Gold Fields determined to turn around its troubled South Deep
JOHANNESBURG – South African gold miner Gold Fields will not call it quits at South Deep, its troubled mechanised mining operation in Carletonville, after it introduced recovery measures following the plunge in profits last year.
Chief executive Nick Holland on Friday said he wanted the market to give South Deep a chance to succeed after the six-month restructuring process aimed at putting an end to the cash bleed.
Holland said the restructuring had seen Gold Fields cutting R800 million in operating costs and trimming R400m in capex.
“I do believe that we can make it (South Deep) successful as does the team, but it is going to take time,” said Holland, speaking at the JSE.
South Deep has been the worst performer and shareholders were reportedly losing patience with management which has failed to deliver on its targets for the last 12 years.
Last year, the mine retrenched 38 percent of its employees to 2 460 from 3 983 in and a quarter of contractors to 1 725 from 2 294.
The National Union of Mineworkers led a violent six-week strike in December to oppose the retrenchments.
The mine also suffered production setbacks, including a 22-day safety-related stoppage in April last year that has resulted in the downgrade for production in the first quarter to 244 ounces from the previous guidance of 321 ounces.
Holland said he believed that the recent measures, including roping in local operations management company OIM and Australian maintenance consultants to improve productivity would yield results.
Said Holland: “We put a plan together, but the plan does not get executed. We think it is about the people, not about the ore body or the infrastructure.”
Gold Fields said it had reduced its fleet, including rigs, loaders and trucks by 33 percent to 66 from 98 in the previous year.
Seleho Tsatsi, an investment analyst at Anchor Capital, said although South Africa was now a small portion of production at Gold Fields, its issues would likely continue to be an overhang on the share.
“The South African gold mining sector has struggled operationally and investors are likely to place shares like Gold Fields at a discount, given the production challenges it has faced,” Tsatsi said.
Holland said 2019 would be an important year for Gold Fields, with the Damang project in Ghana approaching completion, Gruyere in Western Australia commencing production and Asanko, also in Ghana, contributing for a full year for the first time since acquisition.
“This will allow the group to increase production by 4 and 7 percent in 2019. This also means that our capital expenditure will fall quite aggressively through 2019 and the amount of project capex reduces,” added Holland.
The struggling industry has seen two mergers, including Newmont Mining and Barrick Gold, which created the world’s top producer by volume.
Holland said the mergers were a result of the dearth of high-quality discoveries and lack of new projects.
He said mergers and acquisitions were not on the table.
“Never say never, you cannot say you will never focus on anything but that isn’t our focus.”
Shares in Gold Fields fell 0.17 percent on the JSE on Friday to close at R52.48.