Is Nick Holland’s time up?

● In almost a decade, Gold Fields has changed senior management at its prized South Deep operation five times. Getting the mechanised gold mine to meet its potential — it has long been touted as the future of gold mining — has proved an elusive target.

Gold mining in South Africa, which has historically been highly labour-intensive, peaked in the 1970s. When Gold Fields rid itself of such mines more than five years ago but kept South Deep, management’s focus was on finally unlocking the potential of the mine bought 12 years ago to one day produce a million ounces of gold a year.

Gold Fields sold its labour-intensive KDC and Beatrix mines to the then newly formed Sibanye in 2012. Gold Fields has underperformed Sibanye, falling 51% since that unbundling, compared to Sibanye’s 53% climb.

The bullion price has declined 23% over that period.

To date, including its purchase price, Gold Fields has spent R29-billion on South Deep, with a further R2.3-billion budgeted to reach the mine’s potential, which some analysts have now dismissed as a pipe dream.

At this point, shareholders are getting anxious, with some pointing to a failure by management to anticipate problems. “But I don’t know if that’s fair,” said Ian Cruickshanks, an independent analyst.

The type of mining followed at South Deep has never been practised locally or internationally because of the unique geology of the Witwatersrand Basin. It has been more than two decades since the idea of mechanising the mine was raised, with ownership in that time moving from one company to another. At one time it was sought by Brett Kebble, one of South Africa’s most notorious mining barons.

Erhan Uludag, a lecturer at the School of Mining Engineering at the University of the Witwatersrand who has done research on mechanisation, said South Africa had a complex reef system and unstable ground, which made gold mining difficult.

Uludag said one of the issues with mechanisation was that lots of hi-tech equipment had been brought in without taking into consideration South Africa’s complex ore body.

South Africa was not short of gold reserves but there was no place in the world where people mined at or below 3km deep, so completely new systems had to be developed, he said.

After management had chopped and changed mining methods at South Deep over the past decade, a new, potentially workable method was developed for South Deep last year, called the Rebase Plan. This has a revised target of mining about 480 000 ounces a year by 2022.

According to Gold Fields’ latest annual results to end-December, South Deep yielded only 281 000 ounces of gold, compared with 290 000 the previous year.

Two deaths and three fall-of-ground incidents limited access to the higher-grade parts of the mine for about four months, leading to an 11% loss of output.

The mining method at South Deep was no longer an issue, said Gold Fields CEO Nick Holland. The “big hurdle” was the mining culture of its 3 500 workers.

Holland said the company’s Australian operations had undergone many changes without missteps because the team had a winning attitude from the top all the way to the rock face. “That’s the kind of thing we are trying to achieve so that we have a more sustainable approach.”

Holland admitted that the changes in management over the past eight years were not a great record and had affected South Deep’s operations negatively.

Leon Esterhuizen, an analyst at Nedbank, said investors should understand that South Deep was not yet a mine, but a project that could still work.

“The original mining engineers that worked on the project were not trackless mining engineers or mechanised engineers. But when you have 20 or 30 years of conventional mining engineering experience . . . you fall short.”

However, Esterhuizen said the buck stopped with Holland as CEO and he should have done a better job.

In the almost 10 years that Holland has been CEO of Gold Fields, starting in May 2008, the company’s shares have fallen about 47%, in line with a 49% fall in the JSE gold mining index.

But Holland said South Deep was not about one man. “If it’s one man who makes the difference, then I’m not doing my job.”

If it’s one man who makes the difference, then I’m not doing my job Nick Holland Gold Fields CEO