South Deep pain barely disturbs Gold Fields’ investment case as share ambles on

Nick Holland Pic: Martin Rhodes

SHARES in Gold Fields were untroubled on Friday following the firm’s third quarter production update in which it detailed deteriorating labour relations at its South Deep mine, and – more importantly for investors – demonstrated the strength of its international portfolio in Australia, Ghana and Peru.

“The South Deep situation seems to be going from bad to worse,” said Nedbank Securities analysts, Leon Esterhuizen and Arnold van Graan in a note on November 9. “From our perspective, the bad news seems to be in the price. As a result, we don’t not expect a material reaction from these results,” they added.

There wasn’t.

Shares in Gold Fields were down marginally by the end of the week, but this morning they had recovered just over 2%. The big hit was in August when Gold Fields shares lost about 28% after announcing that around 1,500 jobs would be cut at South Deep. The group also said South Deep was destined for another restructuring exercise, the results of which will be presented in February. The likelihood of the mine ever reaching its 500,000 ounces/year production target by 2022 appear remote.

The latest setback is a strike – now into its second week – which is being staged by 150 National Union of Mineworkers (NUM) members who work at the mine. RBC Capital Markets described a decision by Gold Fields’s not to assume any more production from the mine this year as “sensible”. It added: “Whilst undoubtedly disappointing it is not surprising to us or, we expect, the street”.

Both banks’ comments suggest exhaustion with South Deep. In fact, since Gold Fields announced the latest restructuring, there have been calls by analysts for the group to take its medicine with South Deep and shut or sell the operation once and for all.

Gold Fields CEO, Nick Holland, acknowledged in an interview with Miningmx on November 9 that the mine absorbed an inordinate amount of management time. But he wanted to give the mine one last chance. “We’ve never done a major restructuring at the mine so let’s see what we get out of this. Let’s see if we are better off and can prevail,” he said.

As for the strike, Holland said it was pointless. “I really don’t think the branch is serving its members well, nor of the national head office. We have instituted a no work, no pay rule so it’ll be sad that employees go home with no salaries over Christmas,” he said.

“Open voids at depth”, which are a part of South Deep’s geology, mean that an interruption to production for more than a month could seriously imperil the mine’s future. “It really doesn’t help if you leave the mine for a number of months,” he said. “Pillars collapse. It’s not good to leave faces standing and there are greater risks than jobs,” he added referring to the safety risks of an extended strike.


Gold Fields may refinance $1bn in syndicated loans during the course of next year, according to the group’s third quarter results commentary. Holland said a decision on some balance sheet reorganisation depending on “… if there is a market”.

“We could refinance potentially once we’ve got the year-end out of the way,” he said. “Since our credit was upgraded we may look at increase flexibility. Banks like our credit and the rest of the [asset] portfolio is doing well. We are looking to pay debt off over the next few years so let’s see if there markets are there. If not, we’ll bite the bullet,” he said.




  1. Comment:the decision it seems as if i was taken suddenly without consulting hr ,this cant happen this u cant retrech the whole department if some must go but some must remain thats the reason they went on strike . #re do it

  2. A gold mine with the largest or one of the largest known ore bodies with a conservative life of mine of 80 years will always have a good business case attached to it. Always. The sad part of it is that organised labour and the DMR wants to take what it can from the mining industry today, without considering tomorrow, while expecting no consequence, perceiving the ‘pot of gold’ to be bottomless. That being said – the impact of this approach may have yielded (perceived) short term success in a society that is epitomised by a growing level of entitlement.

    The reality is that, there will be no jobs without a business case and the people of this country will only once it is too late, realise what has been done. Shareholders invest their money to make money, not to make a loss. The mining industry has therefore been pushed into a path of no return. A path of automation and the replacement of (expensive) employees with technology in order to stop the loss making free-fall. The unions will not understand this, but they will feel the pinch of a shrinking member base. No doubt about that.

    The time has come for the DMR to stop seeing the industry that is paying their salaries as the enemy and to start playing the role they were supposed to fulfil and for the unions to accept that they have already taken all the fat and most of the meat off the bone. There will be consequences for the actions of the past decade or two…

    • Even a great RESOURCE (like south deep) only becomes mineable when it become profitable to mine. This it too deep, too expensive, too complex etc. The real issue is that there are numerous other options in mining friendly jurisdictions which are open pit (quick return) and cheaper to mine. That is where we should put our money. It is just plain stupid to show how tough we are in trying to show the world we can make this work, all the time losing huge amounts of money. Mining is not about bravery (or rather, stupidity) nor is it about upliftment of the “people” it is about profits… If Government thinks I will invest money in order to provide jobs and make people´s lives better by losing my money, they have another thing coming. I would rather put it safely in the bank… Just not an ANC/EFF bank like VBS mind you …

    • Ha Ha, for many years the so called DMR has been playing openly for the workers-unions, so what will change their attitude. Their actions (read unscrupulous Section 54’s for example) have eaten into the industry on a massive scale, expediting the early demise of the industry. This has been happening since 2009, so let them enjoy their unemployment looming. Or policing the “legal” zama zamas….

  3. Fellow Readers,

    We will be do a thorough-going deep dive into the techno-economic issues affecting South Deep Mine. I am currently engaging technical experts etc. We will explore Nick’s incompetence and GFI BoD failures as well!

    It’s NOT going to be superficial-Sandton-style analysis …. It will be “no holy cows” …”no holds barred” techno-economic analysis!

    I hope the editor will allow us, for once, a headline page , which will include diagrams etc because its my believe that miningmx readers deserve to be afforded an opportunity to hear unfiltered truth about this asset which has caused them so much agony. Diarise for Feb 2019 for a 1/2 day worth of reading !

    Truly yours,

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