Gold Fields Reports Profit as Output Rises and Costs FallKevin Crowley
Gold Fields Ltd., which spun off most of its South African mines this year, cut output costs by 23 percent as it prepares for the possibility of writing down the value of some of its mines at the end of 2013.
So-called all-in sustaining costs were $1,089 an ounce in the three months ended Sept. 30, compared with $1,416 an ounce in the previous quarter after output rose and corporate overhead expenses were reduced, the Johannesburg-based company said today in a statement. Gold slipped 0.9 percent to $1,264.16 an ounce at 5:55 p.m. in Johannesburg.
The cost cuts “set the company up to be sustainable at the lower prices we’ve seen today which has been a key objective over the last six months,” Chief Executive Officer Nick Holland said in a telephone interview today. It will try to sustain expenses at similar levels in the fourth quarter, he said.
Gold Fields is trimming expenditure as it seeks to adjust to a bullion price that has plunged 24 percent this year and is on course for its first annual decline since 2000. The lower gold price may also force the company to book impairments on some of its mines by the end of the year, Holland said.
“There may well be some impairments but I can’t tell you what and where they will be,” he said.
Gold Fields’ cost-cutting helped the company return to profit in the third quarter. Normalized earnings, which exclude one-time items, were $12 million in the period, compared with a loss of $36 million in the previous quarter, the company said in the statement. Output of the metal climbed 10 percent to 496,000 ounces in the period.
“The market will be surprised at the reduction in costs,” David Davis, a Johannesburg-based analyst at SBG Securities Ltd. “They have been very, very well controlled.”
The stock fell 3.9 percent, the most in two months, to 44.02 rand by the close in Johannesburg. It has slumped 52 percent this year, compared with a 46 percent drop in the FTSE/JSE Africa Gold Mining Index.
South Deep, a largely mechanized mine in South Africa that will be Gold Fields’ biggest when it reaches full production, probably won’t achieve its targeted 700,000 ounces of annual output by 2016, the company said in August. A new plan for for the operation will be announced in February, Gold Fields said.
The company has cut 1,700 jobs to 1,800 jobs, or about 10 percent of the total, this year, Holland said. It will reduce the workforce by 800 to 1,000 positions in the fourth quarter, including some in Ghana, he said.