By Patrick McGroarty and Devon Maylie
JOHANNESBURG--Gold Fields Ltd. (GFI), South Africa's
second-largest gold producer, posted a drop in third-quarter
earnings Monday and said it was likely to restructure its South
African operations following several strikes at its mines.
The Johannesburg-based company is struggling to recover from a
fire at its KDC mine west of Johannesburg in July and a 23-day
strike at some of its operations that ended in October, which cut
production and raised costs for the company. Gold Fields said last
quarter that it was conducting a review of its mines. Following the
violent and costly strikes, the company said Monday that it was now
even more likely to restructure its South African operations.
"The two months of unlawful and unprotected strike action, in
which about 29,000 of our employees participated, has had a
significant impact on the financial viability of some of our
shafts," said Gold Fields Chief Executive Nick Holland.
Mr. Holland added that sharply escalating electricity tariffs
and rising input costs increase the need of a "significant
restructuring of our South African operations in the near to
medium-term."
The mining industry in South Africa has been rocked by strikes
over wages and living conditions, which started in August at
platinum producer Lonmin Plc (LMI.LN). After police fired into a
crowd of protesters, killing 34 people, the strike spread to the
gold and iron ore industries. The gold sector has lost thousands of
ounces of production as a result of the strikes and prompted
Africa's largest producer, AngloGold Ashanti Ltd. (ANG.JO), last
month to announce a review of its operations, which could result in
closures.
Analysts have warned that gold mining companies could be forced
to close assets and lay off employees in the coming months owing to
high labor and input costs. Last month, the three top gold
producers in South Africa, including Gold Fields and AngloGold,
agreed to increase worker salaries by another 2% to help end the
strikes.
Gold Fields Monday reported net earnings of 1.424 billion rand
in the quarter ended September, compared with ZAR2.055 billion in
the same period the year before. Revenue rose to ZAR11.395 billion
compared to ZAR11.06 billion.
In the third quarter, Gold Fields produced 811,000 troy ounces
of gold, compared to 900,000 ounces in the third quarter last year.
The company previously said it plans to have five million
gold-equivalent ounces in production or development by 2015.
Write to Patrick McGroarty at patrick.mcgroarty@dowjones.com and
Devon Maylie at devon.maylie@dowjones.com.
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