Kevin Crowley
GOLD Fields’ 2015 plans for its South Deep mine would not be achieved due to a skills deficit and problems with underground infrastructure, the local producer with operations from Peru to Australia said. The shares fell.
The mine would only break even in 2016 as the “knock-on effects of the stoppage last year will have a material impact on 2015”, Gold Fields said yesterday. “The planned build-up for 2015 will not be achieved.”
Production from the operation would probably rise 15 percent to 230 000 ounces this year, it said.
Gold Fields had previously planned to produce 650 000 to 700 000 ounces from South Deep by 2017, which was already two years behind its initial schedule. That target would have to be revised, chief executive Nick Holland said yesterday.
“It’s a long-life operation, so it’s important that we do things right as opposed to doing them quick,” Holland said. “That’s why we’ve adopted a more cautious approach.”
South Deep is the world’s largest gold deposit after Grasberg in Indonesia and production at 700 000 ounces a year would be worth about $855 million (R10.1 billion) in revenue at current spot prices. The mine could sustain output at that level for about 70 years, Gold Fields said in 2014.
The shares declined as much as 9.22 percent in yesterday’s session, before closing 8.27 percent lower at R60.78 by 5pm in Johannesburg.
A
complex ore formation, depth and operational and safety problems have mired the mine in delays throughout its 24-year lifespan, during which it has been owned by JCI, Western Areas and Barrick Gold.
Two workers died in accidents in May and the company halted 70 percent of production for four months last year to build new ground support structures.
Gold Fields hired a team of Australians last year to explore two new mechanised mining methods to improve performance. A new group had been hired, headed by South African Nico Muller, while the company has retained a small part of the Australian team “to assist with ongoing training”, the company said yesterday.
Gold Fields’ headline loss was $10m in the three months to December 31, compared with earnings of $14m the previous quarter, it said. All-in sustaining costs declined 4.7 percent to $1 023 an ounce, while production retreated 0.5 percent to 556 000 ounces. The price of gold averaged $1 200 an ounce in the final quarter of 2014.
South Deep aside, Gold Fields had produced about 2 million ounces at a cost of about $950 an ounce from its international operations in Ghana, Peru and Australia for 2014, Holland said. That allowed the company to reduce its debt 16 percent to $1.45bn, he said
. – Bloomberg