Presenting on the company’s financial results for the six months ended June 30, NYSE- and JSE-listed Gold Fields CEO Nick Holland said the strong gold price, spotting between $1 400/oz and $1 450 during the period, has helped the company positively turn its cash flow position around.

The company generated cash flow of $49-million, compared with a net cash outflow of $79-million in the first half of last year, owing to two years of reinvestment or project development.  

Holland expects Gold Fields’ cash generating ability to improve further in the second half of the year and into 2020, as project capital expenditure reduces and new projects start to contribute to cash flow.  

Holland on Thursday announced that the company made an attributable profit of $71-million, or $0.09 apiece, compared with losses of $367-million, or $0.45 apiece, in the six months ended June 30, 2018.

Normalised profit for the reporting period was $126-million, compared with $43-million in the prior comparable period.

The company declared an interim dividend of 60c apiece, compared with the 2018 interim dividend of 20c apiece.

Attributable gold-equivalent production for the reporting period increased by 9% year-on-year to 1.08-million ounces, compared with 994 000 oz in the prior comparable period.

The company has eight operational mines in five countries, and is developing two projects – Salares Norte, in Chile, and Gruyere, in Australia.  

PROJECT ADVANCEMENT

After two years of capital investment and development, the Gruyere project poured its first gold in June, and the processing plant reached practical completion – ran uninterrupted for 96 hours – on August 10. The project is now being ramped up to steady-state production.

Holland said it should take between six and seven months for the project to ramp up to its 8.2-million-tonne-a-year processing capacity.

Gold Fields expects Gruyere to produce between 75 000 oz and 100 000 oz of gold for the year.

Holland noted that the company would chase a 300 000 oz/y production target for the mine in 2020.

Meanwhile, the company’s Damang mine, in Ghana, is on track to meet full-year guidance of 218 000 oz; the mine produced 112 000 oz during the reporting period.

At the end of the second quarter, and 30 months into the Damang Reinvestment Project, total material mined amounted to 103-million tonnes, which was 19% ahead of the project schedule.

Holland anticipated opening up the “heart” of the mine’s orebody, which has been the objective, by the second quarter of next year.

Meanwhile, during the reporting period, the focus at Salares Norte was put on responding to queries related to the environmental-impact assessment (EIA), as well as progressing detailed engineering, which was at 33% completion at the end of the reporting period.

Holland said the Chilean government was expected to approve the EIA within the next 12 months.

The company continued district exploration at Horizante, a concession near Salares Norte’s proposed processing plant site.

REGIONAL PERFORMANCE

Gold Fields’ Australian operations – St Ives, Granny Smith and Agnew – produced 435 000 oz of gold in the period under review, compared with the 442 000 oz produced in the prior comparable period.

Australia accounts for 38% of the gold miner’s production.

Holland said the Invincible complex at St Ives continued to grow laterally and at depth and was expected to be a key source of ore for years to come. At Agnew, drilling at Waroonga North continued to yield positive results, with indications that it is open laterally and at depth.

Similarly, the Redeemer and Barren Lands deposits were emerging as likely new ore sources for the future. Resource and reserve delineation was under way and was expected to be completed by the next declaration, early in 2020.

Gold Fields reported attributable gold production from its West African operations of 400 000 oz in the reporting period, compared with the 319 000 oz produced in the prior comparable period, largely owing to contributions from the Asanko mine, and increased production from Tarkwa and Damang.

This region accounts for 39% of the company’s production.

Gold Fields’ Cerro Corona mine, in Peru, produced 156 000 oz in the reporting period, compared with 137 000 oz in the prior comparable period.

The Americas region accounts for 15% of the company’s production. The company during the reporting period acquired a 16% stake in TSX-listed Chakana Copper.

Meanwhile, at South Deep, in South Africa, the company recorded positive increases on most performance metrics during the second quarter of the year, after a slow start to the first quarter, which followed restructuring at the end of 2018.

The mine produced 92 000 oz of gold during the reporting period, compared with 97 000 oz in the prior comparable period.

As part of the restructuring in 2018, the mobile underground production fleet was rationalised. The drill rig fleet was reduced by 29% from 21 to 15 rigs.

Holland commented that South Deep contributed only 8% to the company’s production.

He said the company’s production in South Africa had been heavily affected by higher wages, coupled with lower productivity rates and high energy costs.

The company spends about R500-million a year on electricity and this is expected to triple within the next few years on the back of higher tariffs implemented by State-owned power utility Eskom.

Holland noted that the gold industry in South Africa had been declining, mostly owing to high operating costs, to such a point that gold mining was now contributing only 1% to gross domestic product (GDP).

Mining’s contribution to GDP was 21% in 1970 – driven by gold and platinum production.

Gold Fields remained on track to achieve its yearly guidance at between 2.13-million and 2.18-million ounces of gold.