Gold Fields expects lower H1 earnings; sets $30m aside for lung disease claims

JOHANNESBURG (miningweekly.com) – Stronger exchange rates on converting local currency costs to dollar, an increase in amortisation and a financial provision to potentially settle silicosis claims will result in an up to 50% year-on-year decrease in JSE- and NYSE-listed Gold Fields’s earnings per share (EPS) and headline earnings per share (HEPS) for the six months to June 30.

The gold miner on Thursday warned that its EPS are expected to be between 43% and 57% lower than the $0.14 reported in the first half of 2016.

HEPS are expected to be between 38% and 50% lower than the $0.16 reported in the first half of 2016. Normalised earnings for the first six months of this year are expected to be between 15% and 31% lower than the $0.13 reported in the prior comparable period.

Gold Fields noted that the higher amortisation related mainly to its Tarkwa mine as a result of lower reserve ounces and an increase in ore mined and stockpiled.

SILICOSIS CLAIMS
Further, Gold Fields has estimated the cost of a possible settlement of the South African class action lawsuit related to silicosis and tuberculosis (TB) claims and has made a provision of $30.2-million, or R390-million, in the half-year under review. It added that the nominal value of the provision was $39.5-million, or R509-million.

Gold Fields warned that the provision may be subject to adjustment in the future.

A consolidated application was brought against several South African mining companies, including Gold Fields, for certification of a class action on behalf of current or former mineworkers (and their dependents), who have allegedly contracted silicosis and/or TB while working for one or more of the mining companies listed in the application.

In May 2016, the South African South Gauteng High Court ordered the certification of two classes – a silicosis class and a TB class – and that the common law be developed to provide that, where a claimant commences suing for general damages and subsequently dies before close of pleadings, the claim for general damages will transmit to the estate of the deceased claimant. 

The High Court ruling did not represent a ruling on the merits of the cases brought against the mining companies. The Supreme Court of Appeal granted the mining companies leave to appeal against all aspects of the May 2016 judgment. The appeal hearing before the Supreme Court of Appeal is scheduled to be heard between March 19 and 23, 2018.

Meanwhile, African Rainbow Minerals, Anglo American, AngloGold Ashanti, Gold Fields, Harmony and Sibanye Gold in 2014 formed the Occupational Lung Disease Working Group to address issues relating to compensation and medical care for occupational lung disease in the South African gold mining industry. 

The working group has had extensive engagements with a range of stakeholders since its formation, including government, organised labour, other mining companies and the legal representatives of claimants who have filed legal actions against the companies.

The working group remains of the view that achieving a comprehensive settlement which is both fair to past, present and future employees and sustainable for the sector, is preferable to protracted litigation.

Gold Fields will release its interim financial results on August 17.