GOLD Fields expects to meet its projected bullion production for 2023 despite shortages of key skills and other persistent challenges with the operating environment in South Africa and Australia, such as above inflation cost surges.
The company said yesterday its production guidance for the full year to end 2023 remained “unchanged despite operational challenges” in the third quarter period to September 2023.
Gold Fields expects attributable gold production, excluding Asanko, to be between 2.25 million ounces and 2.3 million ounces this year compared to the 2.32 million ounces produced last year.
The company is also anticipating all in costs of production to range from $1 480 (R28 017) per ounce to $1520 per ounce, with an exchange rate guidance of about $1:R17 and A$1/US$0.70.
Interim CEO Martin Preece said Gold Fields operated against the backdrop of a worsening operating framework in South Africa and Australia during the third quarter period to the end of September.
“The operating environment remained challenging as above-inflation cost increases and the shortage of key skills, particularly in the Australia and South Africa regions, persisted,” said Preece.
Gold Fields has appointed Mike Fraser as substantive CEO with effect from the beginning of next year. Mining sector insiders said he faced tough tasks in growing the company’s production next year in addition to focusing on safety and environmental issues.
In the period under review, Gold Fields’ attributable gold was 9% lower on a year on year basis at 542 000 ounces. On a quarter on quarter basis, the gold miner’s output remained 6% lower, with its largest volume decline recorded in the Ghana region on account of production volume reduction at one mine and safety related stoppages at another.
Revenue per ounce for the period however grew from $1 699 in the September 2022 quarter to $1 924 for the same quarter this year. Shares in Gold Fields traded 4% lower at R229.8 on the JSE yesterday but were up 35.9% in the year to date period.
All in costs of production for the group paced up 27% year on year to $1 279 per ounce “due to lower gold sold and above-inflation increases in costs” across all operations. This was further compounded by “initial spending of pre-production capital at the Windfall Project” in Canada.
Market analyst Marco Olevano said Gold Fields’ operating update for the September quarter was “very sub-par when compared to Harmony's blow out update” although he said the company was “on track to meet the original production and cost guidance” in spite of high costs.
Gold output from Gold Fields’ South Africa operations fell by 8% compared to the same quarter last year but was up by 19% to 2510 kilograms on a quarter on quarter basis as a result of “ore phasing, gold in process (GIP) release and stockpile” movements.
Costs for producing gold in South Africa during the quarter to September shot up by 21% per kilogram as a result of lower gold sold and above-inflation increases in costs.
“The availability, attraction and retention of key skills, including artisans and long hole stopping rig operators, continued to impact both fleet availability and utilisation and consequently performance at South Deep Mine,” said the company.
In South Africa, Gold Fields’ sustaining and total capital expenditure nonetheless increased by 36% to R446 million compared to the June quarter. The increase has been attributed to “fleet replacements and refurbishments, an increase in New Mine Development, shaft conveyance system upgrades and the old return dam” upgrade.
In Ghana, Gold Fields’ production dropped 14% year on year to 185 000 ounces while costs rose 33% to $1 503 per ounce. The company is now pushing for a joint venture with AngloGold Ashanti on adjacent mines in Ghana although this was taking longer, according to Preece, with government approvals yet to be secured.
In Australia, production volumes were impacted by lower grades mined and skills shortages. Operations at Granny Smith, St Ives and Agnew were also negatively affected by ventilation challenges although these have now been remedied. Production from Australia was down by just 5% at 244 000 ounces although costs climbed up by 23% to $1 377 per ounce.
“Despite a slight improvement in annualised turnover rates for some critical skills categories during the quarter, the shortage of skilled staff is expected to remain a headwind for the Australian operations,” added the company.
Although its production declined in the quarter to September, Gold Fields last month announced a bank syndicated loan facility of A$500 million. Its net debt increased by $113 million during the period under review to $1.1 billion due to the payment of the interim dividend of $154m.