Griffith says South Deep to keep “realistic” as market waits on Gold Fields’ M&A direction

Gold Fields CEO Chris Griffiths

GOLD Fields would consider “the next tranche” at South Deep once it had reached 375,000 ounces in gold, but for now the South African mine was not the answer to the group’s long-term production target.

South Deep was engineered to produce more than double Gold Fields’ current production from the mine, but losses over the years resulted in its restructuring in 2018.

“We have been disappointed by South Deep over the years. We have got realistic objectives right now. So we are not going to the stars when we can’t get round the corner,” said Chris Griffith, CEO of Gold Fields in a media conference today.

Griffith was appointed in April last year and whilst he hasn’t taken Gold Fields on a new strategic path – preferring to build on the foundations of his predecessor Nick Holland – he said the company should maintain peak production of up to 2.8 million oz which it is currently scoped to achieve in 2024.

Regarding South Deep, he said: “Once we have got there (to 375,000 oz) we will look at the next tranche as we have the available hoisting capacity (to retrieve ore). But for now, let’s focus on the positive turnaround. Griffith identified South Deep as the “stand out” performer in Gold Fields’ 2021 financial year.

The mine produced 293,000 oz – 29% higher than forecast – and is set for production of 312,000 oz this year, a 7% improvement. “We expect production to grow by a further 20% to 30% to 345,000 oz to 375,000 oz over the next three to four years,” Griffith said.

In the absence of organic production growth from South Deep, there’s a possibility that Gold Fields could delve into merger & acquisitions. However, Griffith said the company still had time to pursue that strategy.

In the meantime, he was focused on the possibility of reinvesting in Damang, a Ghana mine that will register lower output in 2023 and will start mining stockpiles from 2024. A pit cutback was one option as well as new regional development.

The future was less clear for another Ghana asset, the Asanko mine that Gold Fields shares in joint venture with Toronto-listed Galiano Gold.

Production had declined in the past year from Asanko whilst Griffith was also not hopeful a reserve and resource declaration would be delivered in 2021 – for the second year running. Galiano Gold was due to provide an update at the end of this month.

“There are issues at the mine,” Griffith said. “We are just giving space for Galiano to make an announcement.” Gold Fields provided attributable production guidance of 2.25 to 2.29 million oz, but it excluded any contribution from the Asanko mine.

According to analysts at RMB Morgan Stanley, Gold Fields might seek value from its investment. “Given production guidance excludes Asanko, we continue to think the near-term strategic focus will be on the best way to realise value from this asset, for which an outcome may be published in the next six months,” they said.