Gold Fields, one of the world’s largest gold miners, has increased its half-year dividend by almost half, while cutting debt by more than a fifth as it cashed in on higher prices and improved output.
The globally diversified miner, valued at R133.7bn on the JSE, has, however, seen its shares slip almost 14% so far in 2022, and it came under pressure in May after news that it was looking to buy Canadian rival Yamana Gold for $6.7bn in an all-share deal.
Analysts noted the hefty price tag and risks to the global outlook, with the miner acknowledging that while dilutive to shareholder value in the short term, it would provide benefits in the longer term.
CEO Chris Griffith told journalists that after a second round of roadshows in SA and abroad, while there were still questions over the premium paid and the overall valuation of Yamana, he was seeing “a lot more positive feedback to the merits of the deal.
“We maintain the view that the acquisition of Yamana represents the best option to accelerate Gold Fields’ growth strategy and deliver long-term shareholder value,” Griffith said in the results. “Having explored both organic growth and bolt-on acquisitions, moving to completion stage of the transaction is the best opportunity to accelerate the next phase of the company’s growth in value.”
The transaction still needs approval from shareholders of both firms, with Gold Fields saying on Thursday that it expects the meetings to take place in late October or early November, and the deal to potentially close in mid-November.
Gold production rose 8.8% to 1.2-million ounces in the six months to end-June, with attributable headline earnings, the primary measure of profit that strips out certain one-off items, rising almost a third to $518m (R8.7bn) amid a 3% rise in prices in dollars, 11% in rand.
It also managed to keep cost increases below the industry norm with all-in mining cost for the group increasing about 6% for the period against elevated mining inflation of about 11% experienced by the sector.
Higher grades of ore helped with production in Australia and Peru, the miner said, offsetting pressure from lower grades in West Africa, with the miner declaring a R3 interim dividend, up 43%, and representing a payout of about R2.67bn.
Gold Fields said it had not had a fatal injury since April 2021, reporting three serious injuries during its half-year.
Net debt fell 22.4% to $851m. The group maintained its full-year cost guidance and production guidance of between 2.31-million and 2.36-million ounces.
According to Griffith, global macroeconomic and sociopolitical uncertainty, coupled with expectations of sustained high levels of inflation, create a supportive environment for stronger gold prices.
Gold maintained a relatively strong price during the first half of the year despite increasing interest rates. The average price of gold in 2021 was $1,799/oz, a 2% increase over the $1,770/oz average in 2020.
The average price increased again in the first half of 2022 by about 3% to $1,891/oz.
Update: August 25 2022
This story has been updated with additional information.
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