Business Context and Reporting Period
Gold Fields Limited, a globally diversified gold producer with operations in Australia, Ghana, Peru, and South Africa, issued a trading statement on February 8, 2018, covering the fiscal year ended December 31, 2017 (FY 2017). The company holds primary listings on the Johannesburg Stock Exchange and secondary listings on the NYSE and Swiss Exchange.
Key Financial Metrics
- Headline Earnings Per Share (HEPS): Expected to range from US$0.23 to US$0.26, representing a 0% to 12% decline from FY 2016 (US$0.26).
- Basic Earnings Per Share: Expected to be a loss of US$0.02 to US$0.05, a significant decrease from the US$0.20 earnings in FY 2016.
- Normalised Earnings Per Share: Expected to range from US$0.16 to US$0.19, down 21% to 33% from FY 2016 (US$0.24).
- Production (FY 2017): Attributable gold equivalent production expected at 2,160koz, exceeding the guidance range of 2,100-2,150koz.
- Costs (FY 2017): All-in sustaining costs (AISC) expected at US$955/oz and all-in costs (AIC) at US$1,088/oz, both below the lower end of prior guidance.
- Q4 2017 Production: Expected at 546koz with AISC of US$959/oz and AIC of US$1,115/oz.
Material Changes and Non-Recurring Items
The net loss for FY 2017 is heavily impacted by specific non-recurring items and operational adjustments:
- South Deep Impairment: A US$278m (gross and after tax) impairment of goodwill was recorded due to a slower-than-expected ramp-up of the rebase plan and a reduction in the gold price assumption used in life-of-mine models. The carrying value of South Deep is now US$1.96bn.
- Legal Provision: A US$30m (gross) / US$21m (after tax) provision for Silicosis and TB Class Action litigation.
- Asset Reversals: A US$53m (gross) / US$38m (after tax) reversal of impairment at Cerro Corona following a mine life extension to 2030. Additionally, a US$39m reversal of impairment at Arctic Platinum following its sale.
- Asset Sale: A US$24m (gross) / US$17m (after tax) profit on the sale of Darlot.
- Amortisation: Increased amortisation at Tarkwa, Cerro Corona, and St Ives impacted basic, headline, and normalised earnings.
Outlook, Risks, and Management Commentary
Management highlighted the successful life extension of the Cerro Corona mine in Peru to 2030, achieved through additional tailings capacity. While production targets were met and costs remained below guidance, the South Deep mine faces challenges with its rebase plan, though the steady-state production target of approximately 500koz in 2022 remains unchanged. The filing notes that the financial information has not yet been reviewed by external auditors, with full FY 2017 results scheduled for release on February 14, 2018.
Investor Verification Checklist
- Verify the final audited figures for the US$278m South Deep goodwill impairment and its impact on the balance sheet.
- Confirm the final status and potential future costs of the Silicosis and TB Class Action litigation.
- Review the detailed breakdown of the increased amortisation charges at Tarkwa, Cerro Corona, and St Ives.
- Monitor the progress of the South Deep rebase plan against the revised production ramp-up schedule.
- Validate the cost savings and production stability at Cerro Corona following the life extension to 2030.