Dual-listed gold producer Gold Fields has reported a 22% year-on-year increase in its headline earnings to $890-millon, or $1 a share, for the year ended December 31.

Normalized earnings for the year were 6% higher at $929-million, and the miner reported a profit of $789-million, or $0.89 a share – a year-on-year increase of about 9%, despite “the high inflationary and Covid-impacted environment”, Gold Fields CEO Chris Griffith noted in a conference call on February 17.

Production for 2021 increased by 5% year-on-year to 2.34-million ounces, despite pandemic-related challenges having impacted on performance at the South African and Peruvian operations, particularly during the first half of the year.

All-in costs (AIC) for 2021 reached $1 297/oz; higher than in 2020 as a result of the increased project capital expenditure at Salares Norte, but below the lower end of the guidance range of $1 310/oz to $1 350/oz.

Griffith explained that although costs had increased by 20%, if the higher Salares Norte capital costs were excluded and the costs were normalised in terms of the exchange rate differences for South Africa and Australia, “the year-on-year increase only amounted to 5%”.

Gold Fields generated cash flow from operating activities less net capital expenditure (capex), environmental payments, lease payments and redemption of Asanko preference shares of $463-million, with adjusted free cash flow, excluding project capital, amounting to $913-million.

CFO Paul Schmidt noted that the company had declared a final dividend of R2.60, with a total dividend for 2021 of R4.70. In dollar terms, the dividend increased from $0.29 to $0.32, which amounted to a 9% increase year-on-year.

He said that, over the year, the company had invested about $700-million into sustaining capital at its eight mines, while $369-million went to dividends, and a further $375-million was spent on Solares Notre.

Griffith reported a $100-million decrease in the net debt, with the company ending the year at $969-million net debt, and stated that the net debt to adjusted earnings before interest, taxes, depreciation and amortisation ratio was “very healthy” at 0.40 times.

Further, he commented that the company’s share price performance for the year rose by 18% compared with the gold index, which was down about 8%. “It was a very solid performance for the year as we met all of our guidance, in terms of costs, production and capex.”

SOUTH DEEP

Gold Fields called South Deep the stand-out performer of 2021, with production exceeding the original guidance provided in February 2021.

Gold production increased by 29% to 9 102 kg, or 293 000 oz. Total AIC decreased by 1% to $1 379/oz, with the increased capital and cost inflation fully offset by the increased gold sales. AIC in dollar terms increased by 9% as a result of the strengthening of the rand.

Encouragingly, South Deep generated net cash of R1.4-billion in 2021, 157% higher than the R558-million generated in 2020.

Gold Fields has started construction on a R715-million solar power plant and taken the decision to increase its capacity from 40 MW to 50 MW. The plant is expected to be completed in the second half of 2022.

Griffith noted that the company was also investigating other means of energy generation. There were ongoing efforts to determine whether the increase in wind at night might justify the inclusion of wind-based solutions to generate more power during the off-peak periods.

He added that the operation was at a “much more sustainable position” and that the company was planning a ramp-up over the next few years to between 360 000 oz and 380 000 oz by 2025. This is based on the notable and consistent improvement at South Deep over the last three years.

SOLARES NORTE
Griffith noted that the Salares Norte project remained on track, with the project progressing from 27% to 63% completion at the end of the year. First gold was still expected by the end of the first quarter of 2023, with an expected production of “just over 200 000 oz” in 2023.

Despite the project progress of 63% being behind plan (67%) by the end of 2021, all critical path items of the project have tracked the plan and the bulk of the equipment has been fabricated and delivered.

Griffith commented that the project was significantly affected by Covid citing, for example, the fact that accommodation had to be “de-densified” and that, at one time, only a third of the planned staff complement were actually on site. Transporting of goods and equipment was also affected by Covid restrictions in Chile. This resulted in non-critical path items being postponed until 2022.

Prestripping of the pit and construction of the processing plant started during January 2021, in line with the project’s construction schedule.

To date, the company has spent $472-million on the project.

2022 OUTLOOK
This year is expected to be another big capex year, given the deferral of spending at Salares Norte, as well as the elevated level of sustaining capex across the portfolio.

Griffith noted that Gold Fields was not yet in a position to provide a production guidance for the Asanko mine for this year, saying it expects mine operator Galiano to update the market by the end of this quarter.

For 2022, group production (excluding Asanko) is expected to be between 2.25-million and 2.29-million ounces. The all-in sustaining cost is expected to be between $1 140/oz and $1 180/oz, with AIC between $1 370/oz and $1 410/oz.

Total capex is expected to be between $1.05-billion and $1.150-billion. The largest component of the capex budget for the year is Salares Norte, with $330-million expected to be spent.

Gold Fields has a solid production profile above two-million ounces a year for the next decade.

Griffith noted that the company was considering both organic and inorganic opportunities to maintain this production profile, including stockpile treatment and life extension projects for Damang.

However, he stressed that there was no need to “rush” and that the company was focused on finding the right project in terms of value and cost.