Gold Fields lost as much as 9% of its market value on Wednesday but subsequently recovered as the market adjusted to the trading update in which the gold producer expects its first-half profits to drop by up to 16% despite elevated gold prices.
In an apparent knee-jerk reaction, the share price initially slumped 9% before bouncing back to trade relatively flat at R256.72 by early afternoon on the JSE, giving Gold Fields a market value of R230bn.
Still, the company’s shares are up a mighty 47% so far in 2023, even though they are well below their record high of R323 touched in May.
Gold Fields and other gold stocks benefited from higher gold price and a weaker rand earlier in the year when the collapse of several US regional banks sparked selling in stock markets and risk assets.
“Gold in dollars and rand recently shot up, but it’s been quite lacklustre before that — almost unchanged for the last three years,” said Casparus Treurnicht, portfolio manager at Gryphon Asset Management.
“So, the latest run creates a bias in investors’ minds that things are improving but they forget how bad it was before that which needs to be taken into account.”
Gold Fields, which has mines in Australia, Ghana, SA and Chile, said headline earnings per share will drop by between 9% and 16% in the six months to end-June versus the same period a year ago.
Lower gold volumes sold and higher operating costs more than offset the higher gold price, which hovered near record highs in March at just above $2,000 before cooling off.
Gold production for the reporting period dropped 4% to 1.154-million ounces year on year, while the so-called all-in-sustaining costs, the industry metric that measures the total costs of production, rose 6% to $1,215/oz.
Gold Fields, led by interim CEO Martin Preece, has earlier in the year announced several partnerships to beef up its production pipeline in an apparent shift in strategy after its botched attempt to acquire the Canadian miner Yamana Gold in 2022.
In May, it announced that it would spend at least R8bn to secure a 50% stake in the Windfall gold project in Canada in partnership with Osisko Mining.
In mid-March, Gold Fields and rival AngloGold Ashanti announced the creation of Africa’s largest gold mine in Ghana. The joint venture brought together Gold Fields’ Tarkwa Mine and AngloGold Ashanti’s Iduapriem Mine, both located near the town of Tarkwa in western Ghana.
In terms of the proposal tabled with the government of Ghana, Gold Fields will own 60% of the joint venture, AngloGold Ashanti 30% and the government 10%.
Preece has said while mergers & acquisitions were likely to be part of Gold Fields’ future growth, large transactions were unlikely options.
Its $985m greenfield Salares Norte project in Chile is expected to deliver average annual production of 500,000oz of gold from 2024 to 2029 once production gathers pace.
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