Gold Fields banks on SA mine as earnings fall

Johannesburg - Gold Fields is looking to break even at its South Deep mine in South Africa by the end of the year, its chief executive said on Thursday after posting a drop in full-year earnings.

Shares in Africa's second-biggest bullion producer by market value were down 2.6 percent to R64 by 07h25 GMT following the fall in earnings, which was due to lower prices and impairments.

Gold Fields' normalised earnings for the year to December fell 47 percent to $45 million from $85 million a year earlier.

The company said it sees 2016 production at its mechanised South Deep mine jumping 30 percent to 257 000 ounces, following years of technical problems.

“Our quest to reach break even at South Deep by the end of 2016 doesn't look like complete pie in the sky anymore,” Chief Executive Nick Holland told Reuters, adding better skills and new fleet had been introduced at the mine, which is the company's last remaining South African asset after it spun off its older mines into Sibanye Gold in 2013.

South Deep sits atop a mammoth 40-million ounce reserve and is still losing money, albeit at a lower rate.

The spot price of gold was volatile last year as markets speculated on US interest rate increases which dented the appeal of gold, which fell $250 per ounce last year, peaking at $1 300 per ounce. South African producers are slightly cushioned by a decline in the rand as they earn in dollars while paying costs in the local currency.

Gold Fields booked impairments of $213 million on the value of investments and its mines in Ghana and Australia.

“These are projects that are not really a part of our mainstream business and with the contagion in the global metals market we have taken a conservative view to write them down,” Holland said.

The Damang mine in Ghana is under review with results of a study expected by May. Holland said expansion of the mine would require a long-term gold price of $1 200 per ounce.

Production for the year fell 2.8 percent to 2.2 million ounces. The global miner expects 2016 production to come in at between 2.05 million ounces and 2.10 million ounces. This is a slight decrease from previous years due to a fall in production from the Australian region.

REUTERS