JOHANNESBURG (miningweekly.com) − World number-four gold producer Gold Fields would seek to capitalise on the record gold price, CEO Nick Holland said on Thursday.

The average gold price during the June quarter rose by about 9% to $1 509/oz, contributing to a 15% rise in Gold Fields earnings, which jumped to R1.3-billion.

Gold broke through $1 800/oz this week, hitting a fresh all-time high of $1 813.79/oz as fears escalate that the US might be sinking into another recession and that Europe’s sovereign debt crises was spreading to the region’s main economies. So far, gold has surged 25% in 2011, on top of a 30% gain achieved in 2010.

Speaking to Mining Weekly Online at the company’s results presentation in Johannesburg, Holland said that a higher gold price could result in good earnings and cash flow for Gold Fields during the second half of the year, as production was also expected to be slightly higher.

The JSE-listed miner saw a 5% increase in production during its second quarter to 872 000 oz, bringing total production for the first half of the year to about 1.7-million ounces. Holland said Gold Fields would produce at least 1.8-million ounces in the second half of the year, as additional production would be added from its Peru and Ghana mines, where it bought out minorities.

The company kept its guidance at between 3.5-million ounces and 3.7-million ounces for its 2011 financial year.

Holland said that the miner planned to “make hay while the sun is shining” and would focus on bringing projects to a stage where building decisions could be made. Gold Fields expected to complete feasibility studies on at least two to three of its current projects by the end of 2012.

Projects currently featured in its growth portfolio include the South Deep mine in South Africa, the Damang super pit in Ghana, the Chucapaca joint venture project in Peru, the Arctic project in Finland and the Yanfolila project in Mali.

“But we do not have stars in our eyes with the higher gold price and continue to ensure that our projects are able to withstand any volatility that we are likely to see in commodity prices,” Holland noted.

The company has been re-engineering its operations to achieve better notional cash expenditure margins, which is the profit margin achieved after all operations and capital expenditure. In the last 12 to 15 months, it has succeeded in increasing this margin to 21%, above the 20% target set out previously.

Holland said that the group had been able to absorb significant inflation pressures, such as a rise in fuel, electricity and wages, with costs only increasing by 5% year-on-year. Globally, the group expects inflation pressures to rise between 5% and 10% a year over the next decade.

“In addition, companies have also been seeing governments across the world wanting to take a bigger piece of the pie, with additional and higher royalties and taxes being levied.”

Talks over nationalisation of South Africa’s mines have also been intensifying, but Holland believed that “sense would prevail” and that the policy would not get the go ahead at the African National Congress policy conference next year.

“Nationalisation will not resolve the underlining problems in this country, and we need to work out alternatives to cater to the need of the four-to five-million youths that are faced with bleak outlooks,” he added.
 

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