Gold Fields

Gold Fields Profit Declines After Strikes Add to Fire Disruption

by Paul Burkhardt,  |  published on November 26, 2012

Gold Fields Ltd. (GFI) said third-quarter profit fell 11 percent as strikes and a fire cut output at its South African mines, increasing the possibility the country’s second-largest producer will reorganize.

“You’ve gone through a strike that’s cost you 2 billion rand ($225 million) in revenue, we’ve lost 145,000 ounces of production, it’s worsened our financial position, and some of those areas that we didn’t mine for a while we’re still trying to build back up, so it’s a big headwind,” Chief Executive Officer Nick Holland said in an interview today at Bloomberg’s offices in Johannesburg.

Output was hurt by a deadly blaze at the Ya Rona shaft that made the operation inaccessible for about 46 days. A wave of strikes that halted gold, platinum, coal, diamond and iron-ore mines in South Africa also curbed Gold Fields’ production. The company has been trying to boost output to take advantage of prices for the metal that have increased for 11 straight years.

About 29,000 employees joined two months of wildcat strikes at Gold Fields sites. That, combined with rising power and labor costs “is increasing the risk of a significant restructuring of our South African operations in the near to medium term,” the company said in a statement.

South African output fell 11 percent to 387,000 ounces in the quarter, with 30,000 ounces lost from the fire and 35,000 ounces during a strike at the KDC operation. Total production slid 5.9 percent to 811,000 ounces from the second quarter.

Shares Gain

Gold Fields rose 1.5 percent to close at 106.62 rand in Johannesburg, the highest for almost two weeks.

“We did have guidance for impact of the strike in the third quarter, but I think more importantly Gold Fields announced that it will have a strategic portfolio review,” David Davis, an SBG Securities Ltd. gold analyst in Johannesburg, said in a phone interview. “They want to maximize cash revenue.”

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