By Alex MacDonald
LONDON--Gold Fields Ltd. (GFI.JO) said Friday that the ongoing
illegal strikes in South Africa have increased the likelihood that
the South African gold mining industry, including Gold Fields, will
have to undergo significant restructuring that could result in
possible mine and shaft closures.
South Africa's three largest gold mining companies--Gold Fields,
AngloGold Ashanti Ltd. (AU) and Harmony Gold Mining Co. Ltd.
(HMY)--have increased their profitability due to rising gold
prices. But the need to dig deeper in South Africa to find gold
coupled with rising energy and labor costs has crimped the
profitability of more marginal mines in South Africa.
On Thursday, the three mining companies jointly tabled a wage
increase proposal to their workers that was met with mixed reaction
partly because the workers may not have been properly told the full
scope of the offer. The mining companies gave the workers until
Monday to consider the wage proposal in full before rendering a
verdict.
Gold Fields said Friday that the illegal strikes have already
negatively affected its operations. The company estimated that it
may have lost about 35,000 troy ounces of gold production due to
illegal strikes during the third quarter ended Sept. 30 after it
shut down its KDC West and Beatrix mines. Company spokesman Willie
Jacobsz said KDC and Beatrix account for more than half of the
company's South African gold production capacity.
"The ongoing unlawful strike action in South Africa is of
concern and will, even if resolved in the near term, increase the
likelihood of major restructuring in the South African gold mining
industry, including at Gold Fields," the company said in a
statement.
Mr. Jacobsz reaffirmed that any restructuring would most likely
involve shutting down mines and shafts that are considered high
cost and therefore marginal. Gold Fields employs about 40,000
workers in South Africa, of which more than half are on strike, he
said.
"The probability of closures is very high," Mr. Jacobsz noted.
"There are [Gold Fields] shafts that were very marginal prior to
the strike. Those are the ones that are at risk in particular" of
being closed, he added.
The company said Friday that it expects to report on Nov. 26
that third- quarter gold output dropped about 6% from the previous
quarter to 810,000 ounces with its international operations
accounting for 424,000 ounces and its South African operations
accounting for 386,000 ounces.
Gold Fields' South African operations are forecast to produce
nearly 12% less gold in the third quarter compared to the previous
quarter due to the illegal strikes and another 30,000 ounces of
lost production stemming from a fire at the YaRona Shaft at the KDC
mine.
Gold Fields' international gold production is forecast to drop
by 1,000 ounces in third quarter compared to the previous quarter
following a two-week closure of its heap leach facilities in Tarkwa
Gold mine in Ghana.
Gold Field's shares closed Friday down 1.2% at ZAR106.64 a share
resulting in a market capitalization of ZAR79 billion, or $9
billion.
Write to Alex MacDonald at alex.macdonald@dowjones.com
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