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S&P downgrades Gold Fields

Nov 15 2012 18:04
Johannesburg - Mining giant Gold Fields [JSE:GFI] was downgraded on Thursday by international ratings agency Standard & Poor's (S&P).

"We believe that South African gold miner Gold Fields faces increased country risk in light of increasing social and political tensions," S&P said in a statement.

Gold Fields was downgraded to BB+/B with a stable outlook, from BBB-/A-3 for its long-term and short-term credit.

"We have revised downward our assessment of Gold Fields's business risk profile to "fair" from "satisfactory" to reflect the increase in country risk in South Africa, and GFI's higher unit cash costs than peers," said S&P.

The stable outlook reflected S&P's opinion that Gold Fields's financial risk profile would continue to be robust, benefiting from healthy gold prices, modest leverage, strong liquidity, and its conservative financial policy, it said.

"This reflects our opinion that South African country risk has increased for Gold Fields," it said.

Gold Fields' unit cash cost has increased faster compared to its peers in recent years. Its unit cash cost was $767 (about R6 848) per ounce of gold in 2011, compared with the industry average of between $600 (about R5 357) and $650 (about R5 803) per ounce.

For the second quarter of 2012, Gold Fields' unit cash cost had increased to $855 (about R7 634) per ounce.

These risks would not lessen in the short term, with Gold Fields' financial risk profile assessed as intermediate. Its competitive position could weaken further if competitors started to produce gold from new mines within the next three years.

"We do not see any upward rating potential at this stage, given the company's weak competitive position and our view of its higher country risk than most investment-grade peers," S&P said.
gold fields  |  standard & poor's



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