Johannesburg - South African miner Gold Fields on Thursday announced a major restructuring to restore profits, hollowed out by the plunging price of gold.
It said it was not afraid of closing mines to make money, including its Damang operation in Ghana, and would revamp its business to generate profit at a spot gold price of $1,300 an ounce.
Gold Fields has already spun off the bulk of its assets in South Africa where labour, power and other costs are escalating in the world's deepest shafts.
Labour and political risks are also high in South Africa, a point underlined this week by a new gold strike threat from the country's largest miners' union.
Gold currently trades around $1,370 an ounce, compared with a record peak of over $1,920 two years ago and a figure of $1,500 which Gold Fields anticipated in its 2012 business plan.
“We will go through this restructuring now in terms of redoing all of our technical models at $1,300 (an ounce). That is going to culminate in a news business plan that we will finalise in three months,” Gold Fields' chief executive Nick Holland told journalists.
“And that will tell us what the profile is going to look like in order for us to make money. We're not afraid to cut production to make money,” he said.
Gold Fields' shares posted their biggest one-day fall in five years as the company reported a second-quarter loss, hit by $270 million of writedowns at Damang and its other Ghana operation Tarkwa related to curtailing processing activities.
Holland said Tarkwa remained viable but there were question marks over Damang.
“Can we come up with a longer-term plan that works for the operation? Or do we have to accept that it has to be put on care and maintenance?”, he said, using a phrase that normally means closing a mine indefinitely.
The loss of $129 million in the three months to the end of June compared with a net profit of $27 million in the previous quarter and $105 million in the same quarter last year.
This made for a net attributable loss of 18 US cents per share, compared with net earnings of 4 cents per share in the previous quarter. The company dropped its interim dividend.
At the same time, Gold Fields said it had bought three Australian mines from top producer Barrick Gold in a $300 million deal which will be 50 percent payable in shares.
The company said the acquisition will add 452,000 ounces to its annual production and make it Australia's third largest gold producer.
The company expects to produce between 1.83 and 1.9 million ounces of gold this year.
Barrick, which recently posted a $8.7 billion writedown, is focusing on lower cost mines.
In 2012, the all-in sustaining costs of the assets were $1,137 per ounce and $1,145 per ounce in the first half of 2013, relatively high by Barrick standards but within Gold Fields' margin target. - Reuters