Gold Fields CEO Nick Holland, who has been globally lauded for rejecting the ‘jam tomorrow’ approach of gold-mining companies in a bombshell speech in Melbourne, announced last week that Gold Fields would be putting its money where its mouth was and placing the gold company under rigorous operational review in order to boost its image as a stand-out gold equity.
“We’ve publicised the problem issues and now we have to be decisive ourselves,” CFO Paul Schmidt told a media round table after Gold Fields presentation of results, which saw free cash flow of $100-million for the June quarter come close matching to the $119-million for the half year.
“This is what we’re leading up to, to focus on cash flow,” Schmidt added.
The company also announced a new dividend policy of 25% to 35% of normalised earnings a year after displaying Bloomberg calculations that place it as the number-one dividend payer in its peer group, well ahead of North American companies like Newmont, Barrick and Kinross.
“We’ve reprofiled the use of our cash and the dividend takes the number-one priority,” Schmidt added.
Holland said it was not about ounces at any cost, but about leveraging existing assets to the gold price, paying dividends and giving investors a reason to buy gold equities.
“You take, as a priority, a piece of your cash flow from your existing assets and you pay a dividend. Then you take the rest of the money, and you sustain the business, making sure that every dollar you spend is meaningful,” said Holland.
His sentiment was expressed against the background of five of the top 20 Canadian gold producers by market value, including world leader Barrick Gold, Kinross Gold and Centerra Gold, naming new CEOs this year after their equities lagged the gold price rise.
“We’ll take a private-equity-style approach to managing our business,” Holland added.
Gold Fields is scrutinising, prioritising and sequencing all capital investment projects.
The company has been engaged for some months in an intense study of the under performance of gold shares against the rising gold price and reports that the $120-billion that has been invested in 2 500 t of exchange traded funds (ETFs) exceeds the combined market capitalisations of Barrick, Newmont, AngloGold Ashanti and Gold Fields.
“As an industry, we’re not delivering against expectations and we must set out to provide returns that beat ETFs,” Holland said of listed gold mining companies.