South Deep mine in South Africa and Cerro Corona in Peru, coming in at 1.09 million ounces for the six months. Production was assisted by the ramp-up of Gold Fields' Gruyere mine in Western Australia which began last year.
There was also the one-off effect of increased production days. Gold Fields decided to align the production months with the calendar months which resulted in an extra 10 production days in the first half of the year.
There was a bump in costs, however.
All-in sustaining costs (AISC) were effected by days lost to Covid-19 lockdowns in South Africa and Peru specifically, equal to about $20 per ounce in the first half, as well as the accounting of waste tons at Damang, a mine Ghana, which were expensed as Gold Fields intersected the mine's main orebody. Higher stay-in-business capital and higher royalties added to costs whilst a drop in the copper price resulted in lower by-product credits.
The outcome for AISC, therefore, was a likely 11% increase to $986/oz from previously guided AISC of $891/oz.
Gold Fields said it would revise its cost guidance for the remainder of the year as a result of the first half performance. AISC will come in between $960 to $980/oz which compares to previous guidance of $920 to $940/oz. "Potential further Covid-19 related disruptions increases the risk to group production and cost guidance," the firm said.
Nick Holland, CEO of Gold Fields, said in July that Covid-19 had brought the company closer in its relations with government and unions. But he also called for broad economic reforms in South Africa in order to counter the effects of economic recession.
"The government's economic narrative is generally sound, but we have been here before and not made the requisite progress. If you take a look at the key areas holding back economic growth and investment in South Africa, they require tough choices to institute structural and economic reforms," said Holland.