JOHANNESBURG (miningweekly.com) – In line with its yearly guidance, Gold Fields on Thursday posted losses attributable to shareholders of $14-million for the quarter ended March 31, saying seasonal production weakness at its South African operations owing to the Christmas break and mine scheduling elsewhere had dampened overall gold output and tempered earnings in the first three months of the year.

The gold miner's share price on the JSE fell by 9.24% to R46.25 in early morning trade, following the release of the company's results.

Attributable gold equivalent production decreased by 10% quarter-on-quarter to 501 000 oz, while unit costs grew concomitantly, despite overall costs being “well contained”.

Net operating costs decreased by 10% quarter-on-quarter to $366-million, while all-in sustaining costs (AISC) increased 12% over the period to $1 143/oz. All-in costs (AIC), at $1 164/oz, were 11% higher quarter-on-quarter.

“In addition to lower gold sold, unit costs were negatively impacted by the gold inventory
charge to cost, lower by-product credits and higher sustaining capital expenditure,” the gold producer outlined in a results statement.

Consequently, Gold Fields reported a normalised loss of $13-million – compared with normalised earnings of $17-million in the December 2014 quarter – which included a negative deferred tax adjustment of $21-million to account for exchange rate changes.

GLOBAL GOLD DIP
In South Africa, gold production at the group’s flagship South Deep mine, in Mpumalanga, decreased by 25% quarter-on-quarter to 36 300 oz, largely as a result of the extended Christmas break, as well as the previously flagged knock-on effects of the four-month safety-related closure in the second half of last year.

“The work to ‘get the basics right’, which we reported on previously, is ongoing, and good progress is being made on recruiting additional skills at the mine.

“These interventions are expected to gain traction progressively through the remainder of the year and, together with the ground-breaking three-year wage deal signed post the end of the quarter, is expected to contribute to a stronger performance during the second half of the year,” Gold Fields CEO Nick Holland explained.

He added that the company had implemented significant initiatives to improve the culture of safety and productivity, the benefits of which were only likely to be realised in the medium term.

Attributable gold production from the West African operations decreased by 3% quarter-on-quarter to 157 300 oz, with a production slump at Damang, in Ghana, partially offset by higher output at the nearby Tarkwa operation.

AIC in the region increased by 15% to $1 299/oz, mainly owing to higher capital expenditure related to a large fleet replacement at Tarkwa that was partially offset by lower operating costs and an inventory credit to costs.

Attributable equivalent gold production at the Peru-based Cerro Corona decreased by
21% over the three months to 66 300 oz, mainly owing to lower gold and copper
head grades treated, in line with the mine sequencing and the production plan for the March quarter.

The operation’s AIC decreased by 2% to $671/oz on the back of lower gold sold and lower by-product credits, partially offset by lower operating costs, an inventory credit to costs and lower capital expenditure.

In Australia, gold production dropped 7% quarter-on-quarter to 241 400 oz, with lower production at all operations, except at St Ives, in Western Australia.

AIC in the region increased by 14% to A$1 240/oz owing to lower gold sold and the gold inventory charge to cost, partially offset by the lower operating costs and lower capital expenditure.

Holland added on Thursday that net debt for the quarter increased by $46-million, from $1.45-billion at the end of December, to $1.49-billion in the quarter under review.

“This is mainly as a result of the decrease in cash inflow from operating activities from $225-million in the December quarter to $150-million in the three months under review,” he outlined.

WAGE DEAL
Gold Fields, meanwhile, reiterated on Thursday that it had signed a three-year wage and other conditions of employment agreements with the registered trade unions at its
South Deep mine.

The agreement was expected to result in average yearly wage increases of 10% over the three-year period of the deal, with the first increase effective on April 1.

“The negotiations took place at a company-level in recognition of South Deep’s significantly different operating model and labour profile to that of the other gold mining companies in South Africa.

“Specifically, South Deep is the only fully mechanised gold mine in South Africa. This ground-breaking deal will contribute to a more stable operating environment for South Deep over the next three years and position the mine more competitively to attract and retain the scarce mechanised mining skills required for it to achieve its full
potential,” said Holland.

Despite the seasonally weaker results for the first quarter of the year, the company had retained its previously published guidance for the year of 2.2-million ounces at an AISC of $1 055/oz and an AIC of $1 075/oz.