Gold Fields weighing up options for Ghana mines as keeps to production growth aspiration

Asanko Gold Mine

GOLD Fields is assessing its options for two Ghana mines that contributed about 13% of third quarter production.

The Johannesburg-headquartered firm reported production of 606,000 ounces in the third quarter, beating its second quarter output 8%. It reiterated a full year production forecast of between 2.3 to 2.35 million oz for the 2021 financial year.

CEO Chris Griffith said on November 11 at the firm’s third quarter results presentation that the company would assess whether it could further exploit the group’s Damang open pit mine which was showing signs of production decline. “We will contemplate whether there are any more cutbacks or the potential to go underground,” he said. Damang produced 56,400 oz in the third quarter.

Another mine, Asanko Gold Mine – in which Gold Fields has a 50% joint venture but is operated by Toronto-listed Galiano Gold – produced attributable production of 24,750 oz in the quarter. Griffith acknowledged the mine was high cost.

“In the current format it is not delivering on expectations, or those of Galiano. We will be discussing opportunities with the partner,” said Griffith. He described the mine was “a work in progress” and that it was likely to remain high cost for the foreseeable future.

Asanko’s gold was produced at an all-in sustaining cost (AISC) of $1,598/oz which compares to a Gold Fields group AISC of $1,016/oz – an improvement on group ASIC of $1,107/oz in the second quarter.

Galiano had earlier revised its full year production guidance downwards to between 215,000 oz to 220,000 oz. The underperformance led RMB Morgan Stanley to ask in a note whether Asanko belonged in the Gold Fields portfolio in the long-term?

“We think consistent operational issues at this mine could be an early indicator of it no longer being considered a franchise GFI asset,” said the bank’s analysts Jared Hoover, Christopher Nicholson and Brian Morgan.

Said Griffith: There is longer term potential there (Asanko) so we have to see what the pathway is. Hopefully we can bring our expertise to bear. It is high cost, we know it. We’re not happy”.

Gold Fields ploughed $202m into Asanko in March, 2018. As part of the joint venture investment, Gold Fields also acquired a 45% stake in Asanko Gold, (before it was renamed Galiano Gold). The investment included the recapitalisation of the then debt-laden Asanko Gold.

Griffith said in August at Gold Fields’ interim results presentation that it was looking to  maintain gold production at 2.7 to 2.8 million oz a year from 2024 through the acquisition of new mines or organic growth.

He also endorsed former CEO Nick Holland’s earlier guidance that South Deep would produce 20% to 30% more gold over this year’s adjusted guidance of 8.7 tons (280,000 oz). South Deep, a South African mine, proved troublesome for Holland until he restructured it in 2018. Griffith took over the reins from Holland in April.