Connect with us:
Our vision is to be the global leader in sustainable gold mining


Up to 1 560 jobs on the line at South Deep - Moneyweb

Tuesday, 14 August 2018

‘We cannot continue with a R3-million-a-day cash deficit,’ says Gold Fields CEO Nick Holland.

NOMPU SIZIBA: Gold Fields today announced that it is to lay off some 1 560 personnel from its loss-making South Deep mine. The company is said to have already spent some R32 billion on the mine. The announcement follows announcements out of Impala Platinum of a plan to cut 13 000 jobs over the next three years, and from Lonmin, which is looking to shed 12 600 jobs over a similar timeframe.

So, to shed some light on the latest decision I’m joined on the line by Nick Holland, the CEO of Gold Fields. Thanks very much for joining us, Nick. Your announcement comes after you’ve had quite a number of employees leave the company already during the first quarter of the year, and some 47 management-level employees leaving late last year as well. So why the jobs bleed? What sort of packages will the workers get, and how much will this cost Gold Fields? Just break down that 1 560 number for us.

NICK HOLLAND: Let’s start maybe with the last part. First of all, there are 11 000 full-time employees, and that makes up about 30% of the current full-time employees at 3 600. And there are 460 contractors out of a total of around 1920 contractors. Those are the numbers. This goes across all disciplines and across all levels from mining and engineering to things like commercial services, human resources, etcetera. So it goes across a range of different areas.

The other part of it is that we are going to shut down part of the loss-making production, and that enables us to reduce a lot of the overheads and service the entire mine from the twin-shaft system, as opposed to the twin shaft in the adjoining south shaft, which is four kilometres away. So there are quite a lot of people affected by that too.

Look, this is regrettable and it comes after numerous attempts to improve productivity and performance through the voluntaries you talked about, through bringing in additional skills and spending significant amounts on training. We probably spend double of what other companies spend on training as a percentage of our base pay, changing shift arrangements, etcetera. So this really isn’t the first resort. We’ve struggled here for a number of years and we’ve been losing a lot of money over that period of time.

The burn rate at the moment is around R3 million a day. It’s a lot of money, so this is an urgent issue. I just want to stress that we haven’t pressed the button yet on this. It is a consultation process and a Section 189 [retrenchment process]. So the process starts today. There are at least 60 days, and it could extend to 90. Obviously there is an opportunity to engage with organised labour on several alternatives. We also briefed the minister that the process is commencing. He has requested that we engage and talk about potential alternatives. We are happy to hear people out. But at the end of the day we cannot continue with a R3 million/day cash deficit here.

NOMPU SIZIBA: Yes, that sounds like a lot of money indeed. My understanding is that South Deep is a great ore body, to use your kind of language. But, some R32 billion later, is it still worth it? How long will it take for you to recoup what you have already invested so far when everything comes together?

NICK HOLLAND: Certainly the ore body is there. We haven’t had a different view on the technical completeness of the ore body, so we believe that exists. The problem we’ve got here is that we haven’t been able to embed a fully integrated mechanised mining mindset on the operation, and we are still on a hangover of some of the old conventional hand-held mining that was done some years ago, when we built the operation back in 2007.

That’s not to say that it can’t still change, but what we believe we have to do is a number of things. First, we’ve got to right-size the operation through the current level of production. That’s step one.

Step two is we’ve got to continue to invest and train up for the mechanised mining culture.

Number three – we’ve got to transition the mine to the new part of the operation, which will be the lifeblood of the mine for the next 20 years, and we’ve spent a lot of money opening that infrastructure and creating state-of-the-art haulages, ramps, crushers, conveyors to the fifth and that. But we need to get the mine into that area in a big way over the next three or four years. Then I think we can start seeing an operation that could be very profitable for the company and the country. The thing is here, in an industry that’s in decline, we have the opportunity to create something that could actually grow in the gold industry with a long life.

So we want to give this every chance, notwithstanding the disappointment. I don’t think it’s time yet to quit on this asset.

NOMPU SIZIBA: Then, more broadly, in terms of your assets, I see that you’ve not really manged to reach your gold-production targets this year, with your gold production falling in the first half of the year. Are there also issues at some of your other mines outside the country?

NICK HOLLAND: Not at all. We are very comfortable with everything else. In fact, the reason behind that decline that you see in the updated trading statement is a function of South Deep. If you take South Deep out, the international mines are doing exceptionally well. So we have no issues at all. The rest of the portfolio is doing very well, it’s making good money, it’s low-cost, it’s round about 88 to 90% of the production. This represents 10%, but this is the 10% we need to address. The rest of the company is doing very well, thank you.

NOMPU SIZIBA: Then lastly, Nick, gold appears to have lost its safe-haven allure, and, with continued interest-rate hikes expected in the United States, many analysts are telling us that the yellow metal is going to become less and less attractive. So how do you manage when you look at a gold price that doesn’t look like it’s going to shoot through any significantly higher levels any time soon?

NICK HOLLAND: The one thing you learn, the longer you are in this industry, is that the gold price goes in cycles. It goes up and it goes down. It’s very difficult to predict the extent of those swings and how long they will be in place for. But it retains its safe-haven status over time, it’s a good hedge against inflation, it’s a good hedge against geopolitical uncertainty, overvalued stock markets, etcetera. And you can see in the fact that ETFs [exchange-traded funds] have grown significantly over the last number of years. So I think what we’ve got to do is we’ve got to expect volatility in the gold price and we’ve got to structure our operations to withstand the troughs when you see them, and at the same time structure ourselves so we can enjoy the upside when it happens, because the gold price will be all over the place, as it has been for many years. So you won’t get a prediction of the gold price out of us, but what we all say is expect volatility – that’s the name of the game.

NOMPU SIZIBA: Indeed. thank you so much, Nick, for your time.

Back to previous page