Gold Fields expects rewards from Buffett’s turn to gold miners

0:00
play article
Subscribers can listen to this article

Gold miners are widening their investment appeal as near-record bullion prices boost profits and dividends, according to the chief executive officer of Gold Fields [JSE:GFI].

Gold Fields is adding more generalist investors as they search for yield amid low bond-market returns, Nick Holland said in an interview from Johannesburg. The sector, which once largely drew the attention of specialist funds, is now attracting a broader base of investors who previously considered gold miners too leveraged and high-risk. Bullion’s surge to a record earlier this month is increasing that allure.

"We can give you the cash yield through a dividend policy that will pay out more at higher prices because of higher earnings," Holland said. "I think we’re going to get a lot more interest as people start doing updated valuations on us."

Warren Buffett’s Berkshire Hathaway recently added Barrick Gold to its investment portfolio after shunning gold producers for years. In the past, Buffett, the billionaire chairperson of Berkshire, cautioned against investing in the metal because it’s not productive like a farm or a company.

Gold Fields shares have more than doubled this year as first-half profit rose 120%, despite virus disruptions at mines in South Africa and Peru.

"A lot of people are running the rule over us now," the CEO said. "We were able to demonstrate that we can actually do well despite the Covid risks."Holland, who plans to retire in September 2021, is building an $860 million mine at Salares Norte in Chile. That project will raise annual output to more than 2.5 million ounces, taking the producer’s "profitability and cash flow to another level," he said.

During more than a decade as CEO, Holland has shifted focus to more profitable operations in Africa, Australia and the Americas as the gold industry in South Africa dwindles amid geological challenges and soaring costs.

Still, South Deep, the producer’s last remaining mine in its home country, has started to "make good money," he said. That means there’s no pressure to sell the asset.

"I don’t think there is any urgency for us to do anything here given the fact that prospects are improving," Holland said. “It’s back in the black, it’s making money. We are happy, we can see more coming down the road.”

We live in a world where facts and fiction get blurred
In times of uncertainty you need journalism you can trust. For only R75 per month, you have access to a world of in-depth analyses, investigative journalism, top opinions and a range of features. Journalism strengthens democracy. Invest in the future today.
Subscribe to News24
ZAR/USD
15.20
(-0.25)
ZAR/GBP
20.40
(-0.01)
ZAR/EUR
18.42
(-0.06)
ZAR/AUD
11.29
(-0.13)
ZAR/JPY
0.15
(+0.06)
Gold
1835.48
(-0.24)
Silver
24.14
(+0.55)
Platinum
1061.00
(+3.78)
Brent Crude
48.78
(+0.95)
Palladium
2336.01
(+1.71)
All Share
59419.37
(+0.80)
Top 40
54500.04
(+0.61)
Financial 15
11646.83
(+2.17)
Industrial 25
79758.36
(+0.10)
Resource 10
57015.33
(+0.70)
All JSE data delayed by at least 15 minutes morningstar logo
Company Snapshot
Voting Booth
Please select an option Oops! Something went wrong, please try again later.
Results
Yes, and I've gotten it.
21% - 384 votes
No, I did not.
52% - 949 votes
My landlord refused
27% - 500 votes
Vote