GOLD Fields CEO, Chris Griffith said the firm’s South African mine South Deep would “make some good money” especially as it increased volumes and lowered costs.
Responding to questions last week following the firm’s third quarter operating update, Griffith said South Deep had an opportunity to prove itself a world class mechanised mine. “South Deep will make some good money; it will compete with other assets (in the Gold Fields portfolio) … if it can get its volumes up.”
In August, Griffith targeted a 20% to 30% long-term increase in South Deep production over the 8.7 tons of gold (280,000 ounces) forecast for this year.
There are signs South Deep could exceed that level this year after producing 30% more gold in the third quarter compared to the second quarter (88,200 oz vs. 67,900 oz). Griffith urged caution, however, saying the focus was on the long-term goal.
“Current production is not at an optimal level,” he said. The group did not “… have a [production] number in mind” but he alluded to 350,000 to 360,000 oz “… with a big focus on productivity … When we get there, [all-in sustaining] costs (AISC) will be $1,200/oz”.
AISC in the third quarter was $1,155/oz but that number might not be sustainable in the short term.
Griffith’s comments come amid continued questions about whether South Deep belongs in the Gold Fields stable. “We took the view we could turnaround South Deep and can deliver and make a lot more money than if we sold it,” he said.
“I don’t want to distract the team with ‘are we going to sell you?’. The expectation is that if you deliver you have a home,” he said.
South Deep has been loss-making for large periods since 2007 when Gold Fields bought it from Barrick Gold. Former Gold Fields CEO, Nick Holland decided to restructure the mine in 2018 – a process that has yielded results.
Griffith confirmed South Deep would report higher average inflation – of about 10% compared to 3% to 6% cost increases in the group’s Australia, Ghana and Peru mines – owing to electricity and wage cost increases.
Paul Smit, Gold Fields CFO, also said that the behaviour of the rand had potential for a significant influence over South Deep’s performance.
“You’ve got to make assumptions about the rand. if we get R17 to R18 [to the dollar] we are there at $1,200/oz [AISC]. But it can look terrible if the rand strengthens,” he said.
“I can’t control the exchange rate.”
