Gold Fields CEO Nick Holland. Picture: MARTIN RHODES
Gold Fields CEO Nick Holland. Picture: MARTIN RHODES

Gold Fields’ struggle with its South Deep mine in SA continued in the third quarter of 2018, forcing another downward revision of the operation’s full-year target.

Gold Fields, which has mines in Australia, Ghana and Peru, has invested R32bn in South Deep and has struggled to make it a sustainably profitable operation since taking ownership in 2006.

The latest news in Gold Fields’ September quarterly production update made for grim reading as South Deep’s production target for the year was lowered to 154,600oz, basically half of what management had expected at the start of the year when it guided the market to 321,000oz.

South Deep produced 49,500oz of gold for the September quarter, little changed from the June quarter, while all-in costs, which include development capital, shot up to R804,998/kg from R755,930/kg, making the mine deeply unprofitable.

The reason for the blowout in costs was because of the lower number of ounces sold, higher operating costs and increased levels of sustaining capital, Gold Fields CEO Nick Holland said.

Gold Fields is in the process of laying off 1,102 employees and 460 contractors at South Deep. The National Union of Mineworkers (NUM) has embarked on a protected strike, which the company says has been marked by violence and acts of intimidation.

South Deep is one of the core areas of focus for investors and analysts because of the enormous amount of money spent at the mine, the missed production targets, and running losses as management grappled to ramp the mine up to steady state output and achieve either breakeven or profitable status.

As a result of the downward revision of South Deep’s full-year production, which was offset by the inclusion of gold production from the new investment in Asanko Gold in Ghana since July, Gold Fields pegged its full-year output at 2-million ounces.

Gold Fields had started the year advising the market to expect up to 2.1-million ounces of gold for 2018.

Elsewhere in the portfolio there was better news, with the redevelopment work at the Damang open pit mine in Ghana ahead of target, with the mine delivering 51,000oz of gold in the September quarter, putting it on track to achieve its full-year guidance of 160,000oz.

The international mines, including the 45% stake in Asanko which will deliver 45,000oz, will generate 1.85-million ounces of gold for the year, up from an earlier steer of 1.75-million ounces.