South Deep continues to weigh on Gold Fields

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South Deep continues to weigh on Gold Fields

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Published Date: 2018-04-26 | Source: Stephen Gunnion | Author: Stephen Gunnion

South Deep continues to weigh on Gold Fields

The gold producer has cut production targets for its South African mine due to labour and equipment issues

Gold Fields has had a disappointing start to its 2018 financial year, with its South Deep mine continuing to perform below expectations. After a strong 2017, the gold producer said its international operations continued to fare well, in most cases exceeding their budgets for the quarter. Gruyere in Western Australia was also affected by severe weather over the quarter.

In an operating update, Gold Fields said attributable equivalent gold production of 490 000 ounces was 1% down on the same period a year earlier, and 10% down on the previous quarter. However, the first quarter of 2017 included 140 000 ounces of gold from its Darlot mine, which it divested at the end of last year. All-in sustaining costs were 6% down from a year earlier and flat quarter-on-quarter. It achieved a higher average gold price of $1 316 per ounce.

Despite the higher level of project capital spent as it entered the second year of its reinvestment programme, net debt grew by just 5.4% to $1.37 billion.

Managed production in Ghana fell 4% over the quarter as spending on its Damang reinvestment projected continued. Gold equivalent production at Cerro Corona in Peru was flat year-on-year and declined 14% from the previous quarter. Continuing operations in Australia delivered a 6% rise in production from a year earlier but a 6% quarterly decline.

Back home, Gold Fields said South Deep was impacted by the slow production build up after the end-of-year break two labour restructuring processes that continued into the quarter; and a change in underground working shift arrangements implemented to increased productivity. Although the changes were necessary to create a platform for sustainable and consistent performance, CEO Nick Holland said they created workforce uncertainty and disrupted operations. It also had to contend with continued low mobile equipment reliability, the intersection of active geological features in the high-grade Corridor 3 of the mine and poor ground conditions in the far western part of the orebody, which slowed production rates. April's production was further impacted by a 22-day safety-related stoppage to re-support the back areas in two of the critical new mine access ramps, which account for half of total production for the mine.

The company says it's now unlikely to meet the production guidance it gave at the beginning of the year of 321 000 ounces and is forecasting production of 244 000 ounces. It says group attributable gold production is expected to reach between 2 million and 2.05 million ounces.

"The reduced full-year guidance is attributable to the ongoing impact of poor equipment reliability, the slower advance rates in Corridor 3 and delayed extraction in the composites as well as slower rates of destress in the March quarter, again a symptom of the lower productivity related to uncertainty around the labour restructuring," Holland said in a statement.

The company said it had concluded a three-year wage agreement with unions at the mine, providing for an average annual increase of 7.3%.

Its shares shed 4.9% to R46.62 yesterday.



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