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Johannesburg - Gold Fields’ South Deep mine, plagued by delays since it was bought for $3 billion in 2006, will underpin long-term growth and be ready for full output by 2017, chief executive Nick Holland said.
The company’s only South African asset, and the world’s second-biggest gold deposit, will produce 650,000 to 700,000 ounces a year at about $900 an ounce by the end of 2017 even with disruptions in the first quarter, he said.
“The build-up in production is going to come with a commensurate reduction in the cost base,” Holland said in an interview.
“We’ve got all the infrastructure already built.”
Gold Fields needs South Deep to help reverse a 54 percent slump in its stock since spinning off three South African mines to create Sibanye Gold in February last year.
The mine cost Gold Fields about $4 billion, including the purchase price, and is seen producing 700,000 ounces a year until at least 2075.
South Deep “is going to fundamentally change the group’s margin delivery and performance,” Holland said.
Gold rose 0.1 percent to $1,291.10 an ounce by 10:41 a.m. in Johannesburg.
The metal has gained this year to 7.5 percent after tumbling by 28 percent last year, the most since 1981.
“The real benefit of South Deep is that it’s a long-life asset,” Holland said by phone from Johannesburg.
“The benefit of a long-life asset is it will carry you through the cycles.”
South Deep output this year will be 10 percent lower than the 360,000 ounces targeted because of “temporary disruptions” during the ramp-up, the company said today.
Gold Fields brought in a team from Australia to improve development.
South Deep, set up as a mine in 1990, has an ore body that can be mined with large machines commonly deployed in Australia rather than the handheld drills typical in South Africa.
Its depth, complex ore formation and the methods needed to extract the gold have led to delays though the life of the mine, which has been owned by JCI, Western Areas and Barrick Gold.
“We want to improve the mechanised mining culture and skills levels,” Holland said in the interview.
“That’s necessitated some changes. This disruption in the short term has affected us. We’re through all of that now.”
Gold Fields’ earnings excluding one-time items were $5 million in the first quarter after a $23 million rand loss the previous quarter, the Johannesburg-based company said today in a statement.
Gold revenue rose 1.4 percent to $1,283 an ounce.
The company produced 557,000 ounces of gold in the quarter, 6.9 percent less than the previous three months, partly on lower output at South Deep.
All-in sustaining costs rose 1.1 percent to $1,066 an ounce. - Bloomberg News