Despite challenges in the mining sector, Gold Fields has said it delivered “solid operating results, with attributable production decreasing 4% (in line with plan) and all-in costs (AIC) rising only 3%”.
Normalised earnings decreased by 9% YoY and the company generated free cash flow of US$140m, allowing it to declare an interim dividend of 325 SA cents.
Gold Fields, in its unaudited interim results for the six months ended 30 June 2023, said it recorded adjusted free cash flow from operations of US$482 million.
Also, it posted US$1,215 per ounce of all-in sustaining cost and US$1,398 per ounce of all-in cost.
Furthermore, Gold Fields recorded 1.154m ounces of attributable production and US$454m normalised earnings.
Read portions of the H1-2023 update below:
Solid performance despite prevailing headwinds
Gold Fields continued to build momentum in its strategy implementation by positively advancing a number of strategic initiatives in H1 2023.
The Group announced two corporate actions that underline our strategic imperative of pursuing value accretive deals to grow the value and quality of our portfolio: The proposed Tarkwa/Iduapriem JV in Ghana on 16 March 2023 and the Windfall JV with Osisko Mining in Canada on 2 May 2023.
We have also accelerated a number of internally focused initiatives which will further enhance the implementation of our strategy, by unlocking the full potential of our people and assets and drive improved business value.
During H1 2023 the focus was on two of these initiatives: Rolling out our culture journey, termed the “Gold Fields Way”, and Asset Optimisation.
Our operating environment remained challenging during the period, with elevated mining cost inflation and strong competition for skills in our key mining jurisdictions presenting significant headwinds.
Despite these challenges, Gold Fields delivered solid operating results, with attributable production decreasing 4% (in line with plan) and all-in costs (AIC) rising only 3%.
Normalised earnings decreased by 9% YoY and the Company generated free cash flow of US$140m, allowing us to declare an interim dividend of 325 SA cents.
Health and safety
The safety of our people remains our number one value, and it is therefore with deep regret that we had to report one operational fatality and three serious injuries during the first half of 2023, the same as in H1
2022.
The fatal incident involving a contractor occurred at our Tarkwa mine in Q1 2023.
In late June 2023, we also suffered a non-operational fatal incident when a contractor working on the renovation and upgrade of the T&A Stadium in Tarkwa fell from the roof of the stadium.
The project is funded by the Gold Fields Ghana Foundation. We extend our heartfelt sympathies and condolences to the family, loved ones and colleagues of the deceased.
H1 2023 operational performance
Attributable gold equivalent production for H1 2023 was 1,154koz, a 4% decrease YoY (H1 2022: 1,201koz), underpinned by the planned decline in production from Damang.
AIC for H1 2023 was US$1,398/oz, 3% higher than H1 2022 (US$1,352/oz), as a result of lower gold sold and higher cost of sales before amortisation and depreciation, partially offset by lower non-sustaining capital expenditure.
All-in sustaining cost (AISC) for H1 2023 was US$1,215/oz (H1 2022: US$1,148/oz), a 6% increase YoY.
Normalised earnings for the six months ended June 2023 decreased by 9% YoY to US$454m, or US$0.51 per share, compared to US$498m, or US$0.56 per share, for H1 2022.
In line with our dividend policy of paying out between 30% – 45% of normalised profit as dividends, we have declared an interim dividend of 325 SA cents per share (35.1% of normalised earnings), which compared with the 2022 interim dividend of 300 SA cents per share.
This represents a 8% increase YoY.
Cash flow and balance sheet
During H1 2023, Gold Fields generated adjusted free cash flow of US$140m (after taking into account all costs and project capex), which compares to US$293m in H1 2022.
The mines generated adjusted free cash flow from operations of US$482m in H1 2023 compared to US$518m in H1 2022.
While our balance sheet remains strong, with a net debt to EBITDA ratio of 0.42x at the end of June 2023, our net debt increased by US$324m during H1 2023 to US$1,028m.
This increase was driven by the initial US$222m payment for the Windfall acquisition, US$34m in Windfall pre-construction capital and the US$215m dividend payments.
Excluding lease liabilities, the core net debt was US$629m at the end of H1 2023.
In June, Gold Fields successfully refinanced its 2019 revolving credit facility (RCF), with a sustainability linked RCF.
The facility has a principal loan amount US$1.2bn with the option to increase it by up to US$400m and a maturity of five years with an option to extend this through two one-year extensions.
Loan repayment for the new facility is linked to the achievement of three of Gold Fields’ key ESG priorities: gender diversity, decarbonisation and water stewardship.
Regional performance
Our Australian mines met their production plan for Q2 2023, though cost inflation in the region remained a significant headwind.
The region produced 267koz at AIC of A$1,942/oz (US$1,299/oz) during Q2 2023, bringing production for H1 2023 to 509koz at AIC of A$1,879/oz (US$1,270/oz).
The shortage of skilled staff continues to impact on the performance of our
Australian mines, with turnover of some of the critical skills categories, such as mobile equipment operators, geologists and geotechnical engineers and supervisors, reaching annualised levels of 25% – 50% in H1 2023.
This is also having an impact on mining costs, as salaries for these skills are continuing to escalate.
The impact of unfavourable ground conditions reported in Q1 2023 as well as staff shortages continued to impact South Deep during Q2 2023.
The mine produced 68koz at AIC of R891,619/kg (US$1,479/oz) in Q2 which resulted in H1 2022 production of 156koz at AIC of R811,816/kg (US$1,387/oz).
Skill shortages in key categories, such as artisans and Long Hole Stope rig operators are impacting on both fleet availability and utilisation.
Annualised turnover levels at South Deep in these categories were 29% – 40% in H1 2023.
Our mines in Ghana produced 204koz (including 45% of Asanko) during Q2 2023 at AIC of US$1,227/oz.
For H1 2023, Ghana produced 397koz at AIC of US$1,210/oz.
Cerro Corona produced 60koz (gold equivalent) at AIC of US$1,162 per gold equivalent ounce during the June quarter, resulting in 135koz (gold equivalent) being produced in the first half at AIC of US$990 per gold equivalent ounce.
Salares Norte progressing to revised plan
Construction and pre-commissioning activities at Salares Norte continued in line with the revised plan.
Total construction progress stood at 94.9% at the end of June 2023 compared to 85.5% at end December 2022.
US$202m was spent on the project in H1 2023, including US$180m in capital expenditure and US$15m on exploration activities.
Total tonnes moved during the first six months of 2023 were in line with plan at 16.0Mt (8.9Mt in Q1 2023 and 7.1Mt in Q2 2023), bringing total tonnes moved to date to 66.6Mt. All of the 7.1Mt mined during Q2 2023 were waste material due to an infill drilling campaign and, as such, the cumulative stockpiled ounces at the end of June remained unchanged from the end of Q1 2023 at 176koz (79koz stockpiled in Q4 2022 and 97koz stockpiled in Q1 2023).
We are on track with our plan to have 490koz on stockpile by the end of December 2023.
As guided in February 2023, first production is expected during Q4 2023, ramping up in 2024.
The project capex remains on track to meet revised guidance of US$1,020m.
Encouragingly, the Chinchilla Relocation Plan proposed by the Salares Norte team was approved by the Chilean environmental authority in June 2023.
Preparations are being made to implement the plan, which has a term of 36 months, from September this year onwards. While the delayed relocation has not impacted construction or the project schedule, the team has advanced a study on the option to mine the Agua Amarga orebody from underground (as opposed to the original open pit plan).
The pre-feasibility study will be completed during H2 2023, at which point the team will decide on the best way to progress the mining of the Agua Amarga orebody.
Strategic initiatives (Pillar 1)
Gold Fields made significant headway on our journey towards our aspirational culture by launching the “Gold Fields Way” in April.
A key milestone on this journey was The Gold Fields Way Summit, which was held in London in June, the first of its kind for Gold Fields. This brought together 92 leaders from across the business to align on the key actions leaders need to own and implement to propel our culture journey.
Asset Optimisation
(AO) has been identified as a key strategic initiative to enable Gold Fields to maximise the potential of its current assets.
This initiative will also be integrated into the Gold Fields Way as part of our priority of ‘working smarter together’.
Key elements of the initiative include analysis to safely improve, operational efficiencies and performance, ore and metal recoveries, the efficient use of energy and optimal use of renewables, modernisation and deployment of appropriate technologies. Asset reviews will be staged over a two-year period starting with our key assets and the benefits from the programme are expected from 2024 onwards.
We will update the market on specific value opportunities in H1 2024.
ESG developments (Pillar 2)
Scope 1 and 2 CO₂ emissions were 819kt for H1 2023 compared with 864kt during H1 2022, with the full impact of our recently commissioned renewable energy plants at the Gruyere and South Deep mines coming into play.
These plants led to renewable energy in H1 2023 accounting for 16% of our total electricity consumption, an increase from 12% in H1 2022.
In early August, Gold Fields released Annual Tailings Disclosure reports for its Tarkwa and Cerro Corona mines, detailing their level of conformance against the Global Industry Standard on Tailings Management (GISTM).
The three tailings storage facilities (TSFs) at Tarkwa have a ‘Very High’ consequence classification, while the TSF at Cerro Corona has an ‘Extreme’ consequence classification.
The disclosure reports show that all four of our priority TSFs partially conform to the GISTM.
Gold Fields has successfully addressed all elements related to material dam safety and the environment, but has also identified areas for further improvement, particularly in community engagement and consultation and addressing human rights risks with respect to emergency response and preparedness.
Improving the quality of our portfolio (Pillar 3)
There were several positive developments during H1 2023 which will have a significant impact on the quality of our portfolio going forward.
In March, we announced the proposed Tarkwa/Iduapriem JV in Ghana with
AngloGold Ashanti, which once approved by the Government of Ghana, will result in a material increase in production and reduction in AISC.
Negotiations with the Government of Ghana are advancing, and we are working with all stakeholders towards concluding the JV.
In May, we announced our partnership with Osisko Mining to develop the Windfall Project in Canada.
The teams have started working together to align our processes and systems.
The projects Environmental Impact
Assessment (EIA) was submitted in March and is expected to take 12 – 18 months to get approved, at which stage key construction activities will commence.
CEO search process
The process to appoint a permanent CEO is ongoing. The Board has held a first round of interviews with the shortlisted candidates with final interviews planned for September. Gold Fields will update the market
when the Board has made its final decision and all contractual agreements have been made with the selected candidate.