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South African Gold Miner Offers Value Despite 'Flatter Medium-Term Outlook'
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David Haughton, an analyst with CIBC, reviewed this company's 2017 financials and 2018 guidance.

Following Gold Fields Ltd.'s (GFI:NYSE; GFI:JSE) recently released financial reports, CIBC lowered its rating to Neutral from Outperform and trimmed its share price target to R56 from R71 on the company "to reflect the revised outlook and prevailing spot prices" in the form of a forecasted stronger rand, explained analyst David Haughton in a Feb. 14, 2018 research report. The gold miner's stock is trading today at around R46.39 per share.

The revised outlook is primarily attributable to the Deep South project, which had a "seasonally low Q1/18 (after the Christmas break)," which "could be a near-term headwind," Haughton noted. Gold Fields recently outlined a slower-than-expected ramp-up there, to 480 thousand ounces (480 Koz), and at a higher all-in sustaining cost (AISC) than anticipated. "Implementation of the plan and achieving the required efficiencies are key to the Gold Fields valuation," the analyst added.

In more positive news, Haughton pointed out that Gruyere and Damang are advancing on track with first ore anticipated in Q1/19 and Q2/19, respectively. Also on schedule is the feasibility study for Salares Norte, which is slated for release by the end of 2018.

In considering the company overall, its reported 2017 normalized earnings per share was as estimated, at $0.17, which falls into the pre-released range of $0.16–0.19. Production, at 2,160 Koz of gold equivalent (Au eq) and an AISC cost of $955 per ounce ($955/oz), exceeded guidance, which was 2,100–2,150 Koz at $1,010–1,030/oz.

Gold Fields provided 2018 production guidance, which was slightly higher than CIBC's, 2.08–2.10 Moz Au eq versus 2.03 Moz Au eq. The miner forecasted AISC at $990–1,010/oz, which was lower than CIBC's anticipated $1,056/oz.

In 2017, despite "heavy capital spending," Gold Fields "delivered a cash-neutral year," Haughton reported. As for capex in 2018, the company guided to $835M, which is in line with CIBC's estimate. However, "an additional $83M budget for the Salares Norte feasibility study was beyond our assumption," added Haughton.

He concluded that while Gold Fields' medium-term outlook is now "flatter," the company still "offers appeal for improving operations and value amongst South African gold miners."

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1) Doresa Banning compiled this article for Streetwise Reports LLC and provides services to Streetwise Reports as an independent contractor. She or members of her household own securities of the following companies mentioned in the article: None. She or members of her household are paid by the following companies mentioned in this article: None.
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Disclosures from CIBC, Gold Fields Ltd., Feb. 14, 2018

Analyst Certification:
Each CIBC World Markets Corp./Inc. research analyst named on the front page of this research report, or at the beginning of any subsection hereof, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect such research analyst's personal views about the company and securities that are the subject of this report and all other companies and securities mentioned in this report that are covered by such research analyst and (ii) no part of the research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed by such research analyst in this report.

Analysts employed outside the U.S. are not registered as research analysts with FINRA. These analysts may not be associated persons of CIBC World Markets Corp. and therefore may not be subject to FINRA Rule 2241 restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

Potential Conflicts of Interest:
Equity research analysts employed by CIBC World Markets Corp./Inc. are compensated from revenues generated by various CIBC World Markets Corp./Inc. businesses, including the CIBC World Markets Investment Banking Department. Research analysts do not receive compensation based upon revenues from specific investment banking transactions. CIBC World Markets Corp./Inc. generally prohibits any research analyst and any member of his or her household from executing trades in the securities of a company that such research analyst covers.

Additionally, CIBC World Markets Corp./Inc. generally prohibits any research analyst from serving as an officer, director or advisory board member of a company that such analyst covers.

In addition to 1% ownership positions in covered companies that are required to be specifically disclosed in this report, CIBC World Markets Corp./Inc. may have a long position of less than 1% or a short position or deal as principal in the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon.

Recipients of this report are advised that any or all of the foregoing arrangements, as well as more specific disclosures set forth below, may at times give rise to potential conflicts of interest.

Important Disclosure Footnotes for Gold Fields Ltd. (GFI):

· CIBC World Markets Inc. expects to receive or intends to seek compensation for investment banking services from Gold Fields Ltd. in the next 3 months.

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