Johannesburg, South Africa — MININGREVIEW.COM — 09 May 2008 – Leading international gold producer Gold Fields Limited has announced a substantial increase in headline earnings for the March 2008 quarter, despite a drop in gold production and a resultant increase in cash costs.
Releasing its results for the third fiscal quarter here this morning, the company said headline earnings for the March 2008 quarter had amounted to R1 246 million, compared with R456 million and R228 million for the December 2007 and the March 2007 quarters respectively. In US dollar terms this meant headline earnings for the March 2008 quarter were US$176 million, compared with US$67 million and US$32 million for the December 2007 and the March 2007 quarters respectively.
The results statement added that the company’s attributable gold production had decreased by 14 per cent to 827 000 ounces, largely due to power disruptions in South Africa. At the same time, total cash costs had increased 21 per cent from R101 532 per kg (US$467/oz) to R122 920 per kg (US$513/oz), mainly due to the loss of production at the South African operations.
In announcing results, Gold Fields CEO Nick Holland made a point of re-emphasising the company’s deep regret that, subsequent to quarter end three, three separate accidents had resulted in the death of 14 colleagues at the South Deep and Driefontein mines. “In all instances full investigations are currently underway,” he added, “and Gold Fields also intends to commission an external, full safety review at all its operations.”
He said that from an operational perspective the March quarter had been characterised by two important developments. “The first was the power disruptions in South Africa which had a significantly negative impact on group production and costs. The second was the 29 % increase in the average rand/gold price received from R170 488 to R220 612 per kg, as a result of a 17 per cent increase in the US dollar price of gold, combined with a 10 per cent weakening of the South African rand quarter on quarter.”
Despite the negative impact of the power disruptions in South Africa, the group margin increased from 38 per cent in the December 2007 quarter to 42 per cent in the March 2008 quarter.
“Gold Fields should benefit over the next three quarters as production in South Africa normalises at stable power supply levels and, in particular, as production increases from the international operations,” Holland concluded. “This involves the commissioning of the Cerro Corona mine in the September 2008 quarter, and the completion of the Tarkwa CIL plant expansion during the December 2008 quarter. This, combined with the reduction in capital expenditure as these projects are completed, is expected to bolster free cash flow and earnings.”