South Africa’s Gold Fields, the world’s fourth-largest listed gold miner, posted weak third quarter earnings below market consensus on falling output and rising costs, but forecast a recovery in the fourth quarter.
Gold Fields — the number two producer in Africa with operations in Africa, South America and Australia — said the decline in production in South Africa was caused by a slow start-up in January after the Christmas break and the maintenance of the water pump column at the South African Kloof mine’s main shaft.
The declining production was partially offset by a 6% rise in the combined output of its international mines.
The company on Friday reported adjusted earnings per share of 45 cents to the end of March against a market estimate of 67 cents, down from 145 cents in the December quarter.
Third-quarter output — which had been revised downwards twice — fell 12% to 793 000 ounces from 900 000 ounces in the previous quarter, but the firm said output would recover to between 875 000 to 900 000 ounces in the fourth quarter.
“Production at all of the South African mines has since improved and we expect that increase to be sustained in Q4,” chief executive officer Nick Holland said in a statement.
“The most important thing on our radar is cost control. We want to reduce costs across our operation so we can reach our objective of generating free cash and growth.”
Total cash costs rose 15% to $703 per ounce.
Analysts had forecast weaker March quarter earnings for Gold Fields and its South African peers, due to lower gold output, rising costs and a marginal rise in the dollar and rand price of bullion.
AngloGold Ashanti also posted weaker earnings on Friday, and Harmony Gold reports on Monday.
Higher electricity tariffs and a new revenue based royalty could worsen their cost outlook in the June quarter, analysts said.
South African gold producers, who sell their gold in dollars and pay their costs in rand, saw little benefit from the increase in the dollar price of gold due to a strong rand.
The gold price in the March quarter rose $10 an ounce or 1% to an average of a record $1 110 per ounce from $1 100 an ounce in the December quarter.
The rand gold price gained 1% to R267 300 rand a kilogramme from R264 500 rand per kilogramme.
Gold Fields earnings are adjusted to exclude the effects of financial instruments and foreign debt. – Reuters