Gold Fields to post healthy leap in interim profits but cost pressures lurk

GOLD Fields will post 10% to 18% higher normalised earnings for the six months ended June owing to higher production – up 9% year-on-year – and a higher gold price, it said in a trading statement today.

Attributable gold output is expected to be 1.2 million ounces incurring all-in costs of $1,352/oz. This represents an increase of 6% which Gold Fields said was “driven by mining inflation and increased project capital expenditure at Salares Norte”, a project in Chile.

All-in sustaining costs for the first half is expected to come in at about $1,148/oz which is a 5% increase year-on-year.

Headline share earnings will be between 56 and 60 US cents per share, an increase of 24% to 33% higher year-on-year.

The company’s performance is likely to be watched closer than ever as it is due to distribute information circulars for the proposed acquisition of Yamana Gold, a Toronto-listed company in September. A vote on the transaction is scheduled for October.

Chris Griffith, CEO of Gold Fields said earlier this week the proposed transaction was still “a work in progress”. He told Reuters: “We are trying to get them (shareholders) to see the massive upside that exists in this deal. Work in progress is the best way to describe it.”

The proposed deal, which valued Yamana at $6.7bn on May 31, caused shares in Gold Fields to plummet. Gold Fields subsequently promised higher dividends and a Toronto Stock Exchange listing to sweeten the offer.

Griffith said the company has held a couple of road shows in recent weeks to “educate” shareholders.

Redwheel, one of the 10 biggest investors in Gold Fields, publicly told the miner to cancel the takeover, which it described as an expensive error with no guarantee of growth and profitability.

When asked if the deal terms would be changed if there’s pushback from shareholders, Griffith said: “The deal structure has been locked in. We don’t foresee that we will change the deal structure. But I do say that never say never.”

Gold Fields is expected to post its numbers on August 25.

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