UPDATE 2-Gold Fields earnings disappoint after impairment

* Impairment of $672 mln booked on gold price

* CEO expects no more unless gold tumbles again

* Sees prospects in west Africa

* Shares down 6 percent

(Recasts with quotes, details)

By Ed Stoddard

JOHANNESBURG, Feb 13 (Reuters) - South African bullion producer Gold Fields GFIJ.J posted a slight quarterly rise in earnings on Thursday as production rose 21 percent but its share price took a pounding as investors focused on a $672 million impairment.

Its shares were down 5.93 percent to 40.61 rand as of 0917 GMT even as the spot price of gold XAU= hovered near three-month highs close to $1,290 an ounce.

Normalised earnings for the quarter to end-December rose to 19 cents per share from 17 cents in the previous three months.

Year on year earnings were down 85 percent reflecting a fall in the price of gold which shed 28 percent in 2013, its biggest loss in three decades.

In response to the sharp fall in the gold price, Gold Fields booked impairments amounting to $672 million on a number of operations, resulting in a headline loss of 37 cents per share.

Headline earnings are the main metric used in South Africa and strip out certain one-off items while normalised earnings exclude such items.

Regarding impairments, Gold Fields' Chief Executive Nick Holland told Reuters: "We're done now at this price unless gold dives significantly from here."

"We had to discount future cash flows to determine what we see as a fair value. We are using a lower gold price. Last year we used $1,500, this year we are using $1,300 an ounce," he said.

A Reuters poll of 37 analysts published in January forecast an average gold price of $1,235 per ounce this year.

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Gold Fields posted a 21 percent rise in production in the quarter to 598,000 ounces mostly on Ghana and new assets in Australia, which added 114,000 ounces of output.

Its Damang mine in Ghana increased its production by 39 percent to 45,400 ounces in the December quarter, the company said.

For the full year it exceeded its guidance with production of 2.02 million ounces, similar to the previous year if operations from Sibanye , which Gold Fields unbundled last year, are stripped out.

MECHANISED FOCUS

Sibanye's operations are completely based in South Africa and the company is labour-intensive, while Gold Fields has shifted its focus to mechanisation.

"Strategically, we are repositioning the group to mechanised mining. I don't want to have a situation where we go back to hand-held mining," Holland said.

Gold Fields only has one operation in South Africa now and gets over 40 percent of its production from Australia.

Asked where he would also go in Africa, Holland said: "West Africa is the most likely hunting ground if we expanded in Africa. We can use our very good skills in Ghana and it is a very perspective geological belt."

"Senegal we like but there are not too many opportunities there," he said, adding that Ivory Coast, Liberia and Guinea were all on Gold Fields' radar.

"But we have tended to be more successful in buying production than trying to find it. Which I think speaks volumes for how tough it is out there and how scarce gold has become," he said.

Gold Fields said its all-in-sustainting cash costs for the quarter were $1,054 an ounce, based on new metrics by the World Gold Council which bullion companies say include everything that goes into producing an ounce of gold including capital expenditure.

(Reporting by Ed Stoddard; editing by Jason Neely)

((Edward.Stoddard@thomsonreuters.com)(+27 11 775 3160)(Reuters Messaging: edward.stoddard.thomsonreuters.com@reuters.net))

Keywords: GOLDFIELDS/