Gold Fields’ SA asset, South Deep, continues to turn the corner and is now expected to remain a valuable asset in the group’s portfolio, new CEO Chris Griffith said.
Speaking at the group’s interim results on Thursday Griffith, who took over from long-time Gold Fields CEO Nick Holland in April, said the asset has made money for the past two years and continues to do so. “The developments are going well, we should be able to continue with this assets for many, many years to come,” said Griffith. “The learning curve has been slow, long, hard [but] I think we are in a much better place now.”
Listed on the JSE and the New York Stock Exchange, the company is geographically diversified. South Deep is Gold Fields’ remaining asset in SA, after spinning off three of its mines to Sibanye Gold in 2013.
Though the third-largest gold deposit in the world, the unique shape of the ore body of South Deep has made it notoriously difficult to mine and Holland often came under criticism for persisting with the project. On his retirement from the company after 13 years at the helm, it was speculated that a new CEO would look to dispose of the asset.
“I think, for very good reasons, there’s been a lot of concern about South Deep for many years when it’s been substantially loss making,” said Griffith. “I think, very positively, we are starting to see a very good increase in performances on a year-to-year basis.”
While the operation has been cash positive since 2019, gold prices, too, have been strong at above $1,500 an ounce.
But Griffith said the improved performance at South Deep was clear.
Production increased 27% year on year, notwithstanding very significant Covid-19 challenges. It marks an improvement of 14% quarter on quarter, demonstrating an improving trend in production.
From 2010 to 2016 the operation haemorrhaged R1bn a year, but since 2019 it has been cash positive. It generated R550m in cash in 2020, and in the first half of 2021 it had already generated almost 80% of that. The operation, which in 2018 suffered the effects of a strike amid a painful restructuring, this year secured a three-year wage ideal providing workers with a 6.5% increase per annum.
For as long as the trajectory of South Deep remains positive, “we believe that this asset has a long-term place in our portfolio”, Griffith said.
The miner reported normalised profit of $431m, or $0.44 per share, for the six months to June 30 compared with profit of $323m, or $0.18 per share, for the first half of 2020. Gold Fields declared an interim dividend of R2.10 a share. Net debt was down 11% to $1.09m from $1.23 in the comparative half.
“We’ve had a solid first half, notwithstanding some very big challenges, in particular around Covid-19,” Griffith said. “The company’s in good shape, the company is generating cash, paying for its capex, paying for its dividends.”
Griffith said the growth projects, notably the Salares Norte development in Chile, was very much on track. “All round, I think this is a very positive direction from the company.”
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