Gold Fields cuts output target as South Deep difficulties persist - BusinessLIVE
The news from the group’s international mines was better, but lower output at its only South African mine led it to cut its full-year group target by as much as 80,000oz
The difficulties at Gold Fields’ South Deep mine persisted into the first quarter of 2018, forcing a downward revision of the operation’s output for the year and lowering the group’s expected production.
Gold Fields lowered its forecast for the year to between 2-million and 2.05-million ounces of gold, from between 2.08-million and 2.1-million ounces, because of the drop in gold expected to come from South Deep.
Gold Fields has a large and growing international portfolio of gold mines and projects, but the South Deep project, which is ramping up to 480,000oz of gold in 2022, is often a focal point because of the ongoing difficulties the company has had in bringing to account the mine, in which it has invested heavily.
In 2017 South Deep, a large, mechanised mine that has already absorbed more than R29bn, undershot its full-year production target and generated 281,000oz of gold instead of the expected 315,000oz because of a poor safety performance in the first quarter of that year.
In 2018 the mine, which is Gold Fields’ last remaining asset in SA, got off to a poor start again, with CEO Nick Holland saying "South Deep had a tough start to 2018".
South Deep’s production of 48,000oz for the March quarter was 41% lower than the December quarter but 4% higher than the same time a year earlier.
"Production for the quarter was impacted by the slow production build-up after the seasonal holidays; two labour restructuring processes that took place at the end of 2017 and during the quarter; and a change in underground working shift arrangements implemented to increase productivity," Holland said.
He said 307 people had left during the restructuring process, of whom 47 were in managerial positions.
"Although necessary to create a platform for sustainable and consistent performance, these changes have inevitably created workforce uncertainty and a disruption of operations," he said.
The underground shift was increased by two hours to 11.5 hours, to increase the amount of time working at the rockface to extract gold-bearing ore.
Another problem at the mine is the low availability of equipment, which is critical for a mechanised mine, while tricky geological conditions have exacerbated the mine’s problems.
As a result, Gold Fields lowered the mine’s production forecast for 2018 to 244,000oz, down from 321,000oz. The mine produced 290,000oz in 2016,
A three-year wage agreement was struck at South Deep, giving employees an average annual increase of 7.3%.
Gold Fields put in a forward sales contract for 64,000oz of South African gold for 2018, agreeing to sell it at between prices of R600,000/kg and R665,621/kg.
Across the international portfolio the news was less gloomy, with most mines exceeding their budgeted production, while work continued on the Damang opencast mine in Ghana and the Gruyere mine in Australia, where adverse weather bumped costs up by 10% and pushed back production by a few months.
Group production of 490,000oz for the March quarter was 10% below the December quarter and 1% below that of the same period a year earlier.
Total all-in costs, which include money spent on growth projects, were $1,150/oz, up from $1,115/oz in the December quarter and $1,104/oz a year earlier.
Gold Fields received 8% more for its gold than it did a year ago, achieving $1,316/oz.
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