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Gold Fields’ South Deep raises game, Damang tested

Thursday, 19 November 2015

JOHANNESBURG (miningweekly.com) – Gold mining major Gold Fields saw its share price soar on Thursday owing to its South Deep mine raising its game and net earnings and cash flow lifting in the three months to September 30, which were also fatality-free.

The Johannesburg- and New York-listed company’s only South African gold mine – South Deep, west of Johannesburg – delivered a much improved third quarter, with its gold production soaring 42% to 54 900 oz (1 709 kg), driven by a 30% increase in tonnes milled and a 13% increase in underground yield.

Print Send to Friend 0 0 var addthis_config = {"data_track_addressbar":false,"data_track_clickback":false}; The company's share price at one stage soared 29% to R39.98 a share, the most in a single day since September 1999.

Weaker currencies offered respite in most regions, with the exception of Ghana, which is fully exposed to further declines in the dollar gold price.

Gold production increased 4% to 557 000 oz, all-in sustaining costs fell 8% to $948/oz and total all-in cost 9% to $961/oz.

The particular challenge of the Damang mine in Ghana may be met by recapitalisation or preservation of inherent value until gold prices recover.

“We should be in a position to announce a decision early next year,” Gold Fields CEO Nick Holland said in a media release to Creamer Media’s Mining Weekly Online.

Net third-quarter earnings of $18-million compared with net second-quarter earnings of $12-million and operational cash flow of $75-million was 2.5 times higher than the $30-million in the corresponding period last year, which enabled Gold Fields to cut net debt by $50-million to $1 427-million and bring it to 1.41 times earnings before interest, taxes, depreciation and amortisation.

In addition to higher production and weaker currencies, the lower oil price also helped to reduce costs and allow the group to realise a free-cash-flow margin of 11% at a third-quarter gold price of $1 103/oz.

South Deep’s raised game follows a strategic mine design change in the destress methodology, involving a conversion from low-profile 2.5 m vertical height to high-profile 5 m vertical height.

The transition to high-profile distress is expected to continue until the early part of 2017.

The outflow of cash from South Deep fell to R266-million and development increased 58% to 1 486 m.

The 57% increase in destress mining to 9 523 m2 was the result of the commissioning of new low-profile fleet, improved mining cycles and the introduction of dedicated supervision for each activity and each corridor.

Total reef tonnes broken increased 37% to 333 000 t.

Long-hole stoping accounted for 40% of total ore tonnes mined, compared with 37% in the June quarter.

Secondary support improved by 14% during the quarter to 1 584 m, while backfill cubes increased by 42% from 79 m3 in the June 2015 quarter to 113 m3 in the September quarter.

Both secondary support and backfill are crucial to providing improved mining flexibility.

Eighty seven per cent of the 164 critical skill positions had been filled by the end of the quarter when 20 of the 27 new category-one equipment were mobilised.

Production for the full year is expected to be 6 000 kg (193 000 oz at the outside.

AUSTRALIA UPS PRODUCTION

Gold production at the Australian operations increased 6% to 249 000 oz with costs 9% down at A$1 173/oz.

Net cash flow rose to $64-million compared with $40-million in the June quarter.

Production at St Ives was 6% lower and production at Agnew/Lawlers rose 7% on higher grades.

Darlot’s production soared 46% on higher grades at Lords South Lower, and Granny Smith continued its strong performance with a 10% production rise.

WEST AFRICA PRODUCTION LOWER

Gold production from the company’s West African operations decreased by 2% to 174 000 oz on lower production at Tarkwa, with costs falling to $962/oz.

SOUTH AMERICAN PRODUCTION FALLS

Gold production at Cerro Corona in Peru fell 5% to 78 800 oz and costs rose 10% to $731/oz

Holland expects full-year production to be within 2% of previous guidance with costs guided at up to $1 055/oz.

He commended the South African government for leading the October 2015 Mining Phakisa and said constructive dialogue between the various industry stakeholders could only yield positive results.

ARMED INTRUDERS

Security Services contractor Sbongiseni Cornwell Ngqoleka, who had been deployed as a security officer at the South Deep re-mining project at South shaft, was tragically killed on August 7 and two other security personnel injured by armed intruders targeting copper cable.

The two wounded security personnel have recovered well from the gunshot wounds and one has recently returned to work. Six perpetrators have since appeared in the Regional Court on three occasions on charges of murder, attempted murder, possession of an unlicensed firearm and armed robbery.


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