Gold Fields is one of the world's largest precious metals producers. After Gold Fields of South Africa Limited and Gencor Limited merged their gold assets in 1998, the company became one of the top three or four gold producers in the world. Its South African operations have played a founding role in the industry in both South Africa and in the world.

Gold Fields states the company "is one of the world's largest unhedged pure gold producers, providing investors with maximum leverage to the gold price. The company has an annual gold production of approximately 4.1 million ounces from mines in South Africa, Ghana, Australia and Venezuela (Choco 10), as well as a developing mine at Cerro Corona in Peru and has ore reserves of 65 million ounces and mineral resources of 179 million ounces; employs 48,467 people globally and is listed on the NYSE, LSE, JSE, Euro next and Swiss Exchanges."

Today, Gold Fields is investing at Kloof, Driefontein, and South Deep in South Africa to extend mine lives beyond 35 years. In recent years, management set a target of 1.5 mil oz of annual production outside South Africa by 2009, and the company is close to 1 million oz there already.

Their policy with respect to hedging is "to remain unhedged to the gold price. However, hedges are sometimes undertaken on a project specific basis as follows: (i) to protect cash flows at times of significant expenditure, (ii) for specific debt servicing requirements, and (iii) to safeguard the viability of higher cost operations. Gold Fields may from time to time establish currency financial instruments to protect underlying cash flows."

Management has a preference for fewer but larger, lower-grade (possibly) but longer life, gold resources. They take pride as skillful operators.

CEO Ian Cockerill puts accretiveness and value ahead of considerations like country risk. He is constantly on the look-out for those "unloved" elephants.

While the company has some 14,000 shareholders holding 1000 shares of less, this is an institutional favorite: 93.5 pct of the stock is held by banks, pension funds, mutual funds, and the like, whereas individuals hold a total of 1.7 pct. In fact there are 52 institutions that each hold over 1 million shares for 81.5 pct of the total issued shares.

The long-term price chart shows that there is long running technical resistance at $15 from 2Q02 through 4Q05, which took at least six attempts to break through to the upside. After reaching a high of $26.95 in May, the stock then tested the new $15 support, which held at $16. I believe that the current trading action is another test of that $15-$16 support.

I would start to accumulate below $16 by writing the $15 puts, and buying stock below $15.50, for a cost base of about $15. As the price is presently $17.00, you have some time to work on this, although you might want to start the put writes soon.

I would also buy some very long $15 calls and hold them as low cost insurance on the possibility gold has a serious run to the upside.

On the upside, I believe the gold price will exceed $730 in the next intermediate-term Bull cycle, which will take the price above $27.00. After a serious run to the upside, I would write the $30 calls in hopes I got taken out there for a double. Then if the gold price really took off, I'd still have my valuable $15 calls, which btw (as a personal tactic) I would be rolling over into higher strike prices after every pull-back in a Bull phase (ie, higher highs and higher lows).

Price targets and trading tactics must be matched to the individual, so I'm going to be very general here. Most of the Wall Street analysts would have a price objective no higher than say $26, and you should be aware of that. So, I am giving you my personal take.

Strategically though, you can see that institutions hold this stock up the yin-yang, and rightfully so. Today, I decided to put Gold Fields Ltd on the Cara 100, which is a personal statement of confidence.

Gold Fields Ltd [GICS 15, Cara 100]
(GFI: Yahoo Finance file)
(GFI: StockChart chart)
(GFI: Investertech chart)
(GFI: ADVFN Financial Data)
(GFI: ADVFN Financial Data)

For readers who are interested in Gold Fields Ltd as a world-class goldminer with a solid future, I urge you to review their presentations at the Denver Gold Forum for 2006, 2005 and 2004. In addition to gaining a thorough perspective of gold mining and a major goldminer, you will also be treated to a sophisticated discussion of the role that foreign currency plays in management decisions and corporate results.