Gold Fields Costs to Climb on Wages, Stronger Rand (Update1)

By Ron Derby

Aug. 6 (Bloomberg) -- Gold Fields Ltd., Africa’s second- largest miner of the metal, said costs will rise 15 percent during the next quarter because of a stronger rand and increases in labor and power charges.

Cash costs in the fiscal first quarter will climb to $590 an ounce from $512 an ounce the previous quarter, Johannesburg- based Gold Fields said in a statement to the city’s Stock Exchange News Service today.

Eskom Holdings Ltd., the largest power supplier to South African mines, is boosting tariffs 31 percent in 2009, while payments to workers, Gold Field’s largest operating cost, will jump between 9 percent and 10.5 percent after a wage agreement with the country’s largest labor unions. South Africa’s inflation rate dropped to 6.9 percent in June.

While gold is rising for a ninth consecutive year in dollar terms, it is declining in rand, which strengthened 19 percent in the June quarter, according to Bloomberg data.

Earlier, Gold Fields posted a net loss of 46 cents a share for the three months through June, compared to a profit of 1.95 rand the previous quarter, it said. That’s less than the 1.52 cent median profit forecast of six analysts surveyed by Bloomberg.

The company took total impairments of 1.25 billion rand, of which 1.1 billion rand related to its investment in Rusoro Mining Ltd. owner of the Choco10 mine in Venezuela. “This is the main contributing factor towards the net loss during the quarter,” Chief Executive Officer Nick Holland said in the statement.

Increased Production

Producers are increasing gold output as prices climb because of investor demand for the metal as a store of value. Bullion for immediate delivery in London has rallied for the past eight years, and has gained 9.3 percent so far this year.

Gold Field’s so-called attributable output rose 4 percent during the quarter to 906,000 ounces, it said. The company’s South African output climbed 2 percent while production from outside the country, including Australia, Peru and Ghana, gained 6 percent.

South African analysts compare quarterly earnings with the previous three months rather than year-earlier figures.

At 9:11 a.m. in Johannesburg trading, Gold Fields was down 10 cents, or 0.1 percent, at 99.40 rand.

To contact the reporter on this story: Ron Derby in Johannesburg at rderby1@bloomberg.net

Last Updated: August 6, 2009 03:13 EDT