RATINGS agency Moody’s on Monday confirmed the corporate family rating of precious metals producer Gold Fields at Ba1 with a stable outlook, sparing the miner a potentially expensive downgrade.
The confirmation comes after Gold Fields was placed on review for a downgrade on January 22. A Ba1 rating is, however, undesirable as it is a subinvestment grade rating. It is one notch below investment grade. A downgrade would have raised Gold Fields’s cost of borrowing.
Gold Fields is based in Johannesburg and is the world’s seventh-largest gold producer with sales totalling $2.55bn and annual attributable production of 2.2-million ounces for the financial year ended December 31 last year, according to Moody’s.
"The confirmation of Gold Fields’ Ba1 ratings with a stable outlook reflects the company’s maintenance of strong credit metrics and the significant inroads it has made in de-risking its business profile, specifically starting to deliver consistent production with a reducing cost at its South Deep mine project in SA," Moody’s analyst Douglas Rowlings said.
The confirmation primarily reflects Moody’s expectations that, under a new mine management team, Gold Fields’ South Deep mine project could generate free cash flow this year at a gold price of $1,100/oz and a rand exchange rate of R16/$, bolstering the company’s already robust metrics, the rating agency said.
Gold Fields successfully negotiated a three-year wage agreement with South Deep mine project employees in 2015 averting a labour dispute.
However, Moody’s warned that Gold Fields’ rating could be revised down if cash flow from operations minus dividends and debt falls below 20% on a sustained basis. Pressure could also be exerted on the company’s rating following increased liquidity risk or should Gold Fields be unable to access cash flows from any of its important international operations, namely Ghana, Australia, and Peru, the agency said.
"Similarly any reversal of de-risking the South Deep mine project could also place negative pressure on the rating and/or outlook," it said.
Miners at a Gold Fields' mine. Picture: SOWETAN
RATINGS agency Moody’s on Monday confirmed the corporate family rating of precious metals producer Gold Fields at Ba1 with a stable outlook, sparing the miner a potentially expensive downgrade.
The confirmation comes after Gold Fields was placed on review for a downgrade on January 22. A Ba1 rating is, however, undesirable as it is a subinvestment grade rating. It is one notch below investment grade. A downgrade would have raised Gold Fields’s cost of borrowing.
Gold Fields is based in Johannesburg and is the world’s seventh-largest gold producer with sales totalling $2.55bn and annual attributable production of 2.2-million ounces for the financial year ended December 31 last year, according to Moody’s.
"The confirmation of Gold Fields’ Ba1 ratings with a stable outlook reflects the company’s maintenance of strong credit metrics and the significant inroads it has made in de-risking its business profile, specifically starting to deliver consistent production with a reducing cost at its South Deep mine project in SA," Moody’s analyst Douglas Rowlings said.
The confirmation primarily reflects Moody’s expectations that, under a new mine management team, Gold Fields’ South Deep mine project could generate free cash flow this year at a gold price of $1,100/oz and a rand exchange rate of R16/$, bolstering the company’s already robust metrics, the rating agency said.
Gold Fields successfully negotiated a three-year wage agreement with South Deep mine project employees in 2015 averting a labour dispute.
However, Moody’s warned that Gold Fields’ rating could be revised down if cash flow from operations minus dividends and debt falls below 20% on a sustained basis. Pressure could also be exerted on the company’s rating following increased liquidity risk or should Gold Fields be unable to access cash flows from any of its important international operations, namely Ghana, Australia, and Peru, the agency said.
"Similarly any reversal of de-risking the South Deep mine project could also place negative pressure on the rating and/or outlook," it said.
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