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Gold Fields Profit Rises 40% on Record Gold Price

Feb. 4 (Bloomberg) — Gold Fields Ltd., Africa’s second- largest producer of the metal, posted a 40 percent increase in profit for the three months through December on higher prices.

Net income increased to 1.41 billion rand ($186 million) in Gold Field’s fiscal second quarter, from 1.01 billion rand in the preceding three months, the Johannesburg-based company said in a statement today. South African analysts compare quarters sequentially rather than year on year.

Cash costs rose to $613 per ounce of gold produced, from $586. Output dropped to 900,000 ounces from 906,000 ounces. The company said Oct. 29 it aimed to produce 925,000 ounces in the second quarter.

Chief Executive Officer Nick Holland has sought to boost output to mitigate cost increases. South African gold-mining companies, including Gold Fields’ bigger rival AngloGold Ashanti Ltd., are paying more to extract the precious metal as they dig deeper into the earth to mine shrinking reserves.

“Gold Fields kept costs pretty constant,” which is “pleasing,” David Davis, a mining analyst at Credit Suisse Standard Securities who has a “neutral” rating on the stock, said in an interview in Johannesburg.

The shares fell 5.70 rand, or 6.4 percent, to 83.30 rand in Johannesburg, the biggest fall since April 30. That makes it the second-worst performer on the five-member FTSE/JSE Africa Gold Index after Simmer & Jack Mines Ltd. in the year to date.

Attributable gold production will be 850,000 ounces in the current quarter, Holland said in a presentation.

Costs Increase

Vishnu Pillay, head of South African operations, said input costs in the country, including timber, steel and cement, will increase by about 10 percent should power utility Eskom Holdings Ltd. be allowed to increase prices by 35 percent a year for the next three years.

Output halted at the Driefontein mine in December because of a seismic event and output at Kloof was curbed by safety stoppages in 2009.

Gold Fields will pay a half-year dividend of 50 cents a share. It had 1.8 billion rand in cash as of Dec. 31.

The dividend is “disappointing but should be seen in light of the guidance for an even worse performance in the following quarter,” said Leon Esterhuizen, a London-based mining analyst at Royal Bank of Canada Capital Markets.

The price of gold averaged $1,102 in the quarter, up from $961 in the preceding quarter.

While Gold Fields does not forecast the gold price, Holland said today it “may well rocket” this year…read more the Bloomberg