Record gold prices a store of value for Gold Fields

GOLD FIELDS said yesterday that the rise in the gold price to record levels during the six months ended June had been a bittersweet respite for gold firms as the company generated R5.5 billion in cash flow and profits doubled.

Chief executive Nick Holland said gold represented a store of value today and more than ever before it was up to mining companies to turn that into value for shareholders.

“Our job is to continue our discipline, make sure that our mines are performing optimally and make sure that we manage our costs. The rest will happen and we can pay a nice dividend and, hopefully in the future, we can find new opportunities. It is a great time and it is up to us to capitalise on it,” Holland said.

Gold Fields generated a net cash flow of R5.5bn ($320m) compared with a net cash outflow of R1.3bn a year earlier on gold’s growing lustre as an investment hedge amid the global economic uncertainties caused the Covid-19 pandemic.

Gold has jumped almost 30 percent since the beginning of the year as investors have been drawn to the precious metal as a safe haven.

Group profits doubled to $323m, or $0.37, per share compared to $126m, or $0.15, per share a year earlier. Gold Fields also rewarded its shareholders by declaring an interim dividend of R1.60 per share, which was equal to last year’s total dividend of R1.60 a share.

Asked if the group was planning to declare a special dividend given the strong gold environment, Holland said the company’s dividend policy was progressive because if the company made more earnings, it could pay more dividends.

“I think there is a good chance we will be paying more dividends. I don’t think that special dividends are something that we need to consider, because we have a policy of paying 35 percent of whatever we earn. The higher gold price means we pay more, and we pay more. We have to reduce debt and we have the Salares Norte project to build,” Holland said, adding that the company wanted to do that without further approaching shareholders for money.

The group lost 42 000 ounces from Covid-19-related production stoppages, comprising 24 000 ounces at the South Deep mine outside Johannesburg and 18 000 ounces at the Cerro Corona mine in northern Peru.

The company said South Deep, its sole South African mine, which was restructured over a year ago, increased production by 10 percent to 100 400 ounces up from 91 700 ounces in the first half of 2019.

Holland said South Deep was progressing beyond expectations and had the potential to surprise people on the upside

“I feel very optimistic about South Deep about the future prospect of South Deep having lived through many disappointments,” he said.

South Deep generated a net cash inflow of R79m ($5m) for the six months ended June, compared to an outflow of R238m ($18m) a year earlier. The group said that attributable gold equivalent production for the period increased marginally year-onyear to 1.087 million ounces from 1.083 million ounces a year earlier.

Gold Fields declined 0.47 percent on the JSE yesterday to close at R214.38.