Gold Fields is currently looking to restructure its South Deep operation in South Africa. This has been attributed by reported operational challenges since the former’s acquisition back in 2006. According to media reports, some of the challenges pointed out include difficulty in transitioning the mine. This is from one run with a conventional mining mindset and practices to mining with a modern, bulk, mechanized mining approach.
However, several efforts aimed at addressing the aforementioned challenges have been effected. These include but are not limited to the optimization of the mining method, extensive training as well as skills development. Nevertheless, the US $280m used seems to have gone down the drain as the mine is still making losses.
So far, Gold Fields has invested a total of approximately US $2Bn since acquiring the mine. Moreover, the firm’s management is of the opinion that the mine can no longer sustain these cash losses. As such, there is need to realign the cost structure with the current lower level of production.
This, then, makes it mandatory for South Deep to be operated and scheduled as a safe, deep-level, capital-intensive, but highly mechanized and efficient operation. According to the management this will require a reduction in fleet and the associated labor complement. That should also include an improvement in effectiveness and productivity to build enough margin in the business to carry the high fixed cost base and deliver sustainable profitability.
South Deep has over several years embarked on a host of initiatives to improve the productivity and deliver sustainable profitability. These, unfortunately, are yet to have the desired impact. On the other hand, in the context of continued negative cash flow, management believes that the best course of action to address these issues includes further restructuring at the mine.
