SA Strikes Weigh on Gold Fields Q4 Production

on Jan 21, 2013

On 21 January 2013 Gold Fields (NYSE:GFI, JNB:GFI), the world fourth-largest bullion producer, published its guidance for the financial year ended December 2012, anticipating lower output figures for the fourth quarter. As with its peers, the gold miner suffered from the wildcat strikes in South Africa earlier in the year. Following the announcement, Gold Fields’ share price slid in Johannesburg trading.

**Gold Fields Expects Lower Output**
The NYSE and Johannesburg-listed miner reported that attributable production for Q4 2012 was forecast to total 753,000 gold equivalent ounces, a drop from 811,000 ounces produced in the third quarter, and well down on the 883,000 ounces in Q4 of 2011.
Gold Fields’ international operations contributed 471,000 ounces, whereas the company’s operations in South Africa are expected to account for as little as 282,000 ounces of the total output. The miner advised in its statement that the lower output largely resulted from the loss of about 110,000 ounces from the “ongoing impact of the prolonged and unprotected strikes” in the KDC and Beatrix mines in South Africa. With another 35,000 ounces lost during the third quarter, the company said that the labour unrest resulted in total lost production of some 145,000 ounces.

Following the guidance publication, Gold Fields’ share price dropped more than one percent in Johannesburg trading. On the NYSE, where the company is also listed, Gold Fields’ share price closed 1.73 percent higher at $12.34 on January 18.
**Sibanye Gold Listing Update**
In its statement, the gold producer noted that the fourth quarter of 2012 was the last time the company would report on the KDC and Beatrix gold mines, which together account for about 45 percent of the company’s production. At the end of November 2012, Gold Fields announced that it was spinning off its domestic South African assets as an independent entity called Sibanye Gold, which would list separately on the NYSE and on the Johannesburg stock exchange.

Recently, Gold Fields provided an update on the Sibanye Gold listing, advising that the unit was to be listed on both exchanges on 11 February 2013, whereas Gold Fields would distribute its interest in Sibanye Gold to shareholders on February 18. Sibanye Gold will list under the ticker symbols “SGL” in Johannesburg and “SBGL” in New York.
!m[Gold Fields Share Price Drops In Johannesburg](/uploads/story/1262/thumbs/pic1_inline.png)

**Credit Rating Downgrade**
Gold Fields’ decision to spin off its South African assets was also influenced by the labour unrest in the country. At the time, CEO Nick Holland commented that by relocating the KDC and Beatrix mines into Sibanye Gold, the newly-listed entity’s cash flows “can be utilised to extend the life of the mines and improve dividend payouts to shareholders”.

The move was adversely interpreted by Moody’s Investor Service, which in December cut Gold Fields’ credit rating to junk. At the time, Bloomberg quoted Gianmarco Migliavacca, a Moody’s analyst, as noting that the unbundling “will initially lead to an overall weaker credit profile after the transaction is concluded”.
**Gold Fields’ share price was 1.32 percent down at ZAR10,653 in Johannesburg as of 2:08 p.m. GMT on 21 January 2013.**