GOLD FIELDS - Quarter and Period ended 31 December 2010

Cost and revenue optimisation initiatives through Business Process Re-engineering

The Business Process Re-engineering programme (BPR) commenced during the second half of 2010. The BPR involves a review of the mines’ underlying organisational structures as well as the operational production processes from the stope to the mill. The objective is to introduce a new business blueprint, together with an appropriate organisational structure, which will support sustainable gold output at an NCE margin of 20 per cent in the short to medium term and 25 per cent in the longer term.

The BPR underpins the suite of M projects under Project 500 which was established during financial 2008 for delivering optimised cost and revenue results over a three year period.

Project 1M is a productivity initiative that aims to improve quality mining volumes by increasing the face advance by between 5 and 10 per cent per annum. The BPR Stoping full potential project aims to enable the delivery of full potential at every workface by introducing standardised reporting and practices and eliminating constraints.

Implementation of a daily performance management routine and a suite of tools to minimise lost blasts;
Acceleration of equipping of panels; and
Introduction of new panel tracker initiative to improve section flexibility and sustainable production. This will be achieved through detailed planning and scheduling of individual panels and crews for 18 months ahead.

Average face advance regressed slightly from 6.8 metres to 6.7 metres in the December quarter. Focus continued on safety, improvement of flexibility and panel availability. The BPR Stoping full potential, amongst others, aims to improve on quality volume addressing the key constraints which affect productivity on a shaft by shaft basis.

Project 2M is a technology initiative aimed at mechanising all flat-end development (i.e. development on the horizontal plane) at the long-life shafts of Driefontein, Kloof and Beatrix. South Deep is excluded as it is already a fully mechanised mine. The aim of the project is to improve safety and productivity, reduce development costs and increase ore reserve flexibility through higher monthly advance rates.

For the December quarter, 73.8 per cent of flat-end metres were advanced by mechanised means at the long life shafts at KDC and Beatrix compared with 67.6 per cent in the September quarter. This improvement was largely achieved by an additional 5 rigs on average in service during the past quarter increasing the number of operational rigs from 49 to 54. Work is also on-going to address constraints to enable reductions in the lost blast rate as well as to increase advance per blast, with particular focus on enhancing the efficiency of the cleaning cycle and improving logistics.

Project 3M focused on optimised spend in specified categories. The BPR NCE full potential project focuses on all categories of spend.

The first phase of the BPR initiatives, which commenced in the second half of calendar 2010 at KDC and Beatrix in South Africa was concluded at the end of December 2010 and between R500 million and R1.0 billion of cost reductions have been scheduled over the next 12 to 24 months. Our intent with BPR in calendar 2011 is to mitigate as much as is feasible of the anticipated mining inflation increases. Although the BPR programme is still work in progress, cost reductions of R173 million have been achieved for the six months to December.

In this first phase of re-organising the operations in the South Africa region, the Driefontein and Kloof operations have successfully been combined into one entity whose senior management structures have been merged into a new management team with the primary role of servicing the new Kloof/Driefontein complex (KDC), but which also has governance oversight across the South Africa region. The team is now based at the combined mine complex situated at Libanon Business park in close proximity to KDC and South Deep.

The South Africa region will now consist of three operations, namely the KDC, Beatrix and South Deep. The revision of the organisational design of Beatrix and South Deep, to ensure that they are fit for purpose in the new structure, will be concluded during the March 2011 quarter.

Project 4M focuses on the Mine Health and Safety Council (MHSC) milestones agreed to on 15 June 2003 at a tripartite health and safety summit, comprising representatives from Government, organised labour and mining companies. The focus is on achieving occupational health and safety targets and milestones over a 10-year period. The commitment was driven by the need to achieve greater improvements in occupational health and safety in the mining industry.

One of the milestone targets is that no machine or piece of equipment may generate a sound pressure level in excess of 110dB(A) after December 2013. In order to achieve this target the company is focusing on reducing the noise at source and enforcing the use of personal protective equipment. Good progress has been made and, by the end of the quarter, 99.2 per cent of equipment measured was below 110dB(A).

Silicosis remains one of the biggest health risks associated with the gold mining industry. In order to meet the silicosis targets the company has several interventions in place, which include:

the upgrading of tip filters by replacing complete unit installations or the installation of additional first stage pre-filtration systems to increase dust filtration efficiency and to remove larger particles of dust before they enter the primary dust filtration unit (92.4 per cent implementation to date across the region);
the use of foggers to trap dust particles liberated from tipping points before dust enters the main air stream (83 per cent implementation to date across the region);
footwall treatment to bind dust on the footwall and prevent it from being liberated into the intake air ways (100 per cent implementation to date across the region); and
installation of tip doors. The tip doors are installed into the tipping points and remain closed when no tipping is taking place, thus reducing dust from entering the intake airways. The tip doors are spring loaded hence they are self-closing after tipping is completed (54 per cent implementation to date across the region).

This progress should enable the Group to meet its targets. It must be noted that although footwall treatment has been completed in all identified areas, periodic retreatment is required to maintain effectiveness.

Of the individual gravimetric dust sample measurements taken during the December quarter, 97.3 per cent were below the occupational exposure limit of 0.1 milligrams per cubic metre, thus meeting the target of not less than 95 per cent of individual samples below the occupational exposure limit of 0.1 milligrams per cubic metre. Progress against all interventions is monitored monthly.

At Tarkwa, the partial owner maintenance project was successfully commissioned during the quarter. The full benefit of this project is expected to impact equipment availability, productivity and life cycle cost of the mining equipment going forward. The cost saving is expected to be around US$5 million per annum. Focus for the March quarter is directed at productivity improvements and cost reductions through consumption improvement as well as price reductions in the areas of mining, processing and maintenance. In addition, a full review of contractor activities is currently in progress.

At Damang, the owner mining project is ahead of schedule. The implementation will be completed by March 2011 with full benefits to be realised in the June 2011 quarter.

A major focus area of the business process re-engineering at St Ives is a heap leach throughput and cost efficiency project. Other initiatives are focussed on materials consumption, use of contract labour, equipment utilisation and use of leased equipment across the site.

Detailed and operational review