Gold Fields

Finweek English Edition - - COMPANIES & INVESTMENTS -

In one of life’s lit­tle ironies, the newlook Gold Fields last week found it­sel f con­fronted by some old­sound­ing prob­lems. Barely three months af­ter un­bundling its strife-torn, age­ing South African mines into Sibanye Gold, Gold Fields was faced with a wild­cat strike at two of t he mines it had de­cided to keep: Da­mang and Tarkwa in Ghana.

The dis­con­tent was wor­ry­ingly fa­mil­iar: work­ers were un­happy at the com­pany’s profit-shar­ing plans while they also de­manded the re­in­state­ment of a worker dis­missed on disc i pl i nar y grounds. And in an echo of SA’s xeno­pho­bia, work­ers claimed ex­pa­tri­ate em­ploy­ees at the mines were be­ing treated bet­ter than lo­cals. They also wanted a cer­tain man­ager dis­missed.

Th­ese griev­ances re­mind one of the broad-sword ap­proach of SA’s own As­so­ci­ated Minework­ers & Con­struc­tion Union (Amcu). The f l ip­side of hav­ing un­bun­dled the 4.1m-ounce-ayear Gold Fields i nto two smaller en­ti­ties is that hicc ups a t the mines have a big­ger im­pact. In­ter­est­ingly, while Gold Fields was try­ing to cool tempers in Ghana, Sibanye Gold was con­tem­plat­ing clos­ing its Beatrix West shaft, a sec­tion of the Beatrix mine in the Free State, which has been made in­ac­ces­si­ble for more than a year by an un­der­ground fire.

Strike ac­tion in Ghana comes at a sen­si­tive time for Gold Fields. The stock has not re-rated post the un­bundling. ( What gold stock has done well re­cently?) While the mar­ket has a glum view on all gold eq­ui­ties, there’s also talk that an­a­lysts aren’t sure how Gold Fields is go­ing to grow. It’s hard to come by hard and fast fore­casts longer than two years out.

Gold Fields quickly moved to in­still con­fi­dence in in­vestors by pub­lish­ing f irst-quar­ter (March) pro­duc­tion guid­ance of some 476 000oz, enough to keep it on beam for f ul l- year out­put of 1.83m oz and 1.9m oz.

Were strike ac­tion at Da­mang and Tarkwa to be ex­tended, how­ever, Gold Fields would have a prob­lem with that guid­ance. The two mines – Tarkwa is by far the big­gest – com­prise twice as much of to­tal gold pro­duc­tion af­ter the un­bundling than be­fore it (43%).

Tarkwa is also Gold Fields’ big­gest mar­gin gold pro­ducer with the sec­ond low­est cash costs. It’s ex­actly the kind of mine Gold Fields CEO, Nick Hol­land, wants to see per­form­ing well in or­der the com­pany meet its prom­ises of qual­ity over quan­tity gold pro­duc­tion.

At the time of writ­ing, nearly all gold and other min­ing stocks were get­ting a past­ing. But since the be­gin­ning of Fe­bru­ary, Gold Fields’ share price has per­formed par­tic­u­larly poorly: down 25% rel­a­tive to An­gloGold Ashanti, down about a fifth.

Nick Hol­land

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