Gold Fields Ltd. (GFI), the fourth-largest producer of the metal, faces the threat of higher royalties and taxes in Peru after elections next month as the country seeks a greater return from its resources amid record-high prices.
“It’s conceivable that we might see some higher royalties, higher taxes,” Chief Executive Officer Nick Holland said in an interview in Johannesburg today. The company, based in the city, paid global royalties of 165 million rand ($24 million), up 40 percent, last quarter. Peru’s presidential vote is on June 5.
A 25 percent surge in London-traded gold in the past year to $1,490 an ounce has added to mining companies’ earnings and encouraged nations such as South Africa, Australia, Chile, Ghana and Namibia to seek changes in their share of the profit. Gold Fields operates in Peru’s Cerro Corona and Chucapaca, where BHP Billiton Ltd., the largest mining company, has copper mines.
Gold Fields will cooperate with Peru, and prefers a system “linked to added taxes on profits as opposed to royalties,” which may limit the size of projects, Holland said.
Peru’s gold-export revenue rose 23 percent to a record $809 million in March, the central bank said on May 17. Prices of the metal in London reached an all-time high of $1,577.57 on May 2.
Without changes in Peru, Gold Fields’ royalty payments in the next few quarters should be similar or just “a little bit higher” than those in the first three months, Holland said.
Labor, Power Costs
Gold Fields and Johannesburg-based rivals AngloGold Ashanti Ltd. (ANG) and Harmony Gold Mining Ltd. are seeking to boost output and cut costs to counter higher labor, power and royalty fees. They face the possibility of “very tough” and “drawn out” South African wage talks from the next few weeks, Holland said.
Northam Platinum Ltd. lost 43 days of production during a strike last year before workers settled for pay increases of 10- 13 percent. Inflation in the country, where Gold Fields mines most of its metal, was an annual 4.2 percent in April.
The company, Africa’s second-largest producer of the metal, posted first-quarter profit, following a loss in the prior three months, on rising prices and as the sale of a stake to black investors previously wasn’t repeated. Profit excluding one-time items was 1.1 billion rand, or 1.51 rand a share, compared with a loss of 776 million rand, or 1.09 rand, in the previous quarter, the company said today in a statement.
Output fell 8 percent to 830,000 ounces. Second-quarter output at the Beatrix mine should recover from the first, Holland told reporters in Johannesburg today.
Gold Fields prefers developing the reserves it already has to acquiring companies, he said. It is advancing studies at Chucapaca, the Far South East project in the Philippines and Yanfolila in Mali, where it’s looking for 200,000 to 250,000 ounces annually, Holland told investors on a conference call.
Gold Fields rose 0.1 percent to 106.80 rand by the 5 p.m. close of Johannesburg trading, paring an 11 percent decline this year. The slide compares with a 4.6 percent drop in AngloGold shares so far in 2011 and an 11 percent slump in Harmony.
Barrick Gold Corp. (ABX), Newmont Mining Corp. and AngloGold are the world’s largest producers of the metal.
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