Machine mines still at carrot-and-stick stage

For more than three decades, South African mining groups have promised investors a mechanised future and warned labour unions about it. Much investment has been made in pursuit of mechanisation.

The spend has not yielded the required results as South Africa's mines remained labour-intensive operations. The amount of labour did shrink, but that was due to lower commodity prices and a cost focus that resulted in significant job cuts across the sector.

Nick Holland, CEO of Gold Fields, which owns the crown jewels in South African gold mining - South Deep - admits that in more than 30 years of looking at mechanisation there have been no easy answers.

"It's not through lack of trying, so it is a challenge. If we can find a way, great ... I don't say it's impossible, it's just not going to be easy."

The promise for South Deep has been a fully mechanised and optimally functioning gold miner - one that over a decade of ownership Gold Fields has been unable to keep.

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After buying the mine in 2006, the miner still finds itself struggling to get some of the fundamentals of the operation right, let alone seeing it operating at full capacity.

"Our job is to try and get to this [production target], and it's not going to be an easy job, it's going to be hard, but like most people once you've achieved the goal then people will try to raise the bar and do better. We shouldn't be thinking about raising the bar yet," he said.

Holland said although South Deep had challenges in the past and management had struggled with ramping it up, he still had "high regard" for South Deep.

After years of missing self-set targets, Gold Fields this week announced a five-year production plan. The aim is for the mine to reach steady state production of about 500,000 ounces in that time frame.

South Deep could be one of the world's largest gold mines if it reached full production capacity.

Peter Major, analyst at Cadiz Corporate Solutions, said Gold Fields was taking a long time to fix South Deep, but eventually it would get it right.

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"Eventually they will hit the target. If you've got a bow and arrow, and you keep hitting closer to the target, and someone keeps giving you more arrows you will hit the bull's eye. [Holland] keeps lowering the target each year and he gets closer to achieving it."

The long-struggling platinum miner Lonmin can trace its woes back to attempts to mechanise its operations at Marikana. It has been an expensive exercise, with the miner forking out R1.2-billion to demechanise and R1-billion to mechanise.

More than a hundred years of conventional mining was replaced with machinery across various geographies.

While shareholders wait on South Deep's promise, it was boosted by a Chamber of Mines study released last month, which paints a not so gloomy picture of the future of mechanised mining, especially in gold.

According to the study, about 220million tons of reserves currently being mined through labour-intensive operations, can be mechanised. About 96million tons cannot be converted, and will continue to be mined out conventionally.

In total, the study shows the gold industry has 592million tons of reserves that can be mined using mechanisation.

"This is equivalent to 11 large gold mines which would otherwise be sterilised", it says.

mtonganal@sundaytimes.co.za