JOHANNESBURG (miningweekly.com) – Slimmed-down gold major Gold Fields sat pretty on a 50% operating margin in the March quarter, the first quarter since the unbundling of its mature underground mines into Sibanye Gold.

With cost reduction, Gold Fields is seen as positioned to absorb the pressure befalling South Africa’s gold mining industry following April’s fierce global gold sell-off, which sent the now-recovering gold price into a sudden tailspin.

Going forward, capital expenditure, feasibility and evaluation costs for the international growth projects were expected to be significantly lower than in 2012, Gold Fields CEO Nick Holland said, adding that closed marginal production at Tarkwa, in Ghana and St Ives and Agnew, in Australia set up the company for cash generation.

In line with guidance, gold production was down 11% to 477 000 equivalent attributable ounces and cash costs of $819 to produce each of those ounces represented a healthy operating margin of 50%.

Even measured by Gold Fields’ own all-in notional cost expenditure (NCE) of $1 291l/oz, the NCE margin was a good 21%.

Local rand-a-kilogram revenue was R464 549/kg against an NCE of R369 050/kg.

The net earnings of the 9 000-employee, 125-year-old company for the three months to March 31 of R236-million were, however, R140-million down on the R376-million in the December 2012 quarter and even more on the R381-million in the March 2012 quarter.

In US dollar terms net earnings for the March 2013 quarter of $27-million compared with $41-million in the December 2012.

The March quarter’s operating profit was R3 593-million ($404-million) and not a single worker was killed, which Holland described as the “most notable achievement”.

Exploration and project activities were being curtailed and financial capacity and technical skills deployed on more promising activities.

Greenfield exploration expenditure has been cut from $130-million spent in 2012 to $80-million planned for 2013, while exploration activities are being focused on smaller, higher-grade, and less capital-intensive targets.

Near-mine exploration expenditure has been reduced from $65-million spent in 2012 to $28-million planned for 2013, again with the focus being on the most prospective short- to medium-term targets.

The feasibility study for the Chucapaca project in Peru is being rescoped to include less capital intensive, higher-grade underground mining.

The Far Southeast project in the Philippines is slowing ahead of the country’s last-quarter elections and the feasibility study for the Arctic Platinum project in Finland,  is close to completion, with a decision expected later this year.

The Yanfolila project in Mali advanced to a resource development stage during the quarter, following a doubling of the resource to 1.4-million ounces.

The fully mechanised South Deep, which is targeting 700 000 oz a year from 2015, mined more than 200 000 t under a new operating model and produced 63 000 oz or 1 959 kg of gold in the quarter, marginally more than in the previous quarter.