Gold Fields said on Thursday it is still on track to hit its quarterly gold output target of 1-million ounces, despite another expected dip in output in the quarter to end-March.
The world’s fourth biggest gold producer posted second-quarter results showing output of 900 000 ounces, down from 906 000 in the previous three months and in line with its revised forecast issued on January 7. It forecast output of 850 000 ounces in the current quarter to end-March.
Weaker gold output is also expected from rivals’ results as the sector struggles to maintain production in the face of a tough campaign by the South African government to slash mine fatalities by shutting mines after accidents.
The world’s No. five gold producer Harmony Gold is due to release results on Monday and third-ranking AngloGold Ashanti on February 18.
“It’s just taking longer to hit our target, but if I look at all the brownfields opportunities around the group … and of course the big increase in production at South Deep, we’re in good shape to still hit that target in the medium term,” chief executive Nick Holland told Reuters Insider television.
Holland said the miner’s second quarter output had mainly been dented by a slump at its main South African operations, which were hit by unplanned work stoppages due to accidents that cost the company 2 200 kilogram’s of gold in 2009.
“We would have made [our target] this last quarter had it not been for the significant stoppage at Driefontein,” Holland said in a webcast of the company’s second-quarter results.
Gold Fields closed the Driefontein mine for six days in December following a series of earthquakes that killed two workers.
“The Christmas break was worse this year … because of safety issues that prevented us from going into the period with stockpiles for example,” Holland said.
South Africa, which has the world’s deepest gold mines, has a dire safety record, and the fatalities have led to the temporary closure of mines by authorities, denting output.
No mine nationalisation
Holland also sought to calm concerns about proposals to nationalise South Africa’s mines, which have raised investor worries at a time when the mining sector is already grappling with the uncertainty of a recession, job cuts and impending high power tariff increases.
“I’ve spoken to the president directly on this, I don’t believe it’s an issue. I have spoken to the mining minister, they assure me that it’s not going to happen,” he said.
South Africa is the world’s biggest producer of platinum and the world’s third largest gold producer, and although the influence of mining on gross domestic product has declined, particularly as gold reserves become exhausted, the sector remains one of the country’s major employers.
Gold Fields, which has operations in Africa, South America and Australia, said in a statement its third-quarter earnings would be negatively affected by the Christmas slowdown.
The group reported a rise in second-quarter adjusted earnings per share to 145 cents from 89 cents the previous quarter.
Total cash costs during the quarter were up 5 percent to $613 per ounce due to a stronger rand, and are expected to rise to $650 per ounce in the quarter to end-March, assuming a rand/dollar exchange rate of R7,45, the miner said.
The shares were 0,8 percent lower at R88,31 by 1.29pm GMT, outpacing a 2,3% weaker JSE Mining Index.
“I don’t think there were any surprises in the results. The lower production forecast for the next quarter is also not unexpected given that this is a Christmas period,” David Davis, an analyst at Credit Suisse Standard Securities told Reuters.
South African gold producers sell their gold in dollars and pay costs in rand. Spot gold traded at $1 107,10 per ounce at 6.24pm GMT on Thursday.
The company declared an interim dividend of 50 cents per share. — Reuters