Impairment drags Gold Fields to loss
• Analysts grill CEO Holland at results presentation about failure to make South Deep mine profitable
Gold Fields reported an interim net loss of $369m as it took a hefty impairment against its unprofitable sole remaining asset in SA.
Gold Fields reported an interim net loss of $369m as it took a hefty impairment against its unprofitable sole remaining asset in SA and incurred restructuring costs in Ghana.
For the six months to endJune Gold Fields reported it had swung to a net loss of $369m from a profit of $57m in the same period a year before.
Gold Fields has shed R9.05bn in value since Tuesday morning and its market capitalisation of R30.8bn is well below the R32bn it has poured into South Deep, west of Johannesburg, since buying it in 2006.
Gold Fields shares went into freefall after it said it would cut up to 1,560 jobs at South Deep and retracted all production targets as the management embarked on yet another plan to bring the mine to profit or breakeven at best.
Gold Fields CEO Nick Holland was grilled about the deeply unprofitable South Deep mine during a results presentation on Thursday.
One analyst, Tshepo Molefe, accused the management of feeding the market “gibberish and garbage” in their responses to questions about what has gone wrong at the mine and what the possible solutions are.
Johann Steyn from Citi questioned whether there was a genuine problem with skilled labour or if it was simply a convenient excuse for the management to hide behind because the mine was technically too challenging.
Holland said the swift turnover in senior management is a key problem, as is the inability so far to operate the mine properly and efficiently.
Despite the problems being well understood, however, addressing them is proving tricky, he said.
CFO Paul Schmidt said the all-in sustaining costs at South Deep have to be reduced quickly to R525,000/kg, essentially breakeven. In the interim period costs were R669,306/kg.
The restructuring and “resetting” of the mine will take place over the next six months and new targets will be put in place that can be realistically reached, said Holland, repeating comments he has made before at previous downgrades of targets and deadlines.
Gold Fields halved its interim dividend to US20c per share from US40c the year before.
Net debt increased to $1.393bn from $1.365bn a year ago, while the cash balance remained virtually unchanged at $498m.
“Gold Fields is in a strong financial position, with the integrity of the balance sheet remaining intact after funding cumulative project expenditure [Damang and Gruyere] of $330m over the past 18 months,” said Holland, with reference to the two growth projects in Ghana and Australia.
In Ghana, Gold Fields incurred $81m in restructuring costs at its Tarkwa mine and $15m at its Damang operation.
It incurred losses of $47m on the sale of equipment and inventory in Ghana.
Restructuring costs at South Deep cost $4m in the first half of 2018.
Gold Fields impaired its Far South East project in the Philippines by $20m.
Group gold production fell to 994,000oz from 1.02-million ounces the year before, while all-in costs, which include growth capital, grew to $1,169/oz from $1,092/oz.
ANALYST ACCUSED THE MANAGEMENT OF FEEDING THE MARKET ‘GIBBERISH AND GARBAGE’ IN THEIR RESPONSES