Gold Fields Confirms Loss will Buy 3 Barrick Mines

August 22, 2013 at 09:15

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Gold Fields Ltd. (GFI), which spun off most of its South African assets this year, had a second-quarter loss and suspended its dividend after prices slumped. It agreed to pay $300 million to buy three Barrick Gold Corp. (ABX) mines in Australia.

Gold Fields’ loss excluding certain items was $36 million in the second quarter, compared with a profit of $68.3 million in the first, it said today in a statement. Gold production at its South Deep mine in South Africa is unlikely to achieve the annual target of 700,000 ounces set for 2016, it said.

“Due to the significant decline in the gold price, the group has made a loss for the quarter,” the Johannesburg-based company said. “Management and the board are also concerned about gold price volatility in the short-term. As a result, the Gold Fields board has deemed it prudent not to declare an interim dividend.”

South African miners including Gold Fields are battling rising power costs and union wage demands that exceed inflation at a time when gold prices have dropped 28 percent from their 2011 peak. AngloGold Ashanti Ltd. (ANG), Sibanye Gold Ltd. (SGL) and Harmony Gold Mining Co. (HAR) preserved cash by skipping dividends as gold prices sank and the threat of strikes loomed this year.

Gold Fields will pay $300 million, subject to capital adjustments of as much as $30 million, for Toronto-based Barrick’s Yilgarn South Assets in Western Australia, it said in a separate statement.

The deal will add 452,000 ounces of annual production and make Australia Gold Fields’ largest regional production center at 42 percent, with Ghana accounting for 34 percent and Peru and South Africa 11 percent each, it said.

Gold Fields spun off all of its South African assets, apart from the largely mechanized South Deep mine, to create Sibanye and focus on higher-growth sites in Australia, Peru and Ghana.
Second-quarter production was 451,000 ounces of gold, 5 percent lower than in the previous three-month period, at a total all-in cost of $1,572 an ounce.