(Bloomberg) — Gold Fields Ltd., the South African miner with operations from Peru to Australia, said its 2015 plans for its South Deep mine won’t be achieved due to a skills deficit and problems with underground infrastructure. The shares fell.
The South African mine will only break even in 2016 as the “knock-on effects of the stoppage last year will have a material impact on 2015,” Johannesburg-based Gold Fields said in a statement Thursday. “The planned build-up for 2015 will not be achieved.” Production from the operation will probably rise 15 percent to 230,000 ounces this year, it said.
Gold Fields had previously planned to produce 650,000 ounces to 700,000 ounces from South Deep by 2017, which was already two years behind its initial schedule. That target will have to be revised, Chief Executive Officer Nick Holland said in an interview Thursday.
“It’s a long-life operation so it’s important that we do things right as opposed to doing them quick,” Holland said. “That’s why we’ve adopted a more cautious approach.”
South Deep is the world’s largest gold deposit after Grasberg in Indonesia and production at 700,000 ounces a year would be worth about $855 million in revenue at current spot prices. The mine can sustain output at that level for about 70 years, Gold Fields said in 2014.
The shares declined as much as 2.5 percent, the most in a week, and traded 2.1 percent lower at 64.89 rand by 9:23 a.m. in Johannesburg.
New Methods
A complex ore formation, depth, and operational and safety problems have mired the mine in delays throughout its 24-year lifespan, during which it has been owned by JCI Ltd., Western Areas Ltd. and Barrick Gold Corp. Two workers died in accidents in May and the company halted 70 percent of production for four months last year to build new ground support structures.
Gold Fields hired a team of Australians last year to explore two new mechanized mining methods to improve performance. A new group has now been hired, headed by South African Nico Muller, while the company has retained a small part of the Australian team “to assist with ongoing training,” the company said Thursday.
Gold Fields’ headline loss was $10 million in the three months to Dec. 31, compared with earnings of $14 million the previous quarter, it said. All-in sustaining costs declined 4.7 percent to $1,023 an ounce, while production retreated 0.5 percent to 556,000 ounces. The price of gold averaged $1,200 an ounce in the final quarter of 2014.
South Deep aside, Gold Fields produced about 2 million ounces at a cost of about $950 an ounce from its international operations in Ghana, Peru and Australia for 2014, Holland said. That allowed the company to reduce its debt 16 percent to $1.45 billion, he said.
Gold Fields forecast group-wide attributable equivalent gold production at about 2.2 million ounces for 2015, matching 2014’s output. All-in sustaining costs are forecast at $1,055 an ounce compared with $1,053 in 2014, while capital expenditure has been set at $660 million.
