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Promise for South Deep as Gold Fields tracks 2016 output target -

Tuesday, 19 July 2016

GOLD Fields will keep the gold industry’s feel-good factor pumping when it reports a 14 US cents increase in interim share earnings next month. This was after beating last year’s interim gold output and registering lower costs year-on-year.

The company said in a statement to the Johannesburg Stock Exchange today that it would announce output of 1.044 million ounces which is slightly more than the 1.036 million oz it achieved in the interim period of 2015. All in sustaining costs (AISC) would come in at $992/oz (H1 2015: $1,083/oz) and all in costs (AIC) would be $1,024/oz (H1 2015: $1,108/oz).

The production numbers are interesting as the general view on Gold Fields is that South Deep, its South African gold mine currently being re-engineered, will have to compensate for falling output at its international operations.

There have been questions as to whether South Deep would be able to achieve this given its less than exemplary performance whilst Gold Fields has owned the asset.

The company has invested $4.2bn in South Deep, including the cost of its acquisition in 2006 but has downgraded its ramp up target a number of times. It has declined to give a fresh ramp up target ahead of a new mine plan to be unveiled in February, 2017.

Gold Fields management has guided flat attributable equivalent gold production of 2.1 million oz for its 2016 financial year.

Share earnings would be $0.14 cents against $0.00c/share last year. Headline earnings per share are expected to be 1,500% higher than the $0.01 per share reported for H1 2015, at $0.16 per share, it said.

In addition, normalised earnings for the period are expected to be 1,200% higher than the $0.01 per share reported for H1 2015 at $0.13 per share.

The performance was primarily driven by an increase in the US dollar gold price which was 3% year-on-year, and lower net operating costs in local currencies as well as the impact of converting these costs at weaker exchange rates, it said.

In the first half of its 2016 financial year, the Australian dollar was 5% weaker year-on-year, and the rand was 29% weaker against the US dollar.

Second quarter gold production was expected to come in at 529,000 oz compared to 515,000 oz in the first quarter of the year. AISC would be $1,023/oz (Q1: $961/oz) and AIC would be about $1,061/oz (Q1: $986/oz).

Gold Fields is due to report its figures on August 18.

JPMorgan Cazenove upgraded Gold Fields to neutral from underweight with a price target of R87/share by July 17. Shares in Gold Fields were currently trading at R84,60/share valuing the company at R69bn.

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