After being stuck in a lateral range for the past year, gold was finally able to overcome the psychological $1,900 an ounce barrier that has held back all previous rallies since early 2021, notes Clif Droke, a leading resources sector specialist and editor of Cabot SX Gold & Metals Advisor.
The breakout to a new one-year high has injected gold bulls with some much-needed optimism that perhaps the metal is finally on its way to the all-time peak at $2,100.
It doesn’t hurt that all of gold’s key factors are in its favor right now, including widespread fear (Russia/Ukraine), rising inflation (up almost 8% on an annual basis in the U.S.) and, more recently, central bank demand.
South Africa-based Gold Fields Ltd. (GFI) is one of the world’s largest gold miners. The company has total attributable annual gold-equivalent production of over 2 million ounces, attributable gold-equivalent mineral reserves of 52 million ounces and mineral resources of 116 million ounces.
The stock typically outperforms the physical metal when gold is in an established intermediate-term rising trend. Gold Fields just reported that its earnings increased an eye-popping 22% earnings to $890 million, or $1 a share, for 2021 compared to a year ago. Revenue of $1.8 billion, meanwhile, rose 8% in spite of higher production costs.
Attributable gold equivalent production for 2021 was 5% higher from a year ago and above guidance, while all-in sustaining costs were $1,063 an ounce — well below gold’s current price of around $1,900 an ounce. The company said South Deep was the “stand-out performer” of 2021, with production increasing 29% on lower all-in costs.
South Deep also generated cash levels that were 157% from 2020, and there are plans to ramp up production at this mine to around 370,000 ounces by 2025 based on its consistent improvement.
Looking ahead, management said it expects production to grow by an additional 20 to 30% over the next three to four years and expects growth to be “more or less linear” in the years ahead, with 2022 production forecast to increase around 7% from last year.
Additionally, Gold Fields said it will pay a final dividend of 2.60 rand per share, taking the total payout for the year to 4.70 rand per share. Aggressive traders can nibble here or wait for a pullback.
