Gold Fields drops 6% as company 'restructures'
DURBAN - Gold Fields share price shed more than 6 percent today after the mining company announced a restructuring at its South Deep operation that could see 1 100 permanent employees potentially be impacted by the proposed restructuring.
The group said in addition, approximately 460 contractors could also potentially be impacted. South Deep currently employs 3 614 full-time employees and 1 940 contractors.
The share price dropped to R45.19 a share, down from Monday’s closing price of R48.55.
“South Deep has had a number of operational challenges since Gold Fields acquired it in 2006. The key challenge has been the difficulty in transitioning the mine from one run with a conventional mining mindset and practices to mining with a modern, bulk, mechanised mining approach. South Deep is a complex and unique mine, that has faced persistent issues that need to be addressed in a holistic manner,” the group said.
Gold Fields has to contend with rising operating and overhead costs at South Deep since its acquisition. The other challenge has been the consistent failure to meet mining and production targets.
Gold Fields said it did not see much improvement in the second quarter of 2018 post the restructuring and shift changes, with production only marginally higher at 1.518kg (49koz) from 1.485kg (48koz) in the first quarter of 2018.
“Similarly, the cash burn continued into the second quarter at R295 million compared to R361m in the first quarter,” Gold Fields said.
Mineral Resources Minister Gwede Mantashe said he has noted with concern the decision by
Gold Fields to go ahead with its restructuring plans, without due regard to processes in the Mineral and Petroleum Resources Development Act (MPRDA).
Mantashe met with Goldfields chief executive and his executives yesterday, where he was
briefed on the company’s plans, and Mantashe requested the company to follow the processes outlined in Section 52 of the MPRDA, prior to embarking on any retrenchments.
“We are beginning to notice a worrying trend where some mining companies do not meaningfully engage with the department on their restructuring plans, and only brief us as a mere formality or tick-box exercise, ignoring processes outlined in the law which are binding to every mining right-holder,” Mantashe said.
Gold Fields acquired South Deep in September 2006 for $2.5 billion cash and shares deal from Canada’s Barrick Gold and other shareholders.