4.3.2 South Deep
In South Deep’s evolution 2015 was a critical year and was very much a year of two halves. We started off the year by taking a step back and deciding to fix the basics at the mine before determining the new long-term steady state profile.
As part of this process, we removed the previous long-term production and cost targets to afford the new South Deep management team the time to fix the base and determine the way forward. In the absence of long-term production targets though, we stated that it was our aspiration to get to cash breakeven at the mine by the end of 2016. In addition, we committed to providing a new long-term plan in early 2017.
The first imperative was recruiting a new management team at the mine. To achieve this, we aggressively handpicked a team of leading mechanised mining specialists, mostly from the South African platinum sector.
The new team developed 68 projects to address the issues faced at South Deep. These projects were categorised into seven broad pillars: People; Safety and health; Mechanised fleet; Infrastructure; Mining; Mine design and planning; Systems. In addition, a separate business improvement team was set up to work with the operating management team to implement the range of improvement projects (p74).
In addition to these seven pillars South Deep also strengthened its energy and water teams as well as the Sustainable Development department in view of the increasing risk faced by the mine amid social volatility in the Westonaria district, home to the mine (see below).
The team undertook an extensive recruitment drive of the identified critical skills and by the end of 2015 had filled 164 of the 166 skills it was seeking. Importantly, most of the core mining and engineering positions have now been filled.
In addition, in April 2015 South Deep entered a three-year wage agreement with its registered trade unions to ensure that the remuneration packages reflected the specialised mechanised mining skills set required.
During 2015, the fleet was optimised and a total of 24 Category 1 machines were delivered to the mine during the year, with all machines, except one, commissioned before year-end. An additional 24 machines will be acquired during 2016. The maintenance capacity at South Deep also improved during the year with the implementation of a maintenance contract with an Original Equipment Manufacturer (OEM) in Corridor 2, which accounts for 35% of total mining at South Deep. We also commissioned the 93 level workshop, one of the largest underground workshops in South Africa.
During the year, a marked improvement in the physical conditions of the underground infrastructure was achieved across the mine. Further improvements are expected in 2016, particularly with new underground roadway constructions and maintenance projects initiated in Q1 2016.
In 2013, we began a review of the de-stress mining method in collaboration with a team of leading international and local geotechnical experts. A strategic mine design change in the de-stress methodology was adopted in July 2015 with a detailed transition programme developed to guide the change process. The conversion from low profile vertical mining (2.5 metres vertical height) to high profile vertical mining (5 metres vertical height) commenced in Q3 2015 and is expected to simplify and derisk the mining process. At the end of the year, all de-stress cuts at the mine had been converted to high profile with the exception of corridor 1. About 70% of the mine is now employing high profile de-stress with the transition for the remainder of the mine set to continue until 2018.
More details on South Deep’s mining processes and methodologies are on page 87.
There were marked operational and financial improvements in 2015. Comparing the second half with the first half of 2015, production at South Deep increased 64% to 123,000 ounces, which resulted in an 37% decrease in AIC to US$1,279/oz. In addition, safety improved materially, with TRIFR falling by 8% over the period backfill placed increased 50% to 33,780m3 and secondary support increased 27% to 614 metres.
While the net cash outflow for the year was R1 billion (US$80 million), the operating improvements through the year and the higher Rand gold price resulted in the Q4 2015 outflow falling to R57 million.
For 2016 we have provided the following guidance to the market: 257,000 ounces at AISC of R550,000/kg (US$1,200/oz) and AIC of R575,000/kg (US$1,250/oz). Capital expenditure is estimated at R1 billion (US$71 million). We maintain our target of achieving cash breakeven by the end of 2016 at our planning gold price of R500,000/kg.
