Gold Fields lowers gold outlook, again

Allan Seccombe | Tue, 23 Feb 2010 13:38

[miningmx.com] -- GOLD Fields revised down its already reduced March quarter output figure by another five percent from an expected 850,000 oz because of safety issues at the Kloof mine.

Gold Fields, a R64bn company and the world's fourth-largest gold firm, produced 900,000 oz in the December quarter and said in early February it would produce 850,000 oz in the following quarter due to the slow start-up in South Africa after the year-end holidays.

The total cash cost outlook in early February was $650/oz (R156,000/kg), up from $613 in the December period.

"It is expected that the lower production will negatively impact cash costs and NCE (notional cash expenditure) on a per ounce basis," Gold Fields said on Tuesday without giving a forecast.

Gold production for March will now be 807,500 oz. This is well below the target set after the September quarter by CEO Nick Holland of between 925,000 and 950,000 oz per quarter for the remainder of its financial year to end-June.

Gold Fields shares fell two percent to R89.18/share, outpacing a 1.5% fall in the JSE's gold mining index.

The reason for the decline in the gold output was a decision to bring forward the replacement of a corroded water pump column at Kloof's main shaft, which had been pencilled in for later this year.

"The decision to accelerate the replacement of the column is consistent with the Group's philosophy of 'if we cannot mine safely, we will not mine'," Gold Fields said.

One analyst said he was becoming a little irritable with Gold Fields using safety as almost a catch-all excuse for underperformance. "This is clearly a maintenance issue, so why don't they just call it that," the analyst, who declined to be named, said.

"They talk a great story, but somehow the numbers never gel. Gold Fields might have dug itself into bit of a hole with this very aggressive stance on safety," the analyst said. "I'm very happy with making mining safer, but I'm uncomfortable with the way they attribute almost all these excuses to safety."

Kloof has been hard hit by safety-related stoppages recently due to fatal accidents and a drive to fix potential hazards. Gold output from Gold Fields' second-largest mine slipped to 161,500 oz in the December quarter because of these issue from 157,100 oz in the preceding three months.

Kloof was forecast in February to produce 145,000 oz or 4,500 kg of gold in the March quarter.

Gold Fields forecast Kloof's output to return to "normal levels" by the end of the March quarter and rise to 5,000 kg in the June quarter, Gold Fields said.