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Precious Metals
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General Precious Metals
Gold Fields - The fourth Largest Gold Producer in the World
Gold Fields (GFI-NYSE): South African-based Gold Fields is the fourth largest gold producer in the world with annual production of nearly 4m ozs. It operates nine mines in
Most impressive of these is the prolific Driefontein mine. Driefontein is a 1m-oz-per-year gold producer that has mined 100m ozs in its history. Gold is currently being extracted from greater than two miles below the surface and there is at least 20 years of mining life remaining.
But even though Gold Fields is one of the highest-volume unhedged gold producers in the world, its South African operations have caused it to be a HUI underperformer over the years. Since most of SA’s near-surface veins are depleted miners have to go deeper and are faced with more complex ores. This of course drives up costs. When you combine these factors with currency issues and a nationwide electricity crisis you can see how South African miners have been challenged to say the least.
And though Gold Fields has not been immune to declining production and rising costs, it has done a fine job refocusing its efforts on the organic development of its global operations. With some big capex out of the way over the last year Gold Fields is now able to focus on operational efficiencies. In the most recent quarter cash costs (high $400s/oz) are down and production is up over the previous quarter.
Scott Wright
February 27, 2009
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