JOHANNESBURG (Reuters) - Shares in Gold Fields fell on Friday after the company reported a 3 percent drop in third-quarter production, dragged down by a decline in output from its last South African asset, South Deep.
The mine has faced numerous operational obstacles in a tough geological setting 3 kilometres (2 miles) below the surface, including strike action in response to restructuring plans that will cut around about 1,100 jobs.
Gold Fields’ production from continuing operations for the three months to Sept. 30 fell to 533,000 ounces from 552,000 in the same period last year, with South Deep producing just 50,000 ounces in that period, against 81,000 ounces a year earlier.
“(The quarter) was characterised by the international assets posting another strong operating performance and South Deep negatively impacted by the restructuring announced in August 2018,” Chief Executive Nick Holland said in a statement.
The bullion producer’s shares were down 5.6 percent at 37.63 rand by 1048 GMT, their lowest in a month, outpacing the broader gold sector which was down 1.68 percent.
“It’s obviously not great news (if) you put it into context with the rest of the market. If you come out with a trading update with numbers that are less than stellar it will be a little bit more magnified,” said Ryan Woods, trader at Independent Securities.
The firm cut its annual gold production guidance for South Deep to around 154,600 ounces, assuming strike action there continues to year-end. The firm had already cut its guidance for the mine to 244,000 ounces from 321,000 ounce in April.
Group production was also revised down to 2 million ounces from a previous estimate of 2.08 million ounces
“All of the international operations in the group are expected to be on or slightly above guidance, with costs expected to be on or below guidance. We are doing pretty good on the international side,” Holland said.
The bullion producer, which also has operations in Ghana, Peru, Chile and Australia, said in August South Deep had lost 4 billion rand ($284 million) over the past five years.
The majority union at South Deep, the National Union of Mineworkers (NUM), downed tools last week over the planned job cuts, with the firm warning it could threaten output and lead to even more layoffs.
Holland said two buildings had been burnt during the protests. The firm, which sought a court order last week to prevent violence during the protest, could not yet estimate the cost of damages due to the strike.
Reporting by Tanisha Heiberg; Editing by Amrutha Gayathri