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.