Gold Fields is coming to the end of a $950m (R14.5bn) international expansion programme and expects to build on the threefold increase in interim dividends it declared on Thursday.
Gold Fields declared a R0.60 a share dividend for the six months to end-June compared with a R0.20 dividend in the same period a year earlier.
Gold Fields has spent $800m on revamping its Damang mine in Ghana, the Gruyere joint venture in Australia and buying a stake in the Osanko mine in Ghana, as well as another $150m exploring its Salares Norte prospect in Chile, the next potential gold mine in the company.
“I can’t give you a profit and cash-flow forecast, but our project spend on Gruyere is all but finished,” CEO Nick Holland said in an interview. “Damang’s spend is coming down in the second half. Our other operations are all solid, so at these higher gold prices, if they hold, we should do reasonably well in the second half.”
Out of a total capital spend for the year of $633m, Gold Fields had already spent $350m and had $283m left in the second half of the year.
The Gruyere mine at the spot price of above $1,500/oz will have a $1,000/oz pre-tax margin from 2020. “That’s a lot of money,” Holland said.
The international expansion has meant SA contributes just 8% of Gold Fields’ production, which will top 2-million ounces in 2019.
There are concerns about the impact of Eskom’s cost increases on the South Deep mine, the last Gold Fields asset in SA. Holland said at the rate electricity prices are rising, the company could double its annual electricity spend to R1bn a year in five years.
For a company with a single mine, this had the potential to lead to further restructuring to maintain a profit margin, but for the broader gold and mining industry in SA there would be severe repercussions.
“The industry is going to have to shed a lot of jobs generally. You have to find a way to offset these tariff increases if the industry is going to remain profitable in the long term. It’s a real macro-economic crisis for the industry and SA,” Holland said.
“Eskom can be fixed in the long run, but at one hell of a cost. And the guys who will pay for it is us, large bulk users,” Holland said, adding Gold Fields and an independent power producer were going to push hard to secure approval for a 40MW solar project in SA, to contribute about a quarter of the mine’s power needs.
Gold Fields reported a $71m profit after a $367m loss before and it turned cash positive “earlier than originally anticipated”, generating net cash of $49m compared with outflows of $79m a year before.
The dividend was equivalent to 28% of its normalised profit of $126m for the period. A year ago, normalised profit was $43m. Gold Fields pays out between 25% and 35% of this metric.
Gold output broke through 1-million ounces in the interim period, reaching 1.08-million ounces, up from 994,000oz a year ago, pushed up by the inclusion of production from the 45%-held Asanko joint venture in Ghana.
Revenue grew by 2% to $1.38bn as a lower dollar gold price offset the higher production. The received gold price dipped to $1,298/oz from $1,306/oz a year earlier.
Looking ahead, Gold Fields kept its production target unchanged at 2.13-million to 2.18-million ounces at an all-in cost ranging between $1,075/oz and $1,095/oz.