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| REVIEW OF OPERATIONS: SOUTH AFRICA REGION
OVERVIEW Location: Kloof is situated some 60 km west of Johannesburg at latitude 26°24’S and longitude 27°36’E, near Westonaria in the Gauteng Province of South Africa. The mine is accessed via the N12 highway between Johannesburg and Potchefstroom. Geologically the mine is located on the main Western Rim of the Witwatersrand Basin. Infrastructure: Kloof consists of six shaft systems and two gold plants. Geology: Kloof exploits auriferous palaeoplacers (reefs), namely the Ventersdorp Contact Reef (VCR) that constitutes 83 per cent of the Kloof Underground Mineral Reserve ounces, the Middelvlei Reef (MR) 15 per cent and two per cent from the Kloof Reef (KR). Mine type and depth: It is a large, well-established intermediate to ultra deep level gold mine to 45 level (the lowest working level) some 3,347 metres below surface. Employees in service: The mine has 14,522 permanent employees and 1,619 contractors. SAFETY AND ENVIRONMENT During the year, ten employees lost their lives in eight separate incidents, compared to fifteen fatalities in F2008. Five incidents were caused by seismic induced falls of ground and one by a gravity induced fall of ground. Falls of ground (gravity and seismic related) remained the major cause of injuries. There has been a 30 per cent improvement in the fatal injury frequency rate from 0.33 to 0.23, and a 52 per cent improvement in the serious injury frequency rate from 6.96 to 3.31. The lost day injury frequency rate improved 45 per cent from 11.05 for F2008 to 6.03 for F2009. Kloof achieved 1 million fatality free shifts on 9 October 2008. The mine remains committed to the zero harm philosophy and has introduced further improvements to its behaviour based training and safety programmes. The Gold Fields Safe Production Rules are also being rolled out in a 20-week process together with the Fall of Ground or “Stop & Terminate All Rockfalls” (STAR) campaign. Following the heightened safety awareness across the Group, Kloof has adopted a more prudent approach to pillar mining. Identified remnant pillars are comprehensively analysed and approved by the Rock Engineering Department before any mining takes place. Kloof was exposed to the external audit by DuPont as well as an internal audit of the Full Compliance Safety Management System. Remedial action plans emanating from these audits provide the platform for continuous health and safety improvements. During the year, Kloof was issued with various instructions to stop operations through the DMR’s Section 54 mechanism with respect to accidents that related to support, grizzlies, shaft repair work and centralised blasting. Following these stoppages, standards were revised and, in addition, physical audits were done on workplaces and practices to improve safety awareness. Kloof maintained its OHSAS18001 and ISO14001:2004 (Environmental Management System) accreditation through the various external audits conducted during F2009. OPERATIONAL REVIEW Gold produced decreased by 22 per cent from 25,533 kilograms in F2008 to 19,998 kilograms in F2009. This was due to major infrastructure repairs at Main shaft which disrupted production in the first half of the year, safety related stoppages and an underground fire at 7 shaft also impacted negatively on mining volumes. As a result of the lower mining activity tons milled from underground decreased from 2.94 million tons in F2008 to 2.40 million tons in F2009. Surface tons decreased from 1.01 million tons to 0.92 million tons due to a reduction in toll milling at South Deep, partially offset by an increase in surface ore processed a Kloof 1 and 2 plants. Main development decreased from 33,582 metres in F2008 to 22,838 metres in F2009. This decrease was mainly due to the redeployment of development crews to address the secondary support backlog. Revenue increased from R4,805 million in F2008 to R5,066 million in F2009. The higher gold price received was partially offset by the lower production. Operating costs increased by 15 per cent from R2,690 million in F2008 to R3,084 million in F2009. This increase was mainly due to increased labour costs, an increase in raw material prices, increased electricity tariffs and higher contractor costs associated with the transport of ore from 4 shaft to 2 plant. This was as a result of the logistical constraints experienced during the Main shaft repair programme. Total cash cost increased from R100,419 per kilogram (US$430/oz) in F2008 to R146,930 per kilogram (US$507/oz) in F2009 as a result of the higher costs and lower production. Operating profit, before amortisation, decreased from R2,115 million in F2008 to R1,983 million in F2009. Operating margin decreased from 44 per cent in F2008 to 39 per cent in F2009. Capital expenditure increased from R898 million in F2008 to R959 million in F2009. The main contributors to this increase were capitalised ore reserve development, the 4 shaft complex and the Social and Labour Plan project. Notional cash expenditure increased from R140,512 per kilogram (US$601/oz) in F2008 to R202,140 per kilogram (US$698/oz) in F2009.
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