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Gold Fields Tumbles on 1st-Quarter Results

- By Alberto Abaterusso

After reporting disappointing first-quarter 2017 operating results on April 26, Gold Fields Ltd. (GFI) shares have fallen more than 10%.

The South African gold producer reported a 3% year-over-year decline in attributable equivalent gold production and a 6% year-over-year increase in all-in sustaining costs. The company produced 497,000 ounces of gold at an AISC of $1,114 per ounce.

The quarterly gold production and AISC were also disappointing compared to the previous quarter. First-quarter equivalent gold production was 12% lower and the AISC per ounce of gold was 18% higher compared to fourth-quarter 2016.

Two fatalities and three ground collapses in the South Deep mine's higher grade section caused first-quarter production to plunge 43% to 45,800 ounces of gold and the AISC increased 56% to $1,821 per ounce of gold compared to the previous quarter.

Gold Fields closed the quarter with decreased gold volumes at its mines in the West Africa Region (174,500 ounces; down 4.5% on a quarter-over-quarter basis and down 0.6% on a year-over-year basis), the South America Region (68,700 ounces; down 15.7% quarter over quarter, up 9.2% year over year) and the Australian Region (211,700 ounces; down 6% quarter over quarter, up 2.4% year over year).

For 2017, the company estimates attributable equivalent gold production will range between 2.1 million ounces and 2.15 million ounces with all-in sustaining costs expected to be $1,010 to $1,030 per ounce.

Despite leaving its guidance unchanged, analysts are pessimistic on this gold stock. RBC Capital Markets recently revised its rating for Gold Fields from sector perform to underperform.

With an average target price of $3.76 per share, analysts do not see substantial upside in the market value of Gold Fields. The recommendation rating is 3.3 out of 5. The recommendation rating ranges between 1.0 (Strong Buy) and 5.0 (Sell).

Gold Fields reported cash outflow of $35 million from its operations versus an inflow of $26 million reported in the last quarter of 2016. Due to poor operating results, the net debt increased from $1.16 million in fourth-quarter 2016 to $1.24 million.

Gold Fields is currently trading around $3.14 per share with a price-book ratio of 0.84 and an EV/Ebitda ratio of 3.29.

Disclosure: I have no positions in Gold Fields Ltd.

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This article first appeared on GuruFocus.