Gold Fields (NYSE:GFI) is 1 of the large golden miners. It has operations successful six countries crossed 4 continents. African and Australian assets lend implicit 80% of yearly output and currency flows. In H1, Gold Fields reported a 4% year-over-year diminution in golden production, portion AISC jumped 6% to $1,215/oz, deed by skilled labour shortages, little grades, and continuing inflation.
Unfavorable crushed conditions astatine South Deep besides influenced its H1 performance, causing guidance to beryllium marginally revised downward and a postponement of the 380,000-ounce steady-state people to H2-2025. Gold Fields has 2 prime projects successful its pipeline: Salares Norte successful Chile, which is astir finished, and Windfall, which volition astir apt person biology licenses successful little than a year.
GFI operates successful six countries, which importantly heightens the operational risk. I similar companies focused connected 1 portion oregon continent in a fewer countries. Agnico Eagle (AEM) is simply a large example, with its flagship mines successful Canada and Australia. Its Mexican and Finnish assets lend 8% of the company`s revenue. Another bully illustration is Endeavour Mining (OTCQX:EDVMF); contempt its mines being successful a highly governmental hazard portion similar the Sahel, the institution has developed profound expertise successful handling West African complexities and uncertainties.
GFI has an fantabulous equilibrium sheet, pays dividends with capable yield, and is for merchantability astatine a steep discount, adjacent utilizing golden spot astatine $150/oz. I springiness Gold Fields a bargain standing alternatively of a beardown bargain lone owed to its overextended operations successful six countries.
Last half, Gold Fields reported golden accumulation of 577,000 ounces and H1 2023 output of 1.15 cardinal ounces, a 4% diminution compared to 1H22. The illustration from the past institution presentation beneath illustrates the past study highlights.
The diminution came from GFI Australian and African mines. Its Australian conception output dropped by 3%, its South Deep Mine successful South Africa by 5%, its Ghanaian operations by 6%, and its JV Asanko Mine produced 28% less. Lower grades astatine astir Australian and African mines contributed to declining output. Another contented is the shortage of skilled labour and an incidental successful a excavation successful South Africa. This diminution was partially offset by a 4% summation successful output from its Cerro Corona Mine successful Peru. However, this couldn't compensate for the little accumulation crossed the remainder of the portfolio.
Reduced output astatine 2 large mines, Agnew and St. Ives, offset higher accumulation astatine Gruyere (50%) and Granny Smith astatine its Australian operations.
Gold Fields' AISC successful Australia accrued yearly to $1,169/oz. The superior operator for that is the shortage of mining workers. According to Gold Fields, a deficiency of skilled workers and churn successful important positions has accrued mining expenses arsenic wages rise. Even though Gruyere had a amended archetypal 4th than the erstwhile year, guidance has been lowered from 355,000 ounces astatine the midpoint to 335,000 ounces, and outgo projections person besides increased.
Let's look astatine West African operations, starting with Ghana.
Tarkwa produced astir 297,700 ounces successful H1 astatine an AISC of $1,181/oz, with output up 12% annually and costs down 10%. Due to higher grades of golden and a little portion ratio, the concern was capable to make $97.5 cardinal successful adjusted escaped currency travel contempt higher CAPEX. Unfortunately, its different West African operations countered the improved output and borderline gain, with Damang experiencing a 38% people diminution and a 37% output decline. Thus, AISC roseate from $884/oz to $1,193/oz.
As shown connected the illustration below, South African operations had little output with 5%, and AISC grew to $1,387/oz.
One of the reasons is simply a fatal incidental caused by unstable crushed conditions. Another persisting contented is the shortage of competent operators for long-hole-stop drill rigs, and the problems that existed earlier successful the 4th persisted into Q2. Despite that, escaped currency travel accrued twelvemonth implicit twelvemonth by 31% to $96.6 cardinal owed to decreased capex caused by accumulation delays. Gold Fields was forced to little its erstwhile projection of 347,000 ounces to 321,500 ounces.
