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Gold Fields Has Tremendous Value – Seeking Alpha

Thursday, 23 February 2017
Summary
  • GFI is a steady 2 million ounce gold miner that trades at a valuation similar to companies that produce 400,000-800,000 ounces of gold and generate far less cash flow.

  • There are many positive aspects that I see regarding Gold Fields that I believe aren't being priced into the stock.

  • The issues are: South Deep is still up in the air, 2017 will be a year of reinvestment, and more reserves are needed at its Australian operations.

The stock market can be highly inefficient in the short term, case in point, Gold Fields (NYSE:GFI) is only trading at a market cap of $2.86 billion at the moment. Compare that to IAMGOLD (NYSE:IAG), which trades at a $2.13 billion valuation. Yet Gold Fields produces far more of the yellow metal than IAG (2.15 million ounces vs. 813,000 ounces in 2016), has a lower AISC ($980 per ounce vs. $1,050-$1,100 per ounce), and vastly greater gold reserves (46 million ounces vs. 7.7 million ounces).

A good portion of IAMGOLD's value is in its Essakane and Rosebel mines, which are expected to produce 660,000 ounces of gold in 2017 at an AISC of over $1,000 per ounce. Gold Fields' Tarkwa mine will produce 565,000 ounces this year at an AISC of just under $1,000 per ounce. This one operation alone is comparable to those two IAMGOLD assets, yet Tarkwa has far more value as it's a long-life mine. But we aren't done, as Gold Fields also has: 900,000 ounces of gold production coming from Australia at a sub $1,000 AISC, 290,000 gold equivalent ounces from Cerro Corona at an AISC of $780 per ounce, the Salares Norte project in Chile that contains 3.3 million ounces of extremely high grade gold, the Gruyere JV project in Australia that will enter production in late 2018, the South Deep mine, which has a resource base big enough to keep the operation in production for 70 years, and the Damang reinvestment plan which will increase the mine life by 8 years.

I'm picking on IAMGOLD a little here, and IAG does have a few other assets in its portfolio that have value. But overall, the mines and projects that it owns pale in comparison to Gold Fields' portfolio.

 

 


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