Business Context and Reporting Period
Company: Gold Fields Limited
Filing Type: Form 6-K (Report of Foreign Private Issuer)
Reporting Period: Six months ended 30 June 2019
Announcement Date: 15 August 2019
Gold Fields reported a return to profitability and positive net cash flow for the first time in two years, concluding a major reinvestment period. The Group successfully commissioned the Gruyere project in Australia and executed a significant debt refinancing program.
Key Financial Metrics
| Metric | H1 2019 | H1 2018 |
|---|---|---|
| Profit Attributable to Owners | US$71 million (US$0.09/share) | Loss of US$367 million (US$0.45/share) |
| Normalised Profit | US$126 million (US$0.15/share) | US$43 million (US$0.05/share) |
| Revenue | US$1,379 million | US$1,351 million |
| Attributable Gold Production | 1,083,000 ounces | 994,000 ounces |
| All-in Sustaining Costs (AISC) | US$891/oz (Revised WGC guidance) | US$965/oz (Original guidance) |
| Total All-in Costs (AIC) | US$1,106/oz | US$1,169/oz |
| Net Cash Flow (Operating less Capex) | Inflow of US$49 million | Outflow of US$79 million |
| Net Debt (IFRS 16) | US$1.79 billion | US$1.61 billion (Dec 2018) |
| Net Debt/EBITDA (IFRS 16) | 1.59x | 1.45x (Dec 2018) |
Material Changes vs. Prior Period
- Profitability Turnaround: The Group moved from a net loss of US$367 million in H1 2018 to a net profit of US$71 million in H1 2019. This shift was driven by the absence of the US$482 million impairment charge on South Deep recorded in the prior year and improved operational performance.
- Production Growth: Attributable gold production increased 9% year-over-year to 1.083 million ounces, primarily due to the inclusion of the Asanko joint venture (55,000 ounces) and increased output at Damang and Tarkwa.
- Cost Efficiency: Total All-in Costs (AIC) decreased 5% to US$1,106/oz. Under the revised World Gold Council (WGC) guidance adopted in 2019, AISC was reported at US$891/oz.
- Cash Flow: The Group generated a net cash inflow of US$49 million, reversing the US$79 million outflow seen in H1 2018, as project capital expenditure decreased and core operations returned to cash generation.
Guidance, Outlook, and Management Commentary
2019 Guidance (Unchanged)
- Production: 2.13 million to 2.18 million ounces.
- AISC: US$980/oz to US$995/oz (Original WGC interpretation).
- AIC: US$1,075/oz to US$1,095/oz.
Management Commentary
- Project Milestones: The Gruyere project in Australia poured first gold in late June 2019 and achieved practical completion on 10 August 2019. The Damang Reinvestment Project is 19% ahead of schedule.
- Debt Refinancing: Gold Fields successfully raised US$1 billion in new bonds (5-year and 10-year) and secured a US$1.2 billion revolving credit facility. Proceeds were used to repay existing credit facilities and buy back US$250 million of 2020 notes.
- Asset Sales: Non-core investments (Maverix Metals and Red 5) were sold for US$88 million, proceeds used to retire debt.
- Safety Incident: The CEO reported a fatal incident at South Deep on 2 June 2019 involving a seismic event. The Group emphasized a renewed focus on safety leadership.
- Dividend: An interim dividend of 60 SA cents per share was declared, representing 28% of normalised profit.
Investor Verification Checklist
- IFRS 16 Impact: Verify the impact of the new lease accounting standard on reported Net Debt (US$1.79bn vs US$1.50bn pre-IFRS 16) and EBITDA ratios.
- South Deep Recovery: Monitor the operational recovery and cost stabilization at South Deep following the 2018 restructuring and the recent fatal safety incident.
- Gruyere Ramp-up: Track the timeline for Gruyere to reach commercial production levels and the associated capital cost overruns (Gold Fields liable for up to 10% of overruns).
- Silicosis Settlement: Review the status of the R5.2 billion class action settlement; Gold Fields has provided US$27 million for its share, but the ultimate outcome remains subject to court approval and opt-out periods.
- Asanko Integration: Confirm the revised life-of-mine plan and production targets for the Asanko joint venture, with updated reserves expected in Q1 2020.