Johannesburg - Gold Fields shares dropped more than 5 percent on the JSE yesterday on news of delays in ramping up production at South Deep, its flagship gold mine in Gauteng, to full capacity.
A R7 billion impairment at its Ghanaian and Australian assets in the quarter to December also weighed heavily.
The listed company had delayed its production run rate target at South Deep, amid infrastructure challenges in the year to December last year. The remaining project and sustaining capital expenditure for South Deep between 2014 and 2020 was $1.2bn (R13bn), it said.
“Things have gone slower than we would have liked, but that said, we are confident on the ore body and our approach to make this work,” chief executive Nick Holland said at a results presentation in Johannesburg yesterday.
South Deep would produce between 650 000 ounces and 700 000 ounces of gold a year by the end 2017 instead of 2016 as was initially expected. The mine posted a 12 percent improvement in production to 302 000 ounces in the year to December. Production was expected to reach 360 000 ounces of gold this year, Holland said.
It was operating at half the optimum tonnage and needed to double that in four years.
The main issue is to have ore handling infrastructure in place, ensuring equipment availability, and the revamping of underground workshops.
The key to unlocking bottlenecks is a plan that includes improvement of infrastructure at the mine and the need to improve technical training among employees.
South Deep is Gold Fields’s only remaining South African asset after it hived off its ageing Beatrix and Kloof-Driefontein Complex mines last year to establish Sibanye Gold. Australian mines now contribute 43 percent of the company’s output, Peru contributes 31 percent and South Africa and Ghana each provide 13 percent of total production.
The company impaired its Australian and Ghanaian assets by R7bn as a result of the declining gold prices.
Gold Fields has been the subject of an investigation by the US Securities and Exchange Commission into its empowerment deal linked to the mining right at South Deep since last year.
Holland said given the early stage of the probe it was not possible to determine the ultimate impact of this investigation, any regulatory findings and any related developments on the company.
He predicted a 10 percent increase in group production to about 2.2 million ounces this year. Production last year was flat at 2.022 million ounces. In the three months to December output rose 21 percent quarter on quarter to 598 000 ounces.
The company declared a gross final dividend of 22c a share for the year under review.
Gold Fields expected to become profitable at a gold price of $1 300 an ounce.
“If the gold price goes to $1 100 an ounce, the industry will not make any money. Some people say gold will go lower before it goes higher, we are prepared for that,” Holland said.
Gold Fields restructured its operations last year and cut its annual exploration budget by $450 million.
The shares fell 5.19 percent to R40.93 yesterday. - Business Report