[miningmx.com] — GOLD Fields is to merge its South African flagship Kloof and Driefontein mines into one combined operation as part of a restructuring process aimed at improving profit margins.
Announcing this in the group’s results for the September quarter released on Thursday morning Gold Fields CEO Nick Holland said the objective was to “introduce a new business blueprint.’
He added this blueprint, together with an appropriate organisational structure, would support sustainable gold output at an NCE (notional cash expenditure) margin of 20% over the next 12 to 18 months.
NCE costs measure the total cost of producing gold by including capital expenditure requirements and funds spent on exploration and development which are excluded from the “cash cost’ figures widely reported by most other gold producers.
Holland said the decision to restructure Kloof and Driefontein was part of a “natural progression to ensuring the sustainability of the region and we are confident that this structure is the most optimal. “
Gold Fields was also shutting down its Africa regional office in Roodepoort and moving staff from this office directly onto the two mines.
He confirmed that some 115 senior management jobs had been lost in the process but that, so far, there had been no impact on workforce numbers at both mines.
Holland commented, “I am trying to mitigate the impact on peoples’ jobs. What we have been doing over the past few years is to not replace workers who have left but rather redeploy other workers into those vacant positions.
“We are also making sure that a lot of tasks on the mines are carried out internally instead of being outsourced to contractors as in the past. “
In terms of the new structure Driefontein and Kloof will be split into six operating units ,each with its own senior management.
Holland said a key benefit of the new structure was that “accountability, responsibility and line of sight are devolved to a lower level.’
Financial reporting from the new Kloof/Driefontein complex will start in the current December quarter.
Holland added that the organisational designs of Beatrix and South Deep were also being reviewed.
He said Beatrix needed to be able to operate autonomously because of its distance from the other group mines.
South Deep needed a different approach and structure because it was a mechanised mining operation engaged in a major gold production ramp-up from 300,000oz/year currently to 750,000oz/year.
Gold Fields reported September quarter attributable gold production of 908,000oz (June quarter – 898,000oz) which was the highest quarterly production figure since the third quarter of the group’s 2008 financial year.
Holland said the NCE profit margin had been maintained at 18%, despite seasonally higher electricity charges in South Africa as well as implementation of the second year of the current two year wage agreement with trade unions in South Africa.
Gold Fields’ operating profit was R3.92bn (June quarter – R3.74bn) giving the group an operating margin of 43% (42%).
Net earnings excluding gains and losses on foreign exchange and exceptional items rose marginally to 144c a share (134c) but headline earnings a share dropped to 99c (147c).
– Ryan owns shares in Gold Fields.
