[miningmx.com] – GOLD Fields brought some much-needed cheer to shareholders, and the sector in general, saying it would pay a 20 cents/share interim dividend on the back of vastly improved cash flow year-on-year.
June quarter normalised earnings came in at $25m equal to 3c/share against $21m in the previous quarter. The improvement, however, is clearer on an annual basis: Gold Fields registered a $36m loss in the 2013 June quarter.
This was despite slightly lower production of 548,000 ounces in the June quarter and a sluggish gold price, although rand weakness helped price received. The results will no doubt revive the spirits of Gold Fields shareholders.
The group has been a lightning rod for bad news lately with its relationship with the South African government deteriorating following claims by the Department of Mineral Resources (DMR) that the company had failed to live up to social and labour standards.
An investigation by the US Securities Regulation Panel is in progress related to alleged irregularities in the award of an empowerment deal at Gold Fields’ South Deep mine.
South Deep, once a property of formerly listed gold company, Western Areas, is also the subject of a R11bn to R12bn claim by Randgold & Exploration for alleged abuses while the late Brett Kebble, and his father, Roger Kebble, operated Western Areas.
During the quarter, Gold Fields was also surprised by a reverse in the Australian government’s attitude to a Native Title claim against one of its mines which may involve litigation later in the year.
Notwithstanding these exogenous pressures, Gold Fields was able to get on with the business of mining booking a $293m turnaround in cash flow year-on-year. It received a cash inflow of $65m in the June quarter taking total positive cash flow for the financial year to $101m and allowing it to trim net debt down to $1.6bn.
The development of South Deep – by far Gold Fields’ most valuable asset in terms of reserves and resources – remains a headache for the group, however.
The mine is scheduled to produce an adjusted nameplate capacity of between 650,000 to 700,000 oz by the end of 2017, and break-even by mid-2015, but its progress has been delayed by a safety review in which 70% of the mine is in downtime.
Gold Fields said remedial measures to improve support structures in the mine would see production lost for the entire September (current) quarter, an interruption that would extend into part of the December quarter.
An effort to mechanise the mine, which controversially involved importing ex-pat skills from Australia earlier this year, will see the reduction in staffing levels by 550 full-time employees and 1,909 contractors, Gold Fields said.
Production for the full-year, however, would remain at guided levels of about 2.2 million ounces with the shortfall from South Deep compensated by improved performances at its Granny Smith, Tarkwa and Cerro Corona mines.
