No exit for Gold Fields as South Deep im­proves

The Citizen (KZN) - - Business -

Gold Fields won’t be rush­ing to join An­gloGold Ashanti in ex­it­ing South Africa af­ter its last mine in the coun­try re­turned to profit last year.

The South Deep op­er­a­tion gen­er­ated $15 mil­lion (R220 mil­lion) of net cash in 2019 af­ter a decade of losses. Prof­itabil­ity will im­prove this year as out­put climbs at the mine that sits on the world’s se­cond-big­gest known body of gold-bear­ing ore.

For CEO Nick Hol­land the mine has the po­ten­tial to be a “shin­ing light” for a South African gold in­dus­try in ter­mi­nal de­cline.

“We have a re­spon­si­bil­ity to the coun­try in mak­ing this big re­source vi­able,” Hol­land told re­porters in Jo­han­nes­burg on Thurs­day. “What kind of mes­sage do we send to the coun­try if we throw in the towel?”

The na­tion’s gold sec­tor has shrunk to less than a fifth of the size it was at its peak and its im­por­tance to the econ­omy is rapidly di­min­ish­ing. The in­dus­try has be­come ex­pen­sive and dan­ger­ous as of­ten un­prof­itable mines ex­tend many kilo­me­tres deep un­der­ground.

Gold Fields has come un­der pres­sure from in­vestors over pre­vi­ous losses at South Deep.

Like An­gloGold, the com­pany has fo­cused on more prof­itable mines in the Amer­i­cas, Aus­tralia and West Africa. But while its ri­val is sell­ing its last re­main­ing South African as­sets to Har­mony Gold Min­ing Com­pany, Gold Fields is keep­ing its op­tions open.

“One thing I can rule out is a fire sale,” Hol­land said. “We want to do some­thing out of a po­si­tion of strength.”

In­stead, Gold Fields has cut costs by re­duc­ing its work­force and is re­viv­ing a plan to open new ar­eas to boost out­put and im­prove grades, the CEO said. That will give Gold Fields at least another year to as­sess its op­tions.

Gold Fields ex­pects pro­duc­tion to rise 16% to 257 000 ounces this year. Un­der the orig­i­nal plans for the mine, out­put was en­vis­aged to climb to 800 000 ounces at full pro­duc­tion.

“They ex­pect fur­ther im­prove­ments on the back of var­i­ous ini­tia­tives at the mine over the past year, while the rand gold price should help to im­prove mar­gins,” Ned­cor Se­cu­ri­ties an­a­lyst Arnold van Graan said. – Bloomberg

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