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Gold Fields Raises Dividend After 1st Half Profit Jumps - Update - Morningstar

Thursday, 18 August 2016

JOHANNESBURG--South African miner Gold Fields Ltd. (GFI.JO) declared an increased dividend after turning a much bigger profit in the first half of 2016, as a higher gold price and weak emerging-market currencies helped reduce costs for the company.

The world's eighth-largest producer of the precious metal reported a profit of $121.2 million during the six months to June 30, from a profit of $2.2 million a year earlier. Headline earnings per share, which strip out certain exceptional and one-off items, came in at 16 cents compared with 1 cent in the first six months of 2015, in line with expectations.

Gold Fields said it would pay a dividend of 50 rand cents per share, up from an interim dividend of 4 rand cents per share in the January to June period last year. Shares of the company on the Johannesburg Stock Exchange are up 99% year-to-date, thanks to a 28% increase in gold prices to over $1,350 an ounce. Gold Fields' bigger dividend and better profits are the latest sign that the South African gold mining industry is experiencing a turnaround after years of low prices.

Gold Fields restructured in 2012 and 2013 to cope with lower metal prices, spinning off three aging, higher-cost South African mines to create Sibanye Gold Ltd. in 2013. Though a higher gold price has recently provided Gold Fields and other gold miners some respite, the yellow metal is still down nearly 30% from its 2011 highs of more than $1,900 an ounce.

The company--which mines in South Africa, Ghana, Peru and Australia--reduced its net debt 16% in the first six months of the year to $1.16 billion. Revenue rose 2.7% to $1.3 billion from the same period a year earlier, missing expectations for a 16% gain, according to Thompson One.

Following the Brexit vote at the end of June, "the gold price has increased almost $100 an ounce and is approximately $250 an ounce higher than our planning price for 2016," Gold Fields Chief Executive Nick Holland said. Results were also helped by a weaker rand and Australian dollar versus the U.S. dollar, he said.

Gold Fields reported a 0.8% rise in gold production to 1,044,000 ounces from the first half of 2015. Due to out-performance in some of the company's Australian mines, Gold Fields increased its production guidance for the full year from between 2.05 million and 2.1 million ounces to between 2.1 million and 2.15 million ounces.

The company also recorded a 2.7% increase in the average gold price received to $1,218 an ounce. All-in sustaining costs fell about 8% to $992 an ounce from the previous year.

The company's fully-mechanized South Deep mine, its only remaining South African asset, reported an 87% increase in output from the first six months of 2015, due to increased ore volumes and grades, also contributing to the increased production guidance for the year.

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