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Gold Fields: Thoughts On Recent Price Action - Seeking Alpha

Friday, 7 June 2019

Summary

  • Gold Fields gets a massive boost from recent gold price upside.
  • The company's increasing fundamental strength is the reason for the positive market action.
  • While such fast upside deserves some partial profit taking, Gold Fields shares may have more room to run.

Back at the beginning of April, I wrote that Gold Fields (GFI) shares looked interesting from both a momentum and more longer-term points of view. The recent upside in gold prices (GLD) ignited a material move in Gold Fields and select gold miners.

A number of material events happened since the previous article was published. Let’s go through them one by one:

  1. Gold Fields raised $1 billion in new bonds. The company issued a $500 million five-year bond with an interest rate of 5.125% and a $500 million 10-year bond with an interest rate of 6.125%. As I expected in my previous article, Gold Fields did not have any problems with refinancing since the period of heavy capex is over and the company is set to grow its cash flow.
  2. The company partially sold its stakes in Maverix Metals Red 5, getting C$16.1 million in May and $88 million in June. Gold Fields plans to direct the proceeds towards debt repayment.
  3. Gold Fields bought back $250 million of notes due 2020; $600 million more remain. The company plans to repay them from a combination of available cash and bank debt facilities.
  4. At the beginning of June, Gold Fields reported a fatality at South Deep, the company’s troubled mine which has recently went through a period of workforce reduction due to restructuring. The company closed the affected area until it will be safe. The area accounts for approximately 10% of South Deep’s planned production this year, so no material impact on the company's results should be expected. Unfortunately, the deep nature of South African mines and the human labor-intensive production make periodic fatalities almost unavoidable.

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