Gold miner Gold Fields Ltd. (GFI) recently announced its production and cost guidance for the second quarter of 2012. The company expects to produce 862,000 equivalent ounces of gold, at total cash costs and notional cash expenditure (:NCE) of approximately $855 per ounce and $1,310 per ounce, respectively.
The expected production for the quarter is almost consistent year over year, but is 4% higher on a sequential basis. Also, total cash costs and notional capital expenditure are almost in line with the company’s annual guidance of $860 per ounce and $1,300 per ounce, respectively, which was issued in February. Gold Fields is scheduled to post its second quarter results on August 23.
First Quarter Flashback
Gold Fields clocked attributable equivalent gold production of 827,000 ounces in the first quarter, at a cash cost of $870 per ounce. It reported net earnings of $268 million, up from $158 million posted in the first quarter of 2011, an impressive jump of 70%. The growth in earnings was remarkable, especially considering the fact that Gold Fields’ production dropped slightly from the year ago period.
Growth and Diversification
Going forward, Gold Fields has a number of development programs, which are expected to drive its growth. The company acquired a 40% stake in the Far Southeast project in the Philippines for $110 million in March. In addition, Gold Fields’ Chucapaca feasibility study in Peru is going as per schedule and is expected to be complete this year. Also, it concluded drilling activities at the Damang Super Pit project in Ghana in the previous quarter.
Moreover, the company is highly focused on improving its reserves. It managed to add 5% to its mineral resource and reserve base in 2011, taking its total attributable precious metal and gold equivalent mineral reserves count to 80.6 million ounces. Gold Fields has managed to spread its reserve base across a wider geographical area in a bid to cut down on geopolitical risks and diversify itself. Its legacy operations now account for only 23% of its reserves, a marked improvement from the 46% concentration in such regions five years back.
Gold Fields, which competes with AngloGold Ashanti Ltd. (AU), Barrick Gold Corporation (ABX) and Newmont Mining Corp. (NEM), currently holds a Zacks #4 Rank, reflecting a short-term (1 to 3 months) Sell rating.
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