Gold Fields converts South Deep

[miningmx.com] — GOLD Fields has received and executed its new order mining right for the South Deep gold mine which the June quarter results show is at last starting to deliver on production forecasts.

Gold Fields CEO Nick Holland said the South Deep mining licence had also been extended by the Department of Mineral Resources (DMR) to include the contiguous property known as Uncle Harry’s.

This property contains a mineral resource estimated at about 14.5m oz of gold.

Gold Fields has had to introduce three further black economic empowerment (BEE) transactions in order to convert the South Deep old order mining right as well as meet its full 2014 empowerment requirements.

These are in addition to the deal previously struck with Mvelaphanda Resources (Mvela) which was supposed to meet the initial 15% empowerment target required by 2009. Mvela is currently selling down its equity stake in Gold Fields.

The first new deal is an employee share option scheme (esop) over an effective 10.75% of GFIMSA (the holding company which controls Gold Fields’ South African assets).

The second and third deals involve a broad-based BEE consortium called BEECO which is being effectively given 600,000 Gold Fields shares worth R60m because these will be issued at R0.50 a share compared with the current share price of around R100.

The consortium will also subscribe for a 10% direct stake in South Deep.

There are no restrictions over BEECO on the Gold Fields shares which means they can be sold whenever BEECO wants to cash them in.

But BEECO must retain ownership of the South Deep shares for 30 years which is the term of the new order mining right granted to South Deep.

Holland said he hoped to conclude the three deals before the end of the year and commented, “once concluded, these three transactions will enable Gold Fields to meet its 2014 BEE ownership commitments.’

The June quarter results show that South Deep achieved its best ever production levels since become a fully-mechanised mine.

Gold production increased 21% to 70,000oz (March quarter – 57,900oz) and the overall yield improved to 4.7g/t (4.2g/t) as management was able to cut back on treatment of surface ore stockpiles because of the higher underground production.

Surface ore processed dropped to 20,000t (112,000t).

Holland said South Deep’s production had increased 52% year-on-year reaching a total of 265,000oz for the year to end-June.

He commented, “South Deep will seek to build on this momentum as it progresses towards full annual production of between 750,000oz and 800,000oz by the end of 2014.’

Gold Fields recorded net earnings of R900m (R316m) for the June quarter during which it reduced its net debt to R4.7bn (R6.1bn) and declared a final dividend of 70c a share to make a total of 120c for the year to June.

The group also held costs down with total cash costs 2% lower at R166,215/kg of gold produced (R169,538/kg) and notional cash expenditure down 3% to R235,223/kg (R241,860/kg).

The writer owns shares in Gold Fields.