Business Context and Reporting Period
Company: Gold Fields Limited (JSE, NYSE: GFI)
Filing Type: Form 6-K (Trading Statement)
Reporting Period: Six months ended 30 June 2020 (H1 2020)
Date Issued: 5 August 2020
Gold Fields is a globally diversified gold producer with operations in Australia, Peru, South Africa, and West Africa. This filing provides preliminary trading results for H1 2020, noting that the financial information has not yet been audited.
Key Financial Metrics
| Metric | H1 2020 (Expected) | H1 2019 (Reported) |
|---|---|---|
| Basic Earnings Per Share (EPS) | US¢17.1 - 18.9 | US¢9.0 |
| Headline EPS (HEPS) | US¢19.5 - 20.5 | US¢5.0 |
| Normalised Earnings Per Share | US¢35.5 - 38.5 | US¢15.0 |
| Attributable Gold Equivalent Production | 1,087,000 oz | 1,083,000 oz |
| All-In Sustaining Costs (AISC) | US$986/oz | US$891/oz |
| All-In Costs (AIC) | US$1,065/oz | US$1,106/oz |
Q2 2020 Specifics: Production was 550,000 oz with AISC of US$997/oz and AIC of US$1,069/oz.
Material Changes vs. Prior Period
- Earnings Growth: Basic EPS is expected to increase by 90-110% YoY, while Headline EPS is expected to rise by 290-310%. The primary driver is the increase in the gold price received.
- Production: Gold equivalent production increased marginally (1,087koz vs 1,083koz). This was driven by the Gruyere mine (commenced July 2019) and an alignment of production months with calendar months (adding 10 extra days in H1 2020). These gains were offset by Covid-19 stoppages at South Deep and Cerro Corona, and lower copper prices reducing gold-equivalent ounces at Cerro Corona.
- Costs: AISC increased 11% YoY due to higher net operating costs (waste tonnes moved from capital to operating at Damang), sustaining capital, royalties, and lower by-product credits. Conversely, AIC decreased 4% YoY due to a US$137m reduction in project capital expenditure.
Guidance, Outlook, and Risks
Revised FY 2020 Guidance
- Production: Remains intact at 2.200Moz - 2.250Moz.
- AISC: Revised upward to US$960/oz - US$980/oz (Original: US$920/oz - US$940/oz).
- AIC: Revised upward to US$1,070/oz - US$1,090/oz (Original: US$1,035/oz - US$1,055/oz).
The revised cost guidance assumes a Rand exchange rate of R17.00 and an AUD rate of 0.70 for H2 2020. Increased royalties (US$15/oz) and Covid-related costs (US$10/oz) account for the guidance increase.
Risks and Contingencies
- Covid-19 Impact: Estimated at US$20/oz for H1 2020. Potential further disruptions pose a risk to both production and cost guidance.
- Unusual Items: The 10 extra production days in H1 2020 were a one-off adjustment with no impact on H2 2020.
- Audit Status: The financial information in this trading statement has not been reviewed or reported on by external auditors. Full results are expected on 20 August 2020.
Investor Verification Checklist
- Verify the final audited H1 2020 results upon release on 20 August 2020 to confirm the preliminary earnings ranges.
- Monitor the impact of the Rand (ZAR) and Australian Dollar (AUD) exchange rates against the US Dollar, as these significantly influence cost guidance.
- Assess the extent of ongoing Covid-19 operational disruptions at South Deep and Cerro Corona against the revised production guidance.
- Review the specific accounting treatment of waste tonnes at Damang to understand the shift from capital to operating costs.