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Gold Fields remains in 'strong' financial position, despite $367m loss, says Holland - Mining Weekly

Thursday, 16 August 2018

JOHANNESBURG (miningweekly.com) – Despite attributable losses from continuing operations for the six-month period ended June 30, of $367-million or $0.45 a share, CEO Nick Holland maintains that the NYSE- and JSE-listed Gold Fields remains in a strong financial position.

Holland further noted on Thursday that the integrity of the South African gold mining company’s balance sheet remains intact after funding cumulative project expenditure, namely at Damang, in Ghana, and Gruyere, in Australia, of $330-million over the past 18 months.

Attributable gold equivalent production from continuing operations for the first half of the financial year, was 994 000 oz, compared with 1.02-million in the first half of 2017.

Normalised profit from continuing operations was $43-million for the period, compared with $78-million for the comparable period.

Normalised profit was impacted on by higher exploration expenditure during the period, particularly as activities at Salares Norte, in Chile, have increased to complete the feasibility study by year-end, Gold Fields said.

Meanwhile, all-in sustaining costs (AISC) for the period were $965/oz, with all-in costs (AIC) of $1 169/oz as a result of the higher project capital.

Net cash flow for continuing operations represented an outflow of $79-million, mainly owing to the growth capital spent at Gruyere, Damang and Salares Norte.

Gold Fields has, however, previously indicated that it expected to be cash negative in 2017 and 2018 as a consequence of building two new mines, as well as the ongoing study at Salares Norte.

Net debt increased to $1.3-billion.

Gold Fields’ international operations, meanwhile, continued to perform well for the six months, generating about $190-million in net cash flow, before project capex, for the group, it said on Thursday.

ADJUSTED GUIDANCE
Gold Fields, meanwhile, expects its attributable equivalent gold production for the full year to be within the original guidance of between 2.08-million and 2.10-million ounces.

AISC is expected to be between $990/oz and $1 030/oz and AIC is expected to be between $1 190/oz and $1 210/oz.

Meanwhile, despite having faced operational obstacles at its South Deep mine, in South Africa, Holland on Thursday, during a conference call, said the production guidance for the mine, is unchanged from the 7 600kg provided in April.

However, he warned that, given the potential volatility related to the proposed restructuring, which was announced earlier this week, there is an increased level of uncertainty with this forecast.

During the first quarter of the year, however, South Deep completed Phase 1 of its organisational restructuring plan, which focussed on the lower levels of the organisation through a voluntary retrenchment programme, which resulted in over 200 employees leaving the company.

In the fourth quarter of 2017, South Deep saw a 25% reduction in the management level as part of its restructuring.

Although the restructuring had been mostly voluntary in nature, Holland noted that it had had a significant impact on productivity and output during the six-month period.

Earlier this week, however, the company announced that it is preparing to lay off up to 1 560 people at the mine, marking another attempt at restoring the operation.

It is envisaged that about 1 100 permant employees could potentially be impacted by the proposed restructuring, while about 460 contractors could also potentially be impacted.

South Deep employs 3 614 full-time employees and 1 940 contractors.

For the six months, production at South Deep decreased by 19% year-on-year to 3 003kg from 3 710kg.

AIC for the six months increased by 8% year-on-year to R715 373/kg, mainly owing to lower gold sold, while net cash outflow for the six months was R656-million.

With a focus on securing the future with intensive near-term initiatives and in support of returning the mine to sustainable profitability, Holland on Thursday noted that the company proposes to temporarily suspend mining activities at 87 level and redeploy these mining crews into the 4W corridor.

Services at the eastern part of the mine from the Twin Shafts and re-staff South Shaft operations will be reduced to a single shift daily, while the South Shaft will also facilitate the provision of water and backfill reticulation, water pumping as well as ventilation to full mining operation.

Gold Fields also aims to reduce its growth capex fat the mine or the next 18 months to reduce the cash burn. New development, Holland said, has outperformed the plan in recent years, which allows the company some flexibility to reduce the activity for the near-term.

Given the impact of the restructuring in the fourth quarter of 2017 and early 2018, Gold Fields is, so far, unable to quantify the impact of the proposed large-scale restructuring on production in 2019 and beyond.

Additionally, Gold Fields will account for its contribution from the Asanko joint venture (JV) from July 31, 2018, and as such, production of 43 000 oz is expected to be attributable to Gold Fields from the JV.

The miner’s Damang and Gruyere operations, meanwhile, are tracking good performances, Holland said.


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