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

5.1.1 Group operational performance

Production

During 2012, we saw a reduction in attributable production to 3.25 million ounces of gold (2011: 3.49 million ounces). This reflected a significant reduction in production in our South Africa Region relating to:

  • Extensive, illegal strikes in the second half of the year at the Beatrix and KDC mines, reflecting a wave of industrial action that affected the whole of the South African mining sector (p139). This resulted in approximately 145,000 ounces of lost production
  • A fatal, large-scale underground fire at the Ya Rona shaft at KDC in June 2012 (p86), which resulted in approximately 30,000 ounces of lost production

In addition, the temporary suspension in July 2012 of our heap leach facilities at our Tarkwa mine by the Ghanaian Environmental Protection Agency (EPA) (p91) resulted in approximately 15,000 ounces in lost production.

We moved closer to our previous target of a 60:40 production ratio between our ‘international’ and South African regions, achieving a ratio of 54:46 (2011: 51:49), albeit with the change in the rate largely driven by the strikes in South Africa.

The impact of two months of illegal strike action (in which around 29,000 employees participated) has – in combination with above-inflation wage increases (p130), higher energy tariffs (p8385) and other rising input costs (p42) – significantly pushed up our NCE in the South Africa Region.

Despite this, a landmark October 2012 agreement with South Africa’s National Union of Mineworkers to implement a new operating model at South Deep (p79 – 81) is expected to make a major contribution to the long-term success of this major mining project. In particular, it will help ensure that production and development is supported by a 24-hour, seven-day a week working schedule – in line with mechanised mining best practice – and underpinned by a progressive, uncapped production bonus system.

Costs and NCE

Lower Group production also impacted on our unit cash costs, which in 2012 rose to R235,451/kg (US$894/oz) (2011: R184,515/kg (US$795/oz)) – reflecting the relatively ‘fixed’ nature of many of our overhead costs.

This likewise affected our NCE margin, which fell to 17% (2011: 25%). Other key issues affecting our NCE included:

  • Higher operating costs (including increases in fuel and energy costs, annual wage increases, increased development and support costs, and general inflationary increases), which rose to US$24.7 billion (US$3.01 billion) in 2012 from R21.3 billion (US$2.95 billion) in 2011
  • Capital expenditure (including ongoing and substantial development at South Deep (p79 – 81), which rose to R2.58 billion (US$315 million) (2011: R1.98 billion (US$275 million))

In 2012, Gold Fields initiated a project at the World Gold Council for the gold mining industry to adopt all-in cost reporting to provide stakeholders with a more accurate picture of the real costs of producing an ounce of gold. While this cost reporting may not mirror NCE exactly, a number of gold producers have already adopted a similar all-in cost reporting basis.