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Gold Fields Looks Interesting At Current Levels - Seeking Alpha

Wednesday, 3 April 2019

Summary

  • Gold Fields' shares recovered from the South Deep-related sell-off in August 2018.
  • Now they look ready to continue the upside movement with several potential catalysts.
  • Right now, the market prioritizes cash flow over investment for gold miners, and Gold Fields is entering the right phase of the business cycle.

Shares of Gold Fields (GFI) have now completely recovered from the major sell-off in August 2018 which was caused by the announcement of South Deep restructuring. Currently, the company’s stock resides at roughly the same levels as in July 2018, while the gold price is higher. Is the stock forming a base for more upside? Let’s look at the key moving parts.

2019 guidance

In 2018, Gold Fields produced 2.036 million ounces of gold at all-in sustaining (AISC) costs of $981 per ounce. For 2019, the company expects to produce 2.13 million–2.18 million ounces of gold at AISC of $980-995 per ounce. The first full year of contributions from Asanko (AKG) and the start-up of Gruyere will drive the production slightly up. More importantly, capital expenses are finally going down, which in combination with higher production levels should improve the company’s cash flow performance:

presentation

South Deep mine

The company has managed to go through a very challenging period of South Deep mine restructuring that was characterized by a iolent strike and managed to say goodbye to as much as 1092 employees according to the annual report. This year, the company will be repositioning the mine for profitability – at least, that’s the plan. However, the progress (if it happens) will not be fast: as per the annual report, the company expects that South Deep will produce 193,000 ounces of gold at AISC of $1394 per ounce. At this point, the mine’s future is under a big question. It’s logical that Gold Fields gives a potentially big operation a last chance, but only actual results will show whether it will work out for the company or not. The good news here is that the market’s expectations are low, so South Deep currently serves as a "free option."


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