GFI has a fewer projects successful its pipeline to boost its profitability. Salares Norte Mine is expected to spell into accumulation successful H2 2024. Assuming a 15-month schedule, Gold Fields besides mentioned that the Windfall task JV with Osisko had progressed. GFI submitted an Environmental Impact Assessment successful March, expecting a June 2024 clearance. Windfall excavation would beryllium connected way to statesman accumulation by H2 2026 with 160,000 ounces of yearly output astatine AISC beneath $800/oz.
GFI has 1 of the champion equilibrium sheets successful the industry. The array beneath shows a fewer solvency and liquidity metrics I usage to measure institution financials. The information is taken from the past financial report.
EBITDA/Interest expenses 44 EBITDA - CPX/Interest expenses 23 Quick ratio 0.51 Current ratio 1.57 Net debt/EBITDA 0.46 Net debt/EBITDA – CPX 0.86 Long-term debt/Equity 11.0% Total debt/Equity 38% Total liabilities/Total assets 43.2%
EBITDA - CPX/Interest expenses
Net debt/EBITDA – CPX
Total liabilities/Total assets
All precious metallic miners improved their equilibrium sheets, but GFI is among the best. Despite the capable CAPEX, the institution maintains excess liquidity. Another affirmative motion is the debased ratio of Net Debt to EBITDA.
GFI superior expenditures merit peculiar mention. I usage CPX to Market Cap, CPX to depreciation, depletion, and amortization ((DDA), and CPX to Operational Cash Flow (OCF) to estimation however capable a company`s superior investments are. The array beneath compares Gold Fields, Endeavour Mining, and Barrick Gold. The information is taken from the last fiscal report.
CPX/Market Cap CPX/DDA CPX/OCF Gold Fields 10.6% 115% 67% Endeavor Mining 14.4% 72% 84% Barrick Gold 12.3% 122% 99%
The astir important metric is CPX/DDA. It indispensable beryllium higher than 100%. That means the company's investments successful Property, Plant, and Equipment (PPE) transcend mining assets depletion, PPE depreciation, and intangible assets amortization. GFI is doing a large job; for each dollar sunk successful DDA, the institution invests $1.15. Besides that, GFI spends lone 67% of its operational currency travel to support specified a unchangeable ratio. That said, the institution has disposable firepower for much investments oregon to instrumentality to shareholders with dividends and stock buybacks.
GFI excels connected show metrics, too. The array beneath shows a fewer profitability figures I usage to estimation the company`s efficiency. The information is taken from the last fiscal report.
FCF/EV 4.6% Sales/EV 39.7% FCF Margin 10.9% Gross Margin 36.6% ROI 13.9% ROE 14.4% Net income per Employee $106,960
Net income per Employee
All metrics are notably higher than the industry`s mean and GFI's twelvemonth average. Sales/EV and FCF/EV exemplify the introduction and exit points of the company`s currency flows. Both metrics amusement GFI`s quality to person revenues into escaped currency flow.
Gold Fields wage dividends with capable yields higher than the manufacture average. The array beneath compares GFI with different large miners with vulnerability to Africa.
Goldfields is simply a golden miner, and arsenic such, I usage 3 valuation methods:
- Net plus worth based connected the company`s plausible reserves, existent assets, and full liabilities.
- Conventional examination based connected EV/Sales and Price/Cash Flow
- Miners peculiar appraisal weighting up EV to Annual production, EV to Plausible reserves, Plausible reserves to Fully diluted shares
I cipher nett assets arsenic follows:
NAV = PR*(SP-AISC) + currency + inventories + full receivables - full liabilities
PR (plausible reserves) = 100% * P&P Reserves + 50%*M&I Resources + 30%*Inferred Resources
I examined 2 scenarios. One blimpish with spot golden 1500 $/oz. The different is the basal script utilizing the 1800 $/oz price.
Conservative NAV per stock = $ 20.38
Base NAV per stock = $ 55.61
Current Market Price = $ 10.86 connected Sept 29, 2023
Even utilizing 1500 $/oz gives an capable borderline of information astatine 46%. However, utilizing basal lawsuit figures, GFI's borderline of information moves to 82 %.
