Gold Fields earnings may drop 70% in first quarter but significantly better next year
RBC Capital Markets reckons Tier 1 gold miner, Gold Fields', earnings will drop dramatically in first quarter 2009, but matters are set to change in the second quarter.Author: Tessa Kruger
Posted: Monday , 13 Oct 2008
Gold Fields' (JSE:GFI, NYSE:GFI) earnings could be about 70% lower in the first quarter of 2009 compared to fourth quarter 2008 (Gold Fields' year end is June 30th), but the company is expected to perform "significantly better" in the second quarter 2009.
RBC Capital Markets said today the gold producer would generate lower revenue and profits in the first quarter of 2009 compared to fourth quarter 2008 on the back of lower production, rising costs and a slightly lower rand gold price.
The improved performance in the second quarter was expected as the gold price rose significantly during the month of October, while the rand depreciated against the US dollar. Gold Fields' production volumes were also expected to rise in the second quarter as its South African rehabilitation projects were largely complete and offshore projects were ramping up.
"This should lead to lower unit costs, higher revenues and therefore stronger profits in the second quarter," said RBC.
The research firm is maintaining its "underperform, average risk" ratings for the company, but said it would review its ratings in light of the changes in the gold price, the rand/US dollar exchange rate and the global macro-economic outlook.
Gold Fields said on Friday it now expected production for the first quarter of 2009 to be 798,000 oz, 2.7% below its previous guidance of 820,000 oz. As a result, cash costs was expected to be "significantly higher"at $618/ounce, compared to RBC's earlier forecast of $544/ounce for the year.
For this quarter, South African production is set to be 2% higher than previously expected, due to good performance from Driefontein and Kloof mines, though Beatrix and South Deep's production are both down 13% on previous guidance.
However, at its international operations Gold Fields experienced delays in production ramp-ups at Tarkwa, Cave Rocks and Cerro Corona.
RBC described Gold Fields as one of the world's largest unhedged gold producers with good quality, long-life operations in South Africa, Ghana, Peru and Australasia. It has attributable gold production of about 4m ounces per year of which 65% is derived from South African, deep-level hard rock operations.
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