Gold Fields spinoff shows decline of South Africa's gold sector

Thu Nov 29, 2012 10:01am EST
 

By Olivia Kumwenda

JOHANNESBURG (Reuters) - Gold Fields (GFIJ.J: Quote), the world's fourth-largest bullion producer, is spinning off its two oldest South African mines in the latest sign of the country's once mighty gold industry succumbing to declining output and soaring costs.

In a move that nearly severs its ties with South Africa, Gold Fields' 70-year-old KDC mines near Johannesburg and its Beatrix operations near the central city of Bloemfontein will be renamed Sibanye Gold and floated on the Johannesburg stock exchange in February.

The deal leaves Gold Fields with just one mine in South Africa, the highly mechanized South Deep operation on which it has pinned the bulk of its hopes for growth. The rest of its mines are in Ghana, Peru and Australia.

Gold production in South Africa has halved in the last seven years, knocking Africa's biggest economy off its perch as the world's top bullion producer, a position it held throughout most of the 20th century.

With most of its deposits exhausted by a more than 120 years of industrial-scale gold mining, South Africa now ranks as only the world's fifth-largest producer.

"It is not only Gold Fields. Our decline is no different from the decline you see at AngloGold (ANGJ.J: Quote) and Harmony's (HARJ.J: Quote) South African operations," Gold Fields Chief Executive Nick Holland said.

"We are all struggling with the same challenges."

MORE PRESSURE   Continued...