Gold Fields Limited - Who benefits most from the gold rally?
Key arguments supporting the idea
Gold is currently trading above $2500, reflecting a 36% increase from its low point last October and a 23% rise since the start of the new bull run in late February. However, the market has yet to price-in these astronomical gold price levels with gold mining stocks. We conducted a thorough analysis of the gold mining landscape and came up with a list of the companies that have the most potential in the coming year in our view.
We evaluated gold mining companies based on three pillars: 1) their performance in the past year, 2) production growth expected in 2025, and 3) EBITDA margin going into 2025. With all three in mind, we decided to list the most undervalued stocks and came up with the following list.
Bull Thesis for Gold Miners
A rally in the gold prices has led to margin expansion for many of the players with some of them going into 2025 with a secured EBITDA margin of nearly 90% (for royalty companies), and 60-70% (for those miners with an AISC of less than $800 per ounce).
A rally has fast forwarded many of the projects under construction phase, prompting miners to enjoy the fruitful seasoning with ingredients such as high price, government support and a decrease in interest rates.
While we may be worried that there’s little room left for expansion in the gold pricing, it does little to affect gold miners, who’re willingly secure future gold sales at currently elevated forward prices, ensuring them hefty margins years in advance.
Business Overview
Gold Fields is one of the world's largest gold mining firms, headquartered in Johannesburg, South Africa, with operations spanning Africa, Australia, and the Americas. Headquartered in South Africa, it is one of the world’s largest gold producers, known for its significant high-quality reserves and resources. Key operating assets include the South Deep mine in South Africa, the Tarkwa and Damang mines in Ghana, the Cerro Corona mine in Peru, and multiple sites in Australia, including the St Ives and Granny Smith mines.
In recent years, Gold Fields has been expanding its presence outside Africa to reduce geopolitical risks and diversify its asset base. It has also been investing in new growth projects, such as the Salares Norte project in Chile, which is expected to become a key contributor to the company’s future production. Namely, Gold Fields (GFI) has become the 4th largest gold mining company in 2022 following its acquisition of Yamana Gold (AUY) for $7 bn. The rationale for acquisition was an intentional increase of presence in the Americas region, where prior to that the Company was fairly active. Recently the Company announced that it will acquire Canadian Osisko for $1.6 billion amid rising precious metal prices. The acquisition supports Gold Fields' business diversification beyond Africa. The mine is expected to start operations in 2027, with an annual production volume of 300 Koz. The Company is forecasted to increase gold output by 14% in 2025, while it enjoys a high margin of 56%.
Gold is currently trading above $2500, reflecting a 36% increase from its low point last October and a 23% rise since the start of the new bull run in late February. However, the market has yet to price-in these astronomical gold price levels with gold mining stocks. We conducted a thorough analysis of the gold mining landscape and came up with a list of the companies that have the most potential in the coming year in our view.
We evaluated gold mining companies based on three pillars: 1) their performance in the past year, 2) production growth expected in 2025, and 3) EBITDA margin going into 2025. With all three in mind, we decided to list the most undervalued stocks and came up with the following list.
Bull Thesis for Gold Miners
A rally in the gold prices has led to margin expansion for many of the players with some of them going into 2025 with a secured EBITDA margin of nearly 90% (for royalty companies), and 60-70% (for those miners with an AISC of less than $800 per ounce).
A rally has fast forwarded many of the projects under construction phase, prompting miners to enjoy the fruitful seasoning with ingredients such as high price, government support and a decrease in interest rates.
While we may be worried that there’s little room left for expansion in the gold pricing, it does little to affect gold miners, who’re willingly secure future gold sales at currently elevated forward prices, ensuring them hefty margins years in advance.
Business Overview
Gold Fields is one of the world's largest gold mining firms, headquartered in Johannesburg, South Africa, with operations spanning Africa, Australia, and the Americas. Headquartered in South Africa, it is one of the world’s largest gold producers, known for its significant high-quality reserves and resources. Key operating assets include the South Deep mine in South Africa, the Tarkwa and Damang mines in Ghana, the Cerro Corona mine in Peru, and multiple sites in Australia, including the St Ives and Granny Smith mines.
In recent years, Gold Fields has been expanding its presence outside Africa to reduce geopolitical risks and diversify its asset base. It has also been investing in new growth projects, such as the Salares Norte project in Chile, which is expected to become a key contributor to the company’s future production. Namely, Gold Fields (GFI) has become the 4th largest gold mining company in 2022 following its acquisition of Yamana Gold (AUY) for $7 bn. The rationale for acquisition was an intentional increase of presence in the Americas region, where prior to that the Company was fairly active. Recently the Company announced that it will acquire Canadian Osisko for $1.6 billion amid rising precious metal prices. The acquisition supports Gold Fields' business diversification beyond Africa. The mine is expected to start operations in 2027, with an annual production volume of 300 Koz. The Company is forecasted to increase gold output by 14% in 2025, while it enjoys a high margin of 56%.
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