Ailing South Deep looks to new methods

Gold Fields is considering two new mining methods at its struggling South Deep mine and selling exploration assets in its strategy to improve its finances.

The company, which halted most activity at South Deep in May after two deaths, said both methods under consideration could de-risk the South Deep build-up plan and future production profiles and have a meaningful effect on costs.

Gold Fields said pilot studies would be undertaken from the last quarter of this year until the middle of next year.

South Deep, which has been in development since the late 1970s, has been plagued by setbacks for decades.

Gold Fields bought the mine in 2007 for $2.7-billion, and has spent $4-billion on development. CEO Nick Holland said on a conference call this week that the shutdown at South Deep, implemented to do extensive ground-support remediation work was set to last until the end of next month.

"We still expect South Deep to reach cash breakeven by the middle of 2015" at current spot prices, Holland said.

It was expected to reach a full production run rate of 650000 to 700000 ounces by the end of 2017, three years behind target.

The company expected a reduction in the number of contractors at South Deep following the payout of voluntary separation packages to about 550 employees to reduce excess staff. An agreement had also been reached with the unions to implement a new shift system, Holland said.

The mine employed 3400 workers and 1900 contractors, he said. It retrenched more than 2000 staff in 2008 when it was decided to mechanise.

The current shift system, which saw people work four 12-hour days followed by four days off, was implemented in 2012.

South Deep, near Carletonville, is home to one of the country's richest gold deposits, but it has been a constant headache for Gold Fields. The company said this week that the Securities and Exchange Commission and Hawks investigation of bribery allegations related to the South Deep empowerment deal, which benefited politically connected individuals, was continuing.

"The investigations are in early stages. It is not possible to determine what the ultimate outcome of these investigations will be on the company or the timing thereof," Gold Fields said. The miner also stands accused by the Department of Mineral Resources of failing to implement its social and labour plan, which forms part of its licensing requirements.

Gold Fields has said it is working with the department to resolve the issues, and that its licence is not at risk.

The company is making progress on the sale of its development and exploration projects following a recent change in strategy to buy assets that are already in production rather than spend money on finding its own gold deposits.

Gold Fields reported net profit of $22.3-million for the June quarter, compared with a profit of $2.2-million in the March quarter. Gold production was down 2% at 548000 ounces. Its share price has risen 36% since January, compared with a 48% rise for AngloGold Ashanti and 24% for Harmony Gold.