Shares of South African gold mining stock Gold Fields (GFI +3.41%) slid 8% through 1:50 p.m. ET Friday after the company reported disappointing earnings results for the first half of 2024.
That's not my word -- "disappointing." It's how CEO Mike Fraser himself described a first half in which gold production dropped 20%, leading to a 16% decline in net income to $0.43 per diluted share.
NYSE: GFI
Key Data Points
Gold Fields' first-half earnings
Gold retails for more than $2,500 an ounce today, up 31% from one year ago. You'd think would be good news for gold miners -- and it is. Unfortunately for Gold Fields, it hasn't been able to capitalize upon this price spike.
"Delayed ramp-up at Salares Norte and the backfill issues at South Deep," explained the CEO, combined with cold weather that froze pipes and temporarily shut down the Salares Norte plant, reduced gold output to 918,000 ounces in the first half of 2024, versus 1.15 million ounces produced in the year-ago period.
One quirk: The company cited "evidence of chinchilla presence at the [Salares Norte] rockery," and a need to develop a "chinchilla capture and relocation plan" as contributing to delays.
In all, Gold Fields' production cost per ounce rose to $2,060, up 47% year over year. Only rising gold prices kept profits from dipping as much as production did.
Is Gold Fields stock a buy?
Gold Fields cited weak H1 results in lowering guidance for the rest of this year. Despite predicting a "significant increase in production" and lower cost of production (per ounce) in the second half of the year, Gold Fields now says it expects gold production to range from 2.05 million to 2.15 million ounces through the end of the year.
That being said, the stock only costs about 22.4 times earnings, including the weak first-half results. Strong second-half results should lower that P/E later in the year, and analysts forecast about 20% annual earnings growth over the next five years. Throw in a modest 2.6% dividend yield, and Gold Fields stock looks pretty attractive.
