[miningmx.com] – GOLD Fields said gold production for 2012 would fall to 3.4 million ounces and could not discount further adjustments on guidance as a go-slow as its key South African mine, South Deep, and other disruptions took hold.
Gold Fields said in July it was on course to meet full-year guidance of between 3.5 million and 3.7 million oz for the year. While it met guidance for the June quarter of some 862,000 oz, the group is obviously facing headwinds to gold production for the remainder of the year.
In positive news for the group, however, it said it had readjusted its dividend policy which Gold Fields CEO, Nick Holland, said was not necessarily to pay more dividends, but would ensure it did not pay less during times of capital expansion. “We want to protect our position as a top dividend payer,” said Holland.
In terms of the new dividend policy, Gold Fields would pay out between 25% and 35% of normalised net earnings, irrespective of capital expenditure. This compares to the previous policy of paying 50% of earnings net of growth capital. Gold Fields has a historic dividend yield of between 2.5% to 3% of earnings, a yield only challenged by Newmont (2%) in its peer group.
Holland said talks to establish the joint development of tailings on the west Rand of Johannesburg with Gold One International, had taken a step forward.
Holland was speaking at the presentation of the group’s June quarter and interim results. On a quarterly basis, the group posted R1.6bn in net earnings, a near R400m improvement on June quarter performance of 2011. On an interim basis, net earnings came in at R3.7bn compared to R2.4bn at the half-year stage in the 2011 financial year. Shares in Gold Fields rose 1.62% to R112.75/share in early morning trade on the JSE. The stock started the year at about R127/share.
Roughly 100,000 oz in gold production was lost in the quarter owing to a “mystery” fire at another South African mine, KDC, which consequently lost 50,000 oz of gold; the temporary suspension of heap leach operations at the Tarkwa mine in Ghana (15,000 oz), and safety related stoppages at Beatrix (20,000 oz).
The possibility of even lower gold production for the year, however, relates to the go-slow at South Deep, an operation Gold Fields hopes to ramp up to 700,000 oz by 2015, and is therefore one of South Africa’s few growth gold projects.
Only 15,000 oz was lost at South Deep in the quarter but the industrial action continues amid the issuance of a Section 189 notice aimed at restructuring the mine in line with a new operating model.
Gold Fields said of 2,800 employees that could be eventually affected by the restructuring at South Deep, some 300 employees, mostly members of the United Association of South Africa (UASA) union, had already accepted the new operating model.
Gold Fields also acknowledged that litigation aimed at furthering silicosis claims, initially on the basis of a class action suit of employees who used to work at the mine and were allegedly infected with lung disease, had taken a step forward.
Gold Fields has 10 days to respond to the first phase of the litigation, which is aimed at certifying the class action. Its lawyers were studying the documents, it said. “We think the process is manageable,” said Holland.
Commenting on a potential joint venture with Gold One International, Holland said Gold Fields anticipated a combined surface retreatment operator producing gold equivalent ounces of some 300,000/year. The total resources within the two companies combined surface assets totalled four million oz of gold and some 65 million pounds of uranium.
“The signs are positive,” said Holland. “It would allow us to create a major facility with high grade uranium and would provide us with a location to deposit tailings from Cooke shaft,” he added. Internal rates of return would double-digit.
