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Gold Fields goes south – Mining Journal

Thursday, 27 April 2017

South Deep’s terrible March quarter has dented Gold Fields’ (SJ:GFI) start to 2017 and hopes of the company achieving its annual guidance.Two deaths and rock falls that blocked access to high-grade areas at the South African operation hit production in the first three months of the year. 

The mine produced 45,800 ounces of gold, a drop of 28% on the same period in 2016 and almost half that produced in the December quarter, at an all-in sustaining cost of US$1,784 per ounce.

Last month, the company laid out a rebase plan for South Deep seeking to improve performance at the troubled operation.

Overall group production was 497,000oz of gold, a 3% drop on the March 2016 quarter, at an AISC of $1,114/oz. Production at the company’s Australia assets was also affected by significant rainfall during the quarter.

Gold Fields sold 512,800oz of gold in the quarter, down 3.5% year-on-year, at an average price of $1,216/oz. 

EBITDA was not given in these quarterlies, but CEO Nick Holland said the company lost $35 million in the March quarter, compared with $26 million of profit in the March 2016 quarter.

Guidance was maintained at 2.1-2.15 million ounces, at an AISC of $1,010-$1,030. 

The results were a big miss for RBC Capital Markets analyst Richard Hatch, who said making annual guidance would be a stretch. 

“While it remains early in the year, we believe that Gold Fields, similar to AngloGold Ashanti (SJ:ANG), could see some pressure on its cost guidance depending on foreign exchange movements (not helped by potentially weaker production),” he said. 

Hatch highlighted good production away from South Deep, but said a lack of cash flow could hurt investor confidence in Gold Fields. 

“While there were bright spots in the March quarter – stable performance in Australia, Ghana and Peru, coupled with upscaled progress at Damang – we believe that a poor quarter from South Deep and lack of free cash flow growth will weigh [on performance],” he said.

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