Gold Fields (US:GFI)2021-02-19 21:43Financial Data and Key Metrics Changes - Gold Fields reported a production increase of 2% year-over-year, reaching 2.236 million ounces despite COVID-19 disruptions [8] - Mine cash flow was $868 million, with normalized earnings rising to $879 million, reflecting a 2.5x increase from the previous year [9] - The company declared a total dividend of ZAR 4.80 per share, representing a payout ratio of approximately 30% of normalized earnings, consistent with its policy [10][11] - Net debt decreased significantly from $1.33 billion in 2019 to $640 million at the end of 2020, indicating effective debt management [13][14] Business Line Data and Key Metrics Changes - Australia produced over 1 million ounces, benefiting from a full year of Gruyere production, with all-in costs at $957 per ounce and cash flow of $498 million [20][21] - West Africa contributed just under 800,000 ounces with all-in costs of about $1,060, generating over $250 million in cash flow, bolstered by strong performance at Damang [22] - The Americas, particularly Cerro Corona, faced challenges with production dropping to 206,000 ounces due to COVID-19, resulting in a loss of approximately 46,000 ounces [23][25] - South Deep in South Africa also experienced a production loss of around 32,000 ounces due to COVID, but still managed a cash flow of $34 million [25][26] Market Data and Key Metrics Changes - The company highlighted the impact of COVID-19 on operations, with only two sites experiencing significant production interruptions, leading to an estimated loss of 80,000 ounces [5][6] - Active COVID-19 cases among employees were around 170, with a focus on mental health support for affected workers [16][18] Company Strategy and Development Direction - Gold Fields is focused on advancing the Salares Norte project, with construction tracking ahead of schedule and expected to be a significant contributor to future production [12][31] - The company aims to maintain a production range of 2 million to 2.5 million ounces annually over the next decade, with Salares projected to produce around 450,000 ounces at low costs [30] - The strategy includes organic growth through brownfields exploration and avoiding expensive M&A, emphasizing the importance of existing assets [36] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating the ongoing challenges posed by COVID-19, emphasizing a commitment to employee safety and business sustainability [19][67] - The guidance for 2021 anticipates production of 2.3 million to 2.35 million ounces, with all-in sustaining costs slightly higher due to various operational factors [66] - The company is optimistic about increasing production at South Deep by 20% to 30% over the next 4 to 5 years, contingent on technological advancements and improved mining practices [74][75] Other Important Information - The company has made significant investments in ESG initiatives, including reducing carbon emissions and enhancing safety measures [39][44] - Gold Fields has increased its attributable reserves to 52.1 million ounces, reflecting successful exploration and resource management [56] Q&A Session Summary Question: Emphasis on reducing pollution through clean technologies and renewable energy - Management highlighted ongoing renewable energy projects at Agnew and Granny Smith, with plans for a solar project at South Deep to reduce carbon emissions [70][71] Question: Maximum steady-state production at restructured South Deep - Management indicated a potential increase of 20% to 30% over the 2021 guidance of 290,000 ounces, with no cap on future production potential [74][75] Question: Expected COVID-related operational costs in 2021 - Management suggested that many COVID-related costs in 2020 were one-off expenses and do not expect similar costs unless there are significant mandated shutdowns [77][78] Question: Movement in reserves and areas of decline - Management acknowledged a slight overall increase in reserves, with declines noted at Damang and Cerro Corona due to depletion and modeling changes [80][82] Question: Concerns regarding COVID-19 impacts on Salares Norte project - Management expressed confidence in logistics and risk mitigation strategies for the Salares Norte project, while acknowledging potential impacts from COVID-19 [84][87]