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Gold Fields CEO looks to replace assets as peak output looms

Production will rise to 2.7m ounces by 2024, which is as much as 400 000 ounces above the forecast output for this year.
Chris Griffith. Image: Bloomberg

Gold Fields is looking at acquiring assets to replace depleting mines as the company’s new chief executive officer seeks to ensure that output doesn’t decline from a projected peak in three years time.

A new Chilean operation starting in 2023 and increasing production from its last South African mine will help the Johannesburg-based producer lift output to 2.7 million ounces by 2024. But as older mines near the end of their lives, Gold Fields will need to consider acquisitions to keep operations at or just above that level, said CEO Chris Griffith.

“What we would be looking for is quality assets in quality jurisdictions,” Griffith said in an interview, after unveiling first-half results on Thursday.

Like local rival AngloGold Ashanti, Gold Fields has shifted focus to more profitable mines in Ghana, Australia and Latin America as the industry in South Africa dwindles amid power cuts, soaring costs and the geological challenges of exploiting the world’s deepest deposits. Griffith, who took over as CEO from Nick Holland in April, would prefer to expand in regions where the company already operates though he doesn’t rule out deals in new jurisdictions.

Still, the company doesn’t want to overpay for assets, nor add output for its own sake, he said.

“We have developed a quality portfolio and it doesn’t help that we buy assets that are going to push us up the cost curve,” the CEO said.

Despite Covid-19 disruptions, production this year is supported by the turnaround at South Deep, the company’s last mine in South Africa. Gold Fields, founded by Cecil Rhodes in 1887, has been under investor pressure to end years of losses at the mine, which sits on the world’s third-biggest known body of gold-bearing ore. Improving efficiency will allow South Deep’s output to rise by 20% to 30% a year, Griffith said.

“South Deep fits the portfolio, it’s an asset we would like to retain and seek to continue driving its productivity and improvement,” he said.

First-half profit more than doubled to $387.4 million from a year earlier. The company will pay a dividend of R2.10 per share, sticking to its policy paying 25% to 35% of headline earnings to investors.

Gold Fields climbed 4.4% as of 11:56 a.m. in Johannesburg.

What Bloomberg Intelligence Says

“Growth-ambition intentions expressed by Gold Fields’ new CEO Chris Griffith — including “value-accretive acquisition opportunities” and in-production assets to boost the production base beyond 2030 — appear to be a step in the right direction to closing the valuation gap vs. peers. Gold Fields is starting to focus on both organic and M&A options to bolster output beyond 2024, when the company’s Salares Norte project bumps up gold output 15-20%.

— Grant Sporre, BI commodities and metals analyst

© 2021 Bloomberg

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