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Gold Fields forecast sparkles on strong dollar gold price - BDlive

Wednesday, 20 July 2016

One analyst said the company, which is headed by Nick Holland, would be increasingly attractive to investors if it continued to reduce its costs.

Citing a slightly stronger US dollar gold price, and an Australian dollar that has weakened 5% year-on-year against the greenback, the company said on Tuesday that it expected its half-year earnings per share to be 14 US cents higher than the zero cents reported in the same period in 2015.

"Lower net operating costs in local currencies, and converting those costs at weaker exchange rates, coupled with dollar exchange rates, work for them. That is why we see their all-in sustaining costs for the half decreased," said analyst at BP Bernstein, Makwe Masilela.

"(Gold Fields) have done very well in reducing their costs, and if they continue to reduce costs and the gold price continues to march forward, the company is very much in line to continue to be on investors’ radar screens," Masilela said.

Gold Fields’ all-in sustaining costs in the period under consideration decreased to $992 an ounce, compared with $1, 083 an ounce in the same period in 2015. In the period under review, the rand had depreciated 29% against the US dollar.

Interim headline earnings per share are expected to be 16c, compared to 1c in the same period in 2015.

Gold Fields has already signed a three-year wage agreement with the National Union of Mineworkers (NUM) and the United Association of South Africa (Uasa).

Gold Fields has operations in Australia, Ghana, Peru, and SA, with attributable annual gold output of about 2-million ounces. Gold Fields spokesman Sven Lunsche said its Australian operations that account for about 45% of the company’s production, were helped by the Australian dollar, which had weakened significantly.

"The three-year wage agreement that we reached with NUM and Uasa last year had an impact of increasing our wage bill by an average of 10% a year. This is despite some of the lower job categories … receiving increases above that level," Lunsche said.

Masilela said Gold Fields had less exposure to the rand, but this was mitigated by the dollar gold price.

"The effect of the international operations in Peru and Ghana was the reason why the attributable gold equivalent production during the period under consideration is expected to be marginally higher than the same period in 2015," he said.

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