South Deep has gone to where it’s meant to be

GOLD Fields is now optimistic about the prospects of South Deep in Carletonville, its only South African mining after several efforts to turn it around ended in disappointment.

South Deep generated a net cash inflow of R79 million ($5m) for the six months ended in June from an outflow of R238m a year earlier.

Chief executive Nick Holland this week said that the mine had gone to where it was meant to be.

Holland said the relationship with labour had been rebased and was working, adding that management had got some of the key ingredients right at the mine.

“I think that we are in pretty good shape and I’m optimistic about the prospects of South Deep having lived through many disappointments. It feels different this time,” said Holland.

Gold Fields struggled to make the mine work since acquiring it in

2006 with the key challenge being the difficulty in transitioning the asset from a conventional mining mindset and practices to mining with a modern, bulk, mechanised approach.

The mine was restructured in 2018 in a bid to turn it around. The restructuring resulted in 1 500 job losses.

It also grappled with a crippling 45-day strike in protest of the retrenchments which ended in December.

Holland said he was confident that the mine would contribute significantly to the group going forward and take advantage of the record gold price environment which has rallied almost 30 percent since its growing lustre as an investment hedge amid the global economic uncertainties caused by the Covid-19 pandemic.

“South Deep is looking like it should be doing much, much better going forward.

“We do have hedges in place which are slowly running off,” he said.

“As we get out of those by the end of the year, all things being equal, we do expect South Deep to be a significant contributor to the portfolio in 2021 going forward.”

Holland said that mine had been trying for three years to get ministerial approval for a 40 megawatt solar-powered plant.

“We are getting closer now. I think the Minister of Resources and Energy, Gwede Mantashe, has acknowledged the importance of this.

“I’m hopeful that we can get the approval in the next month or two,” said Holland, adding that the application was well advanced.

“That can make a hell of a difference, it will take the pressure off Eskom, take the pressure of the economy, reduce our costs and our carbon footprint,” said Holland.

Mantashe announced that mining companies were enabled to generate their power.

Holland said that the rise in the gold price to record levels during the six months ended June had been a bitter-sweet respite for gold firms as the company generated R5.5 bn in cash flow and profits doubled.

Gold Fields generated a net cash flow of R5.5bn during the period under review compared with a net cash outflow of R1.3bn the prior year.

“Our job is to continue our discipline and make sure that our mines are performing optimally and make sure that we manage our costs, and the rest will happen, and we can pay a nice dividend and hopefully in the future we can find new opportunities.

“It’s a great time and it’s up to us to capitalise on it,” Holland said.