[miningmx.com] – SHARES in Gold Fields fell 4% on the Johannesburg Stock Exchange in the wake of the latest production snafu at the group’s South Deep mine which will largely be closed for four months following a review.
A management review this year discovered that about 1,000 metres of ‘legacy’ ground support in the older part of the mine – from which 70% of production is derived – was deemed to be below international best practice standards.
The outcome is that these sections of the mine will be shut for about four months until September with the deferral of an expected 1,500kg or 48,225 ounces in gold.
The study also concluded that South Deep has “… more equipment and people than is required” which would result in retrenchments. “Discussions have commenced with the trade unions to agree on the way forward on these issues,’ the group said.
Gold Fields’ full-year production guidance of 2.2 million attributable ounces for 2014 has been maintained, however, owing to the anticipated ‘ out-performance of Cerro Corona, Granny Smith and Tarkwa gold mines,” the group said.
“We are now paying the price for the skills deficit at South Deep, which contributed to this outcome,” said Gold Fields CEO, Nick Holland, regarding the management review. “In addressing these issues we will not only ensure the safety of our people, but also the long-term integrity and sustainability of the mine,’ he said.
Ominously, there was a chance that the review would uncover other deficits in the planning of South Deep which has been a project for roughly 20 years. Holland did not think the mine’s build up to between 650,000 oz and 700,000 oz by 2017 would be affected, but he couldn’t be sure.
“We cannot at this point in time guarantee that there will not be other issues identified by the new management team, which may further impact guidance for the
year,’ he said.
Gold Fields suffered two fatalities recently at South Deep which led to a partial shut-down of its workshop facilities, a development that lost it 300kg (9,645 oz) of gold this week, with a further 200kg expected to be lost next week.
The interruption to South Deep’s planned build-up is the latest in a string of upsets for Gold Fields which in 2012 announced it was demerging its mature gold mines at Kloof and Driefontein so it could focus on South Deep.
In February, Holland said South Deep’s production would be reduced to a target level of between 650,000 to 700,000 ounces – with the mine not at full pelt until some 12 months later that promised. It produced 302,000 oz in Gold Fields’ 2013 financial year.
Then in on May 10, the group said the mine – which is still classed as a project on Gold Fields’ books, would produce 10% less gold than forecast for the 2014 financial year. It had earlier been described as its most important “value driver” by Gold Fields.
Gold Fields has estimated the cost of developing the mine at R8bn with expenditure kept to within 12% of budgets.
