South African gold mining companies: You were dead to me.
I'll be the first to admit it. I had written off South Africa's gold miners as relatively unattractive choices within a wide world of heavy competition. And let's face it, the challenges there are very real.
South African gold miners face nationwide electricity shortfalls; an aging mining industry that's pushing the world's deepest gold mines deeper still; a troubling miner fatality rate; and currency translation woes from a strong South African rand. These are no easy obstacles to overcome, and still, the nation's overall output from maturing assets continues to decline. I have virtually ignored Harmony Gold Mining
Despite all of those challenges, however, South Africa still sits atop a sizeable chunk of the world's estimated gold resources. It would be downright foolhardy to turn a blind eye to a miner like Gold Fields
Although still comfortably profitable at these gold prices, Gold Fields joins most South African miners in reporting elevated operating costs relative to global peers. The company's second fiscal quarter of 2010 saw costs rise 5% to $613 per ounce, on further strengthening of the rand relative to the dollar. With golden child Goldcorp
Even after an aggressive expansion program to raise annual production at the South Deep mine, from a current run-rate of 300,000 ounces to 750,000 ounces by 2015, Gold Fields envisions a lengthy 45-year mine life that will form the new long-term keystone of its South African operations. As with two of the company's maturing mines operating at depths of more than two miles, the path to South Deep's treasure leads directly downward.
The key to Gold Fields' future, meanwhile, involves a more lateral expansion. The company expects to collect 60% of production from outside of South Africa within five years. With no intention of conducting "M&A heroics," Gold Fields has mapped an organic growth strategy focused on conversion of existing prospects and resources into proven reserves and producing assets. With new discoveries in Peru and Mali, including the promising Chucapaca (no, not Chupacabra) joint venture with Peruvian miner Buenaventura
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Fool contributor Christopher Barker can be found blogging actively and acting Foolishly within the CAPS community under the username TMFSinchiruna. He tweets. He owns no shares in any of the companies mentioned. The Motley Fool has a gilded disclosure policy.