Gold Fields hit by earnings plunge
Gold Fields is pinning its growth hopes on South Deep - its only remaining South African asset.
|||Johannesburg - Global diversified producer Gold Fields, is pinning its growth on South Deep, its only remaining South African asset, after announcing that the group’s earnings had halved in the quarter to December, resulting in a sell-off that saw the stock fall to new record lows on the JSE yesterday.
Gold Fields yesterday announced impairments on its assets in Ghana and the Philippines and an 11 percent drop in revenue for the quarter under review.
Read: Gold Fields banks on SA mine as earnings fall
However, it declared a final dividend of 21 cents a share in line with the company’s dividend policy to pay out a dividend of between 25 percent and 35 percent of its earnings.
The news sent Gold Fields shares down by as much as 19 percent in intraday trade yesterday, before paring some losses to close the day 14.78 percent down at R55.99.
The company, which unbundled its ageing South African operations Driefontein and Kloof into Sibanye Gold – the country’s largest gold producer in 2013 – said it was getting basics right at South Deep.
“At South Deep, good progress has been made on getting the basics right, with early encouraging indicators emerging in the second half of 2015,” the company said.
Gold Fields said it expected attributable equivalent gold production of between 2.05 million ounces and 2.1 million ounces for the group, with decreases in the international operations partly offset by the growth in production at the South Deep operations.
It forecast 30 percent higher production at South Deep to about 257 000 ounces this year. In the last quarter to December, the mine posted a 24 percent increase in production to 68 000 ounces and 198 000 ounces for last year.
It was, however, expecting lower production from the Australian region to about 905 000 ounces, lower copper and gold output at Peru’s Cerro Corona operation and lower production from Damang in Ghana, given the review that was currently under way.
Sibonginkosi Nyanga, an analyst at Momentum SP Reid Securities, said Gold Fields was different to local gold companies, as it only had one asset in South Africa, and did not feel the full effect of the weakening rand against the dollar. South Deep contributed 198 000 ounces out of total production of 2.23 million ounces.
“South Deep is a fantastic resource, the question is whether management will be able to make it work. Their production guidance of 257 000 ounces is lower than 2013 output of 302 000 ounces. They are saying let us go back to the basics, if we sort out the basics we will be in a position to increase production. Recent production increases, albeit from a small base, could be a big boost of confidence that the mine is in the process of a turnaround,” Nyanga said.
Gold Fields reported normalised earnings of $15 million (R231m) for the December quarter down from $22m in September and $17m year on year. Net losses attributable to shareholders of $258m for the December quarter compared with net earnings of $18m for the September period and net losses of $26m for the December 2014 quarter.
Revenue for the quarter fell by 11 percent to $2.5 billion.
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