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Gold Fields lowers South Deep production forecast - Mining Weekly

Friday, 9 November 2018

JOHANNESBURG (miningweekly.com) - Dual-listed Gold Fields has lowered its production guidance for the South Deep mine, in South Africa, for the full year to 154 000 oz, from the previously anticipated 244 000 oz target.

The deep-level mine, which is Gold Fields’ only remaining South African operation, has long been faced with operational challenges.

It only produced 281 000 oz of gold in 2017 and, Mining Weekly Online reported in February that the mine needs to produce closer to 300 000 oz/y of gold to break even.

In August, Gold Fields announced a proposed restructuring at South Deep, which it said, at the time, could potentially affect 1 102 permanent employees and 460 contractors.

Progress on consultation with the majority union, the National Union of Mineworkers (NUM), has since then been slow and confrontational and characterised by a lack of consensus, Gold Fields CEO Nick Holland stated.

This resulted in low morale in the workforce and uncertainty about job security. As a result of this, the restructuring process has had a negative impact on productivity at South Deep, with the mine producing 50 000 oz during the third quarter.

Holland further said on Friday that the retrenchment process is now under way, with retrenchment letters having been issued to about 1 100 affected employees.

As a consequence, the NUM has embarked on industrial action, with Gold Fields applying the “no-work, no-pay” principle.

“We don’t know when the strike is going to end, but . . . we’ve assumed that there will be no further production from South Deep for the rest of the year,” Holland said.

In essence, he said, Gold Fields has truncated almost a full quarter of production.

“Even before that, it was clear that there was a slowdown of production activities as people got to grips with the Section 189 restructuring announcement.”

Additionally, despite the miner’s focus on safety, there was a fatality at South Deep post quarter end when an underground load haul dumper operator succumbed to his injuries on October 13 following an accident that occurred underground at South Deep the previous day.

Prior to this incident, South Deep had achieved two-million fatality-free shifts over 18 months.

Nevertheless, the company’s attributable equivalent gold production increased by 6% quarter-on-quarter to 533 000 oz in the third quarter, at an all-in sustaining cost (AISC) of $977/oz and an all-in cost (AIC) of $1 140/oz.

Its international operations, including Asanko, in which it holds a 45% interest, are expected to produce 1.85-million attributable ounces for the full year, compared with the original guidance of 1.75-million attributable ounces.

This includes 45 000 attributable ounces from Asanko for five months, Holland commented.

The rest of the operations have made up about another 50 000 oz on the original guidance, Holland said, adding that it is “certainly good to see against the backdrop of the disappointment of South Deep”.

As a consequence, group attributable production is expected to be two-million ounces, compared with the February guidance of attributable equivalent gold production of between 2.08-million ounces and 2.1-million ounces.

“We are still on track to make our guidance on AISC of between $990/oz and $1 010/oz and AIC of between $1 190/oz and $1 210/oz,” Holland said.

At Damang, in Ghana, the reinvestment project continues to track ahead of plan, Holland said.

During the quarter, the total tonnes mined were 20% ahead of plan at 11.4-million tonnes, while gold produced of 51 000 oz at AISC of $682/oz and AIC of $1 288/oz was also ahead of expectations.

Year-to-date, Damang has produced 141 000 oz and is well on track to achieve full-year guidance of 160 000 oz, Holland said.

The construction at Gruyere, in Australia, meanwhile, continued to make steady progress during the quarter, with the project remaining on track for first production in the second quarter of 2019.

As at September 30, overall project engineering and construction were 95% and 69% complete, respectively.

Engineering, procurement and construction was 55% complete.

Downer, which was awarded a five-year mining contract in December 2017, has completed work on the mine workshops and supporting infrastructure and has started mobilising the mining fleet and operation team for the start of mining operations in November this year.

Additionally, the feasibility study at Salares Norte, in Chile, is on track for completion by the end of this year, the miner stated.

The results of the feasibility study, however, are not expected to differ materially from the interim results released in February, when the miner saw a net cash outflow of $53-million.

The February results also highlighted a goal of producing 3.5-million ounces over ten years, with an average of about 350 000 oz/y.

AISC of $575/oz was also included, and upfront capital, to build the project, of $850-million.

The environmental-impact assessment was, meanwhile, accepted for review in July. Gold Fields anticipates a period of between 18 and 24 months for the review to be completed.

The miner has also successfully extended the maturity of the $380-million term loan by 12 months to June 6, 2020, on the same terms, which results in no material debt maturities in 2019.

The extension has been approved by the syndicate of lending banks.


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