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Gold Fields Swings to Profit in 2016, Raises Dividend -- Update - Morning Star

Thursday, 16 February 2017

JOHANNESBURG--South African mining company Gold Fields Ltd. (GFI.JO) declared a higher dividend after swinging to a profit in 2016 on higher gold prices and weaker emerging-market currencies, and said it plans to reinvest in many of its mines.

The world's eighth-largest producer of the precious metal reported a profit of $162.8 million for the 12 months ended December, reversing from a loss of $242.1 million in 2015. The company's headline earnings per share, which strip out certain exceptional and one-off items, came in at 26 cents in 2016 from a headline loss of 4 cents a share in 2015.

Gold Fields--which mines in South Africa, Ghana, Peru and Australia--said it would pay a second-half dividend of 60 South African rand cents a share, up from a dividend of ZAR0.40 a share in the January-to-June period for a total dividend of ZAR1.10 in 2016. In 2015, the total dividend paid was ZAR0.25.

The improved results are the latest sign of a turnaround in the gold-mining industry in South Africa and globally after years of low prices.

In a statement, the company said it will boost its focus, and spending, on brownfield projects, some of which are already under way in countries from Chile to Australia.

"Investments such as these do not mean that our strategy has changed," the statement said. "We remain focused on generating cash in order to reduce our debt, pay dividends to shareholders and share the value we create with employees and host communities."

Gold Fields said it could spend more cash than it generates in 2017 as it invests in various projects. In 2016, the company reduced its net debt by 16% to $1.17 billion from the previous 12-month period.

Shares of the company on the Johannesburg Stock Exchange are up 3.6% year-to-date, but down 32% over the past 12 months. Gold futures on the other hand have risen 7.3% in 2017, but are essentially flat over the past year at about $1,236 an ounce.

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. (SGL.JO) in 2013. Though a higher gold price has recently provided Gold Fields and other gold-mining companies some respite, the metal is still down more than 30% from its 2011 highs of more than $1,900 an ounce.

The price Gold Fields received per ounce of gold jumped 8.9% during the year through December to $1,241 an ounce from the previous year, cushioning a 0.6% drop in gold production to 2,146,000 ounces. All-in sustaining costs fell 2.7% year-over-year to $980 in 2016. Revenue for the 12 months to Dec. 31 rose 8% from a year earlier to $2.75 billion.

The company's fully mechanized South Deep mine, its only remaining South African asset, reported a 47% increase in output from 2015, due to increased mining volumes, and was cash-flow positive for the first time in 2016.

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