Gold Fields posts Q2 loss, snaps up Barrick assets

Hit by lower gold prices and rising costs at home, South Africa’s Gold Fields reported a second-quarter loss on Thursday and said it was expanding abroad with a $300 million deal to buy three Australian mines from top producer Barrick Gold.

The company said it lost $129 million in the three months to the end of June compared with a net profit of $27 million in the previous quarter and $105 million in the same quarter last year. This made for a net attributable loss of 18 U.S. cents per share, compared to net earnings of 4 cents per share in the previous quarter.

Gold Fields earlier this year separated off the bulk of its assets in South Africa, where labour and political risks are seen as relatively high since the sharp fall in world gold prices, a point underlined this week by a new strike threat from the country's largest miners' union.

"The gold industry (in South Africa) is frankly in crisis at the moment," Chief Executive Nick Holland told Reuters.

Gold Fields’ shares were down 9 percent at 59.83 rand by 0900 GMT, with the strike threat in South Africa hitting the shares of other producers in the country such as Anglo Gold Ashanti, which fell almost 5 percent.

The company said the Barrick acquisition, which will be 50 percent payable in shares, will add 452,000 ounces to its annual production and make it Australia’s third largest gold producer. The company expects to produce between 1.83 and 1.9 million ounces this year.

Following the acquisition Australia will be Gold Fields’ largest regional production centre, it said, accounting for 42 percent of group production, with Ghana decreasing to 34 percent and Peru and South Africa remaining largely unchanged at 13 percent and 11 percent respectively.

"The acquired assets are located in a preferred jurisdiction that we know well and where we have significant operational and management experience and infrastructure to maximise the value of the acquired assets," Holland said in a statement.

"This acquisition further repositions Gold Fields as an international gold producer with a well-balanced global footprint, which should enhance our risk profile and global credit rating.

The company said its second-quarter loss was mostly due to impairment charges in Ghana of $143 million at its Tarkwa mine and $127 million at Damang.

The charges related to its decision to curtail processing activities at the operations because of the lower gold price.

The average gold price in the June 2013 quarter was 13 percent lower at $1,405 an ounce and the spot price has lost around 30 percent since its record high of just over $1,920 scaled in September of 2011.

Rival AngloGold also has troublesome assets in Ghana and its chief executive said this week its flagship Obuasi mine there was unsustainable.

But Holland said Gold Fields remained committed to the west African country which is the continent's second largest bullion producer. Tarkwa's total cash costs are relatively low at just over $800 an ounce.

"Tarkwa is still a great operation and we are not concerned about Tarkwa," Holland said.

Damang's road to solid profitability will be a longer one.

"I think we have done a lot of capital stripping to uncover what we believe is still a world-class ore body and the challenge now is for us to bring that to account in a profitable mine. It's got good grades," he said.

Holland said the company was also looking for a buyer for its Arctic platinum project in Finland.