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Gold Fields’ production exceeds guidance but its full-year profit falls

23rd February 2023

By: Donna Slater

Creamer Media Chief Photographer and Senior Contributing Editor

     

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JSE- and NYSE-listed gold miner Gold Fields produced 2.4-million ounces of gold for the year ended December 31 – a 3% year-on-year increase and exceeding guidance of between 2.31-million and 2.36-million ounces.

In what interim CEO Martin Preece describes as an "eventful" year for the gold producer, its profit decreased by 13% to $722-million, while the net profit attributable to the group decreased by 10% to $711-million.

Headline earnings increased by 19% to $1.06-billion, but normalised earnings were 7% lower year-on-year at $860-million.

However, despite its legacy dividend policy stating a payout ratio of 25% to 35% of normalised earnings, Gold Fields declared a final dividend of R4.45 a share, representing a 47% payout ratio. This takes the total dividend declared for 2022 to R7.45 a share.

Cash inflow from operating activities increased by 7% to $1.71-billion, mainly owing to a higher profit before royalties and taxation which was largely as a result of the break fee received in the failed Yamana deal.

Cash inflow was partially offset by a higher royalties and taxation payment and a higher investment in working capital as a result of higher gold in process inventory owing to stockpiling in certain operations in 2022.

In 2022, Gold Fields’ capital expenditure (capex) decreased by 2% to $1.07-billion, comprising sustaining capex of $657-million and non-sustaining capex of $412-million.

Group all-inclusive sustaining costs increased by 4% to $1.1-billion, mainly owing to higher sustaining capex and higher cost of sales before amortisation and depreciation, but partially offset by higher gold sold and the 11% weakening of the rand to US dollar and 8% weakening of the Australian dollar to dollar.

Total all-inclusive costs increased by 2% to $1 320/oz, mainly owing to higher sustaining capex and higher cost of sales before amortisation and depreciation, partially offset by higher gold sold, lower non-sustaining capex and the 11% weakening of the rand to the dollar and an 8% weakening of the Australian dollar to the dollar.

PRODUCTION
Attributable equivalent gold production at Asanko – which is excluded from group revenue as a result of Asanko’s revenue being equity accounted – decreased by 19% year-on-year to 76 700 oz.

Gold-equivalent ounces sold (excluding Asanko) increased by 3% to 2.4-million ounces for the period under review.

For operations in South Africa, Gold Fields’ managed production increased by 12% to 327 900 oz, with production from South Deep having increased by 12% to 316 200 oz.

Managed gold production at the miner’s West African operations decreased by 4% to 838 300 oz, mainly owing to decreased production at Damang with the completion of mining at the Damang pit cutback and decreased production at Asanko as a result of the temporary cessation of mining activities in July 2022 and lower grade material processed from stockpiles.

Gold produced at Tarkwa, in Ghana, increased by 2% to 531 600 oz, while managed production from Damang decreased by 10% to 230 000 oz.

Preece says Tarkwa is a cornerstone asset for the group and is expected to produce about 500 000 oz this year.

Gold production at Asanko, in Ghana, decreased by 19% (on a 45% basis) to 76 700 oz (on a 45% basis).

Gold production at Goldfields’ Australian operations increased by 4% to 1.06-million ounces, with the miner’s production from St Ives having decreased by 4% to 376 700 oz.

He says the group has a solid production base underpinned by its Australian region, which is expected to produce about one-million ounces a year, for at least the next ten years.

In Australia, production from the Agnew mine increased by 7% to 239 200 oz, mainly owing to an increase in yield, partially offset by a decrease in ore tonnes processed; while production from Granny Smith increased by 3% to 287 900 oz as a result of an increase in yield, partially offset by decreased ore tonnes processed.

At Gruyere, in Australia, gold production increased by 28% to 314 600 oz owing to an increase in ore grade and volume processed. 

In South America, attributable equivalent gold production at Cerro Corona in Peru, increased by 5% to 259 200 oz.

Salares Norte, in Chile, is due for first production in the fourth quarter of this year.

Guidance for this year is expected to range between 2.25-million and 2.3-million ounces at an all-in sustaining cost (AISC) of $1 300/oz to $1 340/oz.

Going forward, Goldfields says 2023 is going to be another significant capital expenditure as a result of the remaining project capital at Salares Norte, as well as the elevated level of sustaining capital expenditure across the portfolio to maintain the production base of the group.

The miner also notes that studies on a microgrid at St Ives are ongoing, and that if these are finalised, and the project approved this year, $25/oz will be added to the AISC.

Preece says Gold Fields’ strategy remains centred around three pillars, the first being to maximise the potential of its current assets through people and innovation, the second being to build on its commitment to the environment, social and governance, and third being to grow the value and quality of its portfolio of assets.

He points out that, while the Yamana transaction addressed pillar three, it was not the only option that Gold Fields considered when assessing its strategic options. “We will continue to conduct analysis on the alternatives, which . . . are more focused on incremental growth and/or regional, rather than transformational, transactions.”

“We have strong production growth from 2024 onwards with the completion and ramp-up of Salares Norte and continued build-up at South Deep to 380 000 oz,” says Preece.

However, he says there are assets in Goldfields’ portfolio which are maturing and reaching the end of their lives.

“2022 was the last year of steady state production at Damang post the reinvestment in the pit cutback.

“In 2023, production from Damang will come from a combination of ore from the Huni pit and stockpiles, with only stockpiles being treated from 2024 onwards.

“Cerro Corona will continue to operate at current levels until 2025, after which the level of production will drop significantly as it will also start only processing stockpiles,” Preece points out.

Therefore, he explains that Gold Fields has limited organic growth opportunities in its current portfolio and will need to pursue inorganic opportunities to bolster its pipeline. “These options will include greenfield targets, development projects or ‘bolt-on’ acquisitions of producing assets.”

“We have a clear indication [about] what would be welcomed, [and] what would not be welcomed. The Yamana transaction was not the only thing of interest to Gold Fields. We will continue doing an analysis of alternatives . . . the answer is about ‘bolt-on’ assets, development plays, exploration – and do it incrementally, rather than a transformation deal.

Gold Fields is currently pursuing some smaller asset (in the region of 2.2-million to 2.5-million ounces) deals.

What is key is that any new deal will need to be value accretive. “We are not chasing ounces for the sake of chasing ounces,” he says.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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