Gold Fields no to South Deep sale

• Production up 41% as mine brings in R295m after R1.9m loss previously

Gold Fields has for now ruled out any sale of its South Deep operation, its only remaining SA asset, as the fortunes of the mine have begun to improve. At the full-year results presentation for the 12 months to end-December 2019, the company, which is among the 10 largest gold producers in the world, reported South Deep’s gold production improved 41%, while the operation generated R295m in cash, compared with a loss of R1.9m in 2018.

Gold Fields has for now ruled out any sale of its South Deep operation, its only remaining SA asset, as the fortunes of the mine have begun to improve.

At the full-year results presentation for the 12 months ended December 2019, the company, which is among the 10 largest gold producers in the world, reported South Deep’s gold production improved 41% while the operation generated R295m in cash, compared with a loss of R1.9m in 2018.

Responding to questions from the audience about whether Gold Fields would look to sell South Deep, CEO Nick Holland said the miner had no plans beyond its short-term focus to improve its performance at the operation. The outcome would inform further strategy.

“The one thing I can say about South Deep that I will rule out completely is a fire sale. We won’t be doing any kind of panic sale. Anything we do will be from a position of strength.”

Holland’s comments come just a day after AngloGold Ashanti announced it would sell its Mponeng mine to Harmony Gold, marking its complete exit from SA. The move by AngloGold is fuelling investor jitters over mining investments in SA where the operations are challenged by rising costs, unreliable power supply and policy uncertainty, to name a few.

Holland said that Gold Fields would keep its options open for the future. “I don’t want to get too carried away ... because we’ve had too many setbacks, though I must say this time does feel different, but we’ve got to get another year under our belt.”

He warned that SA’s power crisis posed a key risk.

“If Eskom goes through severe load-shedding it is going to hurt us. It’s going to hurt everybody of course, so that does worry us,” Holland said. He hoped that mineral resources & energy minister Gwede Mantashe would make good on a commitment to remove regulatory hurdles preventing companies from generating their own power.

Gold Fields has been waiting for the green light on a 40MW solar plant for South Deep that would cater for up to 25% of the operation’s power needs. Once up and running, “that will start to mitigate some of the risk, particularly if there’s more common stage two load-shedding”, Holland said.

In its results for the year to end-December 2019, released on Wednesday, Gold Fields’s normalised profit for the year soared to $343m (about R5bn) up from $27m in 2018.

The company also declared a final dividend of R1 per share, bringing the total dividend for 2019 to R1.60. At the same time, Gold Fields announced a private placement of 41-million shares to raise funds for its new $860m Salares Norte mine in Chile for which construction will begin later this year.

On Thursday, the company announced the offering was oversubscribed and raised $250m. The balance will be funded by cash and possibly some debt.

Though recent media reports said financiers were hunting for a partner to take up a 30% stake in the project, Holland said the company did not go it alone over a lack of interest.

“We had a number of very large partners that were very interested,” he said.

“The reason we didn’t go ahead is because they wanted too big a piece of the project relative to what we were willing to sell down. Being such a quality project, we don’t believe we need to give away as much as they were asking for.”