Shares in Gold Fields fell nearly 8% on Friday after the group reported a 30% decline in profit for the six months ended June and revised downwards its full-year production guidance with its South Deep mine weighing on the group’s earnings.
The Johannesburg and New York-listed group reported profit of $320m in the six months under review, down from about $458m in the comparative period.
The company’s South Deep mine produced 1,110kg less gold in the six months under review, a big contributor to it missing out on the gold price boom.
The mine, which one of the world’s largest gold reserves and also one of the deepest, produced 3,633kg in the reporting period compared to 4,743kg in the first six months of last year, blaming the 25% decline in output to backfill rehandling challenges and poor ground conditions.
“Backfill seepage constrained access to stopes, while the backfill rehandling added complexity to the planning and mining process. This had an affect on stope turnaround and delayed access to the higher grade areas of the mine,” the company said.
“South Deep is making progress accelerating backfill placement to address the historic backfill leakage and is assessing various solutions to reduce backfill leakages going forward. Other recovery activities are focused on improving long hole stope drilling and overall productivity.”
Gold Fields acquired South Deep, its only remaining asset in SA, in 2006. Backfilling in underground mines is a fundamental part of the operation.
The backfill material provides support to the surrounding rock mass, mitigates the risk of surface level subsidence, reduces wasteful ore dilution, and creates a safer working area for mining activities.
Gold Fields revised its previously guided production for South Deep further downwards, now expecting the mine to produce in the range of 7,800kg-8,200kg, against the target of 9,500kg-9,700kg it announced just two months ago.
Production also faltered at Gold Fields’ Australian mine St Ives in the period. The group said gold production at the mine plunged 25% to 139,000oz due to lower grades of ore mined and processed from the underground mines.
The group’s other Australian mines, Granny Smith and Gruyere, did not fare better, with output down 6% and 20%, respectively, with the latter mainly due to substantial rainfall events during March 2024 which resulted in the Great Central Road being closed for nearly two months.
Agnew mine, also situated Down Under, declined marginally in the period, down just 1%. Production at Gold Fields’ two mines in Ghana also reported lower production volumes — with output at the Damang mine in Ghana down 9% and gold production at Tarkwa decreased 14%.
The group’s Peru mine, Cerro Corona reported a 45% plunge in gold production, while the company’s Chile asset Salares Norte is scheduled to restart by the end of next month and deliver production of 40,000oz-50,000oz this year.
The group has scaled down its full-year production guidance to 2-million ounces to 2.15-million ounces from a previous forecast of about 2.3-million ounces — implying its lowest output since 2013 when is sold several assets to Sibanye-Stillwater.
The underperformance of Gold Fields’ gold assets come at a time where the price of the commodity, an asset that many like to own for inflation protection, have been on a record-breaking run since the start of the year.
The spot price for the “safe heaven” commodity reached a record $2,531.60/oz on Tuesday. Gold prices have risen by two-thirds since the end of 2019.
Mike Fraser, CEO of Gold Fields, said he expected a better second half of the year, with the group having implemented a redesigned operating model, which he said provided the company with agility to deliver on strategy.
“I am confident of an improved performance in the second half of the year as we implement enhancements to our safety processes and systems, progress ramp up of Salares Norte and realise the benefits of operational recovery plans under way at South Deep, Gruyere, St Ives and Cerro Corona,” he said.
“Our portfolio of quality assets is operated and managed by talented and dedicated teams and our focus remains on setting up these assets to deliver safe, reliable and cost-effective production, sustainably. Our asset optimisation initiatives and improvements in organisational capability further support the focus on safe, cost-effective and reliable operating performance.”
Correction: August 25 2024
The previous version incorrectly said the company’s profit declined 33%.
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