Why Gold Fields shares are down 8% today

South African Gold Stock Shares Fields of gold (GFI -7.87%) was down 8% by 1:50 p.m. ET Friday after the company reported disappointing earnings results for the first half of 2024.

Not my word — “disappointing.” That’s how CEO Mike Fraser himself described a first half in which gold production fell 20%, leading to a 16% drop in net income to $0.43 per diluted share.

Gold Fields earnings for the first half of the year

Gold is retailing at over $2,500 an ounce today, up 31% from a year ago. You’d think that would be good news for gold miners – and it is. Unfortunately for Gold Fields, it failed to capitalize on this price increase.

“The delayed slowdown at Salares Norte and infill issues at South Deep,” the CEO explained, combined with cold weather that froze pipes and temporarily shut down the Salares Norte plant, reduced gold production to 918,000 ounces in the first half of 2024. compared to 1.15 million ounces produced in the year-ago period.

One quirk: The company cited “evidence of chinchilla presence at the rockery (Salares Norte)” and the need to develop a “chinchilla capture and relocation plan” as contributing to the delays.

Overall, Gold Fields’ cost of production per ounce rose to $2,060, up 47% year over year. Only rising gold prices kept profits from falling as much as production.

Is Gold Fields stock a buy?

Gold Fields cited weak first-half results in lowering guidance for the rest of this year. Despite predicting “significant production growth” and a lower cost of production (per ounce) in the second half of the year, Gold Fields now says it expects gold production to be between 2.05 million and 2.15 million ounces by the end of the year.

That said, the stock trades for just around 22.4 times earnings, including the weak first-half results. Strong second-half results should lower the price/bundle later in the year, and analysts are forecasting around 20% annual earnings growth over the next five years. Throw in a modest 2.6% dividend yield, and Gold Fields shares look pretty attractive.