Last year, Gold Fields (GFI, Financial) delivered $235 million of operating cash flows compared to last year. Gold Fields has also achieved significantly in right-sizing the organization by selling most of its non-core assets including Asosa in Ethiopia, Talas, Yanfolila and Chucapaca.
Gold Fields has stopped all of its Greenfield's exploration with only Salares Norte Greenfield project in Chile which is under scoping study level or sophisticated drilling stage.
Making the right moves
The planned efforts of Gold Fields is to right-size its mine operations portfolio by shutting down the non-core operations and continuing the strategy, Greenfield exploration programs is believed to improve the company’s cash flows and allow superior shareholder returns.
Gold Fields has targeted executing a program for drilling approximately 42,000 meters this year, with a majority of the drilling estimated to be high-resolution diamond drilling and enabling the company to have a deeper understanding of the mine going forward.
Further, Gold Fields is taken to be a dividend payer and has been paying excellent dividends for several years. For the current year, it has declared a dividend of R0.40, which is twice the amount paid last year. Currently, it has plans to offer greater dividends within the range of 25% to 35% of its normalized earnings in line with its commitment by February conclusion or early March.
The keen focus of Gold Fields on drilling, extensively with a majority of drilling being precision focused, diamond drilling is estimated to support the company with its commitment to deliver improved shareholder value.
Operational improvements
Gold Fields is eyeing on enhancing the amount of mining to get a greater volume. At present, it is operating on approximately 25% of overall mining from open stopes, and with time, expects to get South Deep at its full operational potential which is later expected to be nearly 70%. Therefore, Gold Fields is currently focusing on bringing those stopes operational by this year end so that it can truly draw the potential benefits of the mine by the conclusion of 2015 and transition of 2016.
During 2014, Gold Fields had three major focus areas at South Deep viz. infrastructure, fleet and people with solid plans to optimize each of them. It had right-sized the workforce by 15% reduction in 2014 by leveraging an intentional parting process.
The focused efforts of Gold Fields to optimize its mining operations at South Deep through right-sizing the workforce and expanding the production is believed to significantly expand the company’s top line and bottom line, benefiting the shareholders.
Going forward, Gold Fields is on a spree of cost-cutting to optimize its balance sheet for future investments and planning. During 2014, it had reduced the net expenditure by R1 billion to an annual expenditure of R4 billion from R5 billion spent in a year. Also, it is expecting a 15% development in reducing the spending at a somewhat elevated spot price.
Considering the global operations, Gold Fields has expanded its gold production to approximately 2 to 2.2 million ounces now from merely 1.2 million ounces earlier and thus achieved roughly double the production from the global operations primarily through acquisitions and through organic growth.
Actually, the strategic cost-cutting efforts implemented by Gold Fields, across its entire operations, have allowed it to display impressive results for the international operations.
Gold Fields has invested significantly into exploring St. Ives which is approximately 60 kilometers in length and nearly 20 kilometrers wide, giving it a huge exploration opportunity.
The shining metal mining major has successfully integrated the operations at Lawlers and Agnew, achieving 270,000 ounces of key gold production and exceeding the guidance with all inclusive costs of $990 an ounce. Moving ahead into the fiscal year 2015, Gold Fields is focused on expanding the operations at the key mines of Waroonga North and Kath.
The significant focus of Gold Fields is on enhancing the investments at the key gold mines also by implementing the major cost-cutting efforts. At the same time it is believed to hugely benefit the company and position it for long-term growth.
The consensus estimate among 18 polled investment analysts evaluating Gold Fields Limited suggests that the company would underperform the market. This consensus rating is maintained since the investment analyst’s sentiments declined on Feb. 13, 2015. The earlier consensus estimate suggested investors hold their position in the gold mining major.
Conclusion
Overall, the investors are advised to hold their position in Gold Fields Ltd. Looking at the excessive company valuation, the trailing P/E and forward P/E ratios of 258.53 and 22.00 respectively as compared to solid industry’s average P/E of 15.79. The profit margin of 0.45% is extremely weak as well. Moreover, Gold Fields is hugely debt-laden with total debt of 1.91 billion against total cash of merely $458.00 million only, restricting the company to execute future growth investments.
