[miningmx.com] – GOLD Fields, the R38.4bn gold producer, risked taking the edge off a resurgent share price today saying there was a 5% reduction in second quarter production owing to strike action at its Ghana mines.
The stock was up 5.3% in Johannesburg as the gold price gained about $34 an ounce or 2.78%, a move credited to US Federal Reserve comments that quantitative easing (QE) may not be eased as quickly as anticipated.
The gold price has lost about a quarter of its value this year but has now reached a two-month high of about $1,282.10 at the time of writing. This is slightly above the total costs Gold Fields said it would report for the second quarter.
The group, which earlier this year unbundled its mature South African mines, said second quarter production would be 451,000 ounces with some 25,000 ounces lost owing to strikes at Tarkwa and Damang mines in Ghana.
The strike has since been resolved but the activity showed how much more reliant Gold Fields is on its African (non-South African) mines which comprise about 43% of total production.
This gold would be produced at a cash cost of $860/oz, and a notional cash expenditure (NCE) of $1,250/oz, about $60/oz lower than the final gold price fix of the second quarter which showed a 25% negative return quarter-on-quarter. Macquarie Research called it the “worst quarterly run since 1900”.
Gold Fields said, however, that full-year production guidance of between 1.83 million ounces and 1.9 million ounces, produced at a cash cost of $860/oz and $1.360/oz were not imperilled by the second quarter performance.
Gold Fields is scheduled to report its second quarter figures on August 22 and that it would post results in line with the World Gold Council’s recently adopted All-In Sustaining Cost model which, similar to Gold Fields’ NCE, includes costs associated with development of future gold ounces.
Gold Fields said earlier this month that it had reduced about 40% of its head-office staff reducing the headcount from just over 100 to under 60. Many of those affected had been redeployed “to the regions” while other retrenchments were voluntary.
The weakness in the gold price would lead to a re-modelling of the South African gold industry, said Gold Fields CEO, Nick Holland on June 27. “What we’ll see is mines being re-modelled so that they will be smaller, produce less volume, and end up paying less taxes,” he said.
“There will potentially be a write-off in reserves. It will be a watershed year for reserves,” Holland said.
