Gold Fields' Shares Fall After Another Guidance Cut, Disappointing Profit — Update

By Christian Moess Laursen

Shares in Gold Fields slipped on Friday after the South African miner booked a lower-than-expected net profit for the first half of the year and cut its full-year production target for a second time due to operational issues.

Its London shares fell as much as 7.4% to 263.02 South African rand in early morning trading. However, shares are up 18% over the past twelve months, driven by strong gold futures.

The miner, one of the world's largest producers of the precious metal, said Friday that it achieved $389 million in net profit in the half-year, down from $457.8 million in the same period last year, while revenue rose 15% to $2.21 billion.

These were markedly lower than the market consensus of $416.9 million in net profit and $2.30 billion in revenue, according to a Visible Alpha poll. Headline earnings--a closely-watched metric for the company--plummeted 30% to $320.7 million, or 36 cents a share.

The results were hurt by a 20% tumble in gold volumes sold as production suffered from severe weather events in Chile and Australia, as flagged by the company earlier this month.

This led to a 20% drop in output to 918,000 ounces, and another cut to full-year production guidance after the reduction announced in June.

Gold Fields now expects to produce between 2.05 million and 2.15 million ounces for the year, down from its previous forecast of 2.2 million to 2.3 million ounces. It had originally targeted 2.33 million to 2.43 million ounces.

The operational headwinds also drove a cost guidance increase; the company now expects all-in sustaining costs--a measure reflecting the full cost of gold mining--of between $1,580 and $1,670 an ounce, from $1,470 to $1,530 an ounce.

"I am confident of an improved performance in the second half of the year," Chief Executive Mike Fraser said, citing a progressing ramp-up of the Salares Norte operation in Chile and continuing recovery plans at South Deep in South Africa, Gruyere and St Ives in Australia and Cerro Corona in Peru.

The Gruyere and Cerro Corona operations were both hit by inclement weather, while South Deep and St Ives experienced backfill issues and delayed development of new open pits, respectively.

A colder-than-expected winter in Chile caused a pause to development plans of the Salares Norte site and meant Gold Fields had to slash its production guidance to 90,000 to 180,000 ounces for the year from 220,000 to 240,000 ounces.

"Through continued investments in our existing assets, bolt-on acquisitions and exploration we are confident of further improving the quality of our portfolio," Fraser said.

The company bought Canadian company Osisko Mining for $1.57 billion earlier this month to secure supply amid soaring gold prices. This will give the Johannesburg-based company full control over one of Canada's largest gold deposits, Windfall.

For the half-year, it declared a dividend payout of 300 rand cents, equating to 40% of normalized earnings versus a 35% payout a year prior.

Write to Christian Moess Laursen at christian.moess@wsj.com

(END) Dow Jones Newswires

August 23, 2024 04:59 ET (08:59 GMT)

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