Terence Goodlace, head of South African operations, Gold Fields
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» Gold Fields' safety drive cuts production
» Holland shakes up Gold Fields with ambitious plans
» Terence Goodlace quits Gold Fields
» SA gold miners hit hard in strike
» Cerro Corona key to Gold Fields' S.American plans
» Gold Fields upbeat on South Deep target

» JSE:GOLD FIELDS LIMITED:
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Gold Fields mothballs 130,000oz/year of gold
Allan Seccombe
Posted: Fri, 01 Aug 2008

[miningmx.com] --GOLD Fields, which spent R9bn in financial 2008 on its mines, is putting on ice production of 130,000 oz of gold a year because it has stopped mining pillars and remnants of ore bodies at its Driefontein and Kloof mines.

The Kloof mine will shut its main shaft for repairs for six months at a cost of 500 kg/month of gold. This gold is worth $88m at current prices.

These production figures are built into the production forecasts Gold Fields released with its June quarter and year-end figures on Friday, which show that South African production will come down by 72,000 oz in the September quarter as the company addresses safety issues.

Ultimately though, the South African mines are forecast to produce between 2 and 2.3 million oz during financial 2009 once the safety issues have been addressed. This will make up half the group’s 2009 production target of four million oz.
We will no longer mine those pillars until technology changes
The Gold Fields share price hit a year-low of R81.49, down R6.98. The previous low was R83.29.

Gold Fields said its capital budget at Cerro Corona was $100m more than the $450m it had initially told the market because of under-estimation of quantities, more claims from contractors and underestimation of the tailings project.

"It has cost us more than we would have liked, but it will still make good money for us," Holland said. The copper/gold project in Peru, which will have 375,000 oz of gold equivalent production a year, is about six to nine months behind target.

As part of its drive for safer operations, Gold Fields is mining less ore from pillars, which are essentially blocks of ground left behind in earlier work either because they were too difficult or dangerous to extract, or they were not economically viable.

The amount of gold extracted from pillars at Driefontein has decreased by 25% and 50% at Kloof, the two biggest mines in the Gold Fields’ stable.

Outgoing chief operating officer Terence Goodlace said this worked out at 700 kg of gold at Kloof and 500 kg at Driefontein. On an annualised basis, Gold Fields will extract 4.8 tonnes less of gold or 130,000 to 150,000 oz.

At current market prices, this gold is worth about $120m.

There is not enough flexibility at those two mines to replace the gold from other working areas yet.

“We will no longer mine those pillars until technology changes,” Goodlace said.

CEO Nick Holland said the pillar and remnant mining review was not quite finished.

“The review process is not over yet and it will be completed at the end of August when we will decide if there will be more cutbacks,” he told a presentation on the company’s results.

Goodlace, who leaves the company at the end of September, later told Miningmx that he didn’t expect there to be a further large reduction. “I would generally say we’ve addressed the high risk areas.”

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One of the key projects to address safety is to replace steel work at the 40-year-old main shaft at Kloof in a six-month project that will cost $5m for steel and labour alone. The total bill is likely to be a fair bit larger as the costs for transporting ore by road, bussing workers to other shafts and time constraints are taken into account, Goodlace said.

The mine will lose 500 kg/month of production for the six months because the shaft will be closed while the steel work is replaced.

The 2,000 metre deep shaft hauls 60% of Kloof’s gold as well as putting 3,000 people a day down the mine.

Management blamed insufficient maintenance of the shaft, its design and age for the problems. “That shaft was designed for a life of 25 years. It’s now 40 years old,” Goodlace said.

Gold Fields capital expenditure in financial 2008 topped R9bn, with R4.6bn going towards growth projects and long-term ounce replacement projects.

“We are positioning Gold Fields for the future. We’ve never spent that much capital before,” said Holland.

South Deep, the difficult, deep and expensive mine Gold Fields bought at the end of 2006, has been restructured and the company has budgeted R70m to reduce the workforce there to 3,500 from 5,500 as mining moves towards mechanised operations and away from the traditional labour intensive stope mining. Gold Fields has also depleted the Ventersburg Contact Reef, which entailed that type of mining.

“We are, in my opinion, finally turning the corner at South Deep,” Goodlace said. The restructuring of the mine will be completed during the September quarter.

The mine will move back to producing 530 kg of gold a month from August and development to increase that will accelerate from October this year.

Gold Fields will complete a pre-feasibility study into its uranium prospects within the next six months, Holland said. There are 28 million pounds of uranium and some two million oz of gold in 400 million tonnes of tailings at Kloof, Driefontein and South Deep.

A second opportunity is to attach a uranium extraction plant at its Driefontein and South Deep mines from which it could extract 20 million pounds of uranium from yet-to-be mined ore.

A decision will be made on whether to develop these opportunities in-house, joint venture or sell these uranium prospects, Holland said.