WRAPUP 1-Gold miners' earnings hurt by higher costs

* Gold Fields, Newmont earnings down

* Both report lower production

* Margins hurt by higher mining costs

By Steve James

NEW YORK, Oct 29 (Reuters) - Two of the world's leading
gold miners reported big drops in quarterly earnings on
Wednesday as soaring costs for fuel and raw materials ate into
margins already narrowed by a slumping gold price.

Denver-based Newmont Mining Corp (NEM.N), the world's
second-largest gold producer, posted a steeper-than-expected 51
percent drop in third-quarter profit, due to decreased sales
volumes and higher production costs.

South Africa's Gold Fields (GFIJ.J), the world No. 4, posted
an 86 percent fall in adjusted earnings in the September
quarter, also because of lower production blamed on safety
repairs and higher costs.

Gold and other mining companies have felt the effects of the
recent financial market turmoil and fears of a global recession,
prompting them to reconsider some capital projects and
exploration.

Last week, the price of gold GC:, traditionally a safe
haven in times of economic uncertainty, fell below $700 per
ounce for the first time in more than a year. It was selling for
about $770 in New York GCV8 on Wednesday.

"This is a problem because the smaller guys have lower
costs, but the really big ounces come from gigantic open pits
that are energy-intensive," said Jay Taylor, who publishes an
industry newsletter, Gold, Energy & Tech Stocks.

"You're looking at a period when oil was peaking, but with
an increase in the price of gold, I expect an improvement going
into the fourth quarter."

"The issue for gold companies is that they are acting like
ordinary equities, rather than gold stocks, and are caught up
in the tidal wave of buying and selling," said Jeffrey Nichols,
managing director of American Precious Metals Advisors.

"In the near-term it will continue, but if gold moves
higher, which I expect in the next six months, gold shares
should perform better.

"Those with higher costs will probably outperform the
lower-cost producers because of the leverage they have with the
gold price," said Nichols.

Newmont said its average production cost per ounce of gold
rose to $480 in the third quarter, from $374 a year earlier,
while the average price it received for its gold rose to $865
per ounce, from $681 a year earlier.

Gold Fields said total cash costs rose 22 percent to $617
per ounce on wage increases in South Africa and higher power
tariffs in both South Africa and Ghana, and global inflation.

Newmont has blamed cost pressures for constraining
development of its Boddington project in Australia, which is 85
percent completed and expected to start up in early- to
mid-2009.

Also on Wednesday, Chief Executive Officer Richard O'Brien
told Wall Street analysts that projects in Conga, Peru; Hope
Bay, Canada; and Akyem, Ghana, are under review "until we
understand the impact of the global financial crisis."

Newmont sold less gold -- 1.28 million equity ounces after
1.33 million a year earlier -- but still expects 2008 annual
equity gold sales of between 5.1 million and 5.4 million ounces,
with costs applicable to sales of between $425 and $450 per
ounce.

Gold Fields, Africa's second-largest gold producer, said
production fell by 8 percent to 798,000 ounces in the quarter as
shutdowns for repairs in key mines and problems in starting its
new Cerro Corona mine in Peru weighed. Lower output from Ghana
and Australia also depressed production.

But it forecast output would rise 5 percent to 840,000
ounces in the December quarter and an annualized 4 million
attributable ounces in the March quarter from 3.64 million.

"Gold Fields has disappointed for some time on production.
The market wants to hear good news, which we haven't seen for a
while," said Stephen Roelofse at Metropolitan Asset Managers.

Newmont's shares, which were trading at a 52-week high of
$57.55 on Jan. 15, were up 2 percent at $27.00 on the New York
Stock Exchange on Wednesday afternoon, off an earlier low at
$25.46. Gold Fields' shares closed 16 percent higher in
Johannesburg, where the gold sector index .JGLDX ended up 9.6
percent.
(Additional reporting by James Macharia in South Africa,
editing by Matthew Lewis)