[miningmx.com] – GOLD Fields’ South African mine, South Deep, has targeted a 30% leap in gold output in 2016 and is expected to do more of the heavy-lifting in a year that sees output fall in the group’s other operating regions.
Nick Holland, CEO of Gold Fields, said in the firm’s December quarter and year-end operating and financial results announcement that the group would produce up to 2.1 million ounces compared to 2.16 million oz in the 2015 financial year.
Of this, South Deep would produce 257,000 oz compared to the 198,000 oz it achieved in the 2015 financial year. “The 30% increase in production from South Deep is expected to be driven mainly by an increase in available working places; an increase in productivity; fleet expansion; and grade improvements,” Holland said.
Set against this improvement – which is still leagues below the 650,000 – 700,000 oz target Gold Fields said in 2014 the mine could achieve at full output – production will shrink from Gold Fields’ operations in West Africa, Australia and Chile.
Closures, and lower grades are behind the expected fall in forecast Australian output to 905,000 oz (2015: 988,000 oz) while the negative impact of the lower copper price on Cerro Corona’s equivalent gold production would reduce its output to 260,000 oz (2015: 295,000 oz). In West Africa, there would be lower production from Damang given the review of the operation currently underway.
Of the declines in output, Gold Fields seems most concerned about Australia. The group said it would budget A$86m (R952m) for exploration in 2016 having spent intensified its search for more gold from last year in which its spent A$91m (R1bn). It described its exploration efforts in Australia as part of a three-year strategy.
“We are targeting to replace depletion in 2016 and aim to add additional targets to the pipeline that will give us improved flexibility and optionality over the long term,” Gold Fields said in its fourth quarter and full-year results commentary.
“Over the past decade, our exploration efforts have largely resulted in us being able to replace what has been mined and we believe there are reasonable prospects that this can be replicated in the future,” it said.
Analysts were mildly concerned about the lower production guidance and its financial impact. “We believe the market might be slightly disappointed with 2016 production guidance which appears light,” said Kane Slutzkin, an analyst for UBS.
Goldman Sachs said there was a possibility the company’s dividend would be compromised in the future owing to lower production. “The key point to note is that given declining production this dividend may not be sustainable,” it said.
DIVIDEND
Gold Fields paid a 21 South African cents per share final dividend taking the total dividend to 25c/share, equivalent to a 5.9% dividend yield based on Wednesday’s share price. Shares in Gold Fields were slightly weaker in early morning Johannesburg trade.
The company impaired $300m in assets in the fourth quarter including $50m at Darlot in Australia and Damang in Ghana; some $105m of deferred assets were de-recognised and investment impairments were $105m.
Normalised earnings, however, came in at $15m for the December quarter compared to $22m in the previous quarter and $17m for the 2014 December quarter.
For the year, net losses attributable to Gold Fields shareholders were $242m compared with net earnings of $13m in 2014. There was a headline loss of $28m (2014: $27m) while normalised earnings were $45m (2014: $85m).
