Johannesburg - Gold Fields, the South African miner with operations from Peru to Australia, climbed the most in 16 years as improvements to its South Deep mine lowered costs.
Cash outflows at South Deep, which has been beset by delays, fell 26 percent to $20 million in the third quarter while the mine’s production climbed 42 percent, the Johannesburg-based company said in a statement Thursday.
The project, bought for $3 billion in 2006, is on course to break even by the end of 2016, CEO Nick Holland said in an interview. All-in sustaining costs will probably be about $1 035 an ounce this year, compared with an August 20 estimate of $1,055 an ounce, Gold Fields said.
"There’s been a pretty dramatic improvement at South Deep," Richard Hart, a Johannesburg-based analyst at Arqaam Capital, said by phone. "The more production that comes on track, the more it will be built into people’s valuation of the company."
South Deep, the world’s largest gold ore body behind Grasberg in Indonesia, is a "kingpin" asset for Gold Fields, according to the company’s website, despite almost a decade of delays, accidents and losing money. The mine makes up about 75 percent of Gold Fields’ reserves.
"We are looking at about a 50 percent improvement in production in the second half versus the first half," Holland said. "The team under Nico Muller are starting to get to grips with a lot of the issues, so we expect quarter four to be better than quarter three," he said, referring to the mine’s manager.
Net earnings attributable to shareholders were $18 million in the third quarter, 50 percent higher than the previous three months. All-in sustaining costs fell 8 percent to $948 an ounce while production increased 4 percent to 557,000 ounces.
The stock climbed as much as 29 percent to R39.98 a share, the most since September 1999, in Johannesburg. It was up 25 percent at R38.85 by 11:43 a.m. in the city.
Gold Fields has been cutting costs and paying down debt to counter a gold price that touched a five-year low of $1 064.55 an ounce on Wednesday, and is 43 percent below its June 2011 peak.
Due to the lower bullion price, Gold Fields said its Damang operation in Ghana is “challenged in the current environment” and so the company is considering recapitalizing it to gain access to higher-grade ore or putting it on care and maintenance. Holland ruled out selling the mine, he said in the interview.
BLOOMBERG