The representation beneath compares Kinross with the pursuing companies:
- Endeavour Mining (OTCQX:EDVMF)
- AngloGold Ashanti (AU)
- IAMGOLD Corporation (IAG)
- Barrick Gold (GOLD)
Comparing GFI to different miners utilizing EV/Sales and Price/Cash Flow is 2nd astir costly to GOLD. Last but not slightest is to comparison GFI based connected EV/annual production, EV/Plausible reserves, and Plausible reserves/Fully diluted shares.
Investors wage $4,714/oz per ounce of yearly accumulation and $102/oz per ounce of plausible reserves. Besides, we get 0.12 ounces of golden by buying 1 GFI share. Like fiscal multiples utilizing EV/Annual accumulation metrics, GFI is 2nd to GOLD; however, the different 2 clasp the mediate crushed betwixt EDV and AU based connected EV/PR and betwixt GOLD and EDV based connected PR/FDS, respectively.
The emblematic risks for miners are metallurgical, geological, financial, and country. Given the palmy cognition and enlargement of its existent projects, GFI handles mining-specific hazard good successful the look of geology and metallurgy. Its fiscal lasting is excellent, too.
The state hazard is good diversified betwixt Australia, Ghana, South Africa, Chile, and Peru. However, arsenic I said earlier, operations scattered crossed respective countries correspond important operational challenges. Even politically unchangeable countries tin person obscure and analyzable mining regulations. The laws disagree considerably from authorities to authorities successful the US and betwixt the provinces successful Canada, which is what remains betwixt antithetic countries. This represents a situation for immoderate absorption team.
Gold Fields is an fantabulous large golden miner. The institution carries a coagulated equilibrium sheet, its profitability is supra average, and it pays dividends with capable yield. GFI has 2 incoming projects to boost existent performance. Estimating GFI`s NAV with the spot terms of $1500/oz, the existent stock terms offers a sizeable borderline of information astatine 46%. Using fiscal multiples Gold Fields is comparatively much expensive, though measured with mining multiples holds the mediate ground. The sole disadvantage is the company`s operations successful six countries connected 4 continents. It reduces single-country hazard astatine the outgo of accrued operational complexity. Given each the facts, I springiness GFI a bargain rating.
This nonfiction was written by
My sanction is MIhail Stoyanov. I was a marine technologist successful my past life, but present I americium a full-time capitalist and writer. I negociate my subscription concern Investo.bg dedicated to investors who question off-the-path ideas. Being an technologist helped maine to make reasoning successful processes and analyzing analyzable systems. On the different hand, I person a heavy passionateness for history, geopolitics, and macroeconomics. My investing benignant expresses the intersection betwixt engineering and humanitarian thinking. I travel 3 halfway principles successful my investing process. Those tenets dictate my investing process: 1. 50/30/20 regularisation by Scott Bessent. Any terms changes are caused by: macroeconomic shifts (50 %), portion and manufacture changes (30 %), and institution specifics (20 %). That is wherefore I usage a top-down attack to analyzing concern ideas. I commencement from the large picture, past walk done regions oregon industries and yet zoom successful connected idiosyncratic companies. 2. Reflexivity by George Soros: astir of the time, the markets are inefficient. Price, fundamentals, and cognition bespeak connected each different frankincense creating a vicious cycle. When I probe an idea, I tally it done technical, fundamental, and communicative analysis. Each measurement corresponds to 1 of the halfway marketplace variables (price, fundamentals, perception). 3. Triangle of fire: 3 are the mandatory ingredients to commencement combustion. They are oxygen, fuel, and heat. I request 3 elements to see 1 thought arsenic a imaginable investment: beardown macro tailwinds for the portion or/and industry, large business, and catalytic events. All 3 are arsenic important and lucifer the Triangle`s ingredients. In practice, it's a substance betwixt planetary macro and event-driven. I usage equity and options arsenic instruments to trial my hypothesis. Occasionally I usage distressed debt, too, successful lawsuit of event-driven plays. Although my passionateness is the banking and precious metals industries, I americium not focused solely connected them. I question opportunities crossed the globe and successful immoderate industry. You are successful the close spot if you are searching for asymmetric concern ideas.
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