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Gold Fields Turns a Profit

Shares of Gold Fields Ltd. (NYSE:GFI) fell 5.39% to close at $5.44 on Thursday despite recording strong results for the first six months of 2019.

The South African gold producer posted a profit of $71 million, or 9 cents per share, shifting from a loss of $367 million, or 45 cents per share, a year ago.

For the first half of the year, revenue was $1.35 billion, up 2% year over year thanks to higher gold sales volumes that offset lower prices realized from the sale of the precious metal.

The miner sold more gold as a result of the additional production from the Asanko Gold Mine joint venture, determining 9% upside in attributable equivalent gold to 1,082,500 ounces. The precious metal was produced at an all-in sustaining cost of $891 per ounce.

Gold Fields inked the joint venture agreement with Asanko Gold Inc. (AKG) in July 2018. According to the terms of the deal, Gold Fields has 45% economic interest in the multi-deposit complex located in Ghana, Asanko Gold holds 45% and the government of Ghana profits from the remaining 10%. The project contributed 5.5% to production growth.

Gold Fields also operates the Cerro Corona deposit in Peru, the Tarkwa and Damang mines in Ghana, the South Deep underground deposit in South Africa and several open-pit and underground deposits at St. Ives, Granny Smith and Agnew in Western Australia.

For full-year 2019, the miner is guiding for production between 2.13 million and 2.18 million ounces of gold at an AISC of $980 to $995 per ounce.

The miner expects operations will continue to generate higher cash inflows following the positive reversal to $49 million in the first half of 2019 from cash outflows of $79 million in the prior-year period as contributions from new projects increase and spending decreases.

The most relevant project is the Asanko Gold Mine project, where Gold Fields is studying several solutions to enhance the life of operations up to 10 years to produce between 225,000 and 250,000 ounces per year, in line with the company's plan to increase its mining presence in Ghana.

To sustain its growth, Gold Fields can rely on a balance sheet that, as of June 30, has $535 million in cash on hand and equivalents. Further, property, plant, and equipment were valued $4.57 billion and total debt was $2.03 billion. Total equity was worth $2.83 billion. The company has protected the balance sheet from changes in the gold price through several hedging strategies.

In addition, Gold Fields announced an interim dividend of 60 South African rand per share (3.9 cents) for 2019, which is up from the previous dividend of 20 rand per share in 2018.

The stock soared 118% over the past 12 months through Aug. 15 to above the 200-, 100- and 50-day simple moving average lines. The closing share price on Thursday was 27.1% off the midpoint of the 52-week range of $2.20 to $6.29.

Sell-side analysts on Wall Street recommend holding shares of Gold Fields with an average target price of $5.04 per share.

Gold Fields has a market capitalization of $4.34 billion.

The 14-day relative strength index is 46, suggesting the stock is neither overbought nor oversold.

Disclosure: I have no positions in any security mentioned.

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This article first appeared on GuruFocus.