Gold Fields seeking “incremental growth” after Yamana failure, says interim CEO

Martin Preece, interim CEO, Gold Fields

GOLD Fields will return to dealmaking in order to remedy a steep production decline from about 2026 with the focus falling on incremental growth rather than blockbuster deals, said the firm’s interim CEO, Martin Preece.

In May last year, Gold Fields bid $6.7bn for Canadian firm Yamana Gold but was knocked out by a rival bid from Agnico Eagle and Pan American Silver in November.

The disappointment resulted in the resignation of CEO Chris Griffith who had been with the company for less than two years. Gold Fields said Griffith’s departure was so the company “could move forward”.

“We will continue to conduct analysis on the alternatives, which, to the extent that they involve potential M&A, are more focused on incremental growth and/or regional, rather than transformational, transactions,” said Preece.

He was commenting on the firm’s operating and financial results today in which attributable profit for the 12 months ended December 31 came in at $711m or 80 US cents a share compared to $789.3m or 89 US cents/share in the previous financial year.

After producing 601,000 ounces in the December quarter (2021: 597,000 oz) full year production totalled 2.39 million oz compared to 2.34 million oz. All in sustaining costs (AISC) rose to $1,105 per ounce compared to $1,063/oz in 2021.

The company declared a final dividend of 445 South African cents a share which resulted in a total dividend payment declaration for the 12 month period of 745 SA cents a share. About half of a $200m break-fee paid by Yamana to Gold Fields was passed out through the dividend, with the balance pumped into debt.

Net debt subsequently fell to $704m as of December 31 from $969m at the close of the previous financial year. Gold Fields normally pays between 25 to 35% of normalised earnings (it will pay out 47% in 2022 owing to the break-fee being passed on), but it will be increased to 30 or normalised 45% earnings from the interim results this year.

Gold Fields’ production of about 2.3 to 2.4 million oz a year increases to 2.7/2.8 million ounces with the commissioning of its Salares Norte mine in Chile from 2024 and build up of South Deep production in South Africa. But gold production declines steeply after returning output to its current level by 2030.

Commenting on the group’s expansion plans, Preece said the firm had “limited organic growth opportunities” and would therefore focus on “inorganic opportunities to bolster our pipeline”. These would include “greenfields targets, development projects or bolt-on acquisitions of producing assets,” said Preece.

“Greenfields will potentially include exploration in targeted jurisdictions as well as taking minority stakes in exploration companies like we have done with Chakana Copper in Peru and more recently with Torq Resources and Tesoro Gold in Chile,” said Preece.

For 2023, Gold Fields forecast gold production of 2.25 to 2.3 million oz and an AISC of between $1,300 to $1,340/oz.

Salares Norte delay

First production from Salares Norte is due this year but Preece said “indications were” the mine’s commissioning had run into a further three month delay owing to skills shortages encountered by the main contractor. First gold was now expected in the fourth quarter of this year, said Preece.

In August last year, Gold Fields said capital expenditure on the project would increase to as much as $940m from the previously scoped $860m were it to be commissioned in June 2023 which would make it about three months late.

Among Gold Fields’ best performing assets during the 12 month period was the South Deep mine, for years a disappointing asset. It reported a 12% improvement in production to 328,000 ounces