Shares of precious metals miner Gold Fields (NYSE: GFI) rose an incredible 53% in the first six months of 2019, according to data provided by S&P Global Market Intelligence. It wasn't a smooth ride higher, though, with the shares roughly following the price of the metals it produces until early to-mid-May, when it was up about 15% or so. At that point, the stock had what can only be described as a vertical lift-off to end the first half up by more than 50%. Between mid-May and the end of June, the stock was up over 40%.
Precious metals prices will always be a big determinant of financial performance and stock prices for precious metals miners. But for some miners, the price of gold isn't the only factor on which you need to keep a close eye. In Gold Fields' case, its balance sheet has been an ongoing concern. The company started the year with a debt-to-equity ratio of 0.78, the highest level in a decade. Although that in and of itself isn't the end of the world, it has a notable debt maturity coming in 2020, which has been a material overhang on the stock price.
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But, in May, the company started to do something about the issue. First, it sold two sets of bonds, $500 million due in five years and another $500 million due in 10. It then used the new debt to start paying down its 2020 debt. Following that, it sold some noncore assets with the intent to use the proceeds to further reduce its debt load. Wall Street clearly believes that the debt overhang is handled, pushing the shares markedly higher as these events unfolded through May and June.
While Gold Fields may be on stronger financial footing at this point, most investors would probably be better off looking at other ways to invest in precious metals. There are too many options available to bother with the balance sheet issues at Gold Fields, even if its debt problems appear to be on the mend.
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