Johannesburg - Gold Fields stopped most production at its South Deep mine in South Africa after two deaths in a fortnight, the latest blow to the 24-year development of the world’s second-biggest gold deposit.
A halt ordered by the Department of Mineral Resources to make safe underground maintenance workshops, where the deaths occurred, will be followed by four months of work to strengthen pathways within the mine, chief executive Nick Holland said today on a conference call.
Gold Fields has started talks with unions at South Deep about job cuts, he said.
Gold Fields has said South Deep is its “most important value driver,” yet it has been beset by delays and safety problems since its inception in 1990.
The Johannesburg-based company, which bought the mine for $3 billion (R31 billion) in 2006, hired a team of 15 Australian experts earlier this year to better mechanise the operation and train employees.
“A safe working environment on all of our mines is our first priority,” Holland said in a statement earlier today.
“We are now paying the price for the skills deficit at South Deep, which contributed to this outcome.”
A contractor was killed after a dump truck reversed over him.
Another man died after being hit by a drill attached to a mining vehicle that was being lowered for maintenance.
Gold Fields is aiming to bring over more Australian workers next month to improve skill levels among South Deep employees, Holland said on the call.
He didn’t detail the number of job cuts.
The mine has “too much in terms of people and resources,” he said.
South Deep has 4,000 employees and between 1,700 and 1,800 contractors.
South Deep has about 1,000 meters of “really critical ground support that has to be fixed,” Holland said.
The company is targeting 650,000 ounces to 700,000 ounces of production from South Deep by 2017, two years behind its initial schedule.
That goal shouldn’t be affected by the stoppage, the company said.
Gold Fields’ can’t guarantee that there won’t be further issues identified by a new management team at South Deep that may affect production guidance, Holland said in the statement.
The mining department’s stoppage order and the company’s four-month safety review mean South Deep will lose about 64,300 ounces of gold production, 16 percent of the mine’s total for 2013.
The stock fell 3 percent to 36.90 rand by the close in Johannesburg, the lowest for four months.
It’s down 59 percent since the start of last year.
Gold Fields has spent about $1 billion developing South Deep in addition to the purchase price.
Nine employees died at the mine when a cage lift cable snapped in May 2008.
A worker died in a fall of ground incident in April that year.
Once ramped up to full production, South Deep will be South Africa’s biggest gold mine, producing 700,000 ounces a year until at least 2075 at a cost of less than $1,000 an ounce.
Only the Grasberg deposit in Indonesia contains more gold.
The disruption won’t affect Gold Fields’ full-year production target of 2.2 million ounces from all its operations, the company said. - Bloomberg News