* 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 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."
($1 = 8.9395 South African rand)
(Editing by Ed Stoddard and James Jukwey)