Vancouver Despite a US$19 million gain in equity investment sales, South Africa’s second largest gold producer posted a 6% drop in earnings in the first quarter of 2003.
Gold Fields (GFI-N) earnings came in at US$92.6 million for the three months ended March 31, compared to a gain of US$98.1 million in the year ago period. The major did manage to post a 12% rise in profits compared to the Dec. quarter when Gold Fields earned US$83 million. Driving the quarter-over-quarter improvement was a US$19 million gain from the partial sale of the company’s equity stakes in Eldorado Gold (ELD-T) and Glamis Gold (GLG-T).
"Our operations did well during the March quarter to produce an excellent set of operational results," says company CEO, Ian Cockerill, "despite the challenges posed by the extended number of public holidays and the strengthening of the Rand."
Gold production was essentially flat at 1.07 million oz. with total cash cost jumping to US$225 per oz from US$160 per oz tallied last year. The higher costs are a direct result of a 17% appreciation in the South African currency (rand) against the US dollar. Like most South African mining companies, Gold Fields received a lower gold price of 95,068 rand per kg, from 100,969 rand per kg, as the rand advanced to an average 8.38 to the dollar from 9.77 in the previous quarter. This currency move effectively negated the economic benefits of a rise in the dollar gold price to US$353 per oz, from US$321 per oz in the quarter.
the major’s Australia’s production was steady, while output in Ghana reported increased production. At the South African operations, the production increase continued at both Kloof and Beatrix due to increased underground tonnage. This was offset by lower production at Driefontein.
The strength of the rand is expected to continue to effect profitability in the second quarter.
"The June quarter is posing even greater challenges as this quarter is characterized by even more public holidays, unevenly spread throughout the period. Combined with an ever-strengthening South African Rand that has continued into the current quarter, shareholders are advised that this is expected to have a much more pronounced impact on our next set of quarterly results," adds Cockerill.
The company also announced plans to spend US$160 million on a 4.2 million ton per year mill and CIL facility, along with a new fleet of mining equipment at its Tarkwa mine in Ghana. The move will boost the mine’s annual gold output to more than 700,000 oz, from the current 525,000 oz
The capital investment will be undertaken between June 2003 and Dec. 2004, with the goal of having the mill commissioned by the end of 2004 and the conversion to owner mining commencing in June 2004.
Be the first to comment on "Gold Fields hit by rising Rand"