Business Context and Reporting Period
Company: Gold Fields Limited
Filing Type: Form 6-K (Trading Statement)
Reporting Period: Six months ended 30 June 2017 (H1 2017)
Date of Filing: 27 July 2017
Business Overview: Gold Fields is a globally diversified gold producer with operations in Australia, Ghana, Peru, and South Africa. The company holds approximately 48 million ounces of attributable gold Mineral Reserves.
Key Financial Metrics and Production
- Earnings Per Share (EPS): Expected to be US$0.06–0.08, representing a 43–57% decrease from US$0.14 in H1 2016.
- Headline Earnings Per Share (HEPS): Expected to be US$0.08–0.10, a 38–50% decrease from US$0.16 in H1 2016.
- Normalised Earnings: Expected to be US$0.09–0.11, a 15–31% decrease from US$0.13 in H1 2016.
- Production (H1 2017): Attributable gold equivalent production expected at 1,047koz (vs. 1,044koz in H1 2016).
- Production (Q2 2017): Attributable gold equivalent production expected at 550koz (vs. 497koz in Q1 2017).
- All-In Sustaining Costs (AISC):
- H1 2017: US$980/oz (vs. US$992/oz in H1 2016).
- Q2 2017: US$949/oz (vs. US$1,016/oz in Q1 2017).
- All-In Costs (AIC):
- H1 2017: US$1,103/oz (vs. US$1,024/oz in H1 2016).
- Q2 2017: US$1,092/oz (vs. US$1,114/oz in Q1 2017).
- Debt and Liquidity: The filing text does not provide specific values for total debt, cash flow, or liquidity ratios.
Material Changes vs. Prior Period
The decline in earnings metrics (EPS, HEPS, and normalised earnings) is primarily attributed to:
- Foreign Exchange: Stronger exchange rates negatively impacted the conversion of local currency costs to US dollars.
- Amortisation: Increased amortisation, mainly at the Tarkwa mine, driven by lower reserve ounces and increased ore mined and stockpiled.
- Non-Recurring Items: Impact from a new silicosis provision.
- Cost Trends: While AISC improved in Q2 2017 compared to Q1, H1 2017 AIC increased compared to the prior year due to the factors listed above.
Outlook, Risks, and Contingencies
Silicosis Provision and Litigation
Gold Fields has raised a provision of US$30.2 million (nominal value US$39.5 million) regarding a potential settlement of class action claims related to silicosis and tuberculosis. This follows the formation of an Occupational Lung Disease Working Group involving major South African miners.
- Legal Status: The Supreme Court of Appeal is scheduled to hear the appeal against the May 2016 High Court ruling between 19 and 23 March 2018.
- Uncertainty: The ultimate outcome remains uncertain. The provision is subject to future adjustment based on settlement negotiations and legal proceedings.
- Company Stance: Gold Fields does not believe it is liable for the claims but is pursuing a comprehensive settlement as preferable to protracted litigation.
Forward Guidance
The forecast financial information in this trading statement has not been reviewed by external auditors. Full H1 2017 financial results are scheduled for release on 17 August 2017.
Investor Verification Checklist
- Verify the final audited H1 2017 financial results released on 17 August 2017 to confirm the EPS and HEPS ranges.
- Monitor the progress of the Occupational Lung Disease Working Group and the March 2018 Supreme Court of Appeal hearing regarding the silicosis class action.
- Assess the impact of foreign exchange rate fluctuations on future cost structures and earnings.
- Review the specific reserve and production updates for the Tarkwa mine to understand the drivers of increased amortisation.