UPDATE 2-S.African gold industry on edge-Gold Fields
* Strikes, deadly fire bite into output
* Earnings fall 19 percent, miss consensus
* Lowers FY output target but sticks to 2015 goal (Recasts to lead on industry outlook, adds quotes)
By Sherilee Lakmidas
JOHANNESBURG, Nov 26 (Reuters) - South Africa's gold mining industry, one of the country's most important sectors, is on the brink and will collapse if no steps are taken to boost its productivity, the world's fourth-largest bullion producer Gold Fields said on Monday.
The mining industry in Africa's biggest economy, particularly its gold and platinum producers, have just emerged from one of the toughest periods in their history with mines ground to a halt by months of wildcat strikes.
"If the last five years' decline in production continues, there will be no industry in five years time," Gold Fields' Chief Financial Officer Paul Schmidt said as the company unveiled its third quarter earnings.
The strikes have exacerbated a difficult situation for companies already battling for years with rising labour costs and steep electricity tariffs.
"We have got closer to the precipice. There is a need to do things differently. We cannot continue to do what we have been doing for 10 years," said Chief Executive Nick Holland.
Gold Fields gets about half of its production from its home base with the balance coming from its operations in Australia, west Africa and South America.
The company lost around 145,000 ounces of gold production during the strike at its KDC and Beatrix mines in South Africa in the second half of this year, resulting in a loss of revenue of 2.1 billion rand ($234.91 million).
It said the two months of illegal strikes had a significant impact on the financial viability of some of its shafts.
Like other companies hit by the wave of illegal strikes, Gold Fields is reviewing its operations, which could lead to the closure of more marginal shafts and possible job losses.
"We are reviewing every dollar we spend," Holland said about the reassessment, which is focused more on delivering profits than additional ounces in an industry already in decline.
Research conducted by SBG Securities earlier this year said mature South African operations need to restructure within the next three years at best.
"The problem we have today is that the industry is at a $1,750 gold price and the overall margins after capital aren't much better than what they were when gold was at half that price," Holland said.
He appealed to the South African government to give the gold industry, which is facing the introduction of a carbon tax as well as a proposed windfall tax on profits, "a bit of a break."
Gold Fields' third-quarter production dropped 6 percent to 810,000 ounces and the company cut its 2012 production target to 3.3 million ounces from 3.5 million.
The company lowered its initial full-year target after losing 65,000 ounces to a deadly fire at its KDC mine near Johannesburg and to the wildcat strikes. Holland said the company should get output back to pre-strike levels by February.
However, shares in Gold Fields, down 20 percent in the last 12 months, reacted positively and were up 3.29 percent by 1334 GMT, making it the best performer on the JSE's Top-40 index . Analysts attribute the rise to the promised revamp.
"The market knew that the South African operations were going to be the downgrading feature," said David Davis, mining investment analyst at SBG Securities.
"(But they) have been busy with a strategic review of all their projects so that they can maximise cash generation."
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