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Gold Fields’ Martin Preece faces South Deep hurdle – Business Live

Friday, 28 April 2017

Martin Preece has his work cut out for him picking up where Nico Muller left off in trying to bring operational stability to the problematic South Deep mine, Gold Fields’s last remaining South African mine.

In the latest quarterly update from Gold Fields, which has mines in Australia, Ghana and Peru, the fragile nature of the ramp-up at South Deep was highlighted after two deaths at the mine meant severe setbacks in production and costs.

Gold Fields is executing an expansion project at its opencast Damang mine in Ghana and is involved in the Gruyere project in Australia, which both contributed to an increase in the company’s all-in costs for the quarter to the end of March.

The most notable aspect of the quarterly update was the difficult period for its R29bn decade-old South Deep mine.

Muller joined Impala Platinum as CEO in April, leaving Gold Fields as executive vice-president of SA where he had oversight of the South Deep ramp-up project, one he was integral to reconfiguring after years of setbacks, missed targets and changed mine plans.

An initial plan pegged output as high as 800,000oz a year by 2014, with a revision to 680,000oz a few years later. In 2017 output was reduced to 500,000oz, using purely mechanised mining to keep employee numbers low in a country where labour makes up half of mining costs as well as keeping the underground workforce as safe and productive as possible.

Preece is a De Beers veteran of 30 years. He was the chief operating officer of the company’s South African arm, De Beers Consolidated Mines. De Beers had once owned the Cullinan mine, which was a huge underground block-cave operation near Pretoria and one that was highly mechanised.

Preece joined Gold Fields as head of SA, "with extensive experience in massive mechanised underground mining".

"We believe that his experience will help drive South Deep to become an efficient, sustainable mechanised mine," said Gold Fields CEO Nick Holland.

It is this experience that will be called upon to keep the mine safe and on track to meet its ramp-up to 500,000oz in 2022 at a cost of nearly R3bn.

South Deep’s March quarter was marred by two fatalities and three falls of ground in a high-grade area, leading to a suspension of work in that part of the mine until the June quarter.

Gold output fell to 45,800oz, a 28% drop compared with that of the previous matching period and a 43% slump compared with the previous quarter’s.

All-in costs, including capital spent ramping the mine up to steady-state production, ballooned by 26% to R777,497/kg.

The average rand gold price in the quarter was R518,799/kg, meaning the mine burned cash, moving away from a small profit at the end of 2016.

Gold Fields had negative cash flow in the quarter of $35m compared to inflows of $26m in the first quarter 2016. Its net debt increased to $1.241bn from $1.166bn at end December.

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