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Gold Fields: Reduced Risks Makes The Stock A Buy - InvestorPoint.com

Friday, 21 August 2015

In 2012, Gold Fields (NYSE:GFI) was producing about 3.5 million ounces of gold per year, and 48% of those ounces were from the company's South African mines. Gold Fields: Reduced Risks Makes The Stock A Buy In 2012, Gold Fields (NYSE:GFI) was producing about 3.5 million ounces of gold per year, and...

In 2012, Gold Fields (NYSE:GFI) was producing about 3.5 million ounces of gold per year, and 48% of those ounces were from the company's South African mines. But their operations in SA were struggling with high costs and labor unrest. Investors were starting to get uncomfortable with the risks associated with mining in South Africa. Some money managers won't touch companies with unions either, and it seems the unions in SA have more say than the mining companies. A stark contrast to the way the industry was in the 1970's in that country. Getting rid of (or significantly reducing) these risks meant that Gold Fields would become a much stronger company and therefore a much more attractive stock to investors. These were older assets as well, and Gold Fields wanted to focus on production growth. So that year (2012) they decided to spin off these mines into a separate company called Sibanye Gold (NYSE:SBGL). The only operation in South Africa that Gold Fields held onto was South Deep. South Deep has a high level of mechanization, so it was able to avoid the labor conflict. Plus it was a relatively new mine with a low cost and substantial reserves. It could eventually become a cornerstone asset for the company.


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