Gold Fields (GFI) Updates on Operations; Maintains FY16 Outlook
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Gold Fields Limited (NYSE: GFI) is pleased to provide an operational update for the quarter ended 30 September 2016. Detailed financial and operational results are provided on a six-monthly basis i.e. at the end of June and December.
OVERVIEW AND UPDATE
The gold industry had a much more buoyant Q3 2016 driven by the higher US$ gold price, however, this has waned post quarterend, with the gold price having pulled back in recent weeks. At Gold Fields, we remain focused on delivering on our strategic objectives, despite the moves in the gold price, including the positioning of the portfolio to withstand lower prices. Regrettably, we had a fatality at South Deep during the quarter (as previously reported), following a seismic event. While we have made good progress on safety across the Group, the incident is a tragic reminder that we still have more work to do and our efforts to achieve ‘zero harm’ will continue.
Attributable equivalent gold production for the quarter was 4% lower YoY (2% higher QoQ) at 537koz. All-in sustaining costs (AISC) were 8% higher YoY (flat QoQ) at US$1,026/oz and all-in costs (AIC) were 8% higher YoY (2% lower QoQ) at US$1,038/oz. Year to date, both AISC and AIC are tracking below the cost guidance for the full year provided in February 2016. The average US$ gold price achieved in the quarter was 20% or US$226/oz higher YoY (7% or US$87/oz higher QoQ). The average Australian dollar for the quarter was 0.76 (4% stronger YoY and 1% stronger QoQ), while the average rand for the quarter was 14.15 (10% weaker YoY and 6% stronger QoQ).
Production from South Deep was 26% higher YoY and 9% lower QoQ at 69koz, as a result of lower reef yield due to changes in mining mix. AIC was 2% higher YoY and 4% lower QoQ at R599,245/kg (US$1,317/oz). Destress mining decreased by 35% QoQ to 6,340 square metres due to the combined effect of the earlier than anticipated full adoption of the high profile destress method and the fatality which resulted in the cessation of destress mining across the operation for a two-week period. High profile destress accounted for 90% of total destress meters in Q3 2016.
Managed production in Ghana for Q3 2016 was 188koz, down 3% YoY (up 14% QoQ), with AIC of US$999/oz, up 4% YoY (down 7% QoQ). Gold equivalent production at Cerro Corona was 23% lower YoY and 5% lower QoQ at 61koz, with AIC of US$765 per equivalent ounce, up 2% YoY (up 28% QoQ). The Australian region produced 237koz for the quarter, down 5% YoY (down 1% QoQ), with AIC of A$1,303/oz (US$991/oz), up 11% YoY (up 2% QoQ).
Net cash flow and net debt
On the back of the increase in the US$ gold price during Q3 2016 and a favourable working capital movement, the net cash flow from operating activities (net of tax) less net capital expenditure, environmental payments and financing costs for the quarter was US$152m, 2.5 times more than the net cash flow reported for H1 2016 (US$60m). Consequently, the net debt balance further reduced during the quarter to US$1,029m (30 June 2016: US$1,155m). We remain on track to beat our net debt to EBITDA target of 1x by year-end.
Guidance (upgraded in August 2016) for attributable equivalent gold production for the Group for 2016 remains unchanged at between 2.10Moz and 2.15Moz. AISC is expected to be between US$1,000/oz and US$1,010/oz and AIC is expected to be
between US$1,035/oz and US$1,045/oz – both unchanged from the guidance provided in February 2016.
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