Our opinion on the current state of GFI

Gold Fields (GFI) is a relatively high-cost international gold mining house with a single mine in South Africa - South Deep. South Deep was bought by Gold Fields in 2006 and it has struggled to make the mine profitable, pouring in a total of R32bn (R22bn purchase price plus R10bn in development costs) into it over the past 14 years. Brett Kebble once described South Deep as, "The world's most expensive long drop". South Deep is 3 kilometres deep and a very difficult mine with many technical complications, but it is the second largest unmined gold resource in the world - hence Gold Field's persistence. Gold Fields is working with an independent power producer (IPP) to build a 50MW project in SA. The company has spent a total of $502m over the past two years to ensure that Damang and Gruyere (international operations) would produce 2 million ounces a year for the next ten years. South Deep now has R800m less in costs and R400m less in capital expenditure. The company is focusing on bringing the new Salares Norte gold mine in Chile into production. On 11th June 2021 the company announced that it had reached a 3-year wage deal with the National Union of Mineworkers (NUM) and USASA for an average 6,5% wage increase per annum. On 31st May 2022 the company announced that it had acquired Canadian company, Yamana Gold, in an all-share deal worth about R103bn. The announcement caused Goldfields share price to drop 20% because of the impending dilution and the fact that the company is thought to have over-paid for this investment. By 13th June 2022 two major shareholders of GFI were objecting to the transaction. On 11th July 2022 the company said that it would list on the Toronto Stock Exchange and that it would adopt a dividend policy of paying between 30% and 45% of profits out. The CEO, Chris Griffiths said, "The acquisition of Yamana represents the culmination of many months of assessing the best option to accelerate Gold Fields’ growth strategy and deliver long term shareholder value. Having explored both organic growth and bolt-on acquisitions, moving now to complete this transaction is the best opportunity for both speed of delivery and value to accelerate the next phase of the company’s growth". Its protracted investment in South Deep is definitely beginning to pay off with output expected to rise by about 25% over the next 4 years. On 9th November the company announced that its bid to purchase Yamana had fallen through. The news sparked a 20% gain in GFI's share price. In its results for the six months to 30th June 2023 the company reported gold production down slightly at 1,154m ounces. Headline earnings per share (HEPS) fell to 51c (US) from 58c in the previous period. The company said, "Attributable gold equivalent production for H1 2023 was 1,154koz, a 4% decrease YoY (H1 2022: 1,201koz), underpinned by the planned decline in production from Damang". In an operational update for the 3 months to 30th September 2023 the company reported production of 542 000 ounces and an all-in sustaining cost of $1381 per ounce. The company said, "Group attributable gold-equivalent production for Q3 2023 was 9% lower YoY at 542koz (Q3 2022: 597koz) and was 6% lower QoQ (Q2 2023: 577koz). The largest decline in production volumes YoY was reported in the Ghana region, which in line with the mine plan is reducing production volumes at Damang". Technically, the share is very volatile and subject to shifts in the international price of gold. It rose sharply since the beginning of March 2023 in line with the higher US dollar price of gold and has been falling since 4th May 2023. It remains a volatile commodity play.

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