Gold has been a focal point of late, bringing Gold Fields Limited (JSE: GFI), one of the world’s largest gold mining companies, to be the trending topic of conversation amongst many market participants.
Chris Griffith, CEO of Gold Fields, elected to step down from his position, as announced on Tuesday, the 13th of December 2022, due to the following failure to secure the much-anticipated deal with Canadian mining company Yamana Gold. In a statement released by Gold Fields, Chris Griffith expressed that “… the Yamana setback should not be allowed to impede the company’s strategy”. Chris’s decision to step down as CEO will be effective from the 31st of December 2022.
The company’s share price has already been on quite the rollercoaster ride this year, with a 52-week high of R262,93 and a subsequent low of R126,62. In 2022, persistently high inflation from a global perspective paved the path for investors to rush towards safe-haven investments such as gold, much to the benefit of Gold Fields. However, the departure of Chris Griffith and how the market reacts to such will attract the eyes of many investors.
Technicals
Looking at the daily price action on Gold Fields, we can see that price broke out of the consolidation phase (green circle) and pushed higher through the first resistance around R190.84 a share. Price has moved lower and is consolidating above the R176.21 support level and could see another leg lower if short sellers start stepping in and driving the price back lower to the breakout level.
The breakout support level could be an opportunity for investors to get in on the action at lower prices if all the fundamental factors play out as commodity prices become in favour once more. The upper resistance levels for the bull case are around R190.84 and R210.56, which could be reached in the short term if safe havens like gold become attractive.
Fundamentals
Looking closely into the Group’s latest report card in US Dollar (USD) terms, Gold Fields has managed to increase revenue from $2,967.1 million in 2019 to $3,892.1 million in 2020 to $4,195.2 million in 2021. This translates to an annualised two-year increase of approximately 19% from 2019 to 2021. The one-year return from 2020 to 2021 is slightly more modest at 8%. Delving into the bottom line in the income statement, Gold Fields incurred an impressive 327% year-on-year increase in net profit from $174,7 million in 2019 to $745,4 million in 2020. From 2020 to 2021, profit for the year continued to rise by approximately 11% to $829,5 million. The annualised two-year increase in net profit from 2019 to 2021 is 118%.
Basic earnings per share incurred a significant year-on-year increase of 310%, from 20 cents in 2019 to 82 cents in 2020. From 2020 to 2021, basic earnings per share climbed by a steady 9% to 89 cents. On an annualised return basis, the two-year return from 2019 to 2021 is approximately 111%.
Much to the delight of dividend-conscious shareholders, the Group’s dividends per share (DPS) figure rose significantly from 2019 to 2021. From 2019 to 2020, dividends per share increased by 220%, from 5 cents to 16 cents. From 2020 to 2021, this figure rose by a further 125% to 36 cents per share. All-in-all, dividends per share increased by an annualised 168% over the two years, from 2019 to 2021.
ESG Compliance
Given the nature of their operations and the associated direct impact mining companies have on the environment, ESG best practice is essential for companies within the mining industry. Companies that can ensure continuity of operations and sustained profitability while conforming to new ESG laws and standards may unlock a competitive advantage over those that fall short of such expectations.
How does Gold Fields fare in the space of ESG compliance?
Gold Fields has assured stakeholders that ESG compliance is well-entrenched within its operating capacity, in which case one of three strategic pillars relates to a leading commitment to ESG. Underpinning the Group’s commitment to ESG includes several sub-targets such as decarbonisation, water stewardship, and gender diversity. Within these targets, Gold Fields aims to achieve the following:
- 30% reduction in net carbon emissions by 2030 from the 2016 baseline level
- Net zero carbon emissions by 2050
- 80% reduction in freshwater use from the 2018 baseline level
- 30% female representation within the workforce
Furthermore, Gold Fields has partnered with Epiroc, a Swedish manufacturing company, to develop diesel-electric mine trucks, aiming to reduce diesel consumption volume significantly. This recently announced partnership bodes well for Gold Fields’ goals targeted toward sustainability and a reduction in net carbon emissions.
Summary
A possible short opportunity exists for day traders if the R176.21 support level does not hold, which could see prices move lower to the R163.40 breakout zone. The breakout zone support could give long-term investors or new entrants to the market lower entry levels. These lower price levels could be possible long opportunities back higher to the major R190.84 and R210.56 resistance levels.
Sources: Gold Fields Limited, Mining Weekly, Cision PR Newswire, TradingView.
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