JOHANNESBURG – Gold Fields has slashed output for this year, saying the week-long go-slow and strike led by the National Union of Mineworkers (Num), following the decision to retrench slightly more than 1 500 employees at its South Deep mine, was weighing heavily on production.
Gold Fields chief executive Nick Holland on Friday cut group attributable production for the year to 2 million ounces – below the guidance of between 2.08 million and 2.10 million ounces announced in February.
Holland estimated gold production at South Deep for the year to be 154 600 ounces (4 800kg) because of the go-slow and strike.
“We do not know when the strike will end. We assume that there will be no further production at South Deep until the end of the year. There was a slowdown in production as people got scripts (retrenchment letters),” he said
Gold Fields completed the 60-day consultation process with the Num and the United Association of South Africa (Uasa) on the proposed restructuring, which affects 1 102 permanent employees and 460 contractors.
The share closed 2.56 percent lower at R38.86 on Friday.
Last month, 1 102 employees were served with retrenchment letters, while 171 others accepted voluntary severance packages.
Disgruntled Num members downed tools at South Deep over a week ago to protest against the retrenchments.
Gold Fields paid Canada’s Barrick Gold and other shareholders R8.5 billion to acquire South Deep in 2006.
Although it pumped in R30bn to convert the deep-level mine into a mechanised operation, the mine has posted losses and production problems.
“The aim of the restructuring is to move the mine closer to break-even, and it is hoped that the strike action will be concluded before year-end” Holland said.
The company last week flagged that jobs might be at risk if the strike was prolonged.
It also said the strike had turned violent, with the office of Uasa and the Adult Education and Training Centre severely damaged, allegedly by arson attacks. Striking employees also allegedly attacked the cars of three employees who attempted to go to work on Monday.
In terms of production, international operations are expected to produce 1.85 million attributable ounces, from a previous guidance of 1.75 million. This included 45 000 attributable ounces from Ghana’s Asanko Gold for five months. Gold Fields acquired 45 percent of Asanko in July.
Despite cutting its output guidance, Gold Fields maintained its cost guidance, with all-in sustaining costs (AISC) of between $990 (R14 141) and $1 010 an ounce and all-in costs (AIC) of between $1 190 and $1 210 per ounce.
Group attributable equivalent gold production was 533 000 ounces for the September quarter, 6 percent higher quarter on quarter at an AISC of $977 an ounce and an AIC of $1140/oz.
The group also extended the maturity of the $380m term loan to June 6, 2020 from June 6 next year on the same terms, which resulted in no material debt maturities next year.
“The extension has been approved by the syndicate of lending banks. Gold Fields continues to proactively manage the balance sheet and will consider further refinancing of its debt during the course of 2019,” Holland said.