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Gold Fields profit rises 42 pct, while output flat

Adjusted earnings per share, excluding the effects of financial instruments and foreign debt, rose to 108 South African cents for the three months to June, less than an average forecast of 134 cents in a Reuters poll of eight analysts.

The gold miner’s output slipped to 1.018 million ounces from 1.023 million in the third quarter, up 4 percent at its South African operations and down 7 percent at international mines.

“In general it is a very poor showing,” said analyst Leon Esterhuizen at Investec Securities in Johannesburg.

“It’s really all about operational performance that’s lagging. South African production was essentially flat, while the offshore production was volume-wise flat with grades declining.”

Another analyst said that lower-than-expected profits were partially due to non-operational issues such as a higher tax rate and more exploration spending.

But investors seemed to brush aside the weaknesses and focus on the surge in cash the firm is churning out.

Gold Fields shares, which have gained 35 percent this year, rose 0.3 percent to 153.50 rand by 1256 GMT.

“Despite a couple of negatives, this gold company is looking to be printing money right now,” said Nigel Suliaman, a fund manager at Metropolitan Asset Managers.

“If they can get their production back to where it was a quarter or so ago and keep costs under control, one is going to see exceptionally strong cash generation.”

Higher gold price

A rally in the gold price, which has surged 50 percent over the past 12 months and 26 percent since the start of the year, was a key reason for the jump in profits.

Gold Fields sold its gold for 128,974 rand per kg, up 18 percent from the previous quarter, while total cash costs rose by 5.2 percent to 77,187 rand per kg.

Gold Fields, which operates in South Africa, Ghana, Australia and Venezuela, along with rivals has been fighting surging prices for inputs due to a global surge in mining.

The firm said operating profit rose 40 percent to 1.66 billion rand ($240 million), while the group operating margin increased to 38 percent from 32 percent.

Cockerill said the firm was working on a number of growth projects in line with its aim to add 1.5 million ounces of production outside South Africa by 2009.

A plan to dig deeper at its South African Kloof and Driefontein mines and access an additional 10 million ounces of gold is expected to shortly be approved, it said.

“We will be going to the board in the next few weeks ... those projects should be going ahead,” Chief Executive Ian Cockerill told a results presentation.

The firm’s ongoing construction of its Cerro Corona mine in Peru was a main factor in a near-doubling of capital expenditure to around 4 billion rand in the current financial year to June 2007, Chief Financial Officer Nick Holland said.

Gold Fields said production for the first quarter to the end of September was expected to be “marginally higher” than for the June quarter, while cash costs would also rise.