Gold Fields Ltd the world's fourth-biggest gold producer, launched a $1.2 billion share placement on Thursday and liquidated hedge positions, overshadowing a worse-than-expected slide in profit.

Analysts welcomed the capital raising as removing uncertainty and said a dip in the share price was expected due to speculative activity.

Shares in the South African firm fell 2.14 percent to 123.30 rand by 1205 GMT, underperforming a virtually flat gold mining index.

"All in all, this whole restructuring is positive and the market should welcome it," said fund manager Stephen Roelofse at Sanlam Investment Management in Cape Town.

Gold Fields' shares have been pressured as the market speculated about how the firm would raise funds to pay for its $2.5 billion purchase of South Africa's South Deep mine, which has the world's largest gold deposit.

"There's still this expecation of a share overhang coming from AngloGold, but by next Tuesday it will be out of the way for Gold Fields," Roelofse added, referring to the end of the book-building period.

Mining group Anglo American Plc has said it plans to dispose of its 41.8 percent stake in AngloGold Ashanti Ltd, possibly over the next two years, but has not given details.

Another analyst said Gold Fields' share placement would dilute shares in issue by around 12 percent, based on current share prices.

Speculators such as hedge funds were selling the shares, hoping to buy them back at a lower price as the large amount of shares go onto the market, he added.

"We're going to be left now, post the capital raising, with a very simple financial structure and also an optimal state of our balance sheet," Chief Executive Ian Cockerill told a presentation.

PROFIT FALLS

Gold Fields posted a 24 percent fall in second-quarter adjusted profit, worse than analysts' expectations, as amortisation and other costs rose and interest income fell.

Earnings per share for the three months to end December, excluding the effects of financial instruments and foreign debt, fell to 108 South African cents from 142 cents the previous quarter.

The firm had been expected to post an 8.3 percent fall in EPS to 130 cents, according to the average forecast of 10 analysts polled by Reuters. The forecasts ranged from 108 cents to 148 cents.

Gold Fields said quarterly output rose by 10,000 ounces to 1.015 million ounces while total cash costs increased 4.8 percent to 83,707 rand per kg.

Investors also welcomed news that Gold Fields spent $528 million to close out the 1 million ounce hedgebook of Western Areas, which it bought for its stake in South Deep.

Gold Fields and the bulk of its shareholders have long been opposed to the practice of hedging or selling gold in advance at fixed prices.

"There was a lot of uncertainty with the hedgebook. It's now behind them and they can concentrate on operating the mine," Roelofse said.

Pricing of the $1.2 billion private placement to institutional investors was due to be announced by January 30.

JP Morgan and Citigroup will act as joint global cooordinators and bookrunners for the capital raising. They have been granted a 15 percent over-allotment option.

Gold Fields will use the funds to pay back a loan taken when it bought the 50 percent stake in South Deep held by Canada's Barrick Gold Corp and acquired the other half owner, Western Areas.