Gold Fields Ltd., the fourth-largest producer of the precious metal, climbed to a three-month high in Johannesburg trading after posting a 15 percent gain in second-quarter profit on record gold prices and production gains.
The shares surged to the highest closing price since April 26. Profit excluding one-time items rose to 1.33 billion rand ($183 million), or 1.84 rand a share, from 1.15 billion rand in the first quarter, or 1.60 rand, the company said in a statement today. Production expanded 5.1 percent to 872,000 ounces from 830,000 ounces in the first quarter.
Gold prices jumped 8.6 percent in the quarter to an average $1,508 an ounce, extending the rally to a record $1,814.95 in London today on concern over global economic growth. The metal may reach $2,000 by the year-end, Glenn Silverman, chief investment officer at Investment Solutions, said yesterday.
Gold Fields, Africa’s largest producer after AngloGold Ashanti Ltd., gained 5.50 rand, or 4.9 percent, to 118 rand at the 5 p.m. close in Johannesburg, where the company is based.
“Clearly, at these sort of gold prices, cash flows for all of the big gold majors are set to increase significantly,” David Davis, an analyst at SBG Securities Ltd., said by phone from the city today. “The name of the game for all the big companies is whether you can maintain or grow your production.”
AngloGold last week posted a 68 percent increase in second-quarter earnings to $342 million excluding one-time items.
Gold Fields Chief Executive Officer Nick Holland plans to boost annual output to 5 million ounces from about 3.6 million ounces this year to mitigate costs he sees rising 5 percent to 10 percent industrywide. In South Africa, workers ended a five-day strike this month to settle for wage gains of as much as 10 percent, twice the inflation rate, costing as much as 1.2 tons of lost output. Average power tariffs rose 26 percent this year.
By the end of next year, Gold Fields may have given approval to build “hopefully” three new projects, Holland told Bloomberg News in an interview today. The company may spend a minimum of $500 million to double production from about 230,000 ounces a year at its Damang mine in Ghana, he said. A study on the Chucapaca project potential in Peru may be completed next year, while initial studies on the Arctic Platinum project in Finland may be finished this year, the company said.
The Far South East project in the Philippines is also a “sizeable opportunity,” Holland said, adding it may contain 15 million to 20 million ounces. Projects of that size would “typically” be mined over 12 to 14 years, he said.
In Peru, where the company owns the Cerro Corona mine, taxes or royalties may not be as harsh as is widely expected, Holland said in the interview. In South Africa, Gold Fields’ view is mines won’t be nationalized, he told reporters.
The youth wing of South Africa’s ruling party has called for mines and banks to be taken over by the government.
South African analysts compare quarters sequentially rather than with the prior year