The gold miner announced earnings, adjusted to exclude foreign exchange and financial instrument effects, of R2.06 per share and remained positive on the outlook for the gold sector.

Gold Fields the world's fourth-largest listed gold producer, on Friday posted better-than-expected second quarter earnings due to cost cuts and higher gold prices and said the outlook remained positive. "It's encouraging to see their costs in rand terms coming down for a second quarter in a row. That's really positive," a Johannesburg-based analyst said.

Gold Fields, the second biggest producer in Africa that also operates in South America and Australia, said cash costs fell to 161,894 rand per kg from 164,898 rand the previous three months. In dollar terms, costs rose to $728 an ounce from $697. The company is likely to continue cutting its costs in the coming quarters, said Chief Executive Nick Holland.

Analysts expect Gold Fields' project pipeline to boost the stock, although they worry if the new projects will merely replace replace declining output in South Africa. "There is some concern around their legacy South African mines and whether they can at least keep them in steady production for the foreseeable future," the analyst said.

Gold Fields said attributable production across its operations during the October-December quarter fell 1 percent to 898,000 ounces from the previous three months.

To limit its exposure to rising electricity prices and declining output in South Africa, where around half of its production is at the moment, Gold Fields is investing heavily to diversify its portfolio into other markets in West Africa, Australia and South America.

The company plans to have 5 million ounces of gold either in production or in development by 2015, with 60 percent of that expected to come from its international assets.

Output for 2011 is forecast at 3.5-3.7 million attributable ounces at a total cash cost of $760 an ounce. The firm plans to spend 9 billion rand on capital expansion this year, with around a third dedicated to growth projects. Holland said a project to build a uranium plant in South Africa may fall behind some of its more lucrative ventures.

Gold Fields posted second-quarter adjusted earnings per share of 206 South African cents, up from 144 cents the previous quarter and above a forecast by seven analysts of 169 cents. The earnings are adjusted to exclude the effects of financial instruments and foreign debt.

Holland said there was a positive outlook for gold prices, which on average rose 12 percent during the last quarter to $1,366 per ounce. Expectations for gold's performance have risen sharply, with a survey of 65 leading analysts, traders and fund managers predicting gold will average $1,450 an ounce this year, well above its record high of $1,430.95. "With the strong gold price I am fairly optimistic on the company," said Abri du Plessis, chief investment officer at Gryphon Asset Management.

AngloGold ,Africa's top producer of the precious metal, said on Thursday the gold price could go beyond $1,500 an ounce this year. As of this quarter, Gold Fields changed its financial year to January-December to bring it in line with its peers. The company declared a final dividend for the six months to the end of December 2010 of 70 cents per share. Reuters