Buy up all the "Easy buttons" you can find, because I think their prices will rise as more and more people clamor for a quick fix in their lives. I'm sure you could sell one for a fine price to whomever wins the November election, and I know of at least one CEO in the gold patch who might be similarly inclined.
Gold Fields (NYSE:GFI) CEO Nick Holland inherits his post at a critical juncture. The company is still reeling from the tragic loss of 14 employees, resulting from three separate incidents at two mines within less than a week. Investigations are ongoing, and Holland has ordered a companywide safety review.
Holland moved into his position after the surprise departure of outspoken gold bug Ian Cockerill, who has moved on to head Anglo Coal, the global coal-producing subsidiary of Anglo American (NASDAQ:AAUK).
As if these events weren't challenging enough, power shortages in South Africa that forced closures and slowed operations last quarter led to a 14% drop in overall production to 827,000 ounces of gold. Cash costs, meanwhile, rose a troubling 21% in the quarter to $513 per ounce. Although electricity to miners has been restored to 95% of historical levels, the relevant utility is seeking a 100% rate increase over the next two years. Fellow South African miners Harmony Gold (NYSE:HMY) and AngloGold Ashanti (NYSE:AU) were also affected by the shortage, but Gold Fields shares have lagged the group and sit near a 52-week low.
But there is hope on the horizon. The Cerro Corona project in Peru is nearing completion, with production scheduled for July. This project is expected to yield about 350,000 additional ounces of gold per year over the life of the mine. With a projected cash cost of just $330 per ounce, the mine should aid in Holland's quest to keep companywide production costs to a minimum. Still, Gold Fields is nowhere near the $250-per-ounce costs that Goldcorp (NYSE:GG) projected for 2008.
I saved the best for last: the "Easy button" for Fools wishing to know what Gold Fields' management thinks of its own company's prospects. Your answer: Insiders own roughly a quarter of the company's shares. Sounds fairly bullish to me.
Further Foolishness:
- Don't keep all of your eggs in one nest.
- Peru even has copper companies looking for gold.
- Have you experienced a golden gut-check?
