Gold Fields said nearly 460 contractors would also be impacted.
It said South Deep had experienced a number of operational challenges since its acquisition 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,” it said.
“South Deep is a complex and unique mine, that has faced persistent issues that need to be addressed in a holistic manner,” it added.
The announcement put gold stocks on the back foot yesterday, with Gold Fields retreating 13.82 percent to close at R41.84 and Sibanye-Stillwater 5.08 percent weaker at R8.22.
AngloGold Ashanti also eased 1.29 percent to R118.20 and Harmony Gold 0.61 percent lower to R22.80.
Gold Fields also blamed rising operational and overhead costs, as well as the failure of the mine to meet its production targets.
It said it still did not see much improvement after the restructuring, with production expected to remain marginally higher at 49 000 ounces from 48 000 ounces 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.
Two weeks ago, Impala Platinum said that it was planning to cut 13 000 jobs at its operations in the next two years.
And in May, Lonmin announced that it would shed more than 3 000 jobs in the current financial year, as part of its plans to release 12600 workers in the next three years.
South Deep has 3 614 full-time employees and 1940 contractors.
Mineral Resources Minister Gwede Mantashe described the Gold Fields decision as concerning.
Mantashe said he had requested the miner to follow the processes of the Mineral and Petroleum Resources Development Act before embarking on retrenchments.
“It is our view that the spirit in which Gold Fields is engaging, contravenes the agreed approach and the laws governing the sector,” Mantashe said.
Gold Fields had acquired South Deep in 2006 for $2.5 billion (R35.15bn) in a cash and shares deal from Canada’s Barrick Gold and other shareholders.
Hogan Lovells head of mining, Warren Beech, said the sector had continued to face strong headwinds.