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Gold Fields is back to making positive cash flows again - Seeking Alpha

Thursday, 3 September 2015
  • Gold Fields produced higher quarter-on-quarter revenues and earnings in Q2.
  • Gold Fields returned to positive net cash flow territory after reporting cash outflows in Q1.
  • Excluding South Deep, Gold Fields made $101 million in net cash flow in Q2.
  • Gold Fields (NYSE:GFI) is a South African gold producer with eight mining operations in Australia, Ghana, Peru and South Africa. Revenue in the second quarter increased over the first quarter as the company produced and sold more gold ounces, partially offset by lower gold prices. Earnings in the second quarter turned positive in the tune of 2 cents a share from a loss of 2 cents in the first quarter. However, when compared to the prior year, Gold Fields revenue and earnings both declined mainly due to gold prices falling $100 an ounce.

    There is a strong industry focus on bringing costs down to reduce the impact of lower gold prices on profits and cash flow. Higher gold sales volume combined with cost cuts contributed to $30 million in cash inflows, a $59 million swing from cash outflows of $29 million in the first quarter. Gold Fields has generated positive net cash flow for seven of the last eight quarters, and we expect operations to run net cash flow positive as long as gold prices stay above US$1,100 an ounce.

    "It is not about ounces, it is about cash. And were making cash" - Nick Holland, CEO at Gold Fields.

    Strong second quarter financial results

    Gold Fields reported second quarter revenue of $660 million on gold sales of 562,000 ounces at a selling price of US$1,174 an ounce. Revenue rose by 8% when compared to first quarter results, reflecting higher gold production and sale volumes. Revenue growth did slowdown on lagging gold prices. Bullion slid $24 an ounce during the June quarter on speculation that the U.S. central bank could raise lending rates at next month's policy-setting meeting, on Sept. 16-17.

    Net profit attributable to equity holders rose substantially to $12 million or 2 cents a share, from a loss of $14 million or 2 cents in the March quarter. The increase reflects strong revenue on higher sales volume primarily due to selling 34,400 more ounces from the Cerro Corona gold mine in Peru. This occurred because Cerro Corona experienced shipping delays in the first quarter. The gold inventory that Gold Fields intended to sell in the first quarter sold during the second quarter.

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