South Africa region

South Deep

Regrettably, a seismic related face ejection resulted in fatally injuring Mrs. Maria Ramela on 2 June 2019. In conjunction with the DMR, the Mine is conducting investigations into the accident in order to implement measures to mitigate the impact of similar events reoccurring. Face support (mesh) has been implemented as an immediate mitigation measure.

The mine finalised the restructuring in the December quarter 2018, this entailed suspending operations in lower grade and high cost areas and reducing the total number of mining equipment deployed as reported previously. A planned production build-up period was followed post the restructuring to re-organise operations, therefore total volume mined was expected to reduce, impacting most of the mining measures.

Gold production decreased by 5 per cent from 3,003 kilograms (96,500 ounces) for the six months ended 30 June 2018 to 2,851 kilograms (91,700 ounces) for the six months ended 30 June 2019.

Total underground tonnes mined decreased by 25 per cent from 639,000 tonnes for the six months ended 30 June 2018 to 482,000 tonnes for the six months ended 30 June 2019. The average reef grade mined increased by 1 per cent from 6.18 grams per tonne to 6.27 grams per tonne due to greater portion of mining in the higher grade proximal areas and suspending mining activities in the lower grade loss making northern portions of current mine as part of the restructuring project.

Total tonnes milled decreased by 33 per cent from 0.80 million tonnes to 0.54 million tonnes, mainly due to less tonnes mined as a result of the reasons above. Underground reef tonnes milled decreased by 23 per cent from 0.57 million tonnes for the six months ended 30 June 2018 to 0.44 million tonnes for the six months ended 30 June 2019. Total tonnes milled for the six months ended 30 June 2019 included 43,900 tonnes of underground waste mined and 61,000 tonnes of surface tailings material compared with 92,000 tonnes of underground waste mined and 139,000 tonnes of surface tailings material for the six months ended 30 June 2018.

Total waste mined reduced as a result of suspending growth capital and associated waste development together with low grade areas in the northern portion of the current mine area, as part of the restructuring, which included proportionally more waste development. The treatment of surface tailing material was halted in the June quarter 2019 to increase underground backfill availability, by sending TSF material directly to the backfill plant and bypassing the treatment plant. In addition, the suspension of surface treatment was required to facilitate modifications to the processing plant, which will enable separating treatment of surface tailings and underground ore, this will increase the mine's capacity to treat surface tailings material and thereby increasing the capacity to manufacture backfill. Underground reef yield increased by 24 per cent from 5.24 grams per tonne for the six months ended 30 June 2018 to 6.50 grams per tonne for the six months ended 30 June 2019. Reef yield improved in the six months ended 30 June 2019 due to a higher mine call factor in the higher grade proximal areas mined.

Development decreased by 33 per cent from 3,406 metres for the six months ended 30 June 2018 to 2,272 metres for the six months ended 30 June 2019. New mine capital development (NMD) (phase one, sub 95 level) decreased by 100 per cent from 828 metres to nil metres due to suspending growth capital development and re-allocation of resources to secondary support and backfill, in line with the restructuring strategy. Development in the current mine areas in 95 level and above decreased by 57 per cent from 1,670 metres to 719 metres, resulting from mining resources being allocated to develop the North of Wrench mine and suspension of mining activities in the northern portions of current mine. Consequently, reef horizon development North of Wrench increased by 71 per cent from 908 metres to 1,553 metres. Longhole stoping volume mined increased by 2 per cent from 236,000 tonnes for the six months ended 30 June 2018 to 240,000 tonnes for the six months ended 30 June 2019 mainly due to improved backfill and secondary support performance, improving stope availability and turnaround.

Destress mining decreased by 22 per cent from 13,114 square metres for the six months ended 30 June 2018 to 10,191 square metres for the six months ended 30 June 2019 mainly due to reduced number of active cuts in the March quarter 2019, production build-up post the restructuring and inclusion of shotcrete in the support requirements, which increases the mining cycle.

The current mine contributed 9 per cent less ore tonnes at 49 per cent of total tonnes for the six months ended 30 June 2019. The decrease in current mine tonnes is also due to the cessation of mining in low grade areas as part of the restructuring. North of Wrench increased by 9 per cent and contributed 51 per cent of total ore tonnes mined for the six months ended June 2019 in line with the strategy to build up North of Wrench.

Cost of sales before amortisation and depreciation, decreased by 11 per cent from R1,882 million (US$154 million) for the six months ended 30 June 2018 to R1,669 million (US$117 million) for the six months ended 30 June 2019. The decrease was mainly due to lower production, lower expenditure on consumable and payroll costs and by a gold inventory credit of R17 million (US$1 million) for the six months ended 30 June 2019 compared with a charge of R36 million (US$3 million) for the six months ended 30 June 2018. The net gold-in-process credit movement was R53 million (US$4 million).

Capital expenditure decreased by 34 per cent from R379 million (US$31 million) for the six months ended 30 June 2018 to R250 million (US$18 million) for the six months ended 30 June 2019, as explained below.

Sustaining capital expenditure increased by 9 per cent from R230 million (US$19 million) for the six months ended 30 June 2018 to R250 million (US$18 million) for the six months ended 30 June 2019 mainly due to higher expenditure on surface infrastructure for the plant. Non-sustaining capital expenditure decreased by 100 per cent from R149 million (US$12 million) to nil million. This decrease was mainly due to the temporary suspension of growth capital in 2019.

All-in sustaining costs increased by 4 per cent from R669,306 per kilogram (US$1,699 per ounce) for the six months ended 30 June 2018 ) to R698,982 per kilogram (US$1,529 per ounce) for the six months ended 30 June 2019 mainly due to lower gold sold and higher sustaining capital expenditure, partially offset by lower cost of sales before amortisation and depreciation.

Total all-in cost decreased by 2 per cent from R715,373 per kilogram (US$1,816 per ounce) for the six months ended 30 June 2018 to R698,982 per kilogram (US$1,529 per ounce) for the six months ended 30 June 2019 due to the same reasons as for all-in-sustaining costs as well as a decrease in non-sustaining capital expenditure to Rnil million (US$nil million).

In September 2018, the support standard was changed which resulted in a 63 per cent increase in the number of bolts that need to be installed in the development and destress areas, which resulted in a 70 per cent increase in support cost when comparing the six months ended 30 June 2019 and six months ended 30 June 2018. The support cost includes the contractors cost associated with the installation of support material.

The implementation of shotcreting in the development and destress areas was also implemented in the latter part of 2018, which resulted in further increases on support cost when comparing the six months ended 30 June 2019 and six months ended 30 June 2018. In December 2018, the contractor crews working on NMD were deployed to the backlog support and backfill activities to reduce backlog and improve stope turnover. This resulted in additional expenditure when comparing the six months ended 30 June 2019 and the six months ended 30 June 2018. The enhanced support protocol should be beneficial in the medium to long term by reducing relatively expensive rehabilitation.

The restructuring process initiated during 2018 was aimed at improving operational efficiency. Even though production output reduced from the previous period, resources deployed was reduced in a larger ratio, improving the unit cost and profitability of the operation. The build-up period, in the March quarter 2019, post the restructuring and related industrial action masked this effect to some extent.