Gold has been on a wild ride this year. Spot gold (GCY00) hit new all-time highs in late May, peaking at $2,449 amid substantial central bank purchases, notably from China, geopolitical tensions, and uncertainty over Federal Reserve monetary policy. However, gold futures (GCQ24) have since pulled back from those highs, providing an opportunity to buy the dip.
Against this backdrop, South African gold mining company Gold Fields Limited (GFI) is starting to win over analysts - most recently, with BMO Capital's upgrade from “Underperform” to “Market Perform.” Let's take a closer look.
About Gold Fields Stock
Gold Fields Limited (GFI), founded in 1887 and based in Sandton, South Africa, is a legendary name in the gold mining world. With roots going back to the golden age of mining, this powerhouse operates nine mines across Australia, South Africa, Ghana, Chile, and Peru, as well as Canada. Its market cap currently stands at $13.3 billion.
Gold Fields annually produces 2.30 million ounces of gold equivalent, supported by 46.1 million ounces of proved and probable reserves. Additionally, it explores for copper (HGU24) and silver (SIU24), diversifying its portfolio. With 31.1 million ounces in measured and indicated resources, plus 11.2 million ounces in inferred resources, Gold Fields remains a formidable player with a rich legacy and a promising future.
Shares of Gold Fields have gained 9.8% over the past 52 weeks and 14.5% over the past six months. Since peaking at $18.97 in mid-April, GFI has pulled back 19.4%, providing an opportunity to buy the dip.
On March 18, Gold Fields paid its shareholders a semiannual dividend of $0.177 per ordinary share. Its annualized dividend of $0.35 per share translates to a yield of 2.28%.
In terms of valuation, Gold Fields stock trades at 12.96 times forward earnings, which is lower than mining stocks like Barrick Gold (GOLD) and Franco-Nevada (FNV), as well as its own five-year average of 14.60x.
Gold Fields Eyes Growth After Operational Snags
In fiscal 2023, Gold Fields’ revenue jumped 5% to $4.5 billion, with annual profits hitting $726.3 million, or 77 cents per share. Managed gold production for the group (including Asanko, which it sold to its JV partner Galliano Gold during Q1) was 2.387 billion ounces of gold equivalents.
In Q1 2024, revenue per ounce hit $2.1 billion. Despite severe weather and operational challenges at key mines like Gruyere, St Ives, South Deep, and Cerro Corona, group-attributable gold production (excluding Asanko) declined by 18% to 464,000 ounces.
Net debt climbed to $1.14 billion from $1.02 billion at the end of 2023, with net debt to EBITDA increasing from 0.42x to 0.51x. Its free cash outflow stood at $51 million after the final 2023 dividend payment of $199 million.
Looking ahead, Gold Fields anticipates fiscal 2024 group attributable gold equivalent production between 2.33Moz and 2.43Moz, weighted towards the latter half. Group AISC is expected at $1,410/oz to $1,460/oz, with AIC between $1,600/oz and $1,650/oz, including $60/oz for the St Ives renewable energy project. Excluding this, AISC ranges between $1,350/oz and $1,400/oz, and AIC at $1,540/oz and $1,590/oz. Capex is estimated to be between $1.13 billion and $1.19 billion, with sustaining capital between $860 million and $890 million (with $132 million for St Ives in 2024).
Analysts tracking GFI predict its profit per share to hit $1.15 in fiscal 2024, a 23.7% annual jump. However, the real gold rush is expected in fiscal 2025, with earnings projected to skyrocket 122.6% to $2.56 per share.
What Do Analysts Expect for GFI Stock?
On June 26, shares of Gold Fields rose over 1.5% after BMO Capital upgraded the stock to “Market Perform” from “Underperform,” highlighting the miner's operational consistency.
Analyst Raj Ray noted that GFI has underperformed its peers, largely due to delays and setbacks with Salares Norte. That project, located in Chile, was expected to start producing in December 2023, but didn’t yield its first gold until April. However, with better visibility on operational risks and the stock's valuation now more aligned with peers, Ray sees potential for improvement.
Ray also praised Gold Fields’ solid operational track record since 2020, and expects the new senior management team to enhance productivity, especially at Salares Norte. Additionally, the analyst pointed out that Gold Fields boasts a strong balance sheet and liquidity, with manageable net debt and access to a substantial revolving credit facility.
GFI stock has raised its profile on Wall Street, earning a consensus “Hold” rating from analysts - a notable improvement from three months ago, when it was rated a “Moderate Sell” overall. Now, out of the five analysts covering the stock, one recommends a “Moderate Buy,” four suggest a “Hold,” and none rate it a “Sell.”
The mean price target of $17.62 suggests an upside potential of 15.2% from the current price levels. The Street-high target price of $22 for Gold Fields implies the stock could rally as much as 43.9%.
On the date of publication, Sristi Suman Jayaswal did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
