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

2.3 Operation: KDC

Introduction

KDC (Kloof Driefontein Complex) is a large, well-established intermediate to ultra-deep-level gold mining complex, with its lowest working level around 3,350 meters below surface. It was established in 2010 through the merger of the Kloof and Driefontein mines and is located around 60km west of Johannesburg, and consists of a total of 11 producing shaft systems and five processing plants. Despite KDC’s long history of production, it retains considerable Mineral Resources and Mineral Reserves of 66 million ounces and 10 million ounces respectively.

Surface operations at KDC East, South Africa
Surface operations at KDC East, South Africa

Strategic overview

KDC has historically been Gold Fields’ largest producing mine – accounting for 29% of Group attributable output in 2012. It has offered Gold Fields a significant production base – albeit one that has been subject to consistent production declines in recent years.

The mine has offered a strong foundation for international growth and diversification by helping fund the development of new operations in the Gold Fields portfolio – including the neighbouring South Deep mine in particular. In recent years, Gold Fields focus has been on stabilising production at the mine – and reducing its operational costs to ensure it remains sustainable.

Performance overview

In 2012, Gold production fell to 934,900 ounces (2011: 1.1 million ounces). This was despite strong signs of production stabilisation and the reversal of a declining production trend in recent years – and was largely attributable to the impact of illegal strike action as well as a large-scale underground fire at the Ya Rona shaft, both of which took place in the second half of the year (see below).

Indeed, output in the first two quarters was similar to that of the first two quarters of 2011 – supported by good results from our ongoing Shaft Full Potential programme. This included, for example:

  • Robust crew productivity performance
  • Improved safety performance based on stronger compliance and better safety behaviour
  • Optimisation of face length and labour planning
  • Improved blasting quality
  • Full face advance
  • Enhanced ore feed sizes to support effective processing
  • Leadership training to ensure effective employee development

Nonetheless, the overall annual fall in production – including a quarter-onquarter 15% fall in the third quarter and a quarter-on-quarter 30% fall in the fourth quarter – reflected two key events.

The first was the loss of 116,000 ounces of production as a result of unlawful and unprotected strikes in September and October (which also affected Beatrix – and was part of a wave of strike action across the South African mining sector). The strikes resulted in the loss of 30 days of production at KDC East and 39 days of production at KDC West.

The second was the loss of 30,000 ounces of production as a result of a large-scale underground fire which took place on 30 June 2012 at KDC West’s Ya Rona shaft, and which resulted in five fatalities. Operations across the mine were temporarily suspended as a consequence. Production resumed at KDC East after three days, whilst those parts of KDC West unaffected by the fire resumed production after five days. Ya Rona itself was only opened on 14 August 2012, but the resumption of production was then hampered by the illegal strike. The cause of the fire, which started in a long-closed, worked-out part of the shaft, remains unknown. Although the fire – and our subsequent work to extinguish it and make the area safe – disrupted production, no damage was caused to our existing working areas.

Despite these material setbacks, we did manage to advance the mechanisation of development ends at KDC’s long life shafts. This is with the aim of improving safety, productivity, cost efficiency and ore reserve flexibility (through accelerated face advance). In the third quarter, we achieved 98% mechanisation in this respect – effectively completing the project.

Total operating costs increased by 11% from R7.45 billion (US$1.03 billion) in 2011 to R8.24 billion (US$1.01 billion) in 2011, due to the implementation of an effective 25% electricity tariff increase by state power utility Eskom from April onwards, general cost inflation and annual wage increases. These cost increases were partly offset by reduced labour costs relating to the ‘no-work, no pay’ illegal strikes during the second half of the year, in addition to a range of cost‑saving initiatives at the mine.

In 2012, the mine’s NCE margin decreased to 16% (2011: 23%). Capital expenditure, which rose to R2.43 billion (US$297 million) (2011: R2.30 billion (US$319 million)) was largely focused on:

  • Ore reserve development
  • Advancement of the mine’s Social and Labour Plan (including housing construction)
  • Ongoing implementation of mine safety initiatives

Key indicators

Figure 2.11: Optimising our operations indicators – KDC

Category   2012   2011   2010   2009   2008  
Gold produced – attributable (kg)   29,078   34,218   37,790   45,362   46,430  
Gold produced – attributable (‘000oz)   935   1,100   1,215   1,458   1,493  
Total cash cost (R/kg)   283,249   219,642   193,948   145,177   125,503  
Total cash cost (US$/oz)   1,076   946   824   536   476  
Notional Cash Expenditure (NCE) (R$/kg)   366,707   285,017   262,141   198,646   173,500  
Notional Cash Expenditure (NCE) (US$/oz)   1,393   1,228   1,114   733   658  
Gold price (R/kg)   434,710   368,309   287,499   261,611   228,856  
Gold price (US$/oz)   1,651   1,587   1,222   965   868  
Operating profit (Rm)   4,404   5,150   3,398   4,969   4,505  
Operating costs (Rm)   8,237   7,452   7,467   6,898   6,121  
Operating margin (%)   35   41   31   42   42  
NCE margin (%)   16   23   9   24   24  
Fatal Injury Frequency Rate (FIFR)   0.15   0.17   0.13   0.24   0.18  
Lost Time Injury Frequency Rate (LTIFR)   8.10   7.95   6.31   5.26   6.72  
Energy consumption (TJ)   11,506   12,126   12,293   12,334   12,066  
CO2 emissions (’000 tonnes) (Scope 1 & 2)   3,141.7   3,295.9   3,348.2   3,492.3   3,311.7  
Water withdrawal (million liters)   54,782   38,971   36,859   22,797   27,182  

Figure 2.12: Growing Gold Fields indicators – KDC

Category   2012   % of Group total  
Attributable Mineral Resources (million oz)   65.81   37  
Attributable Mineral Reserves (million oz)   10.17   15  

Figure 2.13: Securing Our Future indicators – KDC

Category   2012   2011   2010   2009   2008  
Total employees   26,159   26,335   31,033   32,196   28,693  
Silicosis submissions (Rate per 1,000 employees)   0.44   n/a   n/a   n/a   n/a  
Employees on Highly-Active Anti-Retroviral Treatment (HAART)   56.41   n/a   n/a   n/a   n/a  
Employee wages and benefits (Rm)   4,224   4,119   4,303   3,896   3,313  
Total taxation and royalties paid (Rm)   1,196   895   348   834   674  
SED spend (US$m)   891   33   n/a   n/a   n/a  

1 Higher figure reflects the inclusion of maintenance provisions and operating costs in 2012