Gold Fields Stock Drops Following Disappointing H1 Performance and Further Reduction in Full-Year Production Forecast (NYSE:GFI)

Gold Fields (NYSE:GFI) -7.6% to a two-month low in Friday’s trading after posting lower than expected H1 adjusted earnings and lowering its full-year production target for a second time after unusually severe winter conditions slowed a planned ramp-up of production at the new Salares Norte mine in Chile.

H1 net profit fell to $389M from $457.8M in the same period a year earlier, while revenues rose 15% to $2.21B, below the analyst consensus of $416.9M in net profit and $2.3B in revenues in a Visible Alpha poll; headline earnings sank 30% Y/Y to $320.7M, or $0.36/share.

CEO Mike Fraser told Reuters that icy weather conditions meant Gold Fields (GFI) lost two months of production time at Salares Norte, located in the Atacama region of northern Chile.

“The massive lesson here is attempting a ramp up during winter was the wrong thing,” Fraser said, adding that despite the delays, the $1B mine is still expected to bring better returns after starting gold production in March this year.

Production Challenges and Guidance

The weather problems meant Gold Fields (GFI) in June had to cut the site’s production guidance for the year to 90K-180K oz from 220K-240K oz; at full capacity, Salares Norte is expected to produce 580K oz of gold.

Salares Norte’s woes as well as production setbacks at the South Deep mine in South Africa and the Gruyere mine in Australia led to a 20% drop in the company’s overall output to 918K oz, and another cut to full-year production guidance after a reduction announced in June.

Gold Fields (GFI) said it now expects to produce 2M-2.15M oz for the full year, down from its previous forecast of 2.2M-2.3M oz, after originally guiding for 2.33M-2.43M oz, while raising its outlook for all-in sustaining costs to $1,580-$1,670/oz from $1,470-$1,530/oz previously.

Future Outlook and Growth

Adding to this, it is essential for Gold Fields to address the challenges in production planning and weather-related delays to ensure sustained growth and profitability in the future.