SOUTH Africa’s second largest gold producer Gold Fields on Thursday reported record earnings for the March quarter lifted by increased gold production from its newly acquired mines in Australia and Ghana.
Operating profit in the three months to the end of March was up 52% to a record R1,6-billion compared to the December quarter as attributable gold output jumped 10% to 1,08-million ounces.
Net earnings of the unhedged miner were up 64% to R1,05-billion Its headline earnings per share were 224 cents compared to 139 cents in December.
Analysts polled by Reuters expected Gold Fields to post an average 66% increase in headline earnings per share ? which strip out exceptional items and their tax effects ? of 231 cents, with a range of 220 to 243 cents.
Unhedged gold producers, unlike hedged ones which sell their production forward to lock in prices, benefit from a rise in the spot gold price.
Gold Field’s outgoing CEO Chris Thompson said the recent spike in the price of bullion to around $310 an ounce needed to go higher to give the gold industry real support.
At $310, gold was still below its replacement price ? the price at which the industry could afford to mine its untapped resources to replace the reserves it currently mines ? and the reserves position was still deteriorating despite the improved price, he said.
”The price recovery appears to be still early in its cycle, and in the absence of a strong US economic recovery and a credible solution to the Middle East crisis, higher prices are possible and needed,” Thompson said in a statement.
The weakness of the South African rand and the strength of the gold price also bolstered Gold Field’s results, which it said could have been stronger if its Kloof division had performed better.
PROBLEMS AT KLOOF
Kloof’s gold output fell 11 percent to 258 000 ounces because of a decrease in underground tonnage, which was blamed on a slow start up after the Christmas break and difficult mining conditions.
”It is anticipated that production will continue at current levels for several quarters before improving,” Gold Fields said.
At 0745 GMT, shares of Gold Fields slipped 1,7% to R126, off a record high of R142 on April 29.
The group’s total cash costs were R59 138 in the March quarter compared to R55 013 before, however in dollar terms the total cash costs fell to $160 an ounce from $169.
The group did not expect major cost increases on its South African mines despite rising inflation in the country. It warned the dollar cost per ounce might increase because of an improved rand/dollar exchange rate.
The group had a full quarter of output from its St Ives and Agnew mines in Australia, which added 166 000 ounces of gold at a total cash cost of $163 an ounce.
Gold Fields has embarked on an exploration programme at the two mines to increase the conversion of resources into reserves, which will allow long-term plans to be drawn up for the mines.
The group benefited from two months of production at its newly acquired Damang mine in Ghana ? where Gold Fields has the Tarkwa mine ? which added 40 000 attributable ounces of gold.
Damang’s gold hedge positions of 420 000 ounces, consisting of forward sales and put options, was repurchased. Gold Fields took a R63-million loss on closing the Damang hedges.
”Gold Fields continues to be totally unhedged to the gold price,” the company said.
Gold Fields had cash of R1,73-billion at the end of the March quarter, which is almost double that of the December quarter. Its debt after the acquisitions of the Australian mines and Damang was R2,4-billion. – Reuters