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Gold Fields heralds end of capital spend with cash flow turnaround - MiningMX

Thursday, 15 August 2019

GOLD Fields generated positive financial results for the six months ended June 30 generating positive cash flow after capital expenditure and paying out 28% of earnings in a dividend the group said signalled the end of its reinvestment strategy.

The group reported $49m in positive cash flow (2008: -$79m) on the back of a near 10% increase in gold production to 1.08 million ounces which included the group’s share of gold from its joint venture in Asanko Gold Mines in Ghana. Gold Fields was tracking full-year production guidance of of between 2.13 million and 2.18 million oz.

Attributable net profit came in at $71m or 0.09 US cents per share for the six months which compares to a $367m or 0.45c/share loss in the interim period of the previous year. Normalised profit of $126m was three times as much as in 2018.

Based on Gold Fields’ payout policy of between 25% to 35% of normalised profit, the group said it would pay in South African currency an interim dividend of 60 cents per share. This is better than the 20c/share it announced at the year-end results in February.

"We expect the group’s cash generating ability to increase in H2 2019 and into 2020 as the project capex reduces and contribution from the new projects increases," said Nick Holland, CEO of Gold Fields in notes the group’s results. Holland said in February the firm was at an "inflection point" having locked in stable production for a decade.

Other important features during the six month period was Gold Fields’ busy reworking of the balance sheet, principally five year and 10-year bonds totalling $1bn and agreement on a $1.2bn revolving credit facility. The new debt was to pay $1.29bn in credit facilities and repay bonds due in 2020.

Gold Fields also raised $88m from the sale of non-core assets which was used to retire debt. As of June 30, net debt totalled $1.79bn, a net debt to earnings before interest, tax, depreciation and amortisation (EBITDA) of 1,59x. This is on the basis of a new lease accounting measure adopted by the group in January. Using the old accounting standard, net debt to EBITDA had improved year-on-year.

PROJECTS

A number of Gold Fields’ projects are nearing an end including Gruyere in Western Australia where first gold was poured. Production is expected to be between 75,000 and 100,000 oz in its first year against 230,000 oz/year for the next 13 years. Capital expenditure was unchanged at the adjusted level of A$621m ($421m) following a capex slippage in 2018.

The company had spent $320m to date on extending the Damang mining complex in Ghana ahead of the $275m it had intended to spend at this stage of the program as it was accelerating the project. Commenting on the $834m Salares Norte project in Chile, Gold Fields said it was dealing with inquiries related to its Environmental Impact Assessment. The EIA would be granted in the next 12 months, it said.

There had also been an agreement on taking Asanko Gold Mines forward. The resources and reserves announcement which is due to be completed in the first quarter of 2020, will be premised on a remaining life of mine of eight to 10 years producing gold of 225,000 to 250,000 oz/year. Gold Fields is joint venturing the mine with Asanko Gold, a company listed on the Toronto Stock Exchange.


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