Integrated Annual Review 2012 Annual Financial Report 2012 Mineral Resources and Mineral Reserves Regional overview  
 

5.1.5 Cutting-edge mining at South Deep

South Deep remains of key strategic importance to Gold Fields – and the broader South African gold mining sector – due to:

  • The significant Mineral Resources and Mineral Reserves offered by its world-class ore body (the mine accounts for 69% of Mineral Resources and 65% of Mineral Reserves for the Gold Fields Group, excluding Sibanye Gold)
  • Its long life of mine, which is estimated to extend beyond 2060
  • Its application of deep-underground mechanised mining and advanced destress methodologies, which allows for safe, relatively low-cost and cash-generating production

In 2012, we continued development to underpin the production ramp-up at South Deep with a 75% improvement in destressing, setting the ground for improved production for the future.

Production build-up

South Deep increased destress mining activity by 75% in 2012. Despite this excellent performance, we could have done more – but were hampered by:

  • Ongoing evolution of our sophisticated destress mining methodology
  • Lower productivity during the Section 189 labour process, which was later resolved
  • Reduced equipment availability relating to skills availability and limited underground maintenance capacity
  • An inadequate incentivisation framework for employees

Nonetheless, we are directly addressing three key factors that we believe will put progress back on track. These include:

New operating model: Implementation of a new ‘24/7/365’ operating model (p 80 – 81) – agreed between Gold Fields and both the UASA and National Union of Mineworkers (NUM) unions – from October 2012. Under the new model, our employees at South Deep receive considerably more leave days per year, receive a one-off compensatory payment, transfer onto 12-hour shifts and are subject to a new, uncapped bonus system that will account for a higher proportion of total earnings, whilst also offering much greater potential for reward. We are ensuring that this does not induce unsafe behaviour by making it a condition that teams will only receive full monthly bonuses in the absence of a single reportable safety incident (p88). In addition, we have implemented a comprehensive fatigue management programme focused on issues such as proper nutrition, prescribed rest periods and control of overtime.

Improved training facilities: Training at South Deep will improve markedly with the completion of our world-class, on-site Trackless Engineering Skills Training Centre in December 2012, as well as the planned completion of our new Operator Training Centre in the first half of 2013. The Operator Training Centre is being fitted with an advanced suite of operator, tele-remote load haul dump and drill rig mesh handling simulators – as well as surface driving and mining mock-up areas – to deliver the highest standards of practical mechanised training.

Improved maintenance facilities: With the commissioning of the new 93-level Main Workshop in mid-2013 we will have the capacity to provide ongoing maintenance to underground machines, working on a 24-hour, double-shift basis. The benefits of the new Main Workshop and planned supporting workshops are expected to become apparent from 2014 onwards.

Collectively, our efforts will make a significant contribution to getting production momentum back on track. In addition, we advanced our learning around the potential application of two mining methodologies that could further support future build-up at the mine:

  • A new ‘vertical slot’ destress cut methodology, which is aimed at reducing horizontal stress and with it the need for additional horizontal destress cuts. It is estimated this will reduce the amount of destress cutting at South Deep by around 15% – accelerating the opening up of the ore body
  • The use of ‘crush pillars’, which are themselves safely mined out once the rest of the area they support has been fully exploited, therefore reducing back-fill requirements, as well as dilution

New South Deep operating model:

Securing the future of South African gold mining

In October 2012 – and after extensive negotiations – Gold Fields reached a formal agreement with the National Union of Mineworkers (NUM) to implement a new, landmark operating model at its South Deep mine in South Africa. The New Operating Model was also agreed to by UASA (the mine’s other recognised union).

The new operating model, which was implemented from 21 November 2012, will signifi cantly enhance productivity at Gold Fields most strategically signifi cant operation – whilst also securing current jobs. Furthermore, it will immediately help create up to 400 new positions – and a further 1,500 additional new positions once the mine reaches full production.

South Deep is targeting a run-rate of 700,000 ounces per year by 2016 and has a life of mine of at least 50 years. Specifi c elements of the new operating model are shown on the next page.

South Deep’s Vision 2015: Safe production of 330,000 reef tonnes per month by 2016

A safe working environment
A well-skilled, incentivised and appropriately remunerated workforce
World-class infrastructure
Best-in-class mining and productivity

10%-15%
Estimated increase in production at South Deep during 2013

23%
Estimated additional face time facilitated by new 12-hour shifts on full calendar operations

700,000oz
Targeted run-rate by 2016

Full calendar operations
New 12-hour shift arrangement on a ‘4-days-on, 4-days-off’ rotation, allowing production on a 24-hour, 7-day a week basis – in line with best practice
About four extra working hours per day between the two shifts (a 30% improvement), plus seven extra production days per year
Fifty fewer working days per year for employees due to changes in shift cycles
New fatigue management system, including focus on nutrition, rest periods and overtime management

Total rewards scheme
New, uncapped and progressive production bonus system – offering significant increases in potential take-home pay
Operators and artisans are able to earn bonuses equal to previous market allowances for ‘on-target’ performance. ‘Above-target’ performance is rewarded by an even higher bonus
Monthly bonus parameters include volume, quality and attendance – but payment is contingent on the absence of reportable safety incidents
Discontinuation of market allowances for mechanised operators and artisans – in return for once-off upfront compen

New grading system
New grading system for new employees to facilitate appropriate and consistent career progression
Existing employees to remain on current gra

Alignment to Gold Fields engagement structures and policies
Implementation of Group-wide engagement structures and policies, including:
Health and Safety Committee
Shaft Leadership Forum
Operational Leadership Forum
Skills Development Forum
Employee Equity Forum

Additional employee benefits
Gold Fields will work closely with the NUM and UASA to jointly develop and implement a range of additional employee benefits, including:
Improved housing arrangements
Medical and wellness benefits
More efficient underground transport arrangements

We plan to investigate the potential implementation of both methods during 2013.

As destressing continues to take place in the higher-grade lower levels, we concentrate ore extraction on the lower-grade, upper levels of the mine. As a result, in the longer term we can expect to see an increase in production as these hitherto unexploited high-grade areas are being mined. In the longer term, we will see head grades reflective of the reserve grade.

Construction

Ongoing construction at South Deep remains broadly on-budget and on-target. During 2012, we achieved the following milestones:

  • Commissioning of the metallurgical plant expansion (including the commissioning of the mill four months ahead of schedule)
  • Completion of the Vent Shaft Deepening project
  • Completion of the Temporary Ore Pass system
  • Commissioning of the Full Plant Tailings back-fill plant

During 2012 we managed to remove all of the remaining mine infrastructure constraints – including hoisting, milling and back-fill restrictions – as production gradually exceeded the previous hoisting limit of 235,000 tonnes per month (t/m) (with 60,0000 t/m via the South Shaft and 175,000 t/m via the Main Shaft). This leaves South Deep with sufficient infrastructure, ventilation and cooling to ultimately deliver to plan, namely 330,000 t/m to the mill and the production of 700,000 ounces per year by 2016.

Figure 5.6: Major progress of key infrastructure at South Deep: On budget and on time

Figure 5.6: Major progress of key infrastructure at South Deep: On budget and on time