Holland concedes lack of leadership key to South Deep failures

South Deep mine

TURNOVER in head of operations at South Deep – equal to an average tenor of between 18 months to two years – was a key reason behind the failure of mine owner, Gold Fields, to drive a profit from the West Rand mine.

Responding to a question from Citi analyst, Johann Steyn, Gold Fields CEO, Nick Holland, acknowledged leadership had been a problem for South Deep over the last 10 months. “The average tenor of the head of operations at South Deep is between 18 months to two years which is clearly not good,” said Holland.

“One of the reasons we are not further down the line at South Deep is that the track record is for people to leave. There is then a hiatus of five to six months and that sets us back. It is something of concern. We need to have that stability at that level to improve institutional capacity. Without that there is no winning team at the face,” he said.

Steyn estimated there must have been seven to eight different people tasked with running South Deep over the last 10 years. During that period, the mine has repeatedly missed its targets and has, therefore, been a perennial drag on Gold Fields which otherwise manages high class operations across the globe.

“I think it may be five or six different heads but whether it’s that or eight, it’s far too many for us,” said Holland who earlier admitted that there was a degree of risk to the mine’s 2018 production target of 322,000 ounces. “There is still some risk in the South Deep target, but there may also be some upside,” said Holland who was commenting at the firm’s 2017 full year results presentation today.

“Broadly speaking, South Deep is about getting people to work in an effective way. It will take time but I think we will succeed in three to four years. It is not about the orebody; it is not about the technical solution; it’s about execution of our plans,” he said.

South Deep failed to meet its 315,000 oz production target as set down in a ‘rebase plan’ of February 2017 for the 2017 financial year by some 11%. Whilst a production target of 500,000 oz/year has been retained, this would not now be achieved until 2022 compared to the previous 2020 target. The execution of the full mining value chain at South Deep “… remains sub-optimal,” said Gold Fields in comments to its numbers.

Gold Fields announced on February 8 that it had decided to impair South Deep for $278m, taking its carrying value on the firm’s books to $1.96bn.

South Deep has serially under-performed over its 20-years plus life for whoever has operated it, including Gold Fields. It was previously owned by Barrick Gold, Placer Dome and JCI before it. In the hands of the late Brett Kebble, who was running JCI at the time, the mine was slated to produce more than 800,000 oz.

Gold Fields bought the mine from Barrick Gold for $1.53bn in December 2006 and has, over the years, lowered the mine’s productive capacity. In May 2015, Holland’s 650,000 to 700,000 oz/year target for South Deep was in jeopardy as he dispensed with previous targets in favour of rescoping the entire mine.

It was further rescoped in February last year to the current 500,000 oz/year target. The then head of SA operations was Nico Muller who has since left the company to run Impala Platinum. Muller was replaced by Martin Preece who was previously chief operating officer of De Beers Consolidated Mines. Preece joined Gold Fields in April last year.

Analysts asked if Gold Fields had considered selling South Deep, or even deciding to stop production altogether. Holland said there was more incremental value in continuing South Deep than in stopping it whilst he thought the market acknowledged South Deep was a long term Gold Fields asset. “No, we have not been shopping it,” he said.


  1. Is this a case of the coach blaming the players? Leadership starts with you Nick, maybe you should do some urgent introspection. Why are the ¨leaders¨leaving? Could it be because of you? Could you be setting unrealistic expectations and setting them up for failure.
    You get to decide who the SVP/GM´s are, you get to lead and manage them…After that, YOU have to take full accountability for performance…

  2. Mr Holland – you are ultimately accountable for the turnover of the Leadership – you selected them, then undermined them and finally fired them!

  3. Dear Fellow readers,

    As readers are aware, i am bullish on GFI ( sans the current CEO) assets portfolio. I believe with the right CEO , this co. can achieve success. This is what I wrote previously about South Deep :

    “The 3Q results have shown that South Deep improved Q/Q production by 10%. This is NOT an accomplishment because this mine will miss its call of 315Koz/yr for FY17 by some 25Koz. This production target was set as recently as Feb 2017. The sorry saga of this Mine is depressing me greatly. I just don’t understand why the BoD of GFI cannot put a stop to this continued underperformance which clearly has governance implications. When will they wake-up and deal with this South Deep mess?”

    Well, GFI released its annual results , and makes for sad reading given their potential. Pls note that meeting low-ball guidance IS NOT success for GFI. With current assets, GFI should be a ±3Moz/yr producer. Furthermore, achieving AISC=$955/oz when its peers ( Newcrest ; Kinross etc) are making drastic improvements to their core assets to achieve AISC $1900/oz. If this is NOT callous criminality, then i dont know what is!

    I discount heavily what Holland says about South Deep performance and as such i will await the new CEO of GFI.


    At first blush, this looks like a sensible mining project to develop. However, it is already late given that spend to date of $161M( Project Baseline : $287M). Furthermore, the AISC are underestimated at <$650/oz for a 2P grade = 1,3 g/t in Australia. I have looked at several similar ( OP , low (<4) strip ratios etc) mining operating assets ( including those with Cu credits) , and NONE achieves this low AISC. Frankly, even after a DD of some 7 months, i think GFI has been sold a bill of Goods!


    When is Nick resigning so that we can get South Deep Mine fixed to achieve its orebody potential?

  4. Well finally: “it might be a leadership issue”. It might indeed. Running a mining enterprise with an “if I want your opinion, I’ll give it to you approach” may create a few problems in my experience. There is one leadership position that has not changed….. Let’s watch this space.

    Forgive me if I’ve been asleep at the wheel, but has anyone heard anymore lately about the furore around South Deep’s last empowerment “deal”. It’ll be interesting to see if that subject hits the headlines again in the next few months…. now that Mr Ramaphosa is President.

    I’m reminded of some lyrics from an Elton John ditty. Something about some tail lights heading for Spain. Don’t know what made me think of that.

    • Hi Steve – Do send it again. I suspect it wasn’t properly logged in my system due to a technical error either your side or mine. I really don’t censor articles unless they consist of bad language, hate speech, raise the prospect of defamation etc … As I keep saying, ad nauseam.

  5. “… the average tenor …”? May I please proofread for you? Great content, but annoying to start with an error and end with another (“No, we have not bee shopping it,” ). Posted without malice.

    • Hi Linda

      Here’s a copy and paste from Investopedia.

      “Tenor (finance) refers to the time-to-maturity of a bond, or for an interest rate swap, the length of time during which these payments are made. For a swap, tenor may also be used to mean the coupon frequency.”

      Thanks for the alert on the typographical error. Fixed